Computer Worm Arrests

The FBI, in conjunction with law enforcement authorities in Morocco and Turkey, have arrested two individuals believed to be responsible for the creation and distribution of the “Mytob” and “Zotob” computer “worms” that disrupted computer networks at major U.S. news organizations.^[1] The man arrested in Morocco was 18 year-old Farid Essebar, who went by “Diabl0” online, and the man arrested in Turkey was Atilla Ekici, who went by the name “Coder.” The two men will be subject to local prosecutions.^[2]

In addition to Moroccan and Turkish authorities, the FBI received “valuable assistance” from Microsoft.^[3] This particular aspect of the investigation is quite fascinating. Microsoft operates an Internet Crime Investigations Team, and they provided ”round-the-clock” technical and investigative support to the FBI and the foreign authorities.^[4]

The investigation is on-going and the FBI will continue to assist the “appropriate authorities” in the prosecution of any charges.^[5]

In the United States, unleashing network worms is behavior that is criminalized under 18 U.S.C. § 1030. Under this statute, it is a crime for a person to knowingly cause the transmission of a program or code, and intentionally cause damage to a protected computer.^[6] Furthermore the damage must cause at least $5,000 worth of damage for the statute to apply.^[7]

Violating section 1030 can be punished in the United States with a fine, imprisonment for up to 20 years, or both.^[8]

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[1] Federal Bureau of Investigation, Press Release: FBI Announces Two Arrests in Mytop and Zotob Computer Worm Investigation, Aug. 26, 2005, available here.
[2] Id.
[3] Id.
[4] Id.
[5] Id.
[6] 18 U.S.C. § 1030(a)(5)(A)(i).
[7] Id. § 1030(a)(5)(B)(i).
[8] Id. § 1030(c)(4).

Hackers

According to US officials, Chinese websites are being used to breach hundreds of unclassified United States government computer networks.^[1] Classified networks have not been breached, and the information gathered seems to be innocuous on its own, but it is possible that the information could yield useful intelligence if put together properly.^[2]

The operation against American networks seems to stretch back two or three years, and analysts are divided on whether the attacks are a coordinated campaign by the Chinese government or simply the work of hackers using Chinese networks to disguise the origins of their attacks.^[3]

China is considered a convenient place from which attacks van be launched because there are large numbers of computers there that can be compromised, and tracking hackers who use Chinese networks is complicated by the lack of “cyber investigation agreements” between the US and China,^[4] and the lack of a formal extradition treaty between the two countries.^[5] The number of attacks against the Pentagon last year totaled 79,000, which was an increase from 54,000 in 2003.^[6]

Illegally accessing computers without authorization is a serious transnational crime covered primarily by 18 U.S.C. § 1030.

Section 1030 covers many different acts which constitute crimes. The acts that seem most appropriate to this discussion are

• knowingly accessing a computer without authorization, obtaining defense-related information that be used against the United States, and communicating that information to someone not authorized to receive it;^[7]
• intentionally accessing a computer without authorization and obtaining information from any department or agency;^[8]
• intentionally, without authorization, accessing a nonpublic computer of a department or agency of the United States;^[9] or
• attempting to do any of the crimes listed in section 1030.^[10]

The punishment for violating, or attempting to violate, section 1030 can be as follows:

• for violating section 1030(a)(1): a fine, imprisonment for up to twenty years, or both;^[11]
• for violating sections 1030(a)(2)(B) and (a)(3): a fine, imprisonment for up to ten years, or both.^[12]

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[1] Bradley Graham, China a Staging Ground for Computer Attacks, Wash. Post, Aug. 24, 2005, available here.
[2] Id.
[3] Id.
[4] Id.
[5] For more information about extradition between the United States and China, please see our post about the extradition of Yu Zhendong, here.
[6] Graham, supra note 1.
[7] 18 U.S.C. § 1030(a)(1).
[8] Id. § 1030(a)(2)(B).
[9] Id. § 1030(a)(3).
[10] Id. § 1030(b).
[11] Id. § 1030(c)(1).
[12] Id. § 1030(c)(2).

McNabb in the News

Senior Principal Douglas McNabb has been quoted by the Canadian Press in a story about Lord Conrad Black.

…U.S. authorities need to move quickly to lay charges against Black to get a potentially lengthy case started, said Douglas McNabb, senior principal at McNabb Associates….

"The U.S. cannot seek Mr. Black's extradition until after he has been charged," said McNabb, adding he's heard rumours that U.S. authorities could announce charges within a week.

Charges would lead authorities to request Black's extradition and to put a notice of the U.S. arrest warrant on Interpol, the international police network.

Even if charged and facing extradition, Black has several legal and appeal options that alone could drag out the extradition case for a few years at least, McNabb said.

"He's not a terrorist, he's a white collar guy, and he's got money and he's prepared to fight it," McNabb said from Houston.

Black, who gave up his Canadian citizenship a few years ago in a dispute with former prime minister Jean Chretien over a British peerage, could face years of prison time, "absolutely, without doubt if he's convicted," McNabb said.

That gives Black a good reason to take each legal battle as far as he can.

There's little reason to see why Britain would prevent Black's extradition, McNabb said, since in 2003 the country changed its own extradition laws allowing the U.S. to extradite people as long as they could prove charges were pending.^[1]

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[1] Gillian Livingston, Long Legal Battle Expected if U.S. Authorities Lay Charges, Extradite Black, Canadian Press, Aug. 25, 2005.

Alien Smuggling

The past couple of days have seen a couple of interesting stories relating to human smuggling and illegal immigrants.

Most recently, a federal grand jury in Arizona indicted a Mexican national on charges that he transported illegal immigrants into the United States, one of whom was left behind and died.^[1] Bolivar Cerbando Morales-Galvez has been charged with 11 counts of human smuggling-related violations.^[2]

The statutes that apply to his behavior are 8 U.S.C. § 1324(a)(1)(A)(i) for bringing the individuals into the United States at a place other than a designated port of entry, and 8 U.S.C. § 1342(a)(2)(B)(ii) for bringing aliens into the country, who have not received authorization to do so, for private financial gain.

Designated Port of Entry
We have discussed bringing aliens into the country at places other than a designated port of entry here. Because death occurred in the violation of section 1324(a)(1)(A)(i), the defendant can be punished by a fine and/or sentenced to death or life in prison.^[3]

Private Financial Gain
Under 8 U.S.C. § 1324(a)(2)(B)(ii), it is a crime for a person to bring an alien into the country for private financial gain, when he knows that that person has not received official authorization to enter the country.

The punishment for violating section 1324(a)(2)(B)(ii) is a fine and imprisonment for between 3 to 10 years.^[4]

Alien Kidnapping
The other interesting story concerning aliens occurred in Los Angeles. Felipe Mendoza-Granados was sentenced to forty years in prison by US District Court Judge Audrey B. Collins for “stealing illegal aliens from a human smuggling ring and holding those aliens for ransom.”^[5] He was one of five Mexican nationals convicted on federal hostage-taking and weapons charges.^[6] The men sent a “confederate” to Mexico where he would pose as someone who wanted to be smuggled into the United States, and when he and other aliens arrived in the US, he contacted Mendoza and his associates. They then met the smugglers in a supermarket parking lot, and brandishing handguns and baseball bats, abducted the other aliens, stole the smugglers’ van, and then went to the “drop house” where they abducted other aliens there.^[7] The aliens were then taken to another location where they were held for two days and threatened with harm unless the aliens’ relatives paid the balance of the smuggling fees.^[8] The California Highway Patrol ended the scheme when they stopped the stolen van and discovered two of the kidnappers and an illegal alien.^[9] Following the arrests, several of the defendants admitted that they had done this as many as 30 times previously.

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[1] Mexican Man Indicted on Human Smuggling Charges, Associated Press, Aug. 24, 2005, available here.
[2] Id.
[3] 8 U.S.C. § 1324(a)(1)(B)(iv).
[4] Id. § 1324(a)(2)(B)
[5] United States Immigration and Customs Enforcement, News Release: Man Sentenced to 40 years for Abducting Illegal Aliens from “Drop Houses” and Holding Them for Ransom, Aug. 23, 2005, available here.
[6] Id.
[7] Id.
[8] Id.
[9] Id.

McNabb in the News

Senior Principal Douglas McNabb was a guest on WWRL's Legally Speaking, where he discussed the federal crime of conspiracy. He also discussed differences between conspiracy involving mail fraud, wire fraud, bank fraud, money laundering, telemarketing fraud, and drug crimes. The host also discussed with Mr. McNabb the concepts of overt acts and withdrawal from a conspiracy.

Deferred Prosecution

Prior to 2004, all companies that were charged with criminal violations of the Foreign Corrupt Practices Act, which forbids the bribery of foreign officials by U.S. companies, had to enter guilty pleas or go to trial.^[1] That has changed however. The US Department of Justice has created new policies which have allowed at least three companies to defer prosecution or enter into nonprosecution agreements.^[2]

The change in policy comes amidst increased governmental interest in corporate fraud in the wake of the Enron collapse, which led to changes in the Federal Sentencing Guidelines and the passage of the Sarbanes-Oxley Act.^[3] However, the policy is inconsistently applied, and companies are wary of cooperating with investigations when they aren’t sure what will happen to them.^[4]

Thus far, the three companies which have escaped FCPA prosecution are:

• Micrus Corp., a medical supply company based in Mountain View, California, which paid foreign doctors to use its medical devices;
• Mansanto Co., an agricultural products corporation based in St. Louis, Missouri, which caused an Indonesian official to be bribed in an attempt to have an environmental decree repealed; and
• InVision Technologies Corp., a maker of explosive-detection scanners based in Newark, California, which attempted to bribe foreign officials to buy its scanners.^[5]

The deals included payment of fines and penalties, and implementation of compliance experts.^[6]

Other companies, however, have not been so fortunate. Houston-based American Rice Inc. saw two of its executives sent to prison after being convicted of authorizing payments to Haitian customs officials to reduce import taxes.^[7] San Diego-based Titan Corp. pleaded guilty to a criminal charge for making a $3.5 million payment to a sales agent in Benin to assist its subsidiaries.^[8]

Foreign Corrupt Practices
Attempting to bribe foreign officials is a transnational crime, and the relevant statute here is 15 U.S.C. 78dd-1. Section 78dd-1 makes it illegal for a company in certain situations to use the mails or other means of interstate commerce to offer money to any foreign official for the purpose of

• influencing that official’s acts or decisions,^[9] or gaining an improper advantage;^[10] or
• inducing the official to use his influence to benefit the American company.^[11]

Violations of 15 U.S.C. § 78dd-1 can result in fines of up to $5 million, imprisonment for up to 20 years, or both.^[12] If someone other than a natural person commits a violation, the punishment can be a fine of up to $25 million.^[13]

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[1] Leonard Post, Deferrals on Rise in Foreign Bribery, Nat. L. J., Aug. 15, 2005, at 1, 18, available here. (subscription required)
[2] Id. at 18.
[3] Id.
[4] Id.
[5] Id.
[6] Id.
[7] Id.
[8] Id.
[9] 15 U.S.C. § 78dd-1(a)(1)(A)(i).
[10] Id. § 78dd-1(a)(1)(A)(iii).
[11] Id. § 78dd-1(a)(1)(B).
[12] Id. § 78ff(a).
[13] Id.

Smuggling Counterfeit Goods Update

This morning, in our previous post, we mentioned that a formal announcement about the large smuggling investigation would be made today. The announcement has been made.

The United States Department of Justice and the Department of Homeland Security have announced “that 87 individuals have been indicted and 59 people have been arrested on charges related to international conspiracies to launder money and smuggle counterfeit U.S. currency, weapons, drugs and cigarettes into the United States.”^[1]

Federal and Canadian agents in 11 cities in the U.S. and Canada carried out the arrests, which were the result of two undercover operations conducted under the auspices of the FBI, the ATF, ICE, U.S. Customs, the Royal Canadian Mounted Police, the U.S. Postal Inspection Service, the Department of Labor’s Inspector general, and several state and local law enforcement agencies.^[2]

After the arrests, federal indictments were unsealed in California and New Jersey, which named 87 individuals on charges including violations of RICO statutes, dealing in counterfeit U.S. currency, narcotics trafficking, money laundering, conspiracy to defraud the United States, and illegal weapons trafficking.^[3]

The investigation conducted out of New Jersey, dubbed Operation Royal Charm, resulted in the seizure of more than $3.3 million in counterfeit currency, $2 million in counterfeit cigarettes, 36,000 ecstasy pills, and nearly 500 grams of methamphetamine.^[4] It is also alleged that a $1 million deal for weapons including pistols, rocket launchers, sub-machine guns, and automatic rifles had been entered into.^[5]

The investigation conducted out of Los Angeles, dubbed Operation Smoking Dragon, has resulted in the seizure of nearly $1.2 million in counterfeit currency. Additionally, the defendants allegedly smuggled $40 million worth of counterfeit cigarettes into the country, along with 9,100 ecstasy pills, four kilograms of methamphetamine, and hundreds of thousands of dollars worth of counterfeit pharmaceuticals such as Viagra.^[6]

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[1] Dept. of Justice, Press Release: Federal Racketeering Indictments Target International Smuggling, Counterfeit Currency Operation, Aug. 22, 2005, available here.
[2] Id.
[3] Id.
[4] Id.
[5] Id.
[6] Id.

Smuggling Counterfeit Goods

100 Asian nationals have been arrested by federal authorities on charges of smuggling counterfeit money, drugs, and cigarettes into the United States.^[1] The arrests, part of an undercover investigation that led to the discovery of cargo containers carrying the contraband items in Los Angeles and Newark, were made in Chicago, Los Angeles, and Atlantic City.^[2] A formal announcement is expected later in the day.^[3] Smuggling contraband items is a serious transnational crime.

Trafficking in Contraband Cigarettes
Trafficking in contraband cigarettes is criminalized by 18 U.S.C. §§ 2341 et seq. Under section 2342, it is illegal for a person to knowingly ship, transport, receive, possess, or distribute contraband cigarettes.^[4]

The penalty for violation section 2342(a) is a fine, imprisonment for up to five years, or both.^[5]

"Contraband cigarettes" is defined as a quantity in excess of 60,000 cigarettes, which bear no evidence of the payment of applicable cigarette taxes in the State in which the cigarettes are found.^[6]

Smuggling Narcotics
We have previously discussed narcotics smuggling, here.

Smuggling Counterfeit Money
Counterfeit currency crimes are criminalized by 18 U.S.C. §§ 470 et seq. It is a crime for a person, who has the intent to defraud, to create counterfeit currency.^[7] If the creation of the counterfeit currency occurred outside of the United States, the punishment for that act will be the same as if it had occurred in the United States.^[8] Likewise, it is a crime for any person to bring counterfeit currency into the United States.^[9]

The punishment for creating counterfeit currency or importing counterfeiting currency is a fine, imprisonment for up to 20 years, or both.^[10]

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[1] Mark Sherman, Counterfeit Money, Drugs, Cigarettes in Cargo Containers Leads to 100 Arrests, Officials Say, Associated Press, Aug. 22, 2005, available here.
[2] Id.
[3] Id.
[4] 18 U.S.C. § 2342(a).
[5] Id. § 2344(a).
[6] Id. § 2341(2).
[7] Id. § 471.
[8] Id. § 470.
[9] Id. § 472.
[10] Id. §§ 471, 472.