2002 Annual Report of Investigations of the United States Postal Inspection Service
Our Mission: Safety, Security, Integrity

A Message from the Chief Postal Inspector
December 2002

I am pleased to present this 2002 Annual Report of Investigations of the United States Postal Inspection Service. This report is especially meaningful to me as it is my first Annual Report to the United States Postal Service, its Board of Governors, members of Congress, and the American public since my appointment as the new Chief Postal Inspector in July of this year. "All Americans have the right to mail and receive letters and parcels with every expectation that no one will tamper with or steal their mail. All users of the mail have the right to be protected from mail fraud and other mail-related criminal activities. And all postal employees and customers have the right to work or conduct business in a safe and secure environment." I have taken these words from a new booklet we issued this year: Because the Mail Matters. And the mail does matter--now more than ever, the mail and the security of the mail are critical to the citizens of this country. As traditional mail security concerns expand to meet the challenges of new technology and a new century, I believe that my experience and leadership will help us preserve the nation's trust in the U.S. Mail. Although protecting the mail, postal employees, and customers took on added significance this year, security efforts were only part of our mission. Criminal investigations continued during FY 2002, as Postal Inspectors arrested 10,828 criminal suspects, with 54 percent of the arrests for mail theft. Inspectors also investigated 3,355 mail fraud cases and responded to approximately 84,000 consumer fraud complaints. Mail fraud investigations resulted in 1,634 arrests, approximately $2 billion in court-ordered and voluntary restitution, and 780 civil or administrative actions. In addition to numerous cases involving bombs, threats, and injurious items in the mail, Inspectors arrested 249 suspects for child sexual exploitation offenses related to the mail and 1,385 suspects for drug trafficking and money laundering via the mail. Safeguarding the U.S. Postal Service's revenue and assets is integral to the mission of the Postal Inspection Service. Through our investigations of workers' compensation fraud this fiscal year, Postal Inspectors reported $108.4 million in long-term and continuation-of-pay cost-avoidance savings for the Postal Service. The U.S. Postal Inspection Service is proud of its accomplishments. We look forward to future opportunities to continue building on our strengths--preserving the safety, security, and integrity of the U.S. Postal Service, postal employees, and postal assets--and ensuring America's confidence in the U.S. Mail. Lee R. Heath Introduction Opening quote: The U.S. Postal Service delivers more than 200 billion pieces of mail a year, containing money, messages, and merchandise, to 138 million addresses at some of the most affordable postage rates in the world. U.S. Postal Inspectors are mandated to safeguard all of it--including the people who move it and the customers who use it--and it's all included in the price of a stamp. As one of our country's oldest federal law enforcement agencies, founded by Benjamin Franklin, the United States Postal Inspection Service has a long, proud and successful history of fighting criminals who attack our nation's postal system and misuse it to defraud, endanger, or otherwise threaten the American public. As the law enforcement and security arm of the United States Postal Service, the U.S. Postal Inspection Service is a highly specialized, professional organization performing investigative and security functions essential to a stable and sound postal system. Congress empowered the Postal Service "to investigate postal offenses and civil matters relating to the Postal Service." Through its security and enforcement functions, the Postal Inspection Service provides assurances to American businesses for the safe exchange of funds and securities through the U.S. Mail; to postal customers of the "sanctity of the seal" in transmitting correspondence and messages; and to postal employees of a safe work environment. As fact-finding and investigative agents, Postal Inspectors are federal law enforcement officers who carry firearms, make arrests, execute federal search warrants, and serve subpoenas. Inspectors work closely with U.S. Attorneys, other law enforcement agencies, and local prosecutors to investigate postal cases and prepare them for court. There are approximately 1,900 Postal Inspectors stationed throughout the United States who enforce roughly 200 federal laws covering investigations of crimes that adversely affect or fraudulently use the U.S. Mail and postal system. To assist in carrying out its responsibilities, the Postal Inspection Service maintains a Security Force staffed by roughly 1,400 uniformed Postal Police Officers who are assigned to critical postal facilities throughout the country. The officers provide perimeter security, escort high-value mail shipments and perform other essential protective functions. The Postal Inspection Service operates four forensic crime laboratories strategically located in cities across the country. The labs are staffed with forensic scientists and technical specialists, who assist Inspectors in analyzing evidentiary material needed for identifying and tracking criminal suspects and in providing expert testimony for cases going to trial. The Inspection Service's approximately 800 professional and technical employees, who include forensic specialists, information technology experts, financial analysts and others, play a vital role in supporting the criminal investigative and security functions of the Postal Inspection Service. They perform a wide variety of tasks, including developing and continually upgrading information systems; providing forensic examinations of evidence; deploying electronic security and surveillance equipment; publishing policy handbooks and consumer awareness guides; supplying photography and video services; and facilitating direct communications with Congress and the public. During this fiscal year, the National Headquarters offices of the Postal Inspection Service were organized in functional groups that reported to Deputy Chief Inspectors for Investigations, Security and Information Technology, and Professional Standards and Resource Development. The Postal Inspection Service's 18 field divisions reported directly to three Deputy Chief Inspectors for field operations. Field offices were supported by five Inspection Service Operations Support Groups. The Inspection Service's Executive Committee, which comprised the Chief Postal Inspector, five Deputy Chief Inspectors and the three Inspectors in Charge who report directly to the Chief Postal Inspector, established the direction of the organization. The National Leadership Team consisted of the Deputy Chief Inspectors and all Inspectors in Charge. In the upcoming fiscal year, the National Headquarters offices of the Postal Inspection Service will be organized in functional groups that report to the Deputy Chief Inspector for Headquarters Operations. The Postal Inspection Service will continue to have 18 field divisions, which will report directly to three Deputy Chief Inspectors for field operations. Field offices will be supported by five Inspection Service Operations Support Groups. The National Leadership Team will include four Deputy Chief Inspectors, two Assistant Chief Inspectors, Inspectors in Charge, and all Postal Career Executive Service Managers. The Postal Inspection Service's national information technology infrastructure supports about 4,200 users at more than 180 sites nationwide. Inspection Service offices are linked nationally via a dedicated frame-relay network, with online connections to the Postal Service, the National Crime Information Center, the National Law Enforcement Telecommunications System, and the Internet. The Internal Affairs Division's mission is to promote integrity and excellence in the Postal Inspection Service through independent internal investigations of its employees and protect the safety of postal employees and customers by providing security and preventive services at National Headquarters. The Office of Counsel provides legal advice and services in support of Postal Inspection Service investigations, programs, and goals; processes requests for access to Inspection Service records; and provides legal training to Inspection Service personnel. The Counsel's office comprises 20 Inspector-Attorneys supported by an administrative staff that includes paralegals, information disclosure specialists, a labor relations analyst, a program specialist, and an administrative support specialist. Charged with managing the Postal Inspection Service's internal and external communications, staff from Congressional and Public Affairs (C&PA) issue news and video releases covering investigations or events of national interest and develop publications with preventive and informational tips related to mail fraud and other mail crimes for postal employees and the public. C&PA personnel represent Inspection Service interests on Capitol Hill and through liaison efforts with other government, law enforcement, and consumer agencies. C&PA's Internet Web site provides weekly investigative news and consumer-oriented tips. Postal customers may report suspected incidents of mail fraud online at www.usps.com/postalinspectors. An Intranet Web site, maintained by the Information Technology Division, facilitates employee communications nationwide. The U.S. Postal Inspection Service extends full cooperation to all federal, state, and local investigative and prosecutive authorities in law enforcement matters to ensure greater protection to the public. Postal Inspectors regularly participate in joint task force investigations with other agencies aimed at curtailing widespread criminal acts of an organized nature. For more information on the Postal Inspection Service, visit our Web site at www.usps.com/postalinspectors. Leadership Team of the United States Postal Inspection Service FY 2002 L. Heath, Chief Postal Inspector J. Birch, Executive Ombudsman L. Katz, Inspector in Charge, Office of Counsel I. Gillis, Executive Coach J. Rowan, Deputy Chief Inspector, Headquarters Operations D. Mihalko, Inspector in Charge, Congressional & Public Affairs R. Geffen, Inspector in Charge, Forensic & Technical Services R. Muehlberger, Laboratory Director T. Denneny, Inspector in Charge, Internal Affairs L. Spallanzani, Manager, Strategic Planning & Management Processes A. Clemmons, Assistant Chief Inspector, Investigations & Security K. Bond, Inspector in Charge, Group 1, Safety K. Roberts, Inspector in Charge, Group 2, Security L. Maxwell, Inspector in Charge, Group 3, Integrity Z. Hill, Inspector in Charge, Group 4, Emergency Preparedness D. Hill, Inspector in Charge, Group 5, International Affairs T. Van de Merlen, Acting Inspector in Charge, Group 6, Intelligence N. Johnson, Assistant Chief Inspector, Administrative Operations V. Bellinger, Manager, Human Resources Performance F. Toogood, Inspector in Charge, Career Development L. Visos, Inspector in Charge, Finance & Administrative Services R. Coccia, Inspector in Charge, Information Technology K. Burke, Deputy Chief Inspector, Field Operations, East Inspectors in Charge Mid-Atlantic, A. Crawford Northeast, K. Jones North Jersey/Caribbean, M. Phanco New York, W. Kezer Philadelphia, I. Carle Washington, T. Brady Western Allegheny, R. Dalgleish W. Mitchell, Deputy Chief Inspector, Field Operations, South Inspectors in Charge Florida, J. Belz Gulf Coast, R. Dodd Rocky Mountain, M. Cobos Southeast, D. Collins Southwest, A. Holmes M. Ahern, Deputy Chief Inspector, Field Operations, West Inspectors in Charge Detroit, Y. Allen Midwest, R. Bowdren San Francisco, A. Kiel Chicago, A. Davidson Northwest, R. Morgan Southern California, J. Somerset Mail Theft Opening quote: Postal Inspectors arrested 5,858 suspects for mail theft in FY 2002, with volume mail theft receiving the highest level of investigative attention. The American public has the right to expect its mail to be delivered on time and intact. As mandated by law, U.S. Mail should arrive unopened and in the mail receptacle for which it was intended. Mail theft comes under the jurisdiction of U.S. Postal Inspectors, who are charged with preserving the "sanctity of the seal." Mail thieves have a number of opportunities to steal mail. Every day, more than 650 million letters travel across the country and around the globe. The mail is delivered to 145 million addresses six days of every week. And every day those millions of mailpieces--First-Class letters, parcels, magazines, financial documents, business correspondence, Express and Priority Mail, registered mail, international mail and much more--are moved to their destinations by plane, ship, rail, truck, automobile and human beings. U.S. Mail is delivered to many different types of receptacles: mailboxes, collection boxes, apartment mailbox panels, relay boxes, co-op mailing racks, post office boxes, neighborhood delivery and collection box units, as well as countless varieties of ingenious, homemade mailboxes crafted to meet the federal standards set by the U.S. Postal Service, under the counsel of U.S. Postal Inspectors. Postal Inspectors know all this. They also know that, because mail can contain any number of valuables--not just jewelry and other expensive items, but personal and financial information, credit card applications and the like--criminals will always try to steal it. Mail thieves employ an endless number of schemes that Postal Inspectors work hard to thwart. The Postal Inspection Service devotes significant resources to investigating and preventing mail theft. Mail theft rings are the agency's biggest concern. While mail is in transit at airports or on the road, highly organized criminal groups--who may recruit airline employees, postal contractors or postal employees to aid them--can make off with large volumes of mail. U.S. Postal Inspectors deploy the best security technology available. Additionally, they initiate preventive tactics that help protect and educate postal employees and the public about mail theft. The following case examples summarize Postal Inspection Service investigations of mail theft that occurred during FY 2002. • Ten people were sentenced in April 2002 after Inspectors from the Gulf Coast Division investigated complaints that high-dollar business checks had been stolen from the mail. Inspectors determined the suspects deposited the stolen checks into brokerage accounts and later wired money from the accounts into bank accounts they controlled. Losses attributed to the ring exceeded $1.5 million. Prison sentences for ring members ranged from six to 84 months' incarceration. • Six Detroit-area residents were indicted by a federal grand jury on May 30, 2002, for mail theft, conspiracy, bank fraud, and counterfeiting securities of a financial organization. In May 2000, Postal Inspectors from the Detroit Division began investigating complaints of mail stolen from corporate offices and counterfeit-check activity exceeding $180,000. One suspect admitted to stealing mail, manufacturing and negotiating counterfeit checks, and supplying the checks to others. • Postal Inspectors from the New York Division and officers from the New York City Police Department and Drug Enforcement Agency arrested six members of an organized ring in May 2002 whose members stole credit cards from the mail. Inspectors initially received a complaint in August 2000 after a suspect purchased a Lincoln Navigator using a stolen credit card for the down payment. Inspectors traced other stolen credit cards used by the ring to purchase computers, jewelry, and tools. • Postal Inspectors and officers from the Hialeah, Florida, Police Department arrested two suspects in May 2002 for mail theft. Investigators executing a search warrant at a suspect's residence recovered more than 100 pieces of stolen mail and 30 credit cards, 50 counterfeit driver's licenses, equipment to produce fraudulent driver's licenses (including more than 1,000 blank plastic cards and Holograms for cards), and computer equipment. The evidence indicated the suspects were using financial information from stolen mail to produce fraudulent IDs and apply for credit cards. They directed fraudulent credit card applications to be mailed to two addresses they controlled. • Postal Inspectors from the Mid-Atlantic Division arrested a suspect on June 6, 2002, for stealing blank checks, bank statements, bill payments, and other financial information from unlocked rural mailboxes throughout North Carolina. Losses are estimated at $161,000, and the investigation is continuing. • The last of 10 members of an organized gang indicted in October 1997 was sentenced on May 20, 2002, to more than 10 years in prison, two years' supervised release, and restitution of $258,568. The investigation began in 1996 when Detroit Inspectors received complaints from postal customers whose personal checks had been stolen from the mail. More than 250 checking accounts were compromised by the ring, and merchants lost more than $350,000. Volume Mail Attacks Postal vehicles, collection and relay boxes, apartment mailbox panels, and neighborhood delivery and collection box units are common targets of volume mail attacks. Volume mail attacks constitute an ongoing threat to postal customers and receive a high level of investigative attention. The following are examples of volume mail attacks investigated and halted by Postal Inspectors during FY 2002. • Postal Inspectors from the Washington Division initiated a surveillance of a Fairfax, Virginia, apartment complex on July 16, 2002. They observed a Nigerian national exit his car, retrieve a butter knife from the trunk, and enter an apartment building. He then forcibly opened several apartment mailboxes and stole numerous pieces of mail. Inspectors arrested the man as he returned to his vehicle and recovered from him stolen U.S. Mail, stolen credit cards, and the knife. Losses from the scheme exceeded $250,000. • After weeks of surveillance and investigation, Postal Inspectors in New Jersey arrested five men in June 2002 for mail theft. Inspectors secured written confessions from the men admitting they had broken into more than a dozen postal relay boxes. They also recovered tools used to break into the boxes and false IDs used to negotiate checks stolen from the mail. The group stole more than 20 feet of mail between April and June 2002 and cashed thousands of dollars in stolen checks at local bodegas and liquor stores. Prosecution of four of the men is pending in federal court at Newark, and additional arrests are anticipated. • On June 18, 2002, Postal Inspectors from the Chicago Division conducted a surveillance that resulted in the arrest of a mail theft recidivist for stealing credit cards from apartment panel boxes. A search of the suspect and her vehicle resulted in the recovery of four credit cards stolen from the mail, screwdrivers, and handwritten notes listing the personal identifiers of numerous mail theft victims. Inspectors later executed a federal search warrant at her residence and seized stolen mail and papers listing victims' names, Social Security numbers, and credit card numbers. • Postal Inspectors arrested two suspects on March 13, 2002, for possessing stolen mail after investigating post office box break-ins throughout the Phoenix area. Phoenix Indian School Station postal employees saw two men enter the facility and break into post office boxes. They called Phoenix police, who stopped the suspect's vehicle and recovered approximately 100 pieces of mail, which included bank statements, credit card applications, and convenience checks. Postal Inspectors responded to the scene and interviewed the suspects about their involvement in other area volume attacks. The investigation is continuing. Graph Volume Mail Attacks: Five-Year Trend FY 98: 4,550 FY 99: 3,435 FY 00: 3,929 FY 01: 6,752 FY 02: Identity Theft Identity theft occurs when a thief steals key pieces of someone's identifying information, such as name, date of birth, and Social Security number, and uses the information to fraudulently apply for credit or to take over a victim's credit or bank accounts. The majority of identity theft schemes involve the U.S. Mail. Postal Inspectors work with bank and credit card issuers, financial institutions, retail merchants, credit bureaus, and government agencies to educate merchants and consumers about identity theft and provide guidance to victims. Examples of Inspection Service cases investigated during FY 2002 follow. • Detroit Postal Inspectors investigated a gang of mail theft recidivists who were recruiting street people, called "runners," to obtain cash advances from banks and casinos via credit cards. Inspectors executed a search warrant at the residence of a suspect in January 2002 and recovered more than 180 documents listing victims' personal IDs. Inspectors and agents from the Detroit Metro Identity Theft Task Force identified and arrested the ringleader of the group who, at the time of his arrest, had more than 700 car rental applications with names, dates of birth, Social Security numbers, and credit card accounts of potential victims. The ringleader and a cohort reportedly called credit card issuers, purporting to be the true account holders, and requested that replacement credit cards be mailed to them. The car rental manager who supplied the rental applications and an employee who worked at a health plan office were later indicted for providing documents to the gang. Total fraud losses exceeded $700,000. • An Illinois man was sentenced on May 1, 2002, to 25 months in prison and ordered to forfeit $590,000 in assets to banks after pleading guilty to the unlawful possession of an access device, mail fraud, and bank fraud. A joint investigation by Postal Inspectors and special agents of the Social Security Administration determined he had fraudulently applied for more than 200 credit cards using numerous victim IDs. • The Minnesota Financial Crimes Task Force, which includes Postal Inspectors, Secret Service agents, and local law enforcement officers, arrested a Nigerian national on March 8, 2002, for a $1 million account-takeover scheme. Postal Inspectors executed a federal search warrant at the suspect's residence and recovered approximately $16,000 in cash, three vehicles, artwork, electronics equipment, and merchandise derived from the scheme. An investigation revealed the man used bank employees to identify high-dollar, dormant accounts with balances of $100,000 or greater for his scheme, and shipped the fraudulently obtained merchandise to his home in Nigeria. • Postal Inspectors in Jacksonville, Florida, arrested six people believed to be running a major identity theft ring. The arrests were the result of a joint investigation by the Northeast Florida High Tech Task Force, which includes Postal Inspectors, members of the Jacksonville Sheriff's Office, and several other federal, state, and local law enforcement agencies. Victims of the ring included employees of the Winn-Dixie Corporation and Hollywood, Florida, police and fire departments. The six suspects were charged with 44 counts of violations related to the Racketeering Influenced Corrupt Organization (RICO) Act, including criminal use of personal information, grand theft, organized fraud, and manufacturing fraudulent IDs. On May 27, 2002, one of the suspects pled guilty to RICO violations and related charges. • Las Vegas police arrested a man in June 2002 for "driving under the influence" and later discovered he had an outstanding arrest warrant for identity theft in Arizona. Postal Inspectors from the Phoenix Field Office reported he stole a person's Social Security number, applied for numerous credit cards in the victim's name, and had the cards mailed to a box he rented at a commercial mail receiving agency (CMRA). Inspectors and Secret Service agents searched the man's business and discovered numerous fraudulent documents, lists of Social Security numbers, and names of numerous potential identity theft victims. The man collected more than $307,000 from the scheme. • Postal Inspectors identified 70 customers of a U-Haul Rental Center in New Haven, Connecticut, as victims of an identity theft scheme. Two U-Haul employees had disclosed confidential customer information to cohorts, who then obtained and used credit cards in victims' names. Inspectors searched one suspect's residence and recovered notebooks containing credit card numbers, addresses, and places of employment for 396 victims, as well as a Mazda van purchased with one of the fraudulent credit cards. On January 14, 2002, the two U-Haul employees pled guilty to four counts of identity fraud, conspiracy, and access-device fraud. Inspectors identified other suspects in the scheme, and the investigation is continuing. Victim losses to date exceed $400,000. Quote: Inspectors from the San Francisco Division and agents from the U.S. Secret Service executed a search warrant at a residence believed to be used by members of an identity theft ring. Investigators seized more than 400 pieces of stolen U.S. Mail and IDs during the search, as well as the counterfeit postal keys and the letter carrier uniforms shown here. It is believed that ring members wore the letter carrier uniforms and reproduced postal keys in order to steal mail. Inspectors arrested two suspects in September 2002, and the investigation is continuing. Credit Card Theft • An eight-month investigation by the Postal Inspection Service, New York City Police Department, Queens District Attorney's Office, and investigators from several financial institutions and credit card companies resulted in the execution of 25 search warrants at local businesses and banks and the arrest of eight merchants in Queens on June 12, 2002. Investigators developed information that several collusive merchants split the proceeds of transactions made with fraudulent or stolen credit cards. Losses linked to the investigation are estimated at $5 million. • Two men were arrested by Postal Inspectors in Hartford, Connecticut, for using personal IDs of customers of a truck rental company to fraudulently obtain credit cards. The men used the cards to order thousands of dollars worth of merchandise that was shipped via the U.S. Mail. Inspectors identified 70 victims with combined losses of $223,526. In July 2002, one man was sentenced to 38 months in prison and the other to 30 months in prison. • On July 12, 2002, New Jersey Postal Inspectors, agents from the FBI and Social Security Administration, and members of the Livingston Police Department arrested a man for credit card fraud and identity theft. A department store employee allegedly stole sales receipts containing credit card numbers and other customer information and provided them to Liberian nationals. The Liberians used the stolen information to order computer parts and other merchandise over the Internet and had it mailed to addresses they controlled. Credit card companies reported approximately $300,000 in losses. Employee Mail Theft The overwhelming majority of Postal Service employees work conscientiously to move the nation's mail to its proper destination. They take their responsibilities seriously. Unfortunately, a small number of employees abuse the public's trust. It is the job of the Postal Inspection Service to identify dishonest employees and take steps to have them prosecuted and removed from the Postal Service. Following are examples of employee mail thefts investigated and halted by Postal Inspectors during FY 2002. • On June 14, 2002, a former mail handler at the Tampa, Florida, Processing and Distribution Center (P&DC) was sentenced to 18 months in prison, three years' supervised release, and restitution of $21,295 to Netflix, Inc., an online DVD rental company that mails millions of DVDs to addresses throughout the country. After numerous complaints from Netflix about missing DVDs that customers claimed they had mailed back to the company, Postal Inspectors identified the postal employee in November 2001 for the crime. Inspectors recovered thousands of the company's DVDs while searching the subject's vehicle and residence, with losses exceeding $100,000. As a result of this investigation, Postal Inspectors are now working closely with Netflix on a national level to increase mail security. • A former registry clerk who was a 25-year employee was sentenced on March 4, 2002, to 41 months in prison, three years' supervised release, and restitution of $497,014 after pleading guilty in November 2001. Postal Inspectors arrested the former clerk in August 2001 for stealing $3.2 million in registered remittances from the Phoenix, Arizona, P&DC. He was sentenced at the high end of the sentencing guidelines because, as an employee of the U.S. Postal Service, he abused the public's trust. • After a four-day jury trial in Arizona in May 2002, a former associate postal supervisor was found guilty of stealing public property. The supervisor resigned from her position after an investigation by Postal Inspectors in October 1999 implicated her in the theft of a $59,723 remittance from the Chandler Post Office; $20,095 of the remittance was in cash. During the trial, the supervisor's version of events surrounding the loss was refuted by numerous witnesses, as well as by physical evidence from the investigation. She faces up to 27 months in prison based on federal sentencing guidelines. Miscellaneous Crimes • Postal Inspectors from Washington, DC; Michigan; and Florida arrested the ringleader and two co-conspirators of a counterfeit postal money order operation on July 2, 2002. They identified losses in excess of $350,000 and involving more than 600 counterfeit, negotiated postal money orders. Prosecutions are underway in federal district courts in Washington, DC, and Michigan. • Acting on a lead from an alert window clerk, Postal Inspectors initiated an investigation into the suspicious check-cashing activity of a ring in Southern California. Members used the names and addresses of area businesses to lull postal clerks into accepting high-dollar business checks for stamp purchases, and the ringleaders used legitimate couriers to further insulate themselves from detection. Inspectors confirmed that losses of $143,000 were directly attributable to the counterfeiters, who were suspected of being responsible for an additional $200,000 in losses from another scheme. Eight members of the ring received sentences in August 2002 ranging from two years' probation to 37 months in prison. • Postal Inspectors, U.S. Marshals, and Deer Park, Texas, police arrested a man in November 2001 for possessing counterfeit law enforcement badges and credentials, as well as handguns and a silencer. One of the counterfeit badges read "Postal Service Special Investigator." Police learned of his activities after he displayed a fake badge at a local bar and identified himself as a Deputy U.S. Marshal conducting an anthrax investigation. He also attempted to force a female patron from the bar. The man was sentenced on April 8, 2002, to 30 months in prison and three years' supervised release for impersonating a federal law enforcement officer and for various firearms violations. Quote: Postal Inspectors in Pasadena, California, concluded a three-year investigation in September 2002 with the convictions of 12 men and women responsible for manufacturing and cashing in excess of $1.2 million in counterfeit postal money orders. Inspectors identified two members of the "Pasadena Devil Lane Bloods" gang as ringleaders of a group that used legitimate postal money orders to produce counterfeit versions, which were cashed at post offices, financial institutions, and stores. Inspectors seized $25,218 in cash, $72,000 in counterfeit postal money orders, a 1998 Lexus, and various illegal narcotics. Violent Crimes Opening quote: For the first time ever, there were no mail bomb incidents during the fiscal year. Homicides, Assaults and Threats The U.S. Postal Inspection Service is committed to ensuring employee safety in the workplace. Postal Inspectors reported 714 postal-related assaults and credible threats during FY 2002 and made 325 arrests. Inspectors seek prosecution in assault cases when appropriate. Following are examples of investigations by Postal Inspectors during FY 2002. • A man was sentenced in June 2002 to more than 10 years in prison and three years' supervised release after shooting a Los Angeles letter carrier on March 7, 1997, as the carrier delivered mail on his route. The shooter fled and remained a fugitive for four years, until he was arrested in July 2001 by Inspectors from the Southern California Division's Major Crimes Team. The shooter must pay restitution of $9,707 to the carrier. • Two men who had been arrested by Postal Inspectors were sentenced on June 17, 2002, after entering guilty pleas to the May 2001 kidnapping and sexual assault of a Tennessee postmaster. On the basis of their "extreme conduct," the judge ordered the maximum sentence of more than 40 years in federal prison for one of the assailants and more than 26 years in prison for his cohort. • Postal Inspectors are continuing their investigation into the murder of a Tulsa, Oklahoma, letter carrier, who was shot in the back while delivering mail. Inspectors arrested a suspect on the day of the murder in December 2001, when they found him carrying a revolver a few blocks from the crime scene. After the suspect pled not guilty in August 2002, a special, non-jury trial held that day ruled he was innocent by reason of insanity. • A postal customer in Chicago, Illinois, struck a letter carrier on the head with a blunt instrument as the carrier delivered mail on her route in June 2002. As a result of the attack, the carrier received eight stitches to her head. She was able to provide Postal Inspectors and Chicago police with information on the incident, and they identified her assailant and took him into custody. He was admitted to Mt. Sinai Hospital for psychological evaluation and, on July 29, formally arrested by Chicago Division Postal Inspectors pursuant to a federal criminal complaint and warrant. Graph Assaults & Threats: Five-Year Trend FY 98: 1,255 FY 99: 1,063 FY 00: 1,037 FY 01: 799 FY 02: Mail Bombs and Other Prohibited Mail Mail Bombs Historically, the motives for mail bombs and bomb threats often have related to personal and business disputes, with revenge being the common thread. In the interest of protecting postal employees and customers, the Postal Inspection Service considers the investigation of mail bombs among its highest priorities. In FY 2002, Postal Inspectors arrested 65 suspects in incidents related to mail bombs or bomb threats, including threats made against postal facilities, hoax devices, suspicious items in the mail, and bombs or explosive devices placed in private mail receptacles. For the first time ever, there were no mail bomb incidents during the fiscal year. A man who mailed two bombs in July 2001 was sentenced to 18 years in federal prison, three years' probation, and $25,645 in restitution to his ex-wife. He mailed one bomb to his ex-wife at her place of employment and a second bomb to one of her co-workers. Fortunately, neither was seriously injured by the explosions that resulted when they opened the mail. Postal Inspectors located the man and obtained a signed confession from him within 24 hours of the detonations. Click here to read Anthony Fu Yin Chang Wanted Poster. Graph Mail Bomb Incidents: Five-Year Trend FY 98: 7 Incidents, 3 Explosions, 3 Injuries, 1 Death FY 99: 6 Incidents, 2 Explosions, 0 Injuries, 0 Deaths FY 00: 7 Incidents, 4 Explosions, 2 Injuries, 0 Deaths FY 01: 3 Incidents, 3 Explosions, 2 Injuries, 1 Death FY 02: 0 Incidents, 0 Explosions, 0 Injuries, 0 Deaths Quote: The Inspector in Charge of the Midwest Division and the Kansas City Field Office Inspector in Charge held a press conference on May 7, 2002, after pipe bombing suspect Luke Helder was arrested and taken into custody 20 miles east of Reno. Charges were filed against Helder in Iowa, Illinois, and Nebraska for using an explosive device to damage or destroy property involved in interstate commerce and resulting in personal injury, and for using a destructive device. Helder entered a plea of not guilty on June 7, 2002, but a trial date has not yet been set. Bomb Threats, Hoaxes, and Placed Devices Less than 36 hours after receiving a report of a pipe bomb explosion on May 3, 2002, in a rural mailbox at Eldridge, Iowa, more than 150 Postal Inspectors joined forces with FBI agents and local law enforcement officers to investigate the crime. Six people, including four rural route carriers and two postal customers, were injured when six of 18 bombs placed in rural mailboxes across the Midwest exploded. Following an intense manhunt that relied on Inspection Service resources nationwide, John Lucas Helder, a 21-year-old engineering student enrolled at the University of Wisconsin-Stout, was identified as the alleged bomber. Helder was arrested and taken into custody on May 7, 2002, by federal agents and members of the Nevada Highway Patrol after he was spotted in his 1992 Honda Civic approximately 20 miles east of Reno. He was armed with a rifle at the time of his arrest. Charges were filed against Helder in Iowa, Illinois, and Nebraska for using an explosive device to damage or destroy property involved in interstate commerce and resulting in personal injury, and for using a destructive device. On June 5, a federal grand jury in the Northern District of Iowa indicted Helder on two criminal counts: using an explosive device to maliciously destroy property used in interstate commerce (a rural mailbox) and using a firearm (pipe bomb) to commit a crime of violence. The indictment was tied to injuries sustained by a woman and her husband when she reached into their rural mailbox on May 3 and discovered a pipe bomb, which exploded. Helder entered a plea of not guilty on June 7, 2002, but a trial date has not yet been set. In another incident in May 2002, Postal Inspectors arrested a former postal employee for making a bomb threat to the Morgan Processing & Distribution Center in New York. Inspectors determined the man had previously worked as a mail handler at the Murray Hill Station, but was fired in 1997 for threatening to shoot fellow employees. On January 13, 2002, a caller to the New York Police Department's "911" emergency hot line stated: "There is a bomb in the Morgan Post Office." Postal Inspectors initiated an investigation that led to an exhaustive review of cellular telephone records and to the identification of the suspect, who is being held in custody in lieu of bail pending psychiatric evaluation. Other Prohibited Mail One strategy adopted by the Postal Inspection Service in response to the October 2001 anthrax mailings was the creation of an interactive, Web-based application for tracking anthrax incidents across the country. The Anthrax Reporting Incident System (ARIS) was the product of a task force comprising Inspection Service representatives from the Corporate Information Management Division, Information Technology Division, Mail Theft and Violent Crimes Division, and various field divisions. ARIS allows Inspectors to track and report anthrax incidents quickly and accurately, in a format easily disseminated to senior-level Postal Service officials. It also provides a formal declaration to alert postal managers when mail must be removed from the mailstream for an extended period of time. Following the October 2001 anthrax mailings, Postal Inspectors responded to an unprecedented 17,735 hoax mailings. Perhaps the most notorious of these was the case of Clayton Lee Waagner, arrested by Postal Inspectors on December 5, 2001, in Cincinnati, Ohio, on charges that he mailed hundreds of anthrax hoax letters to women's health clinics nationwide. During the investigation, Inspectors conducted surveillances of the suspect, monitored his telephone calls, and executed search warrants at his residence. Among other items found was a Postal Inspector's ID card bearing Waagner's photo. America's Most Wanted aired a show about the fugitive in December 2001, and Inspectors from the Pittsburgh area staffed the call room for the show. Waagner was indicted on September 19, 2002, in Pennsylvania for violating the Freedom of Access to Clinic Entrances Act, threatening to use a weapon of mass destruction, extortion, mailing threatening communications, and mailing threatening interstate communications. Other examples of prohibited mailings investigated by Postal Inspectors in FY 2002 follow. • An inmate at the State Correctional Institute in Albion, Pennsylvania, was sentenced in July 2002 to 40 months in prison and three years' supervised release for mailing an anthrax hoax, consisting of powdered sugar and a threatening letter, to the Pennsylvania Probation and Parole Board in Harrisburg. Postal Inspectors determined the sender was already serving a 20-year sentence for previous violent crimes at the time of the mailing, which qualified him as a career offender and raised his sentencing guidelines. He was additionally ordered to pay $4,191 in restitution for damages to the clothing of a mailroom employee and for costs related to a Hazardous Materials Team response. • A Lafayette, Louisiana, man was indicted in June 2002 on 78 counts, including transmitting threats through interstate commerce, mailing threatening communications, and threatening to use weapons of mass destruction. A joint investigation by Postal Inspectors and FBI agents determined he had mailed more than 200 hoax bomb and anthrax letters in April 2002 and sent threatening e-mails in June 2002. Bail was denied due to the suspect's mental state and the danger he represented to himself and society. • A former mail handler at the Cicero, Illinois, Post Office was sentenced on May 16, 2002, to three years' probation and four months' home confinement for mailing a threatening communication. He was indicted in November 2001 after Postal Inspectors reported that he wrote "Anthrax Enclosed" on a parcel that was received by a postal customer at the Cicero Branch of the Chicago Post Office in October 2001. Quote: Among many other duties, Postal Inspectors responded to more than 17,000 hoaxes and helped evacuate 600 post offices since October 2001. - The Federal Times, September 9, 2002. Quote: After America's Most Wanted aired a show on the anthrax hoax mailings, Postal Inspectors staffed the show's phone-in Tipline over a three-month period to respond to callers and follow up on leads. Quote: Postal Inspectors followed biohazard procedures developed by the Centers for Disease Control and Prevention to enter the Trenton, New Jersey, Post Office, which was closed on October 18, 2001, due to anthrax contamination. Quote: Postal Inspectors at the Bellmawr, New Jersey, Post Office, which was closed during the anthrax crisis. Robberies and Burglaries Robberies Robberies are a threat to postal employees, jeopardize the public's trust in the mail, and attack the financial integrity of the Postal Service. Postal Inspectors in all parts of the country receive expert training on how to safeguard both employees and facilities against criminals, but the U.S. Mail will likely always remain a compelling target for larceny. Thieves who attack letter carriers seek mail containing valuables--such as jewelry, checks or financial information--or keys to mail receptacles that give them greater access to even more mail; those who target postal facilities are usually after cash and money orders. Postal Inspectors also investigate robberies of postal remittances and trucks (as well as "highway contract route" trucks) that transport valuable registered mail. This type of robbery often depends on the "inside" knowledge of a postal employee, who can provide important details to an accomplice on truck arrivals and departures. Statistics for robberies that occurred in the past two fiscal years are shown in the chart at bottom, and five-year robbery trends are depicted in the graph at left. Following are examples of robberies investigated by Postal Inspectors in FY 2002. • Postal Inspectors arrested two suspects for the July 1, 2002, robbery of the Fredericktown, Ohio, Post Office. The facility's Officer in Charge (OIC) was punched in the face and robbed of $1,115 in postal funds. He was taken to the hospital by an emergency response squad, treated, and later released. Both suspects admitted their involvement in the robbery, and one of them admitted to striking the OIC. The investigation is continuing, and federal prosecution is anticipated. • On June 20, 2002, an Alabama man was sentenced to 70 months in prison and three years of supervised release for the December 2001 robbery of a letter carrier from the Prichard Branch Post Office. The robber wore a bandana over his face, claimed he had a weapon, and demanded a parcel the carrier was in the process of delivering. The robber was on parole at the time of the incident after serving 10 years for armed robbery. • An Ohio man was sentenced in May 2002 to 96 months in prison, three years' supervised release, and restitution to the Postal Service of $613. Postal Inspectors identified him as responsible for the May 2001 armed robbery of the Northridge Branch Post Office in Dayton. • A letter carrier on duty at the San Francisco P&DC was robbed and assaulted and his postal truck was hijacked in April 2002. Three suspects entered the postal truck, one assaulting the carrier and demanding money. Another suspect pushed the carrier out of the vehicle while the third hijacker jumped behind the wheel of the truck. The men drove off with the truck and its contents, including mail and postal keys; the carrier suffered minor physical injuries. Postal Inspectors and local authorities recovered the truck and located and arrested the three suspects. Two of the men pled guilty in July 2002 and are awaiting sentencing. The third suspect was sentenced in September 2002 to nine years in the custody of the California Youth Authority. • Postal Inspectors arrested a suspect on September 11, 2002, wanted in connection with the armed robbery of the Elizabethport Station Post Office in New Jersey. The robbery occurred on September 3, 2002, when two men, one brandishing a large knife, forced their way into the rear of the post office and demanded the station's funds. More than $48,000 in cash and $1,000 in checks were stolen, but there were no injuries. Two days later, a suspect connected with the case was remanded to the custody of U.S. Marshals pending a detention hearing, and a federal arrest warrant was issued for a second man. All efforts are being made to locate the second suspect at this time. Inspectors recovered more than $9,000 in cash and watches from the robbery. • A man and a woman pleaded guilty to the August 2001 robbery of the Tigerville, South Carolina, Post Office. They were sentenced in April 2002 for robbing the post office and possessing property stolen during the robbery. The man was sentenced to 15 years and eight months in prison and five years of supervised release. His accomplice was sentenced to five years of probation. • Postal Inspectors identified three suspects responsible for a series of armed robberies of letter carriers in Los Angeles between July and August 1997. The robbers are believed to be associated with the Centinela Park Family Blood street gang. At least six letter carrier robberies have been attributed to the gang. Inspectors arrested two gang members on December 20, 2002, who confessed to the robberies, and additional arrests are anticipated. The investigation is continuing. Graph Robberies: Five-Year Trend FY 98: 161 FY 99: 130 FY 00: 116 FY 01: 89 FY 02: Quote: FY 01: 3 facility robberies with physical injury and 41 without physical injury for a total of 44 facility robberies; 5 carrier robberies with physical injury and 20 without physical injury for a total of 25 carrier robberies; 1 other robbery with physical injury and 19 without physical injury for a total of 20 other robberies. In FY 01, the total robberies with physical injury was 9 and the total robberies without physical injury was 80 for a grand total of 89 robberies during FY01. FY 02: 3 facility robberies with physical injury and 41 without physical injury for a total of 44 facility robberies; 3 carrier robberies with physical injury and 22 without physical injury for a total of 25 carrier robberies; 0 other robbery with physical injury and 30 without physical injury for a total of 30 other robberies. In FY 02, the total robberies with physical injury was 6 and the total robberies without physical injury was 93 for a grand total of 99 robberies during FY01. Burglaries The Postal Inspection Service continues to see a significant decrease in the number of postal burglaries occurring over the past five years, although a few problems remain in rural areas of the country. About 81 percent of the burglaries in FY 2002 resulted in losses of less than $1,000, or the theft of fewer than 100 postal money orders. The graph below depicts postal burglary trends over the past five years. Following are examples of burglaries investigated by Postal Inspectors in FY 2002. • Postal Inspectors and members of the California Department of Forestry responded to a report that the Berry Creek Post Office had been burglarized and set afire. Mail and postal property were destroyed as a result of the vandalism. Damage to the facility was estimated at $150,000. Arson investigators determined that piles of mail had been placed throughout the building and ignited. The fire was contained to the building's interior. Postal Inspectors and local authorities identified four men responsible for the crimes. State charges were filed in April 2002, and the investigation is continuing. • A man was sentenced to 92 months in prison, to be served concurrently with a 10-year sentence on unrelated charges, after pleading guilty to the April 27, 2001, burglary of the Alvordton, Ohio, Post Office. A second convicted burglar was sentenced in March 2002 to 10 years in prison for his part in the crime. Postal Inspectors determined the men were part of a ring responsible for at least seven burglaries in Ohio and Michigan. • A man was convicted on June 12, 2002, for the February 2000 burglary of a New Jersey Post Office. During a routine traffic stop, state police found rifled mail and other items stolen from the New Gretna Post Office, as well as drug paraphernalia, in the vehicle the man was driving. A records check revealed that Postal Inspectors had an outstanding warrant for the suspect, and he was taken into custody. The man is scheduled to be sentenced soon on charges related to his burglary conviction. Graph Burglaries: Five-Year Trend FY 98: 367 FY 99: 291 FY 00: 294 FY 01: 286 FY 02: Mail Fraud Opening quote: "The Postal Inspection Service will bring a wealth of experience, expertise, and resources to our fight against corporate corruption." --Deputy Attorney General Larry Thompson, announcing the Attorney General's designation of the Chief Postal Inspector as a member of the Corporate Fraud Task Force The Mail Fraud Statute is the oldest and most effective of the consumer protection laws, and the Postal Inspection Service is the federal law enforcement agency mandated by Congress to enforce it. To increase their efficiency in investigating suspected mail fraud, Postal Inspectors lead and participate in several joint law enforcement and consumer group initiatives aimed at safeguarding the public's confidence in the U.S. Mail. Educating the public on fraud schemes that involve the mail is an essential component to meeting this goal. Postal Inspectors work cooperatively on joint task force investigations with other law enforcement agencies to take advantage of the expertise of each agency and to leverage resources. Of the approximately 1,900 Postal Inspectors across the nation, about 300 are assigned to mail fraud investigations. Inspectors investigated 3,355 fraud cases this past fiscal year, and Inspection Service analysts prepared more than 84,000 letters in response to mail fraud complaints. During FY 2002, Postal Inspectors arrested 1,634 mail fraud offenders, and 1,453 were convicted as a result of Inspection Service investigations conducted during this and prior fiscal years. In a significant case in July 2002, Postal Inspectors arrested five people in a securities fraud investigation of the nation's sixth largest cable company, which provided service to 5 million subscribers across the country. Inspectors arrested the 77-year-old founder of the company and his two sons in New York. Until their resignations in May, the three men held positions as president and CEO, executive vice president and chief financial officer, and executive vice president, respectively. Inspectors also arrested the company's former vice president of finance in Coudersport, Pennsylvania, and the director of internal reporting at his residence in Port Allegheny in that state. The defendants were charged with securities fraud, wire fraud, and bank fraud for failing to disclose billions of dollars worth of debt for which the company was liable. Directly following the July arrests, Deputy Attorney General Larry Thompson announced the Attorney General's designation of the Chief Postal Inspector as a member of the Corporate Fraud Task Force. Mr. Thompson stated, "The Postal Inspection Service will bring a wealth of experience, expertise, and resources to our fight against corporate corruption." Mail Fraud Against Businesses Postal Inspectors work diligently to protect the business community from being victimized by mail fraud. Examples of Postal Inspection Service case activity in FY 2002 follow. • After Postal Inspectors uncovered evidence that a California television station was the victim of embezzlement fraud, a news director at the station was convicted and sentenced to serve three years in prison, pay $2.4 million in victim restitution, and pay a $60,000 fine. The man submitted false billings under the guise of satellite and election poll expenses, using the money instead to cover personal expenses. • A Marengo, Illinois, woman was sentenced to two years in prison, three years' probation, a $7,500 fine and full restitution to her employer after submitting more than $2.5 million in fraudulent invoices for consulting services that were neither requested by nor performed for her company. Postal Inspectors learned the woman had used her position in the company to process the fraudulent invoices and had collected in excess of $1.7 million before the scheme was discovered. • In Alabama, one man was sentenced to life in prison and ordered to pay over $1.2 million in restitution and another was sentenced to three years and 10 months in prison for an insurance scheme involving people addicted to alcohol and drugs, or who had serious, pre-existing medical conditions, such as the AIDS virus. An Inspection Service investigation revealed that more than 100 life insurance policies the defendants handled were incomplete or inaccurate, although they paid the insurance premiums, controlled the policies, and acted as beneficiaries, collecting more than $1.6 million in proceeds. • An accountant in Dallas, Texas, was sentenced to one year and nine months in prison, three years' probation and more than $321,000 in restitution for an embezzlement scheme that began in 1997. Postal Inspectors found the accountant embezzled funds from his employer by writing and endorsing approximately 50 stolen checks. He mailed several of the bad checks to personal creditors. • A Minnesota man pled guilty to one count of mail fraud and one count of money laundering after embezzling more than $14 million from his employer. Inspectors found he used his position as chief financial officer to issue more than $11 million in cashier's checks to brokerage firms for credit into accounts he controlled, and used company checks to cover personal expenses and buy merchandise, which he resold. To conceal these activities, he altered financial records to reflect higher expenses, more inventory, and a lower gross profit. • Three Kentucky men were indicted after Postal Inspectors revealed their scheme to defraud investors and insurance companies of more than $13 million. They purchased, resold, or processed life insurance policies for people who were HIV positive or sick with AIDS, knowing the insureds had furnished false health information to get the policies. The men arranged for blood from a healthy person to be submitted to insurance companies instead of blood from sick applicants. • After an Inspection Service investigation, a doctor was sentenced to three years in prison, three years' probation, a $30,000 fine, and restitution of $72,145 to the Internal Revenue Service. Inspectors learned the doctor had scammed numerous insurance companies and the Texas Workers' Compensation Commission by mailing fraudulent billings. Most of his patients received gifts to induce them to return for more treatments. The doctor pled guilty to tax evasion related to $212,387 in unreported income derived from the scheme. Quote: John Rigas of cable television giant Adelphia Communications Corporation is led from New York's Main Post Office by a U.S. Postal Inspector on his way to federal court in July 2002. Rigas, his two sons, and two other Adelphia executives were charged with conspiracy, securities fraud, wire fraud, and bank fraud in connection with a scheme to defraud investors, creditors, and the public about the financial condition and operating performance of Adelphia. The scheme allegedly ran from 1999 through May 2002 and involved the failure of Rigas and others to disclose billions of dollars worth of debt for which Adelphia was liable. Mail Fraud Against Consumers The Postal Inspection Service emphasizes the importance of consumer awareness and prevention as the best protection for consumers, but many people still "take the bait." Examples of Postal Inspection Service case activity in FY 2002 follow. • A five-year Inspection Service investigation resulted in a sentence of eight years in prison, a fine of $7.3 million, and court-ordered restitution of $2.3 million for the head of a group of Massachusetts-based companies that defrauded novice inventors. People who mailed in ideas for new inventions were promised assessments by experts in the field. Instead, the companies accepted roughly 80 percent of the ideas, misleading people about the merits of their proposals and convincing them to pay advance fees of $4,000 to $12,000 for patenting and marketing services--which proved to be completely useless. About 34,000 people were defrauded of nearly $60 million. At sentencing, the judge praised Postal Inspectors for their dedicated work investigating and prosecuting this predatory scheme. • A man who ran several envelope-stuffing schemes from the Phoenix, Arizona, area was sentenced to five years' supervised probation, nine months' home detention, and more than $1 million in victim restitution. Inspectors found he placed ads in national publications offering envelope-stuffing opportunities to those who mailed in money to purchase supplies (the amount varied, from $18 to $36). People who mailed money to the anonymous, commercial mail receiving agency (CMRA) address only got a description of how to operate their own envelope-stuffing program, not the actual materials needed to do the job. • A Texas man pled guilty to mail and securities fraud after Inspectors proved he sold about $6.5 million in fraudulent certificates of deposit (CDs) to nearly 80 investors. The man never purchased the CDs, instead using the money he collected for personal and business expenses and to pay earlier investors, to keep the scheme going. Approximately $3.5 million is still owed to his 45 victims, many of whom are elderly citizens. • The owner and operator of a company that purported to invest money on behalf of personal injury victims who were recipients of lawsuit settlements was sentenced to 22 years in prison, five years' probation, a fine of $250,000 and restitution to victims of $66 million. Postal Inspectors found that most victims of the scheme had been seriously injured in accidents, or were widows and orphans of those killed in accidents. The company offered to set up trusts for victims and invest their settlements in U.S. government bonds to bring them a monthly income. Instead of buying the bonds, the owner used their money for personal expenses, unauthorized business transactions, high-risk investments, and real estate. • As a result of an investigation by Postal Inspectors, Sears--a major battery retailer that defrauded the public by selling defective Diehard car batteries--was ordered to pay $62.6 million in fines, $15 million of which will be paid to the Postal Inspection Service, and sentenced to serve five years' probation. Exide, which was also involved in the scheme, was ordered to pay $27.5 million in criminal fines, all of which will be credited to the Postal Service. Inspectors revealed that Sears misrepresented the batteries as being the "longest lasting" and containing certain proprietary features, although the batteries were defective. • An Inspection Service investigation of a multimillion-dollar investment scheme resulted in a sentence for a New Jersey man of one year and six months in prison, three years' probation, and more than $10 million in restitution. The man enticed people to invest in foreign bank guarantees (also called prime bank notes) by promising they would realize high rates of return with little or no risk. He then wired people's money to off-shore accounts he and co-conspirators controlled for their personal use. • Inspectors arrested two employees of a company that prints Business Week magazine who were charged with conspiracy to commit securities fraud after allegedly divulging confidential information about publicly held companies. The defendants are said to have collected--via the U.S. Mail--thousands of dollars in kickbacks for giving two co-defendants "insider" trading information they got from a column in Business Week. Postal Inspectors alleged that on 42 occasions the co-defendants bought company stock mentioned in the column on the day before the magazine's release to the public. The stock was sold the next day--after stock prices increased. The dollar value of the trades exceeded $2 million, and profits totaled approximately $450,000. • In the first of 24 sentencing hearings scheduled in New York for stockbrokers convicted of securities fraud and conspiracy to commit mail, wire, and securities fraud, eight stockbrokers received sentences of 18 to 41 months' imprisonment and restitution ranging from $89,000 to $1.8 million. The defendants, who were investigated by Postal Inspectors, are subject to full financial disclosures during probation. Quote: Victims snookered, criminals caught, and the world is safer thanks to Postal Inspectors. Washington--Northeast Division Postal Inspectors were honored at the U.S. Attorney's Office, Law Enforcement Awards, for their roles in uncovering a $60 million fraud scheme involving American Inventors Corporation (AIC) and American Institute for Research and Development (AIRD). AIC and AIRD allegedly assisted inventors in acquiring patents and marketing their ideas. But between 1980 and 1995, the companies snookered over 34,000 victims with deceptive advertising, misleading sales pitches, and false success stories. The two Inspectors were key to the investigation, interviewing more than 100 victims, employees, and others and reviewing more than a million documents seized by federal agents. Due to efforts, 17 suspects pled guilty. --USPS Newslink, The News Source for Postal Employees, May 10, 2002 Mail Fraud Against State, Local, and Federal Governments Government agencies and health care groups that fall prey to mail fraud scams are afforded the same protection under the Mail Fraud Statute as consumers and businesses. Examples of investigations in FY 2002 follow. • A task force investigation that included Postal Inspectors resulted in sentences of four years in prison, six months' home detention, and $2.5 million in fines for two principals of a family-owned construction company. As general contractors for the minority business enterprise (MBE) program of New York, the defendants conspired with subcontractors to act as "fronts" and fraudulently collect MBE credit on dozens of public works construction projects. Although the subcontractors did no construction work, they received kickbacks of five percent of the contract, resulting in $40 million in losses. • An administrative law judge with the Social Security Administration in Illinois was arrested by Postal Inspectors and charged with seven counts of mail fraud and four counts of unlawful disclosure of claimant files. Inspectors also arrested an attorney in the scheme, who was charged with seven counts of mail fraud and one count of making false statements. The judge allegedly directed claimants who lacked representation to retain the attorney as their counsel and then gave the attorney monthly docket sheets, allowing him to review Social Security files to strengthen claimants' cases. The judge was arrested on the day he was to celebrate his retirement from the bench. • A government contractor was sentenced to two years and six months in prison and her company was ordered to pay more than $421,000 in restitution after Postal Inspectors revealed she sold "O-rings" to the government that did not meet military specifications. As a result, 20 C-130 airplanes were grounded until their O-rings could be replaced, and more than $87,394 in damages occurred to a B1-Bomber when fuel leaked into the weapons bay through the O-rings. Losses to the Department of Defense exceeded $334,000. • A former California accountant was sentenced to three years in prison and ordered to pay more than $206,000 in restitution for a false-billing scheme, uncovered by Postal Inspectors, that defrauded California's Department of Transportation (CDOT) and two credit card companies. As an accountant for CDOT, the man submitted false invoices in the name of a defunct, hazardous waste materials clean-up company for a fictitious chemical spill. The agency mailed him a check to pay for the clean-up, and the man wired the money to Nigeria to finance the construction of a house he was building for his family. He also used information from identity theft victims to fraudulently obtain two credit cards, resulting in further victim losses. • A Baltimore, Maryland, man was sentenced to one year and six months in prison and three years' probation and was prohibited from running a tax-return preparation business during his supervised release. The man filed or helped to file 165 fraudulent federal and state income tax returns using fake Social Security numbers and unauthorized U.S. Congress letterhead. Postal Inspectors discovered the scheme in time and intercepted all refund checks in the mailstream before they reached his post office box. • A man in Monroe, Louisiana, was sentenced to four months with the Bureau of Prisons, four months' detention at a halfway house, and three years' probation. The judge also ordered him to pay $17,464 in restitution to the Internal Revenue Service after he pled guilty to two counts of filing false, fraudulent, or fictitious claims. Inspectors found he set up four post office boxes to receive tax refunds after filing fraudulent returns. The refunds were false because the people named on the returns did not authorize them to be filed, sign the returns, earn the income reported, or withhold taxes. He also named fictitious dependents and falsely claimed an earned income credit. The man got the names and Social Security numbers of dependents for the false returns from an elementary school where he had been employed as a custodian. Deceptive Mail The Postal Inspection Service created the Deceptive Mail Enforcement Team to identify violators of the Deceptive Mail Prevention and Enforcement Act and ensure swift, appropriate investigative attention in such cases. Team members examine questionable promotions and review consumer complaints for compliance with the act. During the past fiscal year, Postal Inspectors stopped 106 deceptive mailing operations, up 54 percent from last year. Postal Inspectors have been encouraged by the finding that many promoters have modified their practices to comply with the law by providing notifications and clearer explanations for customers. Further, the U.S. Postal Service has noted a sharp decline in the number of sweepstakes mailings, as companies adopt new marketing strategies in response to the law. Following are examples of actions taken against promoters of deceptive mailings in FY 2002. • A San Antonio man opened a post office box in the name of the "World Trade Center Charity" and advertised it was raffling a red, white, and blue PT Cruiser valued at $43,500. Inspectors interviewed the man and, after determining it was a bogus offer, obtained a Voluntary Discontinuance against the promotion and placed a "return mail" on the man's post office box to protect consumers. No money was collected. • At the request of a Postal Inspector, a federal judge issued a Civil Injunction and Consent Order to stop a fraudulent promoter from collecting donations for victims of September 11. The promoter claimed to be raising funds for the "purchase of 11,000 body bags." His scheme was halted before consumers lost any money. • As a result of an investigation by Postal Inspectors of the Washington Division, a Settlement Agreement was reached between the U.S. Postal Service and two Canadians operating businesses through the U.S. Mail. The agreement prohibited the men and any company associated with them from using the U.S. Mail for weight-loss products, diet products, diet patches, fat burning or dissolving products, nutritional supplements, or health food. They also agreed to pay a $25,000 fine. Inspectors found the Canadians did not solicit customers in their own country for the fraudulent products. Fraud on the Internet Cybercrime presents unique challenges to law enforcement groups. Traditional mail fraud schemes rebound with new success on the Internet, which expands the victim base and increases anonymity for the perpetrators. Postal Inspectors investigate Internet fraud when the U.S. Mail is used to further the scheme. • The founder and chief executive officer of a multi-level Internet marketing group in Boca Raton, Florida, was sentenced to 11 years and three months in prison, three years' probation, and more than $13.5 million in restitution. Customers were told they could buy "self-replicating" Web sites for $295, which would revolutionize Internet commerce by enabling them to become "cyber managers" and generate countless wealth while working from their homes. Inspectors determined there were no such sites. The officer used customers' money to pay for lavish personal items. • In Denver, Colorado, a woman was sentenced to two years in prison and three years' probation for defrauding people at eBay and Yahoo Internet auction sites. Postal Inspectors disclosed the woman and her daughter used fictitious and stolen identities when placing items for bid on the sites and took payments from the highest bidders without ever providing the goods. They used the same fake identities to fraudulently open bank and credit card accounts and apply for home mortgages. Victims lost about $15,000. • A South Carolina man was sentenced to 11 months in prison, three years' probation, and more than $21,000 in restitution for defrauding 25 eBay customers. He offered computers, cameras, digital recordings, and other electronics for sale at reduced prices. Customers submitted payments via the U.S. Mail to post office boxes he rented, but they never received the advertised goods. Graphic: Beware of Digital Thieves. Internet fraud schemes have cost consumers at least $4.3 million so far this year, up from $3.3 million in all of 2000, according to complaints received by the National Consumers League's fraud center. The true cost of these scams is probably much greater. Many victims do not report being ripped off. Average loss per Internet fraud victim was $427 for 2000 and $636 for 2002 according to the National Consumers League. The 2001 figure represents January through October statistics. The top Internet frauds for 2001 from the period January through October were online auctions - 63%, general merchandise sales - 11%, Nigerian money offers - 9%, Internet access service - 3%, and frauds on adult and game sites - 3%. The costliest scam: The average loss per victim of Nigerian money offers is $6,542. Victims of work-at-home schemes lost the least on average: $120 per person. Mail Order Fraud At the spring meeting of the Business Mailing Industry Task Force (BMITF) in Boston this past year, the Postal Inspection Service announced a new Web site to support communications between the business mailing industry and law enforcement groups dedicated to the prevention of mail order fraud. The Promotion Marketing Association will oversee Web site activities and work with the Inspection Service staff to implement regular updates. Password-protected links guide authorized users to information on mail fraud, prevention guidelines, and best industry practices, greatly facilitating communications between group members. Following are examples of mail order fraud investigated by Postal Inspectors during FY 2002. • A man was sentenced in Camden, New Jersey, to two years' probation, $40,000 in restitution, and an additional $20,000 in voluntary restitution for rebate fraud. An Inspection Service investigation revealed he mailed thousands of fraudulent rebate applications with fictitious or altered information to receive rebates for items he never purchased. The defendant mostly mailed in rebates for computer software worth $10 to $100 per item and used a computer to create the needed "qualifiers"--such as cash register receipts and universal product code (UPC) labels. To extend the scam and hide his identity, he used addresses of his family, friends, and others to receive the rebates. • Two individuals were indicted by a federal grand jury in Charleston, South Carolina, and charged with seven counts of mail fraud for scamming a well-known music company. The suspects ordered 7,000 compact discs worth $58,000 and failed to pay for them--they protected their identities by using post office boxes and CMRAs rented under fictitious names in 10 cities throughout the state. One of the defendants agreed to cooperate with Postal Inspectors, resulting in the indictments of a music store owner and another music store manager, who bought the discs for $3 to $5 each and sold them at a substantial profit. • Two Philadelphia men pled guilty to two counts of mail fraud and two counts of filing false income tax returns as the result of an investigation by Postal Inspectors. From 1993 through 1997, the men mailed more than 1.9 million unredeemed, manufacturers' cents-off coupons, valued at more than $1 million, to coupon redemption centers. The two failed to report income of more than $93,000, which they had collected in just one year from the scheme. Telemarketing Fraud Americans receive thousands of unsolicited phone calls from telemarketers each year trying to sell a variety of products, with older citizens often the target. Many offers are legitimate, but unscrupulous telemarketers can be the smoothest of operators, successfully swindling people out of millions of dollars. Indeed, those on fixed incomes who fall prey to these schemes can lose their entire life savings. Telemarketing fraud robs Americans of billions of dollars annually. During FY 2002, Postal Inspectors shut down 40 illegal telemarketing operations, a 43 percent increase over the previous year. Examples of cases follow. • Postal Inspectors disrupted a $9.3 million business-to-business telemarketing scam in Philadelphia, and the operators were charged with mail fraud and money laundering after thousands of U.S. businesses claimed to be defrauded. The operators allegedly charged companies exorbitant prices for lighting and maintenance supplies, in one instance billing a company $390 for trashcan liners worth $19.99, and in another case charging $945 for florescent lights worth $141. • The owner of an industrial supply company in Philadelphia was sentenced to two years in prison, three years' probation, and a $10,000 fine for a mail fraud and money laundering scheme. Postal Inspectors determined the owner had defrauded roughly 9,000 companies nationwide of more than $8.7 million using fraudulent statements, concealing material facts, and charging exorbitant prices for maintenance supplies. To induce companies to pay the inflated invoices, the promoter encouraged purchasing agents to accept gifts or kickbacks. • As a result of a joint investigation by Postal Inspectors from the Philadelphia Division and Toronto Area Royal Canadian Mounted Police, three Canadians were arrested for a cross-border telemarketing scheme targeting elderly U.S. citizens. Victims were told they had won a Cadillac and a cash prize, but had to mail a fee to cover taxes, licenses, and transportation expenses before they could claim it. Approximately 100 people lost more than $250,000. • A final settlement was announced in a lawsuit filed against operators of an alleged telemarketing scheme that operated in Portsmouth, Virginia. The settlement liquidated the corporation's assets and certain personal assets of the defendants and directed the money to be used as refunds, expected to total approximately $2.5 million, to victims of the alleged fraud. In addition to being permanently banned from offering telemarketing loans, the operators may not participate in any telemarketing activities or lending services for three years; after that time, they must post a $500,000 bond before engaging in such activities. Administrative Actions Related to Mail Fraud In addition to criminal prosecution, Postal Inspectors frequently rely on civil or administrative actions to deter mail fraud. Below is a list of actions taken this fiscal year to help stem losses from various fraud schemes. Graph: FY 2002 Administrative Actions: 76 Complaints filed by the Law Department, 35 Consent Agreements signed, 35 Cease & Desist Orders issued, 46 False Representation Orders issued, 151 Withholding Mail Orders issued, 1 Temporary Restraining Orders issued, 321 Voluntary Discontinuances signed and 1 Civil Injunction. Work-at-home scams target those who need money but are unable to work outside their residences. The scams usually promise big earnings and do not require prior job experience. Postal Inspectors take pride in putting the scammers out of business. The Postal Inspection Service conducted 60 such investigations during FY 2002 and reported 10 arrests, four Cease and Desist Orders, three Withholding Mail Orders, and 14 Voluntary Discontinuance Agreements. A Withholding Mail Order (Title 39, USC 3003) enables the Postal Service to withhold an addressee's mail if they are using a false or assumed name, title or address to conduct or assist with activity that violates 18 USC 1302 (lottery), 1341 (mail fraud) or 1342 (use of a fictitious name or address), until proper identification is provided and the person's right to receive the mail is established. Under 39 USC 3004, the Postal Service may withhold mail if the address is not a person's residence or business address, allowing them to remain anonymous. Examples of Postal Inspection Service case activity related to administrative actions in FY 2002 follow. • A False Representation Order was issued against the promoter of a weight-loss scam based on his breach of a previous order to cease and desist. A settlement agreement was then reached between the promoter and the Postal Service permanently prohibiting him from using the mail for such activities in the United States; the promoter also agreed to pay the Postal Service a $100,000 penalty. Using several names, the promoter solicited customers through the mail to buy diet and weight-loss products and mail their payments to addresses across the country. • A Withholding Mail Order was served on a Swiss company that rented mailboxes worldwide under various psychics' names. Postal Inspectors learned the promoter solicited senior citizens almost exclusively, leading them to believe a psychic would perform a spiritual reading based on information they provided. All respondents, it turned out, received virtually the same reading. Victims paid between $14 and $99 and were encouraged to also purchase amulets of colored glass or carbon that would "protect" them. Company principals hired a San Francisco attorney to represent their interests, and the attorney agreed to have his clients sign a Cease and Desist Order and stop soliciting U.S. citizens. • The Postal Service's judicial officer issued a Withholding Mail Order for mail addressed to a company operating from several addresses in the Northwest. The company used addresses at commercial mail receiving agencies (CMRAs) to anonymously conduct a lottery and sweepstakes scam in which respondents could spend from $9.95 to $29.95 for chances to win $300,000 to $2.5 million in prizes. All mail received at the addresses was reshipped to Vancouver, British Columbia. • The Postal Service's judicial officer issued 70 Withholding Mail Orders for U.S. addresses, 65 of which were CMRAs, used by a criminal enterprise with an elaborate network that used more than 100 false IDs and addresses in the United States and Canada to insulate it from detection. Inspectors alleged the ring committed tax fraud, insurance fraud, and credit card fraud that claimed thousands of victims, but expect the withholding orders will prevent further losses. All withheld mail is returned to senders. • A Consent Agreement and a Cease and Desist Order were issued by the U.S. Postal Service's judicial officer against a man who rented addresses at CMRAs under various names in Tampa, Florida. Postal Inspectors found he sent direct mail solicitations with misrepresentations about programs people could buy for $29.99 to $49.99 that would earn them large sums of money in a short time with little or no effort. After people bought the material, he added new requirements for "bonus payments." The Cease and Desist Order prohibits false representations, requires that refunds be provided to requestors, and states that those who respond to the solicitation receive the money as advertised. Fraudulent Foreign Lottery Mail To date, 39 False Representation Orders (FROs) have been issued against foreign lottery promoters. FROs enable Postal Inspectors to stop victims' mail (most of which contain checks) from leaving the United States and return mail to senders, thereby preventing losses. To further combat illegal foreign lotteries, Postal Inspectors work with U.S. Customs Service officials to stop such offerings from entering the U.S. mailstream, and Customs agents contact Inspectors when they find such mail during border searches. Inspectors detain the mail and provide samples to the Postal Service's Law Department to determine if they meet mailing standards. If the pieces are considered nonmailable, the mailer is notified that the material is subject to destruction and may appeal the notice. If the mailer fails to appeal or loses the appeal, the detained mail is destroyed upon the issuance of a Destruction Order. During this reporting period, roughly 849,000 pieces of foreign lottery mail were destroyed prior to entering the mailstream. Since the initiative began in 1994, approximately 14.6 million pieces have been destroyed. Child Exploitation Opening quote: Since the passage of the Child Protection Act of 1984, Postal Inspectors have conducted 4,474 child exploitation investigations, resulting in the arrests of 3,711 individuals who used the mail in violation of federal child exploitation laws. Child pornography and the sexual exploitation of children are tragic, heart-rending crimes that plague law enforcement agencies worldwide. Child pornographers who assume (incorrectly) the U.S. Mail will provide a safe, reliable, and anonymous vehicle for exchanging such material are aggressively targeted by U.S. Postal Inspectors, regarded internationally as leaders in the fight against child exploitation. In keeping with this reputation, the Chief Postal Inspector was offered and accepted a seat on the National Center for Missing and Exploited Children's (NCMEC's) Board of Directors in FY 2002. The Postal Inspection Service has developed strong, cooperative relations with the NCMEC over the years, and it is expected that representation on its board will foster an even more effective partnership through mutual, coordinated efforts to protect children from sexual abuse and exploitation. NCMEC Cyber Tipline reports are reviewed at Inspection Service National Headquarters and forwarded to field Inspectors who are child exploitation specialists for investigation or referral, as appropriate, and an Inspector is assigned full-time to the NCMEC. The Postal Inspection Service is an active member of the Attorney General's Federal Agency Task Force on Missing and Exploited Children and participates on the Attorney General's Advisory Committee Working Group on Child Exploitation. A Postal Inspector is assigned full-time to the FBI's Innocent Images Task Force, a national initiative based in Calverton, Maryland, and Inspectors work closely with federally funded Internet Crimes Against Children Task Forces strategically located across the country. The exchange of child pornography by mail is often accompanied by communication over the Internet. Child molesters and pornographers often use the Internet to seek potential victims, communicate with like-minded individuals and locate sources of child pornography. Over the past several years, there has been an increase in unlawful computer transmissions and Internet ads for child pornography, which occur hand-in-hand with the trafficking of child pornography videotapes and computer disks through the mail. In FY 2002, 60 percent of child exploitation cases investigated by Postal Inspectors involved computers, as well as postal violations. Since the passage of the Child Protection Act of 1984, Postal Inspectors have conducted 4,474 such investigations, resulting in the arrests of 3,711 individuals who used the mail in violation of federal child exploitation laws. In addition to a tie-in with Internet transactions, Postal Inspectors have long seen a correlation between child molesters and those who sell, purchase, and trade child pornography. In 1997, Postal Inspectors first began compiling statistics in these areas: • Postal Inspectors have stopped 476 child molesters (roughly 36 percent of 1,327 arrests). • Inspectors rescued 530 child victims from further abuse. • Approximately 52 percent of all digital evidence examinations performed by forensic specialists from the Inspection Service's Forensic and Technical Services Division involve child exploitation investigations, and that number is expected to increase. In FY 2002, Postal Inspectors arrested 249 individuals for child sexual exploitation offenses and reported 256 convictions in such cases from this and prior fiscal years. Incident to a search of a suspect's property, Postal Inspectors often find evidence that the target of the investigation is also a child molester. As a result of Inspectors' casework this past fiscal year, 93 child molesters were identified and 96 child victims saved from further abuse. Examples of such cases investigated by Postal Inspectors in FY 2002 follow. • Postal Inspectors arrested a 35-year-old man, who was an intensive-care nurse at several hospitals in the Chicago area, after he unlawfully received two videotapes of child pornography by mail. The defendant pled guilty and admitted that, between 1995 and 2000, he sexually assaulted as many as 18 young girls and women under his care. One victim was only nine years old, and other victims were attacked when in comas, unconscious, or so heavily sedated they were unable to defend themselves. The former nurse was sentenced in October 2001 to six years and six months in prison and three years' probation. • The mayor of Ashland, Kentucky, and a local businessman were indicted in June 2002 as co-conspirators in receiving child pornography by mail and possessing child pornography. Inspectors identified the men during an undercover investigation, resulting in the mayor's resignation from office on May 31, 2002, three days after Inspectors searched his home. • Postal Inspectors working with local law enforcement officers arrested the head custodian of the Rockwood Elementary School in Oklahoma City on May 20, 2002, after he received child pornography through the mail and attempted to hide it in the school's boiler room. After news of the arrest spread, several female students came forward and reported inappropriate touching by the custodian. Inspectors served search warrants at the man's home and a private storage facility and seized hundreds of videotapes, student photographs, and swatches of girls' hair stored in labeled envelopes. The investigation expanded considerably after a number of elementary school students were identified on the videotapes. The custodian is being held in federal custody without bond. • Postal Inspectors identified a man from Whitfield County, Georgia, as part of a child pornography ring known as the "Spanking Club," a loose-knit group of individuals in the United States and Canada who derived sexual pleasure from the severe spankings of children. He was convicted of producing and mailing videotapes depicting the sexual abuse of his own children. Videos trafficked by the club's members depicted extreme child abuse and cruelty. The suspect was sentenced on November 26, 2001, to 10 years in prison. • Another member of the Spanking Club, from Vanceburg, Kentucky, was sentenced in March 2002 to 20 years in federal prison with no possibility of parole for producing and mailing videotapes depicting the brutal and sadistic sexual abuse of his own children. Postal Inspectors and FBI agents have arrested other members of the group in Alabama, Florida, Illinois, New York, and Wisconsin. • Acting on a tip from the National Center for Missing and Exploited Children, Postal Inspectors and local law enforcement officers arrested an Elizabeth, New Jersey, man in April 2002 for sexually assaulting children, producing child pornography, and distributing child pornography by mail to the Netherlands. Investigators found photographs on his computer depicting child sexual abuse for distribution on the Internet. Four victims ranging from eight to 13 years of age were rescued from further sexual abuse and exploitation. • A man in Davenport, Iowa, who regularly babysat neighborhood children, pled guilty in May 2002 to producing child pornography. Postal Inspectors searched his home after receiving a tip that he had received child pornography by mail from foreign sources. Inspectors found videotapes of the man sexually abusing four young boys, one of whom was only six years old. • A man in Cheektowaga, New York, was sentenced in July 2002 to 15 years and nine months in federal prison for producing, possessing, and mailing child pornography. An investigation by Postal Inspectors and FBI agents revealed the man had sexually abused his nine-year-old grandson and had been doing so since the boy was three years of age. Further, he videotaped the abuse and mailed the videotapes to others; Inspectors found more than 100,000 child pornography images on his computer. The offender was previously arrested in 1987 on state charges for raping his 16-year-old daughter and sodomizing his 14-year-old son, but was sentenced to only two years of probation for those crimes. • A Roman Catholic priest in Baltimore, Maryland, pled guilty on July 16, 2002, to receiving child pornography after his arrest by Postal Inspectors, FBI agents, and Baltimore City detectives. Inspectors joined the investigation at the request of Baltimore police after they learned the priest was purchasing items of a questionable nature through eBay. They found the priest had spent in excess of $6,000 on more than 110 items in a two-month period, which he received at the church rectory and his parents' home. The majority of purchases were photographs and videotapes involving young boys. • In September 2002, Inspectors arrested an Ecuadorian man who was a regular visitor to the United States and charged him with distributing child pornography by mail. He was indicted later that month on charges of conspiracy to produce and ship child pornography and for possessing child pornography. Inspectors alleged he used a commercial mail receiving agency to sell child pornography, much of which he produced himself in South America and smuggled into the United States. Quote: "The U.S. Postal Inspection Service provides an important role in tracking sexual predators, because child pornographers often use the mail to purchase obscene materials off the Internet. In Operation Avalanche, Postal Inspectors created an undercover Web site which they used to bring down what is believed to be the largest commercial child pornography enterprise ever encountered by law enforcement authorities in the United States. They started in Texas; it ended in Texas--because of the hard work of the Postal Inspectors, the good work of prosecutors, and the sentencing of one tough federal judge." --President George W. Bush, from his speech "Remarks by the President on Children's Online Safety" Quote: The U.S. Postal Inspection Service was presented with the National Exploited Children's Award for Operation Avalanche, a two-year investigation that successfully brought down a husband-and-wife team who operated a multimillion-dollar company offering Web sites for child pornography. The principal operator received an unprecedented lifetime sentence in federal prison, and more than 120 others related to the enterprise were arrested across the country. A Postal Inspector from the Tampa Field Office of the Florida Division also received a National Missing Children's Award for her safe recovery of Lindsay Shamrock, a teenaged girl who was lured via the Internet and the U.S. Mail from her home in Mulberry, Florida, to Greece by a German national, who was arrested and charged with cild abduction and exploitation of a minor. Illegal Drugs and Trafficking Opening quote: Postal Inspectors report that the Internet is used in conjunction with the U.S. Mail in approximately 15 percent of its narcotics investigations. In Operation Liquid Mail, Inspectors arrested 120 customers who ordered and received illegal drugs via the Internet and U.S. Mail at 84 locations across the country. The Postal Inspection Service interdicts mailings of illegal drugs and drug proceeds to protect postal employees from the violence often related to drug trafficking and to preserve the integrity of the U.S. Mail. Working in concert with other law enforcement agencies, Postal Inspectors arrested 1,385 individuals this fiscal year for drug trafficking and money laundering via the U.S. Mail. Seizures from the mail included roughly 4,888 pounds of illegal narcotics and approximately 770,644 units of steroids. Postal Inspection Service investigations also resulted in the seizure of about $1.6 million in cash and monetary instruments, five vehicles, and 66 firearms. Postal Inspectors from New York and agents from the Drug Enforcement Agency and other state, local, and federal law enforcement agencies initiated Operation Liquid Mail, an investigation that began in January 2002 of the activities of a Canadian man who was trafficking large quantities of GBL (gamma-butryrolactone) via the U.S. Mail and the Internet. GBL is used to manufacture GHB (gamma hydroxtbuyric acid), a central nervous system depressant banned by the Food and Drug Administration in 1990 and commonly referred to as the "date rape" drug; it can result in unconsciousness, seizures, severe respiratory depression, or coma. The man set up Web sites to process orders for the drug, which he mailed to customers around the world, collecting several millions of dollars in revenue. Investigators arrested him in Quebec on September 18, 2002, at which time they seized from him banking records and two computers. A search of a related warehouse resulted in the recovery of 605 gallons of GBL, 55 gallons of 1,4 butanediol, 350 cases of 1,3 butanediol, and 600 pounds of potassium hydrochloride. Postal Inspectors also identified and arrested 120 of the man's business customers at 84 locations across the country. The following paragraphs are examples of other Postal Inspection Service investigations of illegal drug trafficking via the mail in FY 2002. • Postal Inspectors and San Diego Narcotics Task Force agents arrested a man on May 16, 2002, for distributing anabolic steroids, ketamine, and other controlled substances via the U.S. Mail. The suspect advertised products and received orders via the Internet and then distributed the products by Express Mail or Priority Mail. He allegedly distributed approximately $5,000 worth of controlled substances per day to more than 300 customers across the country. • On May 22, 2002, Postal Inspectors and agents from the Marietta-Cobb-Smyrna (MCS) Narcotics Unit and U.S. Customs arrested a man for selling illegal steroids over the Internet and distributing them via the U.S. Mail. The defendant rented several addresses at a commercial mail receiving agency (CMRA) in Marietta, Georgia, allegedly in order to traffic illegal narcotics to other addresses, including a CMRA in San Diego. The Postal Inspection Service's Computer Forensics staff analyzed evidence seized under warrant from the suspect's residence and alleged that each of his customers generally placed orders exceeding $2,000 for the steroids. • On October 3, 2001, two men were sentenced for their roles in distributing eight pounds of crack cocaine and nine pounds of heroin from Vallejo, California, to Rock Island, Illinois, via Express Mail. The men were sentenced to 27 years and 22 years, respectively, in federal prison. They hid the narcotics in vacuum-sealed cans of tuna fish before mailing them. During the execution of a search warrant by Postal Inspectors and Rock Island narcotics officers, one of the men tried to elude capture by jumping out of a second-story apartment window. He broke both his legs in the fall, and was admitted to a secured unit in a local hospital. After receiving medical attention, the man escaped from the secured unit and remained a fugitive for over two years before being located and arrested in Omaha, Nebraska. • In December 2001, a Des Moines, Iowa, man was sentenced to 25 years in federal prison for orchestrating a scheme to distribute methamphetamine and narcotics proceeds through the U.S. Mail. An investigation by Postal Inspectors led to the disruption of a ring of six suspects who conspired to distribute approximately 30 pounds of methamphetamine throughout the Midwest. Four others in the ring received federal sentences ranging from four to 17 years in prison. A sixth member of the ring remains an international fugitive. • Postal Inspectors in St. Louis, Missouri, concluded a two-year investigation in February 2002 of four men responsible for distributing more than 40 pounds of cocaine and narcotics proceeds via the U.S. Mail and other private couriers. During the course of the investigation, Inspectors seized $111,000 in cash, five weapons, bulletproof vests, and fake police insignia used by the group. The men relied on a local business to conceal their transactions. They were sentenced to federal terms ranging from four to 10 years in prison. • A three-year investigation of a major, multistate drug distribution ring investigated by the U.S. Postal Inspection Service and the Jackson County, Missouri, Drug Task Force concluded in FY 2002. The ringleader orchestrated the distribution of 100 pounds of methamphetamine and other narcotics in the Kansas City area. Ring members transported the drugs from Los Angeles via Express Mail and Federal Express to addresses in Missouri and Kansas. Twenty suspects were indicted as a result of the investigation, and all pled guilty in federal court, receiving sentences ranging from five to 17 years in prison. • On May 16, 2002, four Illinois men were indicted on charges of conspiracy to deliver controlled substances. The four were arrested one month earlier when they attempted to sell approximately 86 grams of methamphetamine to an undercover Postal Inspector assigned to the High Intensity Drug Trafficking Area (HIDTA) Designer Drug Task Force. In conjunction with three other arrests in October 2001 and another in December 2001, this latest group of arrests marked the end of a Filipino ring that had been distributing crystal methamphetamine in Chicago. The ring used various methods, including U.S. Mail, private couriers, and body carriers to distribute and transport the illegal drugs. The methamphetamine was produced in the Philippines and Mexico and then smuggled into the United States. Distributors in Las Vegas and California brought the drugs to the Chicago area for distribution and sale. Quote: Postal Inspectors in Philadelphia and Los Angeles initiated an investigation in June 2002 of two Philadelphia brothers who were distributing methamphetamine via Express Mail between the two cities. Inspectors discovered the men were secreting methamphetamine inside caulking tubes and transporting the tubes to Philadelphia via Express Mail. As with many drug networks, dealers used the U.S. Mail along with other transportation methods to distribute narcotics and narcotics proceeds. After taking the brothers into custody, Inspectors identified their conspirators who drove the methamphetamine from Winston-Salem, North Carolina, to Philadelphia. Inspectors additionally arrested another two conspirators and seized 26 pounds of methamphetamine secreted in two tires in the back of their vehicle; more of the illegal drug was found hidden in the motor housing of the windshield wipers. Employee Drug Investigations Postal Inspectors investigate the selling of narcotics by postal employees while on postal property or on duty. Information on the possession or personal use of illegal drugs by postal employees is referred through postal management to the Employee Assistance Program for attention. In FY 2002, Postal Inspectors arrested 34 postal employees suspected of possessing or using illegal drugs on duty, and 24 employees were removed from the Postal Service. Following are examples of Postal Inspection Service investigations of narcotics-related offenses by postal employees during FY 2002. • Postal Service managers requested Inspectors' assistance in addressing suspected illegal narcotics activity by employees at the Englewood Station in Chicago, Illinois. A subsequent investigation resulted in the arrests of three postal employees and an accomplice. A letter carrier was placed on emergency suspension from postal duties following his arrest on May 16 for distributing a controlled substance. Two mail handlers were also arrested and suspended, and the outside accomplice was arrested. • Following a two-year investigation by Postal Inspectors, a former postal supervisor, who was an "acting" postmaster in Massachusetts, was sentenced in January 2002 to eight years and one month in prison and four years' supervised release. Inspectors determined that, between 1990 and 1998, the former employee opened post office boxes for the purpose of receiving marijuana through the mail. Each package weighed between 20 and 30 pounds. Quote: Postal Inspectors use surveillance cameras to identify customers suspected of mailing prohibited items, including illegal drugs, via Express Mail. Asset Forfeiture and Money Laundering Opening quote: Forfeiture activity by Inspectors this fiscal year netted $6.7 million. The Postal Inspection Service also equitably shared $11.4 million with other federal, state, and local law enforcement agencies. Asset Forfeiture The Postal Inspection Service uses asset forfeiture laws to combat financial crimes, as well as drug trafficking and child exploitation conducted through the mail. In FY 2002, the USA Patriot Act expanded the government's money laundering and asset forfeiture authority. President Bush signed the act, formally titled "Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA Patriot) Act" on October 26, 2001. Also referred to as "the Anti-Terrorism Act," it made sweeping changes to the criminal laws related to wiretapping and electronic surveillance and contained a number of provisions related to money laundering and asset forfeiture that are useful to prosecutors in terrorism cases and in a broad range of other areas. Key forfeiture provisions include these portions of the act: • 18 USC 981 was amended to authorize civil and criminal forfeiture of all assets, foreign or domestic, of any individual or organization engaged in terrorism or terrorist activity. • The act of smuggling currency into or out of the United States was made a criminal offense, and all property involved in such an offense is subject to civil and criminal forfeiture. • 18 USC 1960 was expanded to cover licensed businesses that transmit funds when the defendant knows they were intended to be used for an unlawful purpose; civil forfeiture for Section 1960 offenses was also authorized. • Additional foreign crimes, including public corruption, were added to the definition of "specified unlawful activity" for money laundering offenses,; and civil and criminal forfeiture of both the proceeds from and the property used to facilitate such offenses was authorized. • The government is now authorized to seize and forfeit money in U.S. correspondent accounts of foreign banks if the funds forfeitable under U.S. law were deposited into an account in the foreign bank overseas. • The U.S. Attorney General was authorized to serve administrative subpoenas on foreign bank accounts for records related to foreign transactions. The act also contained expanded money laundering and forfeiture authority in a number of minor areas. The bill authorizes civil and criminal forfeiture for conspiracies to commit Title 31 currency reporting offenses, and possibly for failure to file a Form 8300 report; expands the government's civil enforcement authority under 18 USC 1956(b); authorizes courts in criminal forfeiture cases to order a defendant to repatriate assets to the United States; expands the fugitive disentitlement doctrine, 28 USC 2466, to apply to corporate claimants; and expands the courts' authority under 28 USC to enforce foreign forfeiture judgments, including foreign restraining orders. Postal Inspectors seized 661 assets and secured 428 forfeitures in FY 2002. Forfeiture activity by Inspectors this fiscal year netted $6.7 million. The Postal Inspection Service also equitably shared $11.4 million with other federal, state, and local law enforcement agencies. Following are examples of Postal Inspection Service asset forfeiture cases from FY 2002. Beginning in 1989, San Diego Postal Inspectors investigated a cross-border mail order business run by a couple over a 15-year period. The man had been the subject of Postal Service administrative actions and Inspection Service criminal investigations since the early 1980s. Inspectors determined that, from the late 1980s until 1998, the couple sold such products as Live Cell Therapy (a "life extension" and "cure" for numerous diseases, including brain disorders), Energy Complex (a "cure" for impotence), and Neutralizer GH (a "cure" for obesity). Promotional literature claimed the products were "banned in the U.S." and "sold only in Mexico," but Inspectors determined they were actually multipurpose vitamins purchased in Southern California. The couple also failed to honor their "100 percent money-back guarantee" for dissatisfied customers. People lost more than $6 million to the pair, who used victims' money to purchase personal luxuries, including two homes in California--one in Newport Beach valued at more than $2 million, and another in Palm Desert worth $565,000. After signing a plea agreement in October 2001, the man was sentenced on May 23, 2001, to 33 months in prison and three years' probation and was ordered to forfeit to the United States either $1.5 million or his two homes and a 1998 Maxum yacht; he was also ordered to pay to his victims half of the $69,781 he scammed from them (the other half will be paid by his wife), a criminal fine of $7,500, and any unpaid taxes to the Internal Revenue Service. He failed to produce the $1.5 million, however and, in November 2001, the United States filed quit-claim deeds and complaints for forfeiture and declaratory relief on the properties. On December 13, 2001, Postal Inspectors seized the yacht under federal warrant. Quote: A task force of Postal Inspectors from the Mid-Atlantic Division investigated a North Carolina Department of Transportation employee who used his position to influence state projects, resulting in substantial property value increases to property he owned. A forfeiture check in the amount of $330,000 was presented to the Postal Inspection Service, representing its equitable share of the $1 million forfeiture. Money Laundering Because the Postal Service is considered a non-bank financial institution and a money services business, it must comply with the reporting requirements of the Bank Secrecy Act (BSA). The Postal Inspection Service supports the Postal Service's BSA compliance efforts by analyzing postal money order transactions and investigating criminals who use them and other postal financial products to launder illicit proceeds and avoid federal reporting requirements. Beginning in 2002, the Postal Inspection Service joined Operation Green Quest, a multi-agency task force headed by U.S. Customs that identifies and disrupts terrorist funding sources. Illicit proceeds may include money gained through narcotic sales, the smuggling of illegal aliens, tax evasion or the selling of counterfeit merchandise. Following are examples of money laundering cases investigated by Postal Inspectors during the past fiscal year. • Postal Inspectors from the Rocky Mountain Division and agents from the Arizona Joint Terrorism Task Force arrested an Iranian national on October 5, 2001, for conducting an illegal money transmitting business and violating the International Emergency Economic Powers Act and money laundering laws. While the indictment and arrest of the defendant are not the direct result of the terrorist attacks of September 11, 2001, information developed during the investigation is being analyzed to identify possible links between the man and those responsible for the attacks. The indictment alleges the defendant owned, operated, and controlled several businesses involved in illegal financial activities. From January 1997 through October 2001, he allegedly transferred more than $19 million to the Islamic Republic of Iran. • A multi-agency task force that included Postal Inspectors from the North Jersey/Caribbean Division arrested four men in November 2001 on charges of money laundering, and one of the group was also charged with mail fraud. Investigators alleged the men laundered more than $2.9 million in fraudulently obtained Medicaid and Medicare proceeds through shell companies, third-party entities, bank accounts, and investment accounts. At least 96 structured purchases of Postal Service money orders and bank money orders were allegedly deposited into one man's investment account. Illegal proceeds were said to be obtained through the operation of a pharmacy in Newark, New Jersey, owned by two of the defendants. They are alleged to have submitted more than $2.5 million in false and fraudulent claims to Medicaid and Medicare for prescription medications that were neither purchased nor dispensed and used two pharmacies to submit another $480,000 in fraudulent Medicare claims. Investigators noted that several of the Medicaid recipients were deceased at the time they allegedly made purchases at the pharmacies. • Two Russian nationals pled guilty on May 30, 2002, after they were arrested by Postal Inspectors from the Northeast Division in February 2002 on money laundering charges. Inspectors found numerous stolen items, including unnegotiated Postal Service money orders. An analysis of the money orders disclosed a clear pattern of structured purchases made at 27 post offices across the United States. The aggregate value of the money orders is $77,700. • Postal Inspectors from the Northeast Division also participated in an investigation of a suspect in Fort Ann, New York. The man bought more than $50,150 in postal money orders in structured purchases, deposited them into his industrial-waste business account, and used the funds to purchase a condominium in Ft. Pierce, Florida. The suspect had previously been arrested on drug trafficking charges and, while out on bail, liquidated many of his assets and fled the country. He was living in Israel when he alerted American authorities of his desire to return to the United States and cooperate. He appeared in court and pled guilty on April 24, 2002, to a two-count information charging him with narcotics and money laundering violations. • Postal Inspectors arrested a New York man on July 3, 2002, for purchasing 267 postal money orders--worth $185,284.46--from 18 postal facilities to avoid federal reporting requirements. The investigation revealed the defendant deposited the money orders into seven bank accounts he held in Long Island, New York; Dallas, Texas; and Honolulu, Hawaii. During the same period, he made 30 cash deposits totaling $167,064. Quote: In a case investigated by Postal Inspectors in the past fiscal year, a company sought investments from people who won large settlements in personal injury suits. The company's owner used investors' money to fund a grocery store venture (which failed) and to purchase luxury items for his own use. He pled guilty to conspiracy charges just before his wife pled guilty to related charges. The husband was ordered to pay $66 million in restitution to victims, but lawyers familiar with the case said it is unlikely anywhere near that amount of money will be available. The couple fled to Belize, Central America, to avoid prosecution and to protect their assets. Midwest Division Inspectors and the Postal Inspection Service's Office of Counsel worked with the U.S. Attorney's Office of the Southern District of Illinois to apply the USA Patriot Act in the seizure of more than $1.6 million of the couple's funds from Hibernia Bank (funds of the Provident Bank and Trust of Belize), a U.S. correspondent bank. The funds had originally been deposited to a bank in Belize. The couple's 67-foot, 1979 Berger yacht was seized by U.S. Marshals on January 8, 2002, and transported to Ft. Lauderdale, Florida, where it was sold through an interlocutory sale that allows for the disposal of seized property that is either expensive to maintain or highly perishable. Revenue and Asset Protection Opening quote: Postal Inspectors determine which products and sources of revenue pose the highest financial risk to the Postal Service and target their investigations accordingly. Revenue Investigations Postal Inspectors determine which products and sources of revenue pose the highest financial risk to the Postal Service and target their investigations accordingly. For the past several years, postage fraud schemes involving large-scale business mailers have been a priority, especially mailers that use metered postage and those that claim presorted discount rates of postage. Postal Inspectors measure the effectiveness of their revenue investigations by the number of postage fraud schemes they identify and successfully resolve. In addition to stopping the scheme, the "resolution" may involve sending the perpetrator to jail, recouping lost funds if possible and, as appropriate, collecting fines and penalties from the perpetrators. The chart at right summarizes Postal Inspection Service revenue investigations this past fiscal year. In FY 2002, Postal Inspectors concluded more than eight major investigations involving the underpayment of postage by large-scale, commercial mailers. Postage fraud schemes are generally complex because of the many postal operations and postage rate structures that must be understood, and can pose a problem for prosecutors trying to present the case to a jury. In this respect, the past fiscal year has been noteworthy. In a significant case that concluded in July 2002, a four-year investigation by Postal Inspectors of the largest mail preparation company in the New York area resulted in sentences for three owners and four managers of American Presort, Inc. (API) following their convictions in 2001 for racketeering and mail fraud. One of the owners, who pled guilty shortly after the trial commenced in 2001, was sentenced to 42 months in prison after he signed a forfeiture agreement for $5 million. A second owner was sentenced to 51 months in prison and also signed a forfeiture agreement for $5 million, and a third owner was sentenced to 60 months in prison. He refused to sign a forfeiture agreement and is liable for the entire judgment of $20.7 million. Four managers involved in the scheme received prison sentences ranging from 30 to 37 months, and each was ordered to pay restitution of $17 million. Five cooperating witnesses were sentenced to probation and community service. An in-depth story of this investigation is featured in the special insert at right. Further examples of revenue investigations conducted by Postal Inspectors in FY 2002 follow. • A civil complaint was filed against the owner of a presort company in Dallas, Texas, as a result of a previous Postal Inspection Service criminal investigation. The company's operations manager was convicted in 2001 of defrauding the U.S. Postal Service of more than $6 million in postage during a period of 19 months. The civil complaint filed in 2002 alleged the company contributed to the postage fraud when the owner knowingly hired a felon to oversee his mailing operation. Further proceedings are pending. • The publisher of a national magazine was convicted in federal court for falsifying information to the Postal Service to get reduced mailing rates and attract advertisers. The conviction is significant, in that frauds of this nature are difficult to uncover, and it is often equally difficult to prove intent; it is also only the second criminal conviction of a Periodicals publisher in the past 10 years. Postal Inspectors learned of the violation by accessing the Web site of an independent audit firm responsible for reviewing the activities of similar publications. • After Postal Inspectors arrested the supervisor of a Washington-area letter shop, she was convicted of defrauding one of its mailing customers, the Democratic National Committee (DNC). The letter shop contracted with the DNC to mail almost 550,000 solicitations during the 2000 presidential campaign. A Postal Inspection Service investigation revealed the letter shop only prepared and mailed about four percent of what it had been paid to do. • A Postal Inspector's arrest of a suspect outside a Palm Springs, California, Post Office in January broke open an investigation of an organized ring that had negotiated or attempted to negotiate $220,000 worth of counterfeit checks throughout Southern California. The ring's success stemmed from its use of "borrowed" names and addresses of legitimate businesses to lull postal clerks into accepting high-dollar business checks for stamp purchases. A legitimate courier service was often used in the ruse, further insulating the suspects from detection. Area post office losses attributed to the ring total $143,000; the same ring is suspected of orchestrating another $200,000 in losses in that area from another scheme. The ring operated successfully for months and evaded capture until January 2002, when a Palm Springs postal clerk became suspicious and alerted Postal Inspectors from the Southern California Division. Inspectors traced the courier to one of the ring's fringe members. Cooperation from the suspect has already led to the identification of a key member of the ring. The investigation is continuing. • The U.S. Attorney's Office in the Northern District of California finalized a False Claims Action in June against a prominent presort bureau, the PSI Group. Pursuant to the agreement, PSI will pay almost $1 million after claiming it had sorted its mail to the greatest extent possible and was entitled to postage refunds from the Postal Service under the Value-Added Refund program. An investigation by Inspectors revealed the mailer had not, in fact, completed all of the work-sharing it claimed, and the Postal Service would have to perform additional, unanticipated processing before the mail could be properly transported and delivered. Inspectors found the mailer altered computer files to deceive postal acceptance clerks, avoided detection by hiding unsorted mail in late-night dispatches--when verifications were least likely to be performed, and pressured clerks into notifying PSI in advance which portion of the mail would be sampled for verification. The False Claims Action received considerable media attention in the San Francisco area in July. • For almost a year, post offices throughout Northern California were victimized by a scheme involving counterfeit checks. Inspectors identified more than 180 checks that were allegedly written and presented by two co-conspirators. Two suspects were apprehended and charged in June 2002 after fleeing California and leading Postal Inspectors on a chase that extended through Washington State, South Dakota, and Nebraska. Graph Revenue Investigation Results in FY 2002 Criminal cases: 260 Criminal convictions*: 43 Civil cases presented: 1 Civil cases resolved*: 7 Amount ordered or agreed to be paid as a result of a civil prosecutive action*: $1.5 million Voluntary restitution*: $10 million Court-ordered restitution-criminal*: $91.4 million** *May be related to cases from prior reporting periods. **$90.8 million is related to the American Presort, Inc. case Quote: Revenue Assurance Analyst Lois Ress of the Greater Indiana District was recognized by the Postal Inspection Service for her role in identifying a case of postage fraud. In 2001, she alerted Postal Inspectors about a large-scale mailer's suspicious business practices. When the mailer learned he was under investigation and facing a potential False Claims Action suite, he stopped the scheme and paid more than $600,000 as part of a pre-litigation settlement. Inspectors presented Ms. Ress with a plaque and certificate of appreciation for her contributions to this case and others. Quote: Inspectors in New York received a tip from postal officials that led to the March arrest of a mailer accused of counterfeiting metered postage after he forged one of the new information-based indicia products. Postal officials noticed the indicia date was well beyond the date of mailing, and the forged postage was used to mail Express Mail pieces from the suspect's small, home-based business. The FBI participated with the Inspection Service in searching the man's place of business, as he was also a child pornography suspect. The search revealed evidence of both his counterfeiting scheme and his production of child pornography. Embezzlements Employee embezzlements unfortunately occur in all businesses. Postal Inspectors have uncovered a range of such schemes by postal employees: failing to report postal retail sales and using the cash for personal expenses; delaying the reporting of postal sales to fund personal, short-term loans; stealing postal stamps, retail products, or packaging products; and covering shortages in postal funds by submitting bogus reimbursements for nonexistent or inflated business expenses. Postal Inspectors conducted 605 embezzlement investigations during the past fiscal year and identified more than $4.9 million in postal losses. Examples of Inspectors' casework in this area during FY 2002 are summarized below. • A former window clerk from the Schiller Park, Illinois, Post Office was sentenced on July 11 to one year in prison, three years' probation, and $122,454 in restitution for misappropriating postal funds. Postal Inspectors determined the clerk underreported postage sales and failed to properly account for customer meter funds. The clerk confessed to having a gambling problem and had been embezzling postal funds for years to cover his losses. • After an investigation by Postal Inspectors, the former postmaster of Addis, Louisiana, was sentenced on July 11, 2002, to one year in prison, three years' probation and $77,471 in restitution for stealing postal funds. The postmaster failed to remit money order, postage, and vending sales and posted fraudulent or inflated disbursements to her Statements of Account. The postmaster first claimed her office had been robbed at gunpoint several times and that she never reported it, and covered up the losses, because the robbers threatened to kill both her children and grandchildren if she told authorities. When presented with the results of the investigation, the postmaster could not explain the financial discrepancies. • After an investigation by Postal Inspectors, a former postmaster "relief" at the Dewitt, Illinois, Post Office pled guilty to a three-count indictment for embezzling postal funds. The former employee, who also worked at the Lane and Wapella Post Offices, imprinted postal money orders totaling $121,800 at the three offices without submitting payments. A co-conspirator pleaded guilty to a two-count indictment in July 2002 after admitting to cashing postal money orders and retaining $75,000 of the proceeds. • A former remote encoding center manager, who had worked at postal sites in Antioch and Chattanooga, Tennessee, and Bowling Green, Kentucky, was sentenced to 10 months in prison and two years' supervised release and ordered to pay restitution of $94,794 for submitting false information on travel vouchers. The former manager reported personal travel expenses, travel expenses for relatives, vacation expenses, bogus travel and relocation expenses, and duplicate claims for miscellaneous expenses as his official travel expenses. Postal Inspectors also determined he had forged the signature of a non-existent manager as the approving official. • A former Missouri postmaster was sentenced to six months of community confinement, five years' probation, and $88,682 in restitution for embezzling money order funds and committing mail fraud. While serving as postmaster or officer in charge at five Missouri post offices, the former employee issued money orders, which she reported as "official disbursements," to cover personal expenses and her daughter's tuition at a local beauty college. Her restitution includes a payment of more than $34,000 to the Missouri Chapter of the National Association of Postmasters of the United States (NAPUS). As the elected secretary and treasurer, she wrote and mailed NAPUS checks to cover personal expenses. • A former sales and service associate of the Derry, New Hampshire, Post Office was sentenced to one year of probation and $1,266 in fines and restitution for stealing postal funds. Postal Inspectors determined he was responsible for approximately $25,000 in Segmented Inventory Accountability losses. He failed to enter numerous postage transactions in POS ONE (a "point of sale," automated accounting system) and falsified other transactions by understating postage and pocketing the difference between the amounts he reported and what he collected from customers. • The last two defendants in a $64,554 money order embezzlement, directed by a former military postal clerk of the Camp Pendleton Marine Corps Base Post Office, were sentenced in January and March 2002 in a California federal court. Postal Inspectors determined the defendants had assisted the clerk by cashing roughly $60,000 in money orders which had been reported as lost or stolen and leaving no record of the sale. The former clerk imprinted the money orders for $600 each and hired the defendants to cash them; he paid them with methamphetamines. Each defendant was sentenced to five years' probation, and they were ordered to pay a total of $59,354 in restitution. • On May 14, 2002, two former sales and service associates from the Horton Plaza Retail Postal Store at San Diego, California, were each sentenced to one year of probation and total restitution of $11,000 for embezzling postal funds. Postal Inspectors disclosed the former associates had failed to enter postage sales into POS ONE, undervalued sales they did enter, and voided legitimate transactions. The funds were converted for their personal use. • The former officer in charge of the Omega, Oklahoma, Post Office was sentenced on May 7, 2002, to 15 months' imprisonment, three years' probation, 104 hours of community service, and restitution of $43,718 for embezzling postal money order and stamp funds. The former employee issued $23,638 in money orders without receiving payments and deposited them into her own checking accounts. She also failed to deposit into postal bank accounts approximately $5,800 worth of stamp sales. Postal Inspectors discovered the scheme when they investigated a fire at the office that occurred on a Sunday, the day before the office was to be transferred to a new officer in charge. The fire caused approximately $13,000 in property damage and destroyed all financial records and main stamp stock. • On May 31, 2002, a former sales and service associate at the Lincolnia Station in Alexandria, Virginia, was sentenced to one year in prison and three years' probation and ordered to pay restitution of $30,800 for his role in a conspiracy to negotiate stolen postal money orders. Postal Inspectors discovered that money orders missing from the station had been imprinted for $700 with an inkjet printer and were cashed in Virginia and Alabama. The former employee used 44 of the money orders to pay child support. Two co-conspirators were previously sentenced. Fraudulent Workers' Compensation Compensation and medical benefits paid to postal employees who sustain injuries while on duty are a major expense for the Postal Service, which is responsible for funding workers' compensation benefits. The Postal Service has accrued approximately $6.5 billion in future liability for workers' compensation claims since its reorganization in 1971. The Postal Service fully supports the workers' compensation program; however, a small percentage of postal employees and medical providers abuse the system, causing the Postal Service to incur millions of dollars each year in chargebacks for fraudulent claims and enforcement costs. As a proactive measure to identify and eliminate fraudulent claims earlier in the claims process, Postal Inspectors' efforts this past fiscal year emphasized continuation-of-pay (COP) investigations. U.S. Postal Inspection Service investigations in FY 2002 resulted in $102.3 million in long-term, cost-avoidance savings and another $6.1 million in COP cost savings, totaling $108.4 million in cost savings for the Postal Service. As a result of Inspectors' work, there was a 10.6 percent increase in COP cost savings from FY 2001. The Postal Inspection Service initiates criminal investigations when it suspects individuals of defrauding the Federal Employees' Compensation Act (FECA), helping to safeguard Postal Service expenses. It also refers to the Postal Service any matters that may require administrative action. Inspectors work closely with Injury Compensation offices to flag potentially fraudulent claims. The Postal Inspection Service also has oversight and responsibility for the Contract Fraud Analyst Program, which provides contract fraud analysts to assist Inspectors in investigating suspect claims. During the course of their investigations this past fiscal year, Postal Inspectors identified 380 individuals for defrauding the workers' compensation program and arrested 45 employees for workers' compensation fraud. Quote: A full-time city letter carrier in Severna Park, Maryland, reported injuries to his hip, back, and left leg after falling on ice while delivering mail in January 1999. He began receiving workers' compensation benefits in February 2001 following the second of two surgeries, telling his postal supervisor that his physical activity was restricted to "bed rest and doctor visits" and his estimated return to work date was "unknown." However, based on a tip that the carrier was refurbishing old houses, Postal Inspectors began a surveillance of his activities in April and May 2001. They videotaped the "disabled" carrier driving; toting paint, sawhorses, a ladder, and a toolbox and loading them into his truck; removing, repairing, and reinstalling doors on an aluminum shed; operating a gas-powered grass trimmer; and spreading grass seed on his lawn. After seeing the tapes, the carrier's physician stated he was unaware of the carrier's ability to perform any of the activities and signed a medical release to return him to full duty. The carrier was terminated from the Postal Service in November 2001, and the Postal Service realized a future cost-savings of $711,313 as a result of the Inspection Service investigation. Employment fraud Postal Inspectors primarily seek prosecution in workers' compensation fraud cases, as it is the best deterrent and prevents the resumption of benefit payments. By law, future payments are barred to anyone convicted of workers' compensation fraud. Prosecution generally is based on showing that the allegedly disabled claimant is receiving outside earnings and failing to report them to the Department of Labor. The following paragraphs highlight examples of court actions that occurred as a result of Inspection Service investigations in FY 2002. • On November 2, 2001, a former Van Nuys, California, mail handler, who had relocated to Chicago, was sentenced in district court after pleading guilty to mail fraud. The former employee claimed he had become disabled by hernias suffered during his 90-day "casual" (temporary) appointment. Postal Inspectors found he was running his own real estate business, had a construction job, and worked as a piano teacher while claiming to be totally disabled, and failed to report either his employment or his ability to work to the Department of Labor, as required. He was sentenced to five years' probation and ordered to pay $15,022 in restitution; the Department of Labor also declared an overpayment of $24,308. The Postal Service realized a future cost savings of $194,267 as a result of the investigation. • A former Cleveland Heights, Ohio, letter carrier was sentenced in January 2002 to eight months in prison and ordered to pay $72,538 in restitution for making false statements to obtain federal employees' compensation. She claimed she sustained a traumatic injury in 1995 to her right elbow, shoulder, and hip and had been totally disabled since 1996 from "frozen shoulder" syndrome. An Inspection Service investigation revealed that, during the time of her alleged disability, the claimant worked at various department stores, graduated from modeling school, and entered modeling competitions; she was also an energetic gardener and performed her own lawn maintenance, lifting and moving objects and performing other tasks inconsistent with her alleged injuries. In one instance, Inspectors saw the former carrier pull a lawn mower cord 76 times while trying to get it to start and, after a doctor's visit (during which she claimed she was in constant pain), spending the rest of the day at an amusement park. Her physician later confirmed the claimant was a fraud and had misrepresented her condition. The Postal Service realized a future cost savings of $827,320 as a result of the investigation. • A former letter carrier in Haddonfield, New Jersey, received a 15-month prison sentence with three years' probation and $115,619 in restitution in July 2002 for making false statements to obtain federal employees' compensation. He had claimed he was totally disabled as the result of a 1996 work-related back injury, but Postal Inspectors found that, during the time of the alleged disability, the carrier operated a home-improvement business for six years and falsified statements to the Department of Labor about his work and income. Inspectors also revealed he had lied to his physicians and the Postal Service after they caught him performing rigorous physical activities, such as removing and replacing roofs on a house and a garage. As a result of Inspection Service efforts, the Postal Service achieved a future cost savings of $669,833. • On July 17, 2002, Postal Inspectors arrested a processing and distribution center clerk in Los Angeles for workers' compensation fraud after she fraudulently accepted compensation benefits for three years due to an alleged back injury. A joint investigation by the Postal Inspection Service and the California Department of Insurance disclosed that, during the same period, the clerk worked as owner and operator of a day care business. She was also collecting fraudulent insurance benefits from a private disability company, along with workers' compensation benefits from the Department of Labor. Prosecution is pending. • A former postal clerk in Landisville, New Jersey, was sentenced to three months' probation and $25,000 in restitution for making false statements to obtain federal employees' compensation. The employee claimed total disability as the result of a 1985 work-related anxiety disorder. An Inspection Service investigation disclosed that, although claiming to be unable to work, the former employee operated a kennel and falsified statements to the Department of Labor about her job and income. As a result of Inspection Service efforts, the Postal Service achieved a future cost savings of $654,353. • On July 22, 2002, a New London, Connecticut, postal clerk was sentenced to six months' home detention, three months' probation, and $54,800 in restitution for workers' compensation fraud. The clerk claimed she suffered from a knee injury in 1998 that rendered her totally disabled, but Inspectors discovered she worked seven days a week as a business manager for a family kennel and did not report her income to the Department of Labor. As a result of the investigation, the Postal Service achieved a future cost savings of $560,090. Misrepresentations of physical abilities Another form of fraud Inspectors uncover in the workers' compensation program involves individuals who misrepresent the extent of their physical abilities. The efforts of Postal Inspectors in obtaining prosecution in these cases have been increasingly successful, as seen in the summaries below. • A former letter carrier in Waconia, Minnesota, was sentenced in March 2002 to six months of electronic monitoring and home detention, five years' probation, and court-ordered restitution of $60,000 after pleading guilty to mail fraud. The former carrier claimed a work-related back injury in May 2000, which was accepted by the Department of Labor. An Inspection Service investigation, however, disclosed the claimant had lied about his pre-employment medical history: He had pre-existing back problems and carpal tunnel syndrome, and suffered from alcohol abuse and other conditions. While claiming total disability, Inspectors saw him driving for extended periods, mowing his lawn, and operating a leaf blower and weed trimmer; he was also seen carrying five-gallon buckets of asphalt and applying a sealant to his driveway. The claimant rejected limited-duty job offers from the Postal Service, stating he was instructed by doctors to "live my life as if I were in a body cast" with "no walking, no running, no nothingÉ" In addition to workers' compensation, the claimant collected benefits from the Veterans Administration for an obsessive-compulsive disorder and from the Social Security Administration for a back injury. The investigation resulted in a future cost savings of $711,316 for the Postal Service. • On March 29, 2002, an arbitration decision upheld the removal of a Franklin Park, Illinois, letter carrier. The carrier worked in limited-duty capacity for the Postal Service as a result of a back injury which had occurred two years earlier. While receiving compensation benefits, he worked as a service technician without reporting his income or ability to work to the Department of Labor, as required. As a result of the investigation, the Postal Service realized a future cost savings of $996,792. • A former clerk in Rock Island, Illinois, was sentenced on January 18, 2002, to one year and a day of imprisonment, three years' supervised release, and $82,769 in restitution for making false statements to obtain federal employees' compensation. After the former employee claimed a neck-and-shoulder injury in 1978, she was placed on long-term disability by the Department of Labor. She continued to collect total disability for 23 years, stating she was unable to run or walk for more than 50 feet at a time, carry either a gallon of milk or her purse, or bend or kneel without help. Inspectors conducted a surveillance of the clerk for several years and determined her claims were fraudulent. As a result of Inspection Service efforts, the Postal Service achieved a future cost savings of $682,082. • A former letter carrier from Atlantic Beach, Florida, was sentenced on March 21, 2002, to two years in prison, three years' supervised release, and restitution of $92,540 for workers' compensation fraud. A former U.S. Marshall, the claimant alleged he suffered an asthma attack eight hours after his tour concluded as a result of dust he was exposed to at the post office. He also claimed he developed a psychological condition from his on-the-job injury and was unable to work at any post office. Postal Inspectors disclosed the man was routinely exposed to gases, fumes, dust, and dog hair at his home with no adverse effects and, in fact, smoked up to two packs of cigarettes a day. All of his physicians subsequently agreed the former carrier had misrepresented his condition. As a result of Inspection Service efforts, the Postal Service achieved a future cost savings of $540,477. Civil prosecutions Affirmative Civil Enforcement (ACE) is an effective tool used by investigative agencies and criminal prosecutors to ensure the fullest recovery of losses for the government. ACE allows the government to fashion settlements that address unique law enforcement issues that can arise in complicated fraud cases. ACE also grants triple damages and mandatory penalties for false claims, as shown by the case that follows. On October 2, 2001, a $60,000 judgment was entered in favor of the United States as a result of an Affirmative Civil Action. Postal Inspectors proved the daughter of a deceased claimant had completed forms indicating her mother was alive and in her custody, allowing the daughter to collect survivor benefits for approximately eight years. In addition to the civil action, the daughter is now serving a sentence of five years' probation and has paid $182,121 in restitution following a criminal conviction for stealing public funds. Safety and Security INSPECTORS HIGHLY REGARDED: Much of the voting public holds the Postal Inspection Service in high regard, according to a survey reported in May 2002. More than 88 percent of the 1,000 registered voters polled agreed that the Postal Inspection Service is "important." The Inspection Service is the lead agency for mail and shipping in the Office of Homeland Security's examination of vulnerabilities in our nation's infrastructure. --from USPS Public Affairs and Communications, Latest Facts Update, May 24, 2002 U.S. Postal Inspectors are charged with ensuring the safety of postal employees, customers and assets. Using a combination of aggressive programs that target specific criminal activities and proven prevention strategies, Postal Inspectors offer a comprehensive approach to postal security, giving employees a safe work environment, reducing or eliminating criminal activity against the Postal Service, and educating postal customers about mail-related crime. Security Postal Inspectors address numerous problems related to the theft of mail from postal collection and relay boxes, neighborhood delivery and collection boxes, cluster box units, and apartment panels by developing various security countermeasures. This past year, Inspectors worked closely with postal engineers to develop a high-security cluster box, now being pilot-tested. The boxes will be deployed in high-risk locations in the near future to increase the security of customers' mail. Inspectors assisted in installing improved security devices at four postal districts and developed innovative measures of "hardening" collection and delivery equipment. In the interest of protecting postal employees, the Postal Inspection Service also initiated new security requirements for postal facilities. All employees must now display photo identification while on duty, and Inspectors are working with facility managers to help phase in compliance with the new regulations. The Security Division continues to improve facility security by working with postal employees in developing a facility risk-assessment model. By quantifying security risks for facilities, the model will allow postal managers and executives to reduce the likelihood of risks and better manage those that occur. The Postal Inspection Service continues to work with the office of the chief operating officer to improve the Postal Service's continuity of operations plans (COOP). Following the September 2001 terrorist attacks, COOP plans were activated at an alternate site within the guidelines established by the Federal Emergency Management Agency. Although the activation was successful, some procedures were identified that needed to be revised. Changes have been ongoing throughout the past fiscal year and include new equipment purchases, upgrades for old equipment, revisions to evacuation procedures for the Postal Service's National Headquarters building, and more detailed space assignments. Security Force Integral to the security efforts of the Postal Inspection Service are the Postal Police Officers (PPOs) of the Security Force. PPOs provide ongoing protection for postal employees and property by enforcing federal laws and regulations at postal facilities. Their presence serves as a key deterrent to assaults, maintaining an environment conducive to the safety and well-being of postal employees, customers and assets. PPOs routinely provide perimeter security at high-risk areas and escort high-value mail shipments. In FY 2002, the Postal Inspection Service initiated a comprehensive review of Security Force operations and staffing nationwide. Also during the past fiscal year, a Security Force Assessment Team concluded a study of Security Force operations and reported the results to Inspection Service and Postal Service managers and to the Security Task Force, a labor-management group. Established in 2001, the team examined the department's operations in relation to the effectiveness of the physical security of major postal facilities across the country. The team found significant deficiencies at almost every site visited. In some cases, closed circuit television cameras were not functioning, new VCRs were needed, and security turnstiles at employee entrances were inoperable. At the majority of sites, the team found that individuals had defeated security systems by wiring gates to remain open and propping open facility doors, either temporarily or permanently, against regulation. After examining Control Centers at the sites, team members identified methods of consolidating operations. The team identified numerous opportunities to use electronic security measures and unarmed contract security officers, instead of armed PPOs, without compromising standards. In keeping with the mission of the Security Force, to secure the perimeter of facilities that require an armed presence, the team determined that electronic security was sufficient for areas inside the perimeter. The Chief Postal Inspector presented the Security Force Assessment Team's findings to the U.S. Postal Service's area vice presidents. Senior postal and Inspection Service managers are now evaluating the findings to determine how to maximize Security Force resources and enhance security at postal sites. Quote: A FedEx-Express Boeing 727 cargo plane, traveling inbound to Tallahassee, Florida, from Memphis, Tennessee, was carrying approximately 550 pounds of Express Mail along with other shipments when it crashed on July 26, 2002. Tallahassee Postal Inspectors responded to the site, recovering roughly 43 pounds of mail over a three-day period; the remainder was destroyed by fire or by the water used to extinguish the flames. The crew escaped with minor to moderate injuries. Quote: Hurricane Lili made landfall on October 3, 2002, south of New Iberia, Louisiana, with sustained winds of 90 mph. As flooding and power outages occurred across the state, teams of Postal Inspectors responded, visiting 40 post offices the first day and another 60 offices on the following day to make damage assessments and assist in recovery efforts where possible. Some offices suffered flooding of up to five feet of water, and roof damage varied from a few lost shingles to large sections of roof. Out of 1.2 million possible mail deliveries, approximately 900,000 could not be made. Graphic: A Washington Times news article dated Wednesday, October 31, 2001 with headline that reads "Postal Police defending customers from contaminants in nation's mail." Mail Screening Postal Inspectors performed mail-screening to check for the presence of anthrax at 25 major processing & distribution centers, concentrating on mail destined for high-profile addresses, such as national print and electronic media outlets and government offices. A total of 280 Inspectors nationwide expended more than 13,600 workhours during the initiative, which ran from October 6 through December 31, 2001. Postal Inspectors from the Washington Division set up a temporary facility near the quarantined Brentwood Processing and Distribution Center in Washington, DC, to screen irradiated mail for 20 federal agencies, including the Postal Service Headquarters building. Inspectors also provided security and monitored operations at mail irradiation sites operated by Ion Beam Applications at Swedesboro, New Jersey, and Titan Scan at Lima, Ohio. Quote: Super Bowl XXXV was designated a National Security Special Event by the Director of Homeland Security. The Chief Postal Inspector authorized mail screening for all classes and types of U.S. Mail, from January 14 through February 3, 2002, at several selected venues. A team of Postal Inspectors from the New Orleans area, with technical assistance from forensic scientists from the Forensic and Technical Services Division, examined targeted mail. Inspectors used X-ray equipment and performed manual examinations of letters, flats, and parcels to screen for suspicious items. Approximately 12,000 letters, 2,000 flats, and 1,400 parcels were examined, as well as roughly 700 UPS and FedEX parcels. Facilities Security Database The Facilities Security Database (FSD), a Web-based application, was implemented in August 2002. Developed jointly by Postal Service and Inspection Service staff, the application uses facility survey data to evaluate security levels at postal facilities and assist managers in planning for future security needs. FSD allows managers to evaluate facility security, identify deficiencies, and estimate equipment replacement costs. The system also helps managers track security expenses and budget appropriately for future needs, thus helping to reduce costs. FSD performs the following functions to enhance postal security: • Improves security for postal employees and facilities • Improves the budget process for purchasing security-related equipment Supplies investigative information for Postal Inspectors • Provides the security status of postal facilities as needed to Congress, other government agencies, and other authorized groups • Reduces security-related costs The system was developed for use by postal area security coordinators, security control officers, division security Inspectors, and headquarters managers. An FSD training video for postal employees, developed by the Postal Inspection Service's Security Division, was selected in August 2002 to receive a Telly Award. The Telly Award recognizes outstanding, non-network film and video productions, and is a well-known and respected national competition. Rather than competing against each other, entries are judged against a high standard of excellence, making the award a sought-after prize in the television and video industry. Quote: A Facilities Security Database training video for postal employees, developed by the Postal Inspection Service's Security Division, was selected in August 2002 to receive a Telly Award. The Telly Award recognizes outstanding, non-network film and video productions, and is a well-known and respected national competition. Mail Transportation After September 11, 2001 In the aftermath of the September 11, 2001, terrorist attacks, the Federal Aviation Administration suspended the transportation of mail weighing more than 16 ounces on commercial flights, eliminating a major vehicle for moving registered mail. As a result, Inspectors from the Security Division worked with Postal Service transportation personnel to revise registered mail handling procedures and allow registered items to travel instead via FedEx-Express and other sources. Inspectors were assigned to the Postal Service's National Operations Center at Headquarters to guide field operations and handle special situations. As a result, postal employees were able to move backlogged registered mail to delivery destinations. Aviation security restrictions imposed by the Transportation Security Administration (TSA) as a result of the September 11 attacks have had a significant impact on the Postal Service's ability to transport mail by air. Legislation authorizing screening for mail transported by air has been enacted for the first time in Postal Service history. It permits mail to be inspected without a search warrant or credible threat declaration. The Postal Inspection Service worked with TSA, the Air Transport Association (ATA), Postal Service Network Operations, and airline and airport personnel to conduct a baseline mail-screening test. The test was conducted at four airports across the country over a three-day period to establish a baseline of information on the reliability of canine and X-ray searches of mail. The tests are needed due to differences in the composition of mail relative to luggage and cargo. Participants are examining the results and will be working together to develop and conduct additional tests during FY 2003. Quote: The Postal Service was selected as the official carrier of the Declaration of Independence Road Trip exhibit. Postal Inspectors were charged with the transportation and security of this rare, original copy of the Declaration. The document is on a three-and-a-half year tour across the country making stops at museums, libraries, and other selected sites. Observations of Mail Conditions For the fourth consecutive year, the chief operating officer of the U.S. Postal Service requested the Postal Inspection Service perform Observations of Mail Conditions (OMC) reviews during the fall and holiday mailing seasons. The first week of observations, scheduled to begin September 10, 2001, was postponed due to the events of September 11. After revamping the OMC program to focus more intensively on the safety and security of postal employees and assets, Postal Inspectors resumed observations on September 17, 2001. The redesigned program emphasized direct contacts between Inspectors and postal district managers, processing and distribution center (P&DC) managers, local postmasters, station and branch managers, and other relevant postal employees. Postal Inspectors performed OMC reviews at each postal area and virtually every district. They issued 14 weekly OMC reports and two special shared network reports to the chief operating officer between September 28 and December 28, 2001. Inspectors made on-site visits to 2,054 mail processing and customer service facilities, with multiple visits to some sites based on management requests, or for sites needing follow-up attention. A total of 305 of the sites were observed on December 24 and 26, 2001. Postal Inspectors identified 252 instances of security deficiencies for registered mail and registry cage operations during their 14 weeks of review. In some cases, there was no individual accountability for registered mail, as employees failed to sign in and out of the registry cage area as required. Postal employees also failed to secure registered mail in locked safes or cages, or left it unattended outside the registry cage. Pouches of registered mail were left unattended on the loading dock, against regulations. Inspectors noted varying levels of compliance with building-access control procedures. Among the 104 instances of access-control problems, they found doors propped open or otherwise not secured, allowing unauthorized access to postal facilities. In another 194 instances, Inspectors found unattended and unlocked postal vehicles--some of which contained mail, unaccounted-for "P-Tags" (government license plates assigned to the Postal Service), and vehicles left unattended and unlocked with the keys inside. The majority of these were on postal property; however, some carrier delivery vehicles parked on the street also were left unattended and unlocked. Postal Inspectors reported that 126 facilities either had no contingency plans to handle emergencies, were unable to produce one, or had incorrect contact titles and telephone numbers in their plans. The significance of such deficiencies is heightened due to the events of September 11 and the subsequent anthrax mailings, as Inspectors strive to maintain safe conditions for postal employees and postal assets. As a result of the Inspection Service's OMC reviews, the Postal Service's chief operating officer issued three memos on security in December 2001, addressing problems with registered mail, postal vehicle access, and postal facility access. The vice president of the Postal Service's Network Operations Management office distributed a revised memo on Priority Mail in the same month, concerning deficiencies found by Postal Inspectors in Mail Classification Reporting System requirements. Quote: Beginning in June 1995, the Postal Inspection Service's 2002 Olympic Winter Games Task Force worked to develop and implement the largest national security plan ever devised in the United States. The security and safety of the 4,200 postal employees from the Salt Lake Performance Cluster were Inspectors' highest priority, although Inspectors also screened mail for biohazards, such as anthrax, and prohibited mail, such as mail bombs, for 25 Olympic venue sites and high-risk locations. Postal Inspectors additionally were an integral part of the Utah Olympic Public Safety Command, a consortium of more than 60 local, state, federal, and emergency management agencies that provided security at the games. The two Inspectors shown here delivered "Old Glory," a flag that has traveled throughout the United States--it was flown at the White House's 200th birthday and was raised over Ground Zero in New York City in December 2001. The flag was mailed from Afghanistan in February 2002 to Salt Lake City for display at the State Capitol during the Olympic Games. Review of Government Mail At the request of the Postmaster General, Postal Inspectors conducted OMC reviews to evaluate government mail processing at 141 federal agencies and 21 Postal Service facilities in the Washington, DC, metro area on May 9 and 10, 2002. Inspectors not only performed on-site observations, but also interviewed government and postal officials to gain an accurate assessment of mail conditions. During the period of the anthrax crisis, from October through December 2001, several federal agencies refused to accept mail delivery, and the Postal Service was forced to store their mail in trailers at the Brentwood Processing and Distribution Center (P&DC). Until the undelivered mail was decontaminated, a project completed in February 2002, incoming mail prepared by "clean-up" contractors was irradiated. As a result, mail irradiated between October 2001 and February 2002 was neither processed nor delivered in sequence. In early April 2002, 20 trailers containing mail for the U.S. House of Representatives, four trailers of U.S. Senate mail, and 15 trailers of Library of Congress mail were released to Pitney Bowes, which accepts and sorts mail for these agencies. Within two weeks, as requested by the agencies, the 39 trailers of backlogged mail from Brentwood were taken to the Pitney Bowes facility at Capitol Heights, Maryland. Computer Crimes and Commerce The Computer Crimes and Commerce Division monitors the development of new postal products and services and provides consultation to postal managers on security, loss prevention, revenue protection, and evidence-retention capabilities. During FY 2002, Postal Inspectors from this group conducted security evaluations involving many of the new products offered by the U.S. Postal Service. Staff members continued this fiscal year to assist postal managers in identifying and evaluating various technologies designed to enable the Postal Service to sanitize mail, detect biochemical agents, and protect postal employees. Division Inspectors conducted site reviews, participated in several working groups, and assisted in evaluating various proposals concerning collection-box containment. An ongoing pilot project on anthrax-testing is under evaluation by Postal Inspectors from the Washington Division. Working with the Postal Service's engineering staff and representatives from Mitretek Systems, division members are completing an Emergency Preparedness Plan for the Postal Service. In a follow-up to that effort, a project is underway to perform a comprehensive threat and vulnerability assessment that covers the full spectrum of biological, chemical, explosive, and radiological threats. International Security The International Security Group of the U.S. Postal Inspection Service undertook various initiatives in FY 2002 to improve the safety, security, and reliability of international mail products for the U.S. Postal Service. Formed in 1990, the group comprises Postal Inspectors assigned to offices at U.S. Postal Service Headquarters and the U.S. National Central Bureau (USNCB)-Interpol in Washington, DC; the Interpol General Secretariat in Lyon, France; the International Bureau-Universal Postal Union (UPU) in Berne, Switzerland; the Dallas International Service Center in Texas; and the Miami Airport Mail Center in Florida. International Security Group members develop strategies to maintain high-quality service and security for the 189 member countries of the UPU. Chaired by the Chief Postal Inspector, the Postal Security Action Group (PSAG) now comprises 55 member and 37 observer countries, as well as 10 international organizations concerned with postal and aviation security. The group meets biannually in Berne to address such topics as aviation security, bioterrorism, revenue security, mail fraud, and eCommerce security, as well as preventing mail losses. Postal Inspectors made presentations to more than 120 postal security and operations officials from 80 countries at the October 2001 PSAG meeting. Although the anthrax crisis was still unfolding, Inspectors provided details about the ongoing investigation. The International Security Group Inspector, who is assigned as the Security Specialist at the International Bureau, helped develop an emergency information system on the UPU's Web site for its 189-member countries. Following the tragic events of September 11, the International Security Group worked diligently to keep foreign postal security and operations officials, U.S. Embassy officials, and other stakeholders informed about the anthrax investigation in the United States through the activities summarized below. • Presentations on anthrax for foreign postal administrations and American embassies in Barbados, Canada, Greece, Honduras, Mexico, the Netherlands, Russia, Trinidad and Tobago, and Uruguay and guidance to Caribbean and Latin American postal security and operations managers. • Keynote address at a Departmental Security Officer's meeting in Ottawa, Canada, in December 2001. The Inspector in Charge of International Security presented an overview of the Postal Service's anthrax concerns to directors of security from departments of the Canadian Government and Crown Corporation; Canada Post and the Mint attended on behalf of the Canadian Crown Corporation. About 125 security representatives attended the meeting, enabling liaisons with key security officials in Canada. • A four-day workshop on bioterrorism in Montevideo, Uruguay, for members of the medical community, Ministry of Livestock (Uruguay), American Embassy, and postal administrations of the Postal Union of the Americas, Spain, and Portugal. The February workshop included detection and remediation initiatives, disruption technologies, contingency planning, medical responses, and liaisons with medical, health, CDC, and environmental officials. Attended by 35 officials from 18 countries, the workshop provided guidance for member countries and postal, safety, and health, and environmental officials in Latin America. • A joint initiative with the State Department's Antiterrorism Assistance two-year program to provide high-priority training to 47 ally coalition countries. The training helps create a network of safety and health, postal, hazardous materials, environmental, and federal police officials in each country to address biological, chemical, and radiological terrorism in the mail. With assistance from the Mail Theft and Violent Crimes Group, International Security staff presented courses at Bangkok, Thailand; Kuala Lumpur, Malaysia; Manila, Philippines; Jakarta, Indonesia; Yerevan, Armenia; Baku, Azerbaijan; Tashkent, Uzbekistan; and Almaty, Kazakhstan. • More than 75 responses to foreign postal security, operations, and safety and health officials' queries following the discovery of anthrax in Senator Daschle's letter in Washington, DC. International Security staff worked with the Postal Service's manager of Environmental Policy to ensure testing for anthrax exposure at international service centers. Since September 11, Inspectors assigned to the USNCB-Interpol in Washington, DC, have provided intelligence for Gatwick Airport Security Bulletins, Federal Aviation Administration circulars, and other communications on aviation security worldwide. The International Security Group supported four bilateral international missions in 2002. An Inspector from the group, assigned as security specialist to the UPU, conducted a postal security survey at La Poste, in Abidjan, Cote d'Ivoire, to provide technical assistance and security services under PSAG. Members of the group briefed the Security Council for the 2004 Universal Postal Congress to be held in Abidjan. It will include police, fire, military and intelligence groups. Following up on a previous airport security review, Postal Inspectors from the International Security Group and New York Division trained SERPOST (Peru)-Office of Inspector General staff on international mail theft investigations. An Inspector who chairs the Caribbean Postal Union Mail Security Task Force conducted a Security-Quality Assurance Review at St. Vincent and the Grenadines and confirmed they had followed a recommendation to recruit an experienced security manager. In FY 2002, Inspectors coordinated International Mail Quality Assurance/Airport Security Reviews at Guatemala City, Guatemala, and Tegucigalpa, Honduras, and did a follow-up review at Lima, Peru. Postal security experts and representatives from airline groups participated with the goal of improving mail security at international airports and offices of exchange. An International Security program manager represented the UPU as lead instructor-coordinator for the UPU-United Nations Drug Control Program (UNDCP), Countering Drug Trafficking and Money Laundering via Postal Systems, in Dar es Salaam, Tanzania; Nairobi, Kenya; and Kampala, Uganda. Jointly funded by the UPU and UNDCP, the initiative teaches technical skills to front-line postal, customs, and law enforcement officials throughout Africa. The International Security Group also coordinated the following initiatives in FY 2002: • In December 2001, assisted the Bureau of Diplomatic Security's Antiterrorism Assistance Program team by reviewing security for the 2004 Summer Olympics at Athens, Greece, visiting the new Athens airport, and forming plans for sanitizing mail destined to the Olympic villages during the event. • Chaired the Security Workshop of the World Mail and Express Conference in Orlando, Florida. Comprising representatives from Brazil, the Federal Aviation Administration, and the Postal Inspection Service, the panel addressed aviation security initiatives in Latin America, the threat of anthrax, and contingency plans. • As requested by the UPU, participated in an International Civil Aviation Organization study group, New and Emerging Forms of Threat to Civil Aviation. They met in Montreal, Canada, to examine threats to civil aviation and develop strategies to deal with threats. • Was named to the U.S. delegation of law enforcement officials attending the 17th American Regional Conference on Interpol in Mexico and shared a report on risk assessment and crime in the Americas, information technology strategy, and regional activities. • Met with the Director of Security, Singapore Post, and airport security officials in Singapore to finalize investigative strategies for thefts of transit mail from Great Britain, the Netherlands, Switzerland, and the United States to China, Malaysia, and New Zealand. Security officials from most of these countries participated. • Hosted programs for the Communications Authority of Thailand (Post) and the Postal Administration of Portugal (CTT Correios de Portugal) on Security and Revenue Protection, with presentations on Anthrax Detection Strategies, Employee Embezzlements, PC Postage and Meter Decertification, Mail Bombs, Stamp Washing, and Money Laundering. • In June 2002, provided training on drugs in the mail and money laundering for 40 students from 15 member administrations of the PUASP in Rio de Janeiro, Brazil, encouraging closer working relationships between law enforcement and postal security officials, which can greatly enhance the postal security network. Quote: International Security Inspectors held meetings in Mexico City to address deficiencies in the airlines' handling of U.S. Mail. Participants included postal inspectors and operations officials of the Servicio Postal Mexicano (SEPOMEX) and American Airlines as well as operations and local managers. Inspectors' work with Mexican Customs officials was affirmed by the resolution of security problems for U.S. Mail storage areas at the airport. The bilateral initiative has improved postal security and the quality of service for mail exchanged between the United States and Mexico. Above, Postal Inspectors presented a course in anti-terrorism at Bangkok, Thailand. Quote: The keynote for the April 2002 Postal Security Action Group (PSAG) meeting was a bioterrorism seminar that included security specialists from Argentina, Austria, Denmark, Netherlands, United States, Interpol, a Postal Service environmental expert, and an industry representative from the Titan Corporation. Included were case studies on how various postal administrations handled bioterrorism concerns, presentations on mail irradiation and detection technologies, and intelligence on world-terrorism trends. Postal Inspectors made presentations to more than 120 postal security and operations officials from 80 countries. Information Technology Opening quote: To safeguard the Inspection Service's network from cyberattacks, minimize security risks, and prevent intruders from accessing the network, ITD enhanced virus-protection systems, firewalls, and intrusion-detection systems. The U.S. Postal Inspection Service maintains a secure and reliable information technology infrastructure, ensuring that strategic and effective information resources are available to meet organizational goals and priorities. The growth of electronic commerce, the globalization of business, and the rapid pace of change present new and exciting challenges for all law enforcement agencies. The Information Technology Division (ITD) provides leadership and direction in support of Postal Inspection Service imperatives. ITD staff strive to improve the Inspection Service's investigative capabilities by developing integrated business systems, providing rapid access to data, implementing emerging technologies, and upgrading its technology infrastructure and capabilities. ITD deployed 1,250 new computers with Microsoft Windows 2000 Professional and Microsoft Office XP software for Inspection Service employees, and the same software was installed on 2,250 network computers. High-performance network printers were provided at strategic office sites. ITD staff also added Web-based applications to the Postal Inspection Service's Intranet site and integrated new national applications into the Inspection Service Integrated Database. ITD staff continue to upgrade the Inspection Service Data Base Information System in line with strategic goals. ITD staff this past fiscal year facilitated information-sharing by providing Postal Inspectors with postings related to anthrax mailings, mail security data, and the Anthrax Reporting Incident System (ARIS) on the Inspection Service's Intranet site. (More information on ARIS can be found in the Other Prohibited Mailings section of this report.) ITD also deployed new business systems during FY 2002, including Phase II of Mathematical Analysis by Route of Irregularities, Air Transport of Mail (MARIA), the FY 2002 National Scorecard, the Recruitment Application Processing System (RAPS), the National Leadership and Training Conference (NL&TC) Web site, and the Bait Money Order System. ITD staff coordinates the Postal Inspection Service's information systems security program to ensure the confidentiality, integrity, and availability of data and operations. To safeguard the Inspection Service's network from cyberattacks, minimize security risks, and prevent intruders from accessing the network, ITD enhanced virus- protection systems, firewalls, and intrusion-detection systems. A network security vulnerability audit was performed by the Postal Service's OIG to identify potential security risks and recommend remedial action, if necessary. ITD staff regularly attend meetings held by the Department of Justice's Technology Policy Council, which shares information on new law enforcement technologies with member agencies. Led by the Deputy Attorney General, the Policy Council holds quarterly meetings chaired by the director of the National Institute of Justice of the Office of Science and Technology. Consumer Education, Fraud Prevention and Legislative Action Opening Quote: "Fraud complaints are on the rise, and more people age 60 and over are becoming victims ... In uncertain financial times, people are looking for a secure place to invest and grow their retirement money. These conditions make it easier for con artists to swindle investors, especially our senior citizens." --Chief Postal Inspector Lee Heath, National Fraud Against Senior Citizens Awareness Week news conference, Dow Jones News Service, Aug 26, 2002. Consumer Education and Fraud Prevention Initiatives Mail fraud investigations focus on a variety of schemes conducted through the mail in an effort to maintain integrity and to ensure the confidence that government agencies, businesses, and postal customers place in the U.S. Postal Service. The Postal Inspection Service works to protect the American public from such schemes, in part by educating people about fraud trends that target various groups, including some of the most vulnerable citizens, the nation's elderly. Inspectors this past fiscal year initiated a number of fraud prevention projects and participated with consumer protection agencies and other groups to help citizens protect themselves before they become victims of fraud. National Fraud Against Senior Citizens Awareness Week People 60 years of age and older accounted for 26 percent of telemarketing fraud victims in 2001, according to the Alliance Against Fraud in Telemarketing and Electronic Commerce. Seniors showed a much higher representation in certain categories, however--especially prize and sweepstakes fraud, where they accounted for 60 percent of the victims. In a hearing before the U.S. Senate Permanent Subcommittee on Investigations in June 2001, Postal Inspection Service representatives and the Pittsburgh Senior Action Coalition discussed the idea of having the Inspection Service and the Coalition initiate a national campaign with other agencies to raise the awareness of older citizens about illegal telemarketing and mail fraud schemes. In support of the effort, the U.S. Senate passed a resolution, introduced by Senators Carl Levin (D-MI) and Susan Collins (R-ME), designating the week of August 25, 2002, as "National Fraud Against Senior Citizens Awareness Week." On August 26, the Chief Postal Inspector joined forces with Postmaster General John E. Potter, Federal Trade Commission Chairman Timothy J. Muris, Assistant Attorney General Michael Chertoff of the Department of Justice, and representatives of the Royal Canadian Mounted Police to announce the campaign kick-off. Betty White, a well-known actress who fits the age range of the targeted group, signed on as spokesperson for the campaign and was featured with the Chief Postal Inspector on CBS's Early Show. A total of 51 press events were held in cities nationwide. Nationally, a multimedia campaign encompassed a wide range of activities: Fraud awareness posters were created, distributed to, and posted at more than 38,000 post offices across the country; brochures were inserted in Postal Service mailings of stamps and philatelic materials; half-page ads were placed in 40 major metropolitan-area newspapers; public service announcements featuring Betty White were broadcast on television and radio stations; and fraud awareness flyers were mailed to roughly 3 million households of seniors and their families. The Postal Inspection Service's Web site, www.usps.com/postalinspectors, promoted the campaign and offered seniors tips on how to protect themselves from mail and telemarketing fraud. Hundreds of consumer-oriented organizations with Web sites catering to older citizens added links from their sites to the Inspection Service site. An immediate success of the campaign was declared when, during its first week, a woman in her 80s went to a small post office near Pittsburgh, Pennsylvania, to mail a $2,200 cashier's check to Canada, telling the postmaster she needed the money right away because her husband had won $162,000 in a Canadian sweepstakes. She had to mail the check to pay for taxes on the winnings before she could receive the prize money. The postmaster, educated by the Inspection Service's campaign, told her, "Don't mail him anything. It's a scam." A video news release about the campaign and highlighting this successful prevention incident was sent via satellite to television stations across the country. National Consumer Protection Week This year's National Consumer Protection Week focused on deceptive mailings under the theme Deceptive Mailings--Don't Be Duped. Staff members from the Postal Service's Consumer Advocate office and the Postal Inspection Service's Congressional and Public Affairs (C&PA) office partnered to sponsor seminars and publicity campaigns during the February 2002 campaign. An educational video news release was issued featuring Senators Susan Collins (R-ME) and Carl Levin (D-MI) speaking on the Deceptive Mail Prevention and Enforcement Act. Consumer Affairs managers and Postal Inspector-Public Information Officers in Cleveland, Omaha, and Milwaukee were recognized for their outstanding contributions and creativity in the week's events. Quote: Staff members from the Postal Service's Consumer Advocate office and the Postal Inspection Service's Congressional and Public Affairs office partnered to sponsor seminars and publicity campaigns during the February 2002 campaign for National Consumer Protection Week. Cross-Border Fraud Press Conference On June 10, 2002, the Inspector in Charge of Fraud, Child Exploitation and Asset Forfeiture represented the Postal Inspection Service at a cross-border fraud press conference hosted by the Federal Trade Commission. Postal Inspectors' participation and high degree of professionalism in these investigations were recognized, and a significant cross-border fraud case initiated by Postal Inspectors working with the Strategic Partnership was highlighted. The Strategic Partnership is a multi-agency task force comprising six law enforcement and consumer-protection organizations, including the Postal Inspection Service, committed to combating cross-border fraud. Quote: A Postal Inspector-Public Information Officer answered questions from the media during a press conference in August 2002 in Milwaukee, one of many held by Postal Inspectors across the country that served to announce National Fraud Against Senior Citizens Awareness Week. Quote: "Don't Let One Phone Call Take It All Away." That was the warning against telemarketing scams promoted on posters that were displayed in thousands of post office lobbies nationwide as part of National Fraud Against Senior Citizens Awareness Week. Quote: The U.S. Postal Inspection Service's office of Congressional and Public Affairs was awarded the APEX 2002 Award of Excellence in the "Annual Report-Printed" category for its 2001 Annual Report of Investigations. APEX 2002, the 14th Annual Awards for Publication Excellence, is an international competition that recognizes outstanding publications, from newsletters and magazines to annual reports, brochures, and Web sites. Quote: Congressional and Public Affairs issued Publication 162, Because the Mail Matters, in August 2002. The booklet provides a snapshot of the history, mission, and operations of the Postal Inspection Service while defining the role of Postal Inspectors in the war on illegal drugs, child pornography, and fraud involving the U.S. Mail. MSNBC airs documentary on Inspection Service Forensic Laboratory "MSNBC Investigates: Mail Crime Forensics" premiered on MSNBC on Saturday, December 22, 2001. MSNBC filmed at the Postal Inspection Service's National Forensic Laboratory at Dulles, Virginia, and showcased the lab's expertise in solving crimes and its leading-edge technology. Reporters interviewed Postal Inspectors and Inspection Service forensic scientists for the show. The Discovery Channel airs documentaries on Postal Inspection Service On January 4, 2002, at 8 p.m., The Discovery Channel aired an hour-long documentary about the Postal Inspection Service, "The Feds: U.S. Postal Inspectors." The show was the first in a series of documentaries about the Inspection Service produced by Heintz Media of Arlington, Virginia, in cooperation with the Postal Inspection Service. The first show highlighted two exciting Inspection Service cases: a deadly mail bomb investigation in Chugiak, Alaska, and an undercover check-buying operation that took a terrifying turn for the worse when a suspect pulled a gun on an Inspector in Chicago. On April 14, a second program was aired that highlighted a video piracy investigation conducted by Postal Inspectors in Philadelphia, Pennsylvania, and an Inspection Service investigation of audio piracy based in Washington, DC. Reward announced on America's Most Wanted Congressional and Public Affairs staff worked with America's Most Wanted to produce an episode on the anthrax investigation. The episode was tied to a news conference with the Postmaster General, the Chief Postal Inspector, the FBI, and America's Most Wanted host John Walsh to announce a $1 million reward for information leading to the arrest of the anthrax mailer or mailers. The reward was subsequently raised to $2.5 million and included a $500,000 pledge offered by ADVO, Inc. Anthrax Mailroom Precautions C&PA staff produced "Biological Threat: Protecting Your Mailroom," a video highlighting precautions mailroom employees should take to reduce their risk of exposure to anthrax. The Postal Service's Public Affairs and Communications staff distributed the video to mailrooms throughout the country and made it available via streaming video on the Postal Service Web site at www.usps.com. C&PA also produced a video news release entitled "Anthrax in the Mail," with guidelines on how to reduce the risk of exposure to anthrax in the mail. The video was distributed via satellite to television newsrooms across the country. C&PA staff also produced a poster with the Postal Service's office of Public Affairs and Communications showing mailroom workers how to identify a suspect parcel or mail piece. Joan Lunden visits the Postal Inspection Service The Postal Inspection Service participated in filming a segment in January 2002 for Joan Lunden's Arts & Entertainment cable broadcast, "Behind Closed Doors," featuring the Postal Service and Postal Inspection Service. The National Forensic Laboratory in Dulles, Virginia, and the Inspection Service's training academy in Potomac, Maryland, were highlighted on the show, which aired in May 2002. Inside the Inspection Service The Inspector in Charge of Congressional and Public Affairs hosted another successful year of USPS-TV's "Inside the Inspection Service." Topics included security, mail theft, violent crimes, and workers' compensation fraud. The show also promoted Inspection Service initiatives such as The Discovery Channel documentaries and National Consumer Protection Week. The show reaches a potential audience of 400,000 postal employees. Inspection Service Annual Report Wins APEX 2002 Award for Excellence The U.S. Postal Inspection Service's office of Congressional and Public Affairs was awarded the APEX 2002 Award of Excellence in July 2002 for its 2001 Annual Report of Investigations. APEX is an international competition that recognizes outstanding publications in various categories, from newsletters and magazines to annual reports, brochures, and Web sites. Quote: A Postal Inspector-Public Information Officer partnered with the New Orleans office of the Better Business Bureau to educate the public with informational displays and discussions about frauds that target the elderly at the Veterans Administration Medical Center during National Fraud Against Senior Citizens Awareness Week in August 2002. Legislative and Regulatory Action Congressional Liaison During this session of the 107th Congress, Congressional and Public Affairs staff briefed Capitol Hill members and staffers on a variety of subjects, including anthrax and anthrax-hoax mailings, consumer fraud, child exploitation, deceptive mailings, identity theft, cooperative mailings, and money laundering. Case summaries were distributed to congressional staff to inform them of current Inspection Service investigations. On June 6, 2002, the Inspector in Charge of Congressional and Public Affairs held a briefing on Capitol Hill for members of the Congressional Postal Caucus and their staffs. The briefing summarized the mission and activities of the Postal Inspection Service and included an update of its joint investigation into the anthrax mailings. Representatives Danny Davis (D-IL), Carolyn Maloney (D-NY), Eleanor Holmes Norton (D-DC), and approximately 35 congressional staffers attended the briefing. The Postal Inspection Service participated for a third consecutive year at a Technology Summit sponsored by the Senate Appropriations Subcommittee on Treasury and General Government. Held on April 30, 2002, the event afforded law enforcement agencies an opportunity to showcase technology developed and used in their crime-fighting campaigns. Members of the Inspection Service's Forensic and Technical Services Division demonstrated new technology in mail-screening devices, transmitters, video cameras, and tracking equipment for senators and other attendees. Staff from the Senate Subcommittee on International Security, Proliferation and Federal Services toured the Merrifield Processing and Distribution Center (P&DC) at Merrifield, Virginia, on February 20, 2002. During a tour of operations, an Inspector-Attorney, currently detailed to the Subcommittee, emphasized mail security in the context of the September 11 terrorist attacks and the anthrax mailings. C&PA sponsors tours of postal facilities for congressional staff, including tours of the Inspection Service's Career Development Division at Potomac, Maryland, and the National Forensic Laboratory at Dulles, Virginia, to educate Congress on challenges facing the Postal Service. Congressional Testimony On September 20, 2001, the Chief Postal Inspector accompanied the Postmaster General to Capitol Hill to testify before the Senate Governmental Affairs Subcommittee on International Security, Proliferation and Federal Services. The Chief described in detail the U.S. Postal Service's response to the terrorist attacks on September 11, including the role of the Inspection Service in the New York, Washington, DC, and Pennsylvania investigations. On October 30, 2001, the Chief Postal Inspector testified before the House Government Reform Committee on the safety of postal employees and the U.S. Mail. The Chief's testimony included a statement explaining the Postal Inspection Service's mission to protect the U.S. Postal Service, its employees, and customers from criminal attack and about the partnerships it has formed with other law enforcement agencies in support of the antiterrorist and anthrax investigations. A House Financial Services Subcommittee on Oversight and Investigations hearing was held February 26, 2002, on the Growing Incidence of Fraud in Viatical Settlements. A fraud team leader from the Inspection Service's Indianapolis Field Office defined viatical settlements as discounted, pre-death sales of existing life insurance policies on terminally ill people. Viatical settlements are legal when a person becomes terminally ill after purchasing an insurance policy and then sells the policy to a viatical settlement company. Fraud occurs when a person is diagnosed with a terminal illness and misrepresents his or her medical condition when applying for insurance. Investors are victimized when a viatical settlement company misrepresents an insured's life expectancy and the guaranteed rate of return on a policy. The Inspector highlighted Inspection Service investigative activity in this area. Quote: After a Postal Inspector from the Western Allegheny Division (seated at right) testified before a Pennsylvania House Committee hearing on check fraud and identity theft in April and September 2001, lawmakers realized that existing identity theft statutes did not contain adequate penalties--especially for those involved in organized criminal activity. As a result, Pennsylvania Governor Mark Schweiker (center) signed House Bill 1546 into law on June 25, 2002, attended by House Representative Matt Baker (left). Legislation H.R. 4970, the Postal Accountability and Enhancement Act, introduced by Representative John McHugh (R-NY), was defeated at a House Government Reform Committee markup on June 20, 2002. The bill did not make it to the House floor for a vote by the entire House of Representatives. No Senate action was taken on postal reform this year. The bill would have given the Postal Service more pricing flexibility (such as high-volume discounts), subjected the agency for the first time to antitrust laws, allowed the agency to offer employee bonuses based on profits, and allowed it to operate in a more business-like manner. On July 18, 2002, Senator Susan Collins (R-ME) introduced S. 2754, a bill to establish a Presidential Commission on the U.S. Postal Service. On August 30, 2002, S. 2754 was referred to the Senate Governmental Affairs Subcommittee on International Security, Proliferation and Federal Services. On October 16, 2001, Congressman Philip Crane (R-IL) introduced H.R. 3129, a bill reauthorizing appropriations for the U.S. Customs Service. Provisions of the bill granted the U.S. Customs Service authority to stop and search at the border, without a warrant, domestic mail for export by the U.S. Postal Service. On August 6, 2002, President Bush signed into law H.R. 3009, the Andean Trade Promotion and Drug Eradication Act, containing the Customs provisions from H.R. 3129. The resulting act, Public Law 107-210, allows U.S. Customs agents to search outbound domestic mail exceeding 16 ounces in weight without a warrant. The President signed into law the USA Patriot Act, Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism, on October 26, 2001, as Public Law 107-56. The act was introduced by Representative James F. Sensenbrenner (R-WI) in October 2001 and incorporated provisions of two earlier anti-terrorism bills. The Asset Forfeiture section of this report provides more detail on the USA Patriot Act. On November 1, 2001, Congressman Lamar Smith (R-TX), Chairman of the House Judiciary Subcommittee on Crime, introduced H.R. 3209, the Anti-Hoax Terrorism Act of 2001. The measure passed the House under suspension of the rules on December 12 and was referred to the Senate Judiciary Committee. If enacted, the law will create criminal and civil penalties for engaging in any conduct with intent to convey false or misleading information where information in the context of biological, chemical, or nuclear threats may reasonably be believed. Senator Diane Feinstein (D-CA) introduced S. 2541, the Identity Theft Penalty Enhancement Act of 2002, on May 22, 2002, to establish penalties for aggravated identity theft. If passed, the legislation would add a two-year penalty for anyone convicted of a serious federal crime while using another person's identity. The crimes would include stealing an identity to illegally obtain citizenship in the United States, to obtain a passport or visa, to remain in the United States illegally after a visa expired or the person was ordered to leave the country, to commit bank, wire or mail fraud, or to steal from employee pension funds. S. 2541 would also add a five-year penalty for anyone who uses a stolen identity to commit a crime of federal terrorism, including destruction of aircraft, assassination or kidnapping of a high-level federal official, bombings, hostage taking, providing material support to terrorism organizations, and other terrorist crimes. The bill would expand existing identify theft prohibitions to include possessing a means of identification of another person with intent to commit specified unlawful activity. Aggravated identity theft is defined as a separate crime, not just a sentencing enhancement. If enacted as written, the two-year and five-year penalties for aggravated identity theft must be served consecutively to the sentence for the underlying crime. Other bills introduced during this session of Congress, which all remain in various Senate committees, include S. 2511, a bill to prevent child pornography trafficking and obscenity, and S. 2770, a bill to amend the Federal Law Enforcement Pay Reform Act of 1990 to adjust the percentage differentials payable to federal law enforcement officers in certain high-cost areas. GAO Issues The Government Accounting Office (GAO) initiated a national study at the request of Congressman Henry Waxman (D-CA), Ranking Minority Member of the Committee on Government Reform, to review and report on the efforts of federal agencies to curtail the proliferation of child pornography and the overall coordination of those efforts. The Postal Inspection Service is one of three primary federal law enforcement agencies charged with investigating this criminal activity. At GAO's request, the Inspection Service responded to a series of questions related to child exploitation investigations conducted by Postal Inspectors nationwide. A report will be issued by GAO to members of Congress following the completion of its inquiry and review. GAO staff hosted a forum in December for Postal Inspectors, congressional representatives, various federal agencies, major mailers, unions, associations, and others to discuss mail security and postal operations. All participants agreed there is no simple solution for ensuring mail safety and vowed to work together to assess risks, develop a framework for responding to potential threats, and take immediate steps to secure the safety of the mail--thereby restoring the public's confidence in the integrity of the postal system. The Postal Inspection Service is refining and expanding recommendations. Forensic and Technical Services Opening quote: Postal Inspection Service forensic laboratory experts conducted 3,427 forensic examinations during FY 2002 and identified 2,457 violators of postal statutes. Solving cases and convicting criminals frequently depend on the unique support of scientific and technical personnel assigned to the Forensic and Technical Services Division. Forensic Analysts at the Postal Inspection Service's National Forensic Laboratory in Dulles, Virginia, and three field laboratories provide expert examinations and testimony on evidence submitted by Postal Inspectors for document, fingerprint, chemical, and physical evidence analysis. Lab personnel respond to the most critical and complex crime investigations and assist in processing and evaluating evidence. Postal Inspection Service chemists are on hand to provide scientific analyses of suspected controlled substances transported through the U.S. Mail. During FY 2002, forensic staff assisted on-site with armed robberies in California, a major mail theft incident in Chicago, and various search scenes related to the anthrax mailings. Postal Inspection Service forensic laboratory experts conducted 3,427 forensic examinations during FY 2002 and identified 2,457 violators of postal statutes. Forensic analysts made 62 court appearances to provide expert testimony. The Digital Evidence Unit (DEU) of the Forensic and Technical Services Division supports criminal investigations by assisting Postal Inspectors with the collection, preservation, recovery, and analysis of computer-based evidence. Using state-of-the-art hardware and forensic software, Inspectors and Analysts from this unit work with Postal Inspectors to execute search warrants and conduct forensic analyses of seized computers and related equipment. Digital evidence contributes to the successful resolution of investigations ranging from child exploitation to financial fraud and identity takeovers via the mail. For example, a timely analysis provided by the DEU revealed that a fugitive from a case investigated by a Florida Division Inspector was using an Internet address at an office in Costa Rica, resulting in his arrest by local police. Critical evidence was also obtained by DEU staff to support the conviction of numerous cases involving child sexual exploitation. During FY 2002, Postal Inspectors submitted 545 requests to DEU staff for the examination of evidence. The Forensic and Technical Services Division also supports Postal Inspectors in complex surveillance and security endeavors. Forensic staff provide support for security, mail screening, communications, and other technical equipment needed for special events, including those designated by the Department for Homeland Security as National Security events. The division provides equipment, training, and field responses to ensure the safety of personnel and to assist case Inspectors in proper evidence-gathering techniques. Specially trained Inspectors and technicians have used their expertise to help resolve almost every high-profile case discussed in this report. Staff members oversee the selection, training, and qualification of Postal Inspectors assigned to conduct polygraph examinations. Postal Inspector-Examiners scheduled 833 polygraph exams for 312 cases during the fiscal year and contributed to the solution of approximately 104 cases as a result of pre-test and post-test interviews conducted incident to the examinations. Included were 29 polygraph examinations conducted in support of anthrax and anthrax-hoax investigations this past year. Quote: Forensic specialists from the Postal Inspection Service's National Forensic Laboratory in Dulles, Virginia, opened the seams of colorful jackets found in suspect Express Mail parcels sent to Hickory, North Carolina, from Thailand. The jackets had an inner lining of burlap, which forensics testing showed had been soaked in opium. Professional Standards and Resource Development Opening quote: All candidate Inspectors must successfully complete academic, firearms, and practical exercises to graduate from Basic Training. Career Development Division The Career Development Division (CDD) of the Postal Inspection Service provides basic training for candidate Postal Inspectors, in-service training comprising refresher and specialized courses for all Inspection Service personnel, and certification for threat management instructors. Located at the William F. Bolger Center for Leadership Development in Potomac, Maryland, CDD's large campus offers the advanced features of an elite law enforcement training program, with dormitory, dining, classroom, fitness, and firearms facilities. Inspector candidates undergo 13 weeks of scenario-based training that covers investigative techniques, defensive tactics, firearms, legal matters, search and seizure, arrest techniques, court procedures, postal operations and a detailed study of the federal laws over which the Postal Inspection Service has jurisdiction. Training focuses on problem-solving abilities, critical thinking, and cognitive skills. All candidate Inspectors must successfully complete academic, firearms, and practical exercises to graduate from Basic Training. Upon successful completion of the program, new Postal Inspectors participate in four to six months of formal, post-basic training, designed and monitored by CDD and administered at an assigned Inspection Service field location. Post-basic training is administered by experienced Postal Inspectors and includes at least two weeks of assessed field training in each functional area for a minimum of 400 hours. New Inspectors spend a minimum of 200 hours in their initial assignment under the direct supervision of a team leader or senior Inspector. During the year, CDD successfully graduated four Inspector classes: on April 26, July 3, September 13, and November 1, 2002. Postal Police Officers (PPOs) undergo a 10-week basic training course at the Federal Law Enforcement Training Center (FLETC) at Glynco, Georgia. During FY 2002, one class of 48 PPO candidates completed training at FLETC. Another class of 48 PPO candidates was started and is expected to graduate on September 30, 2002. The Postal Inspection Service also sponsored supervisory and management training at FLETC for 14 employees. CDD co-sponsored training for 847 Postal Inspection Service employees, including the first Mail Fraud-Asset Forfeiture training offered since 1997. Work continues on e-Training methodology in a pilot project sponsored jointly by the Inspection Service and FLETC. At the FLETC Web site, Inspection Service employees are authorized to access more than 1,000 online training courses anytime, anyplace, and anywhere. Course development and learning management opportunities are also available at the site. Human Resource Performance and Career Development Division staff members revised the Needs Analysis process for FY 2003. Information compiled from the survey will facilitate planning and funding for training in the next fiscal year. Strategic Planning and Management Process Strategic Planning and Management Process (SP&MP) coordinates Postal Inspection Service efforts in preparing goals, strategies, and objectives to carry out its mission and respond effectively to short- and long-term challenges. During FY 2002, SP&MP staff led the Inspection Service through its planning cycle by developing the Annual Performance Plan, which sets forth national objectives for the coming fiscal year, tracks performance toward achieving objectives using a National Scorecard system, and communicates results in the Annual Performance Report. SP&MP staff members worked with the Postal Service's Office of Strategic Planning to ensure that Inspection Service initiatives supported corporate goals. A liaison with the Postal Service's Transformation Team was established to identify Inspection Service strategies addressing future needs of the Postal Service. In addition to traditional strategic planning duties, group members contributed significantly to the development of employee safety initiatives related to the anthrax crisis. SP&MP led and coordinated a mail screening process to target suspicious letters during the height of the anthrax investigation. Inspectors worked closely with postal operations and engineering managers to develop a process that would examine targeted mailpieces. SP&MP was also responsible for ensuring that all Inspection Service employees at National Headquarters in Washington, DC, that may have been impacted by the anthrax contamination at the Brentwood facility were provided with available medical information and treatment options. Human Resource Performance Human Resource Performance comprises Inspection Service Operations Support Groups (ISOSGs) in Newark, New Jersey, and South San Francisco, California; and the Executive Leadership Resources, Training Assessment, Workforce Strategic Planning, and Employee Development units at National Headquarters. Staff members implement training initiatives and employee development programs and processes, perform succession planning, and coordinate job developmental opportunities and temporary "detail" assignments. Employee Development During FY 2002, Employee Development staff revised its teambuilding curriculum, "Using Differences to Build Effective Teams," to include instructional systems design, adult learning principles, and the Personal Insights Profile. The course offers a two-day session on teambuilding activities for student Inspectors during their first week of Basic Training at the Career Development Center. Master Facilitator staff was reduced in FY 2002 due to attrition, career advancement, and job reassignments. In response, the Employee Development unit opened recruiting for new facilitators and offered Facilitator Training Certification instruction for five new applicants, bringing the total to 17 Master Facilitators. Human Resource Performance staff convened subject-matter experts to develop functional supervisory training, which included self-study modules and corresponding on-the-job instructional (OJI) components. Staff members also initiated a job analysis of three division-support positions--Inspection Service Operations Technician, Inspection Service Operations Coordinator, and Administrative Support Specialist. The effort involved preparing lists of tasks and knowledge, skills, and abilities (KSAs) for each of the three positions and then validating the lists through surveys of subject-matter experts, comprising position incumbents and supervisors, from field sites. Executive Leadership Resources During FY 2002, the selection process for Assistant Inspector in Charge positions (ISLE-15s) was re-engineered to better identify employees who have demonstrated key competencies needed for job success. The Competency Review Panel now reviews applications for ISLE-15 vacancies during one of the three "open seasons," when applicants submit a Postal Service job application, written narratives addressing ISLE-15 competencies, and a recent executive assessment. The Competency Review Panel recommends employees who qualify for ISLE-15 vacancies. The Competency Review Panel interviews applicants for specific positions and recommends the best qualified to selecting officials. Workforce Strategic Planning was refocused in FY 2002 to emphasize human resource data collection, analysis, and display to aid in management decision-making. Managers will be able to access data on costs per hire, turnover rates, and promotions. The new approach will be applied to several areas of human resource planning in the next fiscal year, and allows for continued expansion. Quote: The Deputy Chief Inspector of Western Field Operations and Postal Inspectors staffed a Postal Inspection Service informational booth at the 2002 National Asian Police Officers Association (NAPOA) Training Conference. Quote: (Photo of) Basic Inspector Training Class. Process Analysis and Improvement In FY 2002, staff members analyzed human resource processes to identify any areas that are not meeting corporate expectations. The recruitment process for hiring new Inspectors was the first process analyzed. Step-by-step and overall cycle times for application procedures were developed, as well as a schedule for processing projected 2003 applicants. Staff are currently evaluating a standard application process for implementation in the next fiscal year. Finance and Administrative Services The Finance and Administrative Services (FAS) group oversees the planning, administration and reporting of the national and capital budgets of the Postal Inspection Service. FAS streamlines decision-making for Inspection Service managers by supplying them with detailed financial analyses, forecasting data and cost-accounting reports, thereby helping ensure the financial stability of the Postal Inspection Service. While FAS dedicates the majority of its efforts to the budget process, the group is also responsible for managing the Postal Inspection Service's administrative programs. These include the vehicle fleet program, employee timekeeping program, national asset tracking system, travel and relocation program, health and medical exams, credit card program and facility project and space administration. FAS staff monitors and evaluates the programs through modeling and cost-benefit analysis. FAS staff also oversees the Postal Inspection Service's general office services at National Headquarters, including office machine maintenance, mailroom services, office space requirements and office supply and furnishing procurements. 2002 National Leadership and Training Conference The National Leadership and Training Conference, held in Washington, DC, from August 20 through 22, 2002, was attended by more than 550 Postal Inspection Service executives, managers, supervisors, administrative support, and Security Force managers. Three, one-day meetings of administrative specialists, Postal Police Managers, and Assistant Inspectors in Charge were held the day before the conference began to take advantage of the presence of out-of-town attendees. Four programs offered on the opening day of the conference included a Security Communications Initiative Open House, Forensic and Technical Services Open House (with a display of new equipment), a Career Development Division "eLearning" demonstration, and an overview of the Collection-Delivery Equipment Security Initiative. Informative workshops and general sessions focused on enhancing the technical and developmental skills of current and future leaders of the Postal Inspection Service. The Postmaster General offered the keynote address at the opening session. A variety of workshops and general sessions provided insights on evidence and case management, coaching and related management skills, stress handling, legal concerns, and personnel issues. Headquarters groups offered workshops in their functional areas. During one of the general sessions, U.S. Attorney James Comey of the Southern District of New York captivated the audience with insightful remarks on how to further enhance relationships between the Inspection Service and U.S. Attorney's Offices nationwide. In one of his last official acts before retirement, Postal Governor Einar V. Dhyrkopp addressed the conference at the closing banquet. Overall, the meetings provided an excellent networking and training venue for Postal Inspection Service leaders from across the country. Quote: Postmaster General Jack Potter adressed Postal Inspectors at various conferences and training sessions. Statistical Charts Table: FY 2002 Goals, Objectives, Targets and Results Safety Goal 1: Ensure a safe, secure and drug-free work environment Objective 1A: Reduce and deter employee-on-employee assaults and credible threats Target: Not to exceed 500 employee-on-employee assaults and credible threats, Result: 278 Objective 1B: Deter robberies of postal employees and facilities Target: Not to exceed 60 facility robberies, Result: 44 Target: Achieve a facility robbery solution rate of 70%, Result: 58.9% Target: Not to exceed 45 non-facility robberies, Result: 55 Target: Achieve a non-facility robbery solution rate of 50%, Result: 22.7% Objective 1C: Reduce and deter illegal drugs in the postal environment Target: Implementation of strategies at a minimum of 18 identified facilities, Result: 18 Objective 1D: Ensure compliance with prescribed pre-employment screening criteria Target: 85 district hiring office reviews completed, Result: 78 Target: 85 reports issued to management, Result: 78 Target: 90% of corrective actions completed, Result: Not Tracked Objective 1E: Ensure compliance with prescribed procedures for HCR driver screening Target: 11 DNO reviews completed, Result: 11 Target: 11 reports issued to management, Result: 11 Target: 90% of corrective actions completed, Result: Not Tracked Security Goal 2: Reduce and deter criminal attack of postal products, services and asets Objective 2A: Reduce and deter attacks on postal vehicles, apratment panels, collection boxes, NDCBUs, and CBUs in AZ and CA Target: Not to exceed the average number of attacks in AZ and CA for the two prior fiscal years (3,623 adjusted), Result: 5,372 Objective 2B: Identify and resolve domestic and international in-transit mail theft Target: 30 major domestic and international airport mail theft problems resolved, Result: 28 Target: 18 airport security reviews conducted, Result: 24 Target: 18 ASYS airport ground-handling personnel screening clearance reviews conducted, Result: 15 Target: 18 SNET airport ground-handling personnel screening clearance reviews conducted, Result: 16 Objective 2C: Reduce and deter mail theft-related ID and ID takeover schemes Target: 1,640 ECMT prosecutive actions, Result: 2,160 Target: 95 ICMT prosecutive actions, Result: 88 Objective 2D: Reduce and deter theft of registered mail, including remittances Target: ²195 remittance losses of registered mail, Result: 204 Target: A minimum of 90 securiy reviews to be completed, Result: 66 Integrity Goal 3: Reduce the use of the postal system to defraud consumers, businesses, and government agencies and prevent its use to transport prohibited, illegal, and dangerous mailings and their proceeds Objective 3A: Reduce and deter embezzlements Target: Resolve 550 financial embezzlement schemes, with 80 from SIA offices, Result: 605, 182 Objective 3B: Reduce and deter criminal misuse of the Postal Service's Workers' Compensation Program and reduce long-term compensation costs Target: 240 long-term or short-term FWC schemes resolved, Result: 244 Target: $105 million in cost avoidance, Result: $102,354,703 Target: 105 COP schemes resolved, Result: 129 Target: $4.4 million in COP savings, Result: $6,104,552 Objective 3C: Reduce and deter postage fraud schemes Target: 75 postage fraud schemes discontinued, Result: 83 Target: 20 criminal or civil prosecutive actions in high-risk areas, Result: 13 Objective 3D: Assure the sancity and security of the U.S. Mail Target: 14 weekly summary reports submited to USPS chief operating officer, Result: 14 Target: 100% coverage at high-risk sites, Result: 100% Target: high-risk sites identified, Result: 14 Target: high-risk sites covered, Result: 14 Objective 3E: Ensure the security of Postal Service employees and assets Target: 66 security reviews completed, Result: 97 Target: 66 reports issued to postal management, Result: 97 Target: 90% of corrective actions implemented, Result: Not Tracked Objective 4A: Reduce and deter multi-state domestic and international telemarketing operations and direct-mail operations Target: 18 multi-state domestic and international telemarketing and direct mail Category 1 operations disrupted, Result: 43 Objective 4B: Reduce and deter deceptive mailing operations Target: 80 deceptive mail operations disrupted, Result: 106 Target: 50 from divisions, Result: 67 Target: 30 from Headquarters and ISOSGs, Result: 39 Objective 5A: Reduce and deter use of the nation's mail system by organized groups to transport illegal narcotics Target: 2 source city, nationally coordinated interdictions, Result: 2 Target: 1 non-source city, nationally coordinated interdiction, Result: 1 Target: 85 organized groups identified and disrupted, Result 118 Objective 5B: Reduce and deter use of U.S. postal money orders to launder money by disrupting money-laundering operations Target: 20 operations disrupted, Result: 22 Objective 5C: Reduce and deter use of the U.S. Mail for procurement of deliver of materials that promote the sexual exploitation of children Target: Identify and prosecute 245 offenders, Result: 194 Table: FY 2003 Goals, Objectives, Indicators, and Targets Safety Goal 1: Ensure a safe, secure and drug-free work environment Objective 1A: Ensure employee screening is effective Indicator 1A-1: District hiring offices reviewed that are in compliance with prescribed screening criteria Target 1A-1: All district hiring offices reviewed are at 90% compliance Objective 1B: Enhance security of postal facilities Indicator 1B-1: "Facility Risk Rating" for high-profile postal facilities Target 1B-1: Establish indicator and baseline Security Goal 2: Reduce and deter criminal attack of postal products, services, and assets Objective 2A: Reduce theft of mail Indicator 2A-1: Number of ICMT prosecutive actions related to identy theft and identity-takeover schemes Target 2A-1: 95 ICMT actions Indicator 2A-2: Number of ECMT prosecutive actions related to identity theft and identity-takeover schemes Target 2A-2: 2,350 ECMT actions Indicator 2A-3: Compliance with all airport security review criteria Target 2A-3a: 80% correction of deficiencies identified in FY 2003 physical airport security reviews that are under control of AMC manager, to include 100% of all policy and process compliance issues Target 2A-3b: Completion of all airport security reviews Objective 2B: Reduce and deter criminal misuse of the Postal Service Workers' Compensation Program and reduce costs due to fraudulent schemes Indicator 2B-1: Periodic roll schemes resolved and cost avoidance achieved due to termination or reduction of benefits and civil settlements Target 2B-1a: 210 FWC schemes resolved through criminal or administrative actions Target 2B-1b: $108 million in cost avoidance Indicator 2B-2. Front-end investigations cost savings and schemes resolved (COP and occupational injuries) Target 2B-2a: 210 front-end schemes resolved through criminal or administrative actions Target 2B-2b: $8.78 million in cost savings Integrity Goal 3: Reduce the use of the postal system to defraud consumers, businesses, and government agencies and prevent its use to transport prohibited, illegal, and dangerous mailings and their proceeds Objective 3A: Protect consumers and business from fraud schemes Indicator 3A-1: Number of multistate domestic and international telemarketing and direct mail category 1 operations disrupted Target 3A-1: 30 operations disrupted Indicator 3A-2. Number of deceptive mailing operations disrupted via criminal, civil, or administrative action Target 3A-2: 110 operations disrupted Objective 3B: Reduce the use of postal money orders and the postal system to launder money Indicator 3B-1: Number of money laundering operations disrupted Target 3B-1: 20 operations disrupted (excluding 3B-2 below) Indicator 3B-2: Number of money laundering schemes attributed to terrorist activities Target 3B-2: Identify schemes and establish baseline and case subject codes Objective 3C: Reduce and deter the use of the U.S. Mail for procurement or delivery of materials that promote the sexual exploitation of children Indicator 3C-1: Number of offenders identified and prosecuted Target 3C-1: 180 offenders prosecuted AMC-airport mail center ASYS-airline systems CBU-collection box units COP-continuation of pay DNO-distribution network office ECMT-external crimes-mail theft FWC-fraudulent workers' compensation HCR-highway contract route ICMT-internal crimes-mail theft ISOSG-Inspection Service Operations Support Group NDCBU-neighborhood delivery and collection box units SIA-segmented inventory account SNET-shared network terminal THS-terminal handler suppliers Table: U.S. Postal Inspection Service Criminal Statistics for FY 2002 Type of Investigation: Mail Theft (includes theft and possession of stolen mail) Arrests: 5,858 Convictions*: 5,215 Type of Investigation: Miscellaneous External Crimes (includes counterfeit and contraband postage, money order offenses, vandalism and arson) Arrests: 395 Convictions*: 394 Type of Investigation: Miscellaneous Employee Crimes (includes theft of postal property and sabotage of equipment) Arrests: 69 Convictions*: 54 Type of Investigation: Bombs, Threats, Hoaxes and Explosive Devices Arrests: 65 Convictions*: 42 Type of Investigation: Prohibited Mailings (includes hazardous material, firearms and weapons, intoxicants, extortion, and false documents) Arrests: 202 Convictions*: 141 Type of Investigation: Assaults and Threats (includes threats and assaults against on-duty postal employees) Arrests: 325 Convictions*: 238 Type of Investigation: Robbery Arrests: 87 Convictions*: 80 Type of Investigation: Burglary Arrests: 137 Convictions*: 140 Type of Investigation: Mailing of Controlled Substances (includes narcotics, steroids, drug-related proceeds and drug paraphernalia) Arrests: 1,385 Convictions*: 1,204 Type of Investigation: Employee Narcotics Cases (includes employees and non-employees selling narcotics on postal property) Arrests: 34 Convictions*: 23 Type of Investigation: Mail Fraud Arrests: 1,634 Convictions*: 1,453 Type of Investigation: Child Exploitation, Mailing of Obscene Matter and Sexually Oriented Advertisements Arrests: 253 Convictions*: 259 Type of Investigation: Financial and Expenditure Investigations Arrests: 282 Convictions*: 267 Type of Investigation: Workers' Compensation Fraud Arrests: 45 Convictions*: 35 Type of Investigation: Revenue Investigations Arrests: 57 Convictions*: 43 Total Arrests: 10,828 Total Convictions*: 9,588 *Convictions may be related to cases from prior reporting periods. Table: Postal Inspection Service Jurisdiction and Laws Postal Inspectors enforce more than 200 federal laws in investigations of crimes that may adversely affect or fraudulently use the U.S. Mail, the postal system, or postal employees. The list below describes some of our most important areas of jurisdiction. Assaults (18 USC 111 & 1114) The protection of Postal Service employees is one of our most important responsibilities. Inspectors promptly investigate assaults and threats that occur while postal employees are performing official duties or as a result of their employment. Bombs (18 USC 1716) Although a rare crime, the mailing of bombs is given one of our highest investigative priorities due to the severe impact it can have on postal customers, employees, and operations. Burglary (18 USC 2115) The Postal Service has averaged about 300 burglaries each year. Inspectors have minimized losses through the use of security equipment and facility design. Child Exploitation (18 USC 1470, 2251, 2252, 2253, 2254, 2422, 2425) The Postal Inspection Service has long been recognized as the leading federal law enforcement agency in the effort to combat the production and distribution of child pornography and other crimes exploiting children through the mail and, when it involves the mail, over the Internet. Controlled Substances (21 USC 841, 843 & 844) Postal Inspectors initiate investigations related to transporting and distributing narcotics through the mail or at postal facilities. Electronic Crimes (18 USC 1029, 1030, 1343 & 2701) Inspectors protect postal customers from fraud schemes and other crimes that may occur online and involve the misuse of the mail or of the Postal Service. This includes using or selling stolen or counterfeit access devices, such as credit card numbers; using protected computers without proper authority or exceeding authorized access; using computer communications in a scheme to defraud; and unauthorized access to communications that are stored electronically via a communications service. Embezzlement (18 USC 1711) Postal Inspectors investigate employees and contractors suspected of embezzling postal funds and review the Postal Service's internal financial controls to protect postal revenue and assets from internal theft or misuse. Forfeiture (18 USC 981 and 982) Postal Inspectors use criminal and civil forfeiture statutes, when appropriate, to seize assets associated with criminal acts. Identity Fraud (18 USC 1028) The Postal Inspection Service is a leading federal law enforcement agency in the investigation of identity takeovers, a crime that often begins with the theft of mail or use of the mail to defraud individuals or financial institutions. Mail Fraud (18 USC 1341, 1342 & 1345; 39 USC 3005 & 3007) The Postal Inspection Service is committed to protecting postal customers from misuse of the mail. Inspectors place special emphasis on mail fraud scams related to advance fees, boiler rooms, health care, insurance, investments and other consumer frauds, especially when they target the elderly or other susceptible groups. Money Laundering (18 USC 1956 & 1957) Postal Inspectors aggressively investigate criminals who attempt to conceal the proceeds of illegal acts through monetary transactions. Inspectors identify and seize criminals' assets, denying violators the proceeds of their crimes. Money Order Crimes (18 USC 500) Postal Inspectors investigate the counterfeiting, altering, and forging of postal money orders. Robbery (18 USC 2114) Postal Inspectors respond promptly to robberies of postal employees and postal contractors. Inspectors focus on preventing robberies through the use of security equipment and improved postal procedures. Theft of Mail (18 USC 1708 & 1709) Postal Inspectors invest significant resources into the investigation of mail theft by criminals, postal contractors, and employees. Workers' Compensation Fraud (18 USC 1920) The Postal Inspection Service places a high priority on investigations of workers' compensation fraud due to the high costs of the program: The Postal Service incurs about 25 percent of the entire federal government cost of workers' compensation. For assistance with postal-related problems of a law enforcement nature, contact your nearest Inspection Service division. Chicago Division 433 W Harrison St, Rm 50190 Chicago IL 60669-2201 312-983-7900 Detroit Division PO Box 330119 Detroit MI 48232-6119 313-226-8184 Florida Division 3400 Lakeside Dr, 6th Fl Miramar FL 33027-3242 954-436-7200 Gulf Coast Division PO Box 1276 Houston TX 77251-1276 713-238-4400 Mid-Atlantic Division PO Box 3000 Charlotte NC 28228-3000 704-329-9120 Midwest Division 1106 Walnut St St Louis MO 63199-2201 314-539-9300 New York Division PO Box 555 New York NY 10116-0555 212-330-3844 Northeast Division 495 Summer St, Ste 600 Boston MA 02210-2114 617-556-4400 North Jersey/Caribbean Division PO Box 509 Newark NJ 07101-0509 973-693-5400 Northwest Division PO Box 400 Seattle WA 98111-4000 206-442-6300 Philadelphia Division PO Box 7500 Philadelphia PA 19101-9000 215-895-8450 Rocky Mountain Division 1745 Stout St, Ste 900 Denver CO 80299-3034 303-313-5320 San Francisco Division PO Box 882528 San Francisco CA 94188-2528 415-778-5800 Southeast Division PO Box 16489 Atlanta GA 30321-0489 404-608-4500 Southern California Division PO Box 2000 Pasadena CA 91102-2000 626-405-1200 Southwest Division PO Box 162929 Ft Worth TX 76161-2929 817-317-3400 Washington Division PO Box 3310 Capitol Heights, MD 20791-3310 301-499-7346 Western Allegheny Division 1001 California Ave Pittsburgh PA 15290-9000 412-359-7900 Office of Recruitment 9600 Newbridge Drive Potomac, MD 20854-4436 301-983-7400 Quote: Roughly 1,900 Postal Inspectors are stationed throughout the United States. In FY 2002, they arrested 10,828 suspects for crimes involving the U.S. Mail. Quote: The mission of the United States Postal Inspection Service is to protect the U.S. Postal Service, its employees and its customers from criminal attack, and protect the nation’s mail system from criminal misuse. Published in December 2002 U.S. Postal Inspection Service 475 L’Enfant Plaza SW Washington, DC 20260-2175 Lee R. Heath Chief Postal Inspector Daniel L. Mihalko Inspector in Charge Congressional & Public Affairs Debbi Baer, Editor Congressional & Public Affairs Martin Communications, Inc. Design For more information on the U.S. Postal Inspection Service, go to our Web site at: www.usps.com/postalinspectors For information on employment opportunities, write to: Office of Recruitment 9600 Newbridge Drive Potomac, MD 20854-4436 Or call 301-983-7400 Special Insert: The Story of American Presort, Inc. The Story of American Presort, Inc. How New York Postal Inspectors Toppled an Empire Story by Postal Inspector Kate Lawrence Photos by Larry Ghiorsi, U.S. Postal Service Three owners and four managers of American Presort, Inc., New York City’s largest presort mailer, were handed down hefty sentences after U.S. Postal Inspectors proved their company had defrauded the Postal Service of millions of dollars in postage. With more than 200 employees and a 500-plus customer base comprising New York City’s largest and most prominent banks, insurance companies, brokerage houses, utilities, and corporations, American Presort, Inc. (API) was the largest presort mailer in the state. In business since the early 1980s, API eventually grew to process an average of 2.3 million pieces of First-Class mail daily. Eight Bell & Howell optical character readers—high-tech computers—“read” addresses on letters, looked up barcodes, printed the codes, and then sorted letters into one of 160 bins at a rate of 25,000 letters an hour. API occupied the eighth floor of an industrial facility on West 26th Street, taking up an entire city block in Manhattan. API was thriving—until its owners succumbed to greed. In a climate already rife with big business corruption, a U.S. Postal Inspection Service investigation of API concluded in July 2002 with sentences and restitution for its three owners and four of its managers, who knowingly committed more than $20 million in fraud against the U.S. Postal Service. While the investigation covered only the period of January 1995 through June 1997, U.S. Postal Inspectors later learned that API’s fraudulent practices had begun in the early 1980s, only a few years after going into business. Quote: API occupied the entire eighth floor of this block-long building on W. 26th Street. U.S. Postal Inspectors are federal law enforcement officers with jurisdiction over all crime involving postal employees, postal assets, and the U.S. Mail. During its 200-year history, Inspectors have uncovered thousands of schemes in which people have committed fraud against the U.S. Postal Service, including by stealing or counterfeiting U.S. postage or by manipulating meters to print “free” postage. Postage fraud may involve a few hundred dollars or as much as several million dollars. API was in a class by itself. Brothers Steven and Philip Fruchter and partner Lawrence Braun owned API, which had grown quickly since its modest beginnings in 1982 as a hand-sorting operation. Their company dispatched mail to the Postal Service’s Morgan Processing and Distribution Center, or Morgan Station as it was known, where postal employees checked it for accuracy against submitted records. The volume of mail API handled was enormous, so hiding portions of it would be a simple matter. Postal Inspectors first learned of possible fraud in 1996, when an anonymous tip led the New York Division’s Revenue Investigations Team to believe that someone at API was tampering with postage meters and lying about discounts it earned. Inspectors suspected the allegations were true—that more of API’s mail was being hidden than was being paid for. Proving it, however, would be a challenge. Attempts by Inspectors to round up all of API’s mail on a given day and then count it according to rate categories left them feeling as if they were trying to put Humpty Dumpty back together again. Aside from the sheer volume of the task, any one of 2 million pieces of mail could fall within a wide range of postage rates: 23.8 cents, 25.4 cents, 26.4 cents, 27.4 cents, 29.5 cents, or 32 cents. Worse, API followed a practice of metering the mail at the lowest rate possible and then (supposedly) paying the difference later, resulting in unreported pieces and incremental amounts of postage owed. To prove fraud was committed, Inspectors needed to verify how much mail was being tendered to the Postal Service and which discounts had been earned in each rate category. The investigation came to a standstill, until New York Division Postal Inspectors Joe McGinley and Tom Van de Merlen, newly assigned to the case, found a focus: meter fraud. McGinley and Van de Merlen knew that U.S. Postal Service statisticians could create reports that would identify postage meter losses. The statisticians routinely sampled mail on a daily basis. Because every postage meter imprints a unique number, statisticians can estimate volume per meter. They compare volume estimates to postal databases that track individual meter payments and use computer programs to “flag” dramatic mismatches between usage (the volume of mail in the mailstream) and meter payments (how much money the customer set the meter for). Postal Inspectors ran a report comparing one of API’s meters and found that, in the spring of 1997, meter no. 2504688 had generated enough meter strips for roughly 120,000 pieces of mail a day over a threemonth period—about $30,000 worth of postage a day. Records for meter no. 2504688, however, revealed it was last set on January 30, 1997, for $9,000. No additional postage had been set on the meter since then, despite huge amounts of mail bearing the meter’s number appearing in the mailstream for months afterward. Inspectors McGinley and Van de Merlen shifted their attention to API’s activities. Working with other Inspectors from the Revenue Investigations Team, they found large volumes of mail generated by API with the meter imprint they were looking for—no. 2504688. A second break came when Inspector Van de Merlen called a representative of Ascom Hasler, the meter manufacturer that leased equipment to API. He wanted information on meter no. 2504688, but first heard some interesting news: Another meter leased by API had just been returned for repairs because one of the denomination wheels had broken. That meant someone at API had tampered with the meter. Meter tampering is illegal. It occurs when someone attempts to manipulate a meter so it will imprint postage without recording usage. This was the kind of evidence Postal Inspectors had been waiting for. On June 27, 1997, 40 Inspectors from the New York Division arrived at API with a search warrant. Inspector Joe McGinley quickly located the area where mail was being metered. He found tens of thousands of letters imprinted by meter no. 2504688. But he couldn’t find the meter. McGinley considered the API employees who had access to the metered mail. An hour later he had narrowed down the list to two: Lenny Taylor, the general manager at API, and Deo Narraine, the daytime meter room supervisor. He and Van de Merlen confronted the supervisor first. “You’re either with us or against us,” Inspector McGinley warned, “and if you’re against us, you’re going down.” Deo Narraine led them to a nearby hamper of mail. He lifted out two trays of mail and withdrew a plastic tub from the bottom of the hamper. Underneath another half-foot worth of mail was meter no. 2504688. He later told the men, “When I saw all the Inspectors way off from the other end of the building, moving out across the floor, I knew this was the meter they had come for.” He hid it at once. Inspector McGinley had reason to believe there was a second “hot” meter somewhere in the plant, and the team found it in Lenny Taylor’s office, hidden in the knee-well of his desk. It came to be known as the “dollar meter” after Inspectors discovered it would print a dollar meter strip when set at zero, meaning it didn’t rack up any postage due. Meanwhile, Inspectors seized other worthwhile evidence, such as logs showing all the details of the “free” postage generated by the meter. In the weeks that followed, they convinced Lenny and Deo to cooperate with the investigation, and other employees soon stepped forward. The picture that began to emerge was a scheme of grand proportions: meter fraud, underreported mail, fake postage reports, manipulation of the software on the Bell & Howell sorters, bribery of a postal supervisor, and kickbacks to customer representatives so they would ignore overcharges to their companies. Inspectors continued to develop evidence as the summer progressed. Then Lenny Taylor’s lawyer called Inspector Van de Merlen with an urgent message: “They’re destroying records.” API president Steven Fruchter had told one of his technicians to erase computer hard drives subpoenaed by the government. Per the terms of the subpoena, Inspectors were supposed to download data from API computers in the next few days, but Van de Merlen now realized he couldn’t afford to wait. They needed another search warrant for API, this time for all of its business records, and they needed it right away. He filled out the paperwork for an emergency search warrant. The June search scene was about to repeat itself, as 40 Postal Inspectors stayed at their posts the afternoon of August 1, 1997, waiting for the emergency warrant to come through. By 8:00 that evening, an advance copy of the warrant had been prepared and was sent to the duty magistrate at the Southern District of New York. But the magistrate had to recuse herself: her husband, a defense attorney, had been hired to represent one of the owners. “You’ll have to find someone else to sign off on this,” she told the men. Assistant U.S. Attorney Brad Ockene jumped in the car with Van de Merlen to track down another magistrate. By the time they interrupted Magistrate Michael Dolinger’s dinner with his wife in a Chinese restaurant and got the needed signature, it was 10:30 p.m. Inspector Van de Merlen made it to New York Division Headquarters by 11. “I parked in the first spot I could find and ran up the stairs. There were a lot of impatient faces in the conference room. These guys had been on hold since around 5 o’clock, waiting for me to get back. It was like being greeted by an army that had been kept waiting for battle.” Postal Inspectors descended on the company a second time. Two postal trucks were ferried up in API’s oversized freight elevator to the 8th floor, where Inspectors loaded them to the hilt with thousands of boxes of seized business records. It was four hours and tons of paper later before they finished the job. Someone hit the elevator switch to go down, but they were met with silence. The freight elevator operator had gone home, and his replacement wouldn’t arrive until 7 a.m. Van de Merlen and another team member elected to stay behind and settled down for a three-hour wait while they guarded the evidence. When the last of the trucks was lowered to the street, driven to Morgan Station, and secured in the garage, Van de Merlen grabbed his jacket to head home. “It had been a long day and an even longer night,” he recalled, “I couldn’t wait to get home. I went to get my car, but it was gone. Then I realized the city had towed it. In my haste, I had parked my personal car in a ‘government vehicles only’ spot outside of the Post Office.” Inspectors now began the task of calculating the extent of the fraud by crosschecking postal records with API client billings—much easier said than done. Inspector Ralph Nardo joined the team and was assigned the unenviable job of compiling and analyzing data from 65,000 invoices and 32,000 mailing statements. Nardo created a computer application that would capture information from client invoices. He then organized a team of Inspectors to input it. The task would entail months of painstaking work. “Originally we focused on the first half of 1997, but we identified so much unreported mail, we knew we had to expand the time frame,” said Inspector Nardo. “We finally decided to go back two and a half years, to the beginning of 1995.” It seemed the deeper they dug, the higher the losses rose. Their final tallies amazed them: API had submitted to the Postal Service 208 million pieces of mail, an average of 278,000 pieces a day, with improper postage. Inspectors were reasonably sure most of the mail had some postage on it; they just didn’t know how much additional postage was due. And calculating losses was tricky, as rate computations varied from piece to piece, depending on how API sorted and packaged the mail. Most of API’s unreported mail probably didn’t qualify for the highest discounts. The question was, did they qualify for any? And just how much extra postage was due? After months of intensive data collection and analysis, the Revenue Investigations Team submitted their conclusions: API owed the Postal Service more than $20 million as the result of underreporting mail volume, $3.5 million of which was from meter fraud. That was when Postal Inspectors discovered, among the seized records, another scheme by API: bribery. Internal records kept by Lenny Taylor, API’s general manager, showed petty cash disbursements had been made to a Postal Service bulk mail supervisor. They located the man and called in a special agent from the Postal Service’s Office of the Inspector General to assist with an interview, as dictated by protocol. The supervisor confessed quickly. He’d agreed to “look the other way” when API underpaid postage—in exchange for a $2,000 payment. He was removed from the Postal Service and later pled guilty to accepting bribes. The U.S. Attorney’s Office in the Southern District of New York was closely monitoring the case. It conducted multiple proffers with API employees and initiated discussions with attorneys representing the owners, managers, and supervisors who were implicated in the fraud. A racketeering indictment encompassed the multitude of frauds committed by API and named the 10 employees who had yet to admit their guilt. Five others had already signed cooperative agreements with the Southern District of New York, including the former general manager, one of the first to “turn.” Before the indictment was rendered, owners Steven and Philip Fruchter and Lawrence Braun sold API to another company for $25 million in cash and stock, but remained as API employees. The Chief of Criminal Investigations at the Southern District of New York was outraged, fearing the proceeds from API would disappear. “If you don’t agree at once to place that money in escrow,” he warned the defendants, “the weight of the entire Southern District will be brought to bear.” Accordingly, $15 million was placed in a voluntary escrow account, and the three were formally charged. API’s new owners fired the men. Five mail processing managers were indicted next and then two technicians who had worked the company’s automated sorting machines and had falsified postage calculations reported to the Postal Service. The case went to trial after more than two years of plea negotiations. Nine defendants were tried. The trial lasted 13 weeks and was prosecuted by three Assistant U.S. Attorneys from the Southern District of New York. Testimony came from four New York Division Inspectors, two postal managers, Inspection Service forensic specialists, three Ascom Hasler employees, an employee who worked with mail sortation equipment, and a forensic accountant hired by the Postal Service. Lenny Taylor was the chief government witness. He was called to the stand on 11 days to provide testimony. The defense attorney’s strategy was to overwhelm the jury. It wouldn’t have been hard to do—the huge volume of data combined with myriad postal regulations was confusing. He inferred the Postal Service was to blame for the lost revenue. “It was a tough trial,” Inspector McGinley later remarked. “We had to educate the prosecutors, the jury, the judge, and the defense attorneys about postal regulations. By the end of the trial, everyone in the courtroom knew how to verify a presorted, discounted-rate mailing. As to who was really to blame [for the fraud], the tampered-with meters and the evidence of the bribes made that clear. The jury knew who to hold accountable.” Steven Fruchter entered a guilty plea after the third week of trial, and six of the eight remaining defendants, including Philip Fruchter and Lawrence Braun, were convicted for racketeering and mail fraud after six days of deliberations. U.S. Attorney Mary Jo White praised the efforts of Postal Inspectors assigned to the case. “It’s ironic,” noted Inspector Nardo, “that in this case the Postal Service was the victim. Usually when we conduct a fraud investigation, some other business is the victim. This time we were the victim. And Postal Inspectors, the Postal Service’s own employees, tracked down the perpetrators. There’s poetic justice in that.” Steven Fruchter was sentenced one year later to 42 months in prison with a forfeiture agreement of $5 million. His brother Philip was sentenced to 51 months in prison and another $5 million forfeiture. Braun received 60 months in prison, but when he refused to sign a forfeiture agreement, the judge showed his displeasure by making him liable for the entire judgment of $20.7 million. The four convicted API managers received sentences ranging from 30 to 37 months in prison, with restitution of $17 million each. Five cooperating witnesses were sentenced to community service and probation. Lenny Taylor, a cooperating witness, was ordered to pay $1 million in restitution. “Protecting the Postal Service is one of our primary missions, but postage fraud investigations like the API case help to protect not just the Postal Service, but all mailers,” remarked Chief Postal Inspector Lee R. Heath. “API was driving out legitimate businesses. Its competitors couldn’t keep up. During the two-and-a-half years we documented the scheme, the three owners pocketed $15 million in salary and bonuses. Plus, they got $25 million for the sale of the company. They got that money because they cheated us, not because they ran a highly efficient operation. When we go after crooks like this, it keeps the playing field level, and when the Postal Service gets the money it’s due, rates are kept stable.” Already, $4.25 million has been repaid to the Postal Service, and an additional $7 million has been restrained by court order and is expected to be recovered. Judgments for the balance of the losses will be in effect throughout the remainder of the convicted defendants’ lives. “This case should never have gone to trial,” said Postal Inspector Tom Van de Merlen. “We had so much evidence against them. They just thought they could get away with it.”