Justice Department Targets Online Fraud and Crime
Justice Department Targets Online Fraud and Crime
Attorney General John Ashcroft, Assistant Attorney General Christopher A. Wray, FBI Assistant Director Jana Monroe, Chief Postal Inspector Lee Heath, and Federal Trade Commission Chairman Deborah Platt Majoras announced the arrests or convictions of more than 150 individuals and the return of 117 criminal complaints, indictments, and informations in a collaborative nationwide enforcement operation directed at major forms of online economic crime and other cyber crimes.
The ongoing action, which included arrests of several people Thursday, August 27, is known as Operation Web Snare. This initiative involved coordination among 36 U.S. Attorneys’ offices nationwide, the Criminal Division of the Department of Justice, 37 of the FBI’s 56 field divisions, 13 of the Postal Inspection Service’s 18 field divisions, the FTC, together with a variety of other federal, state, local and foreign law enforcement agencies.
The various Justice Department offices made full use of the Identity Theft Penalty Enhancement Act, signed into law by President Bush on July 15. The Act prescribes stiff prison terms for those who use identity theft to commit other crimes.
Operation Web Snare is targeting a variety of on-line economic crimes including identity theft, fraud, counterfeit software, computer intrusions, and other intellectual property crimes. The cases involved show the extent to which alleged online criminal activity increasingly is not only multi-jurisdictional, but involves the blending of traditional crimes with various forms of computer crime, such as computer intrusion and malicious computer programs.
More than 160 investigations have been opened as part of Web Snare, which ran from June 1 to August 26, 2004. Investigators have identified more than 150,000 victims with estimated losses of more than $215 million. More than 140 search and seizure warrants were executed as part of the operation, and prosecutors have obtained 117 criminal complaints, informations, and indictments to date. The charges have led to more than 150 arrests or convictions.
Some of the charges filed in districts throughout the country include:
- In the Central District of California, a federal grand jury indicted a Romanian computer hacker and five U.S. residents on charges that they allegedly conspired to steal more than $10 million in computer equipment from Ingram Micro in Santa Ana, California — the largest technology distributor in the world. The indictment alleges that Calin Mateias hacked into Ingram Micro’s online ordering system and placed fraudulent orders for computers and computer equipment. Mateias allegedly directed that the equipment be sent to dozens of addresses scattered throughout the United States as part of an Internet fraud ring. In a separate indictment in the Western District of Pennsylvania, Mateias was charged in another alleged scheme involving shipments of fraudulently ordered merchandise that was sent to co-conspirators in Pennsylvania, Georgia, and Louisiana.
- In the Northern District of California, Roman Vega of Ukraine made an initial appearance in federal court after being extradited from Cyprus to face a 40-count indictment alleging credit card trafficking and wire fraud. Vega allegedly used Internet chat rooms to traffic in credit card information of thousands of individuals that had been illegally obtained from sources around the world, including credit card processors and merchants. Vega was also allegedly an operator of a website at www.boafactory.com, where stolen and counterfeit credit card account information was allegedly bought and sold.
- In the District of Utah, R. Mark Pentrack was sentenced to more than 11 years in prison as a result of his guilty pleas to mail fraud, misuse of a Social Security number, attempted destruction of evidence, and making a false statement in connection with an Internet fraud scheme. Pentrack offered car parts, aircraft parts, and other items for sale over the Internet, but did not possess those items and did not deliver those items to buyers. To conceal his activities, he hired secretaries in five states outside Utah to receive payments from would-be buyers, used an e-mail service based in Australia, and used an anonymizing program when conducting online activities. More than 10 individuals sent Pentrack more than $200,000 in connection with the scheme. After being arrested, Pentrack tried to enlist two people to enter his apartment and remove two computers and other materials relating to his scheme before federal authorities could find and seize them.
He also made false statements concerning his scheme to federal authorities.
- On August 20, 2004, in the Western District of Washington, Usman Hayat of Islamabad, Pakistan, pleaded guilty in federal court in Seattle to one count of transmitting interstate and foreign communications with intent to extort, in violation of Title 18, United States Code, Section 875(d). According to the plea agreement, Hayat contacted Eddie Bauer, Inc. in February 2004, via email, threatening to release photos that Hayat alleged showed child labor being used in the production of Eddie Bauer apparel. Hayat claimed he would post the photos on the web or send them to the media or Eddie Bauer’s creditors if he was not paid $685,000. (According to Eddie Bauer officials, regular audits and unannounced inspections of the Pakistani factories where its apparel are produced have found no evidence of the use of child labor in the manufacture of Eddie Bauer products.) At the direction of law enforcement, Eddie Bauer communicated with Hayat via email and ultimately provided Hayat with a plane ticket to Seattle. In the plea agreement, Hayat admitted that he traveled to Eddie Bauer headquarters in Redmond, Washington, and met with undercover agents in order to collect the $685,000 he had demanded. At the meeting, Hayat showed the agents photographic negatives that he claimed showed child labor. Federal agents provided him with $500,000 cash. Hayat reviewed the money and agreed to meet the agents the next day to open bank accounts and deposit the money. Hayat was arrested before leaving the Eddie Bauer offices.
- Six men were charged in the Central District of California in the largest and first-ever case involving sophisticated denial of service attacks for commercial advantage. Jay R. Echouafni, Chief Executive Officer of Orbit Communication Corporation in Massachusetts, was indicted by a federal grand jury this week on multiple charges of conspiracy and causing damage to protected computers. The indictment and a related complaint filed allege that Echouafni and a business partner hired computer hackers in Arizona, Louisiana, Ohio, and the United Kingdom to launch relentless computer attacks against Orbit Communication’s online competitors. These sustained attacks allegedly began in October 2003 and caused the victims to lose over $2 million in revenue and costs associated with responding to the attacks. In addition, it is alleged that the attacks temporarily disrupted other commercial and government sites hosted by the victims’ internet service providers. The case involved close cooperation among several United States Attorneys’ Offices around the country, the Criminal Division of the Department of Justice, and law enforcement agencies in the United States and United Kingdom.
“The wide range of investigations included in Operation Web Snare reflects law enforcement’s commitment to investigating and prosecuting all types of online crimes, from identity theft to computer intrusions, from Internet fraud to intellectual property crimes,” said Assistant Attorney General Christopher Wray. “The Criminal Division and its partners throughout law enforcement re-main committed to responding aggressively to online crime, whatever form it may take.”
Operation Web Snare represents a significant component of law enforcement’s concerted and coordinated response to the rising numbers of reports about Internet-related economic crime to government agencies and other organizations. The Federal Trade Commission reported that Internet-related complaints accounted for 55 percent of all consumer fraud reports that it received in 2003, up from 45 percent in 2002. The Internet Crime Complaint Center (IC3) – a joint project of the FBI and the National White-Collar Crime Center reported that it referred 71,442 Internet-related fraud complaints to law enforcement in 2003, and 42,183 Internet-related fraud complaints in the first half of 2004. (By comparison, the IC3 referred to law enforcement 48,252 Internet-related fraud complaints in 2002, and 16,775 Internet-related fraud complaints in 2001.)
For some types of online crime, such as “phishing” –the use of emails and websites resembling those of legitimate organizations to commit identity theft and fraud –the incidence of reporting has grown dramatically. In the first six months of 2004, according to the Anti-Phishing Working Group, an industry coalition, the number of unique phishing attacks increased by more than 800 percent — from 176 in January, 2004 to 1,422 in June, 2004.
Operation Web Snare is a follow-up to Operation ECon and Operation Cyber Sweep, which Attorney General Ashcroft announced in May and November 2003, respectively. E-Con resulted in the execution of 70 search and seizure warrants and charges against more than 130 individuals. Cyber Sweep resulted in the execution of more than 90 search and seizure warrants and the arrests or convictions of more than 125 individuals.
Victims of online crime are encouraged to file a complaint online with the Internet Crime Complaint Center, or IC3. The IC3 is a joint venture of the FBI and the National White Collar Crime Center. The IC3 staff reviews complaints, looking for patterns or other indicators of significant criminal activity, and refers investigative packages of complaints to the appropriate law enforcement authorities in a particular city or region. Victims can find the online form at http://www.ifccfbi.gov. (The Federal Trade Commission also has an online form for complaints about consumer fraud and deception, available through its website, http://www.ftc.gov.)
For more information on this initiative and other matters related to fraud and cybercrime, please visit the Department’s website at www.usdoj.gov.