FY 2004 Annual Report of Investigations of the United States Postal Inspection Service Contents A Message from the Chief Postal Inspector 1 Introduction 3 Fraud and Prohibited Mail Mail Fraud 5 Child Exploitation via the Mail 13 Obscenity in the Mail 15 Illegal Drugs and Trafficking 16 Money Laundering 18 Asset Forfeiture 19 Internal and External Investigations Mail Theft 21 Homicides, Assaults, and Threats 24 Robberies 25 Burglaries 26 Revenue Investigations 27 Financial Investigations 28 Workers' Compensation Fraud 29 Dangerous Mail and Homeland Security Biological or Chemical Hazards in the Mail 31 Explosive Devices in the Mail 31 Homeland Security 34 Security Facility Security 35 Natural Disasters 36 Personnel Security 37 Transportation Security 37 Observation of Mail Conditions 38 Intelligence 39 Consumer Education, Fraud Prevention, and Congressional Liaison 41 International Affairs 46 Forensic and Technical Services 49 Administrative Operations 52 Criminal Statistics for FY 2004 56 A Message from the Chief Postal Inspector April 2005 Iam pleased to present this 2004 Annual Report of Investigations of the United States Postal Inspection Service, the law enforcement, crime prevention, and security arm of the U.S. Postal Service, to our key stakeholders: the United States Postal Service, the Postal Service Board of Governors, members of Congress, and the American public. Protecting the Postal Service's revenue and assets remains integral to the mission of the U.S. Postal Inspection Service. Postal Inspectors' investigations of workers' compensation fraud this past fiscal year resulted in $166 million in long-term and continuation-of-pay cost-avoidance savings for the Postal Service. The Postal Inspection Service's role in assuring the security of the mail has become more critical than ever. Postal Inspectors have been trained as hazwoper specialists, and a new security protocol introduced this past year ties Inspectors to every postal site, 24/7. When an Inspector responds to a call from a postal facility, a report is filed instantly with our new Critical Watch Desk in Washington, DC, and sent via wireless access to "need to know" executives-not just Inspection Service officials, but postal managers, other law enforcement agencies, and certain government agencies. More than ever, we must ensure that U.S. Mail is safe for all Americans. The Postal Inspection Service has roughly 1,970 U.S. Postal Inspectors stationed across the country. It is their job to safeguard more than 200 billion pieces of mail a year and protect more than 700,000 postal employees, 38,000 postal facilities, 200,000 postal vehicles, millions in postal assets, and millions of postal customers. Yet in FY 2004, those 1,970 Inspectors, in their law enforcement capacity, arrested nearly 12,000 suspects for crimes involving the mail or against the Postal Service. Nearly 56 percent of our arrests in FY 2004 related to mail theft-a total of 6,618 suspects. Mail fraud investigations also yielded significant results: Inspectors arrested 1,446 mail fraud suspects and responded to nearly 82,000 consumer fraud complaints. Since the White House named Inspectors to its Corporate Fraud Task Force, Postal Inspectors have investigated numerous high-profile cases, including a $43 million embezzlement at Merrill Lynch and the conviction of executive Jamie Olis of Dynergy, Inc., who in 2004 received a 24-year jail term for defrauding stakeholders of $105 million. The Postal Inspection Service has long been an international leader in the fight against child pornography. In FY 2004, Inspectors arrested 338 suspects for child sexual exploitation and obscenity related to the mail, stopped 97 child molesters, and rescued 158 children from sexual abuse. To keep the mail free of dangerous and illegal drugs, Postal Inspectors arrested 1,724 suspects for drug trafficking and money laundering via the mail. I have every reason to be proud of our accomplishments. I pledge to continue to build on our strengths and fulfill our mission: safeguarding the safety, security, and integrity of the U.S. Postal Service, postal employees, and postal assets, and ensuring the confidence of all Americans in the U.S. Mail. Lee R. Heath U.S. Postal Inspectors are assigned as liaison officers at the Department of Homeland Security's Operations Center, the Terrorist Screening Center, the National Joint Terrorism Task Force, and the National Counterterrorism Center (established by the executive order of President Bush in August 2004), which includes the Interagency Intelligence Committee on Terrorism. More than 70 Postal Inspectors work with 63 Joint Terrorism Task Forces across the country to investigate domestic and international terrorism, bombs, bomb threats, "suspicious powder" cases, and other incidents related to homeland security. Introduction 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, crime prevention, 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. Approximately 1,970 Postal Inspectors stationed throughout the United States enforce more than 200 federal laws related to 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 approximately 1,020 armed, 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 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 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. The National Headquarters offices of the Postal Inspection Service are organized in functional groups that report to the Deputy Chief Inspector for Headquarters Operations. The Postal Inspection Service has 18 field divisions, which report directly to three Deputy Chief Inspectors for field operations. Field offices are supported by four Inspection Service administrative service centers. The National Leadership Team includes four Deputy Chief Inspectors, two Assistant Chief Inspectors, Inspectors in Charge, and Postal Career Executive Service Managers. The Postal Inspection Service's national information technology infrastructure supports about 4,000 users at approximately 200 sites nationwide. Its offices are linked via a private law enforcement network, with online connections to the Postal Service, the Department of Justice, the Department of Treasury, the National Crime Information Center, the National Law Enforcement Telecommunications System, and the Internet. In FY 2004, the Postal Inspection Service began consolidating 29 of its security Command Centers, staffed by Postal Police Officers, into two National Law Enforcement Control Centers (NLECCs). The new, high-tech sites are designed to centrally manage radio and alarm monitoring for about 12,000 Postal Service facilities, provide after-hours emergency phone coverage for all Postal Inspection Service offices, and give Postal Inspectors access to law enforcement and intelligence information databases. About 10,000 postal facilities are now monitored by NLECCs, and an additional 2,000 will be added in the next fiscal year. Other security measures for Postal Service facilities will be coordinated by NLECCs on completion, enhancing security for all postal employees and facilities. The mission of the Internal Affairs Division is to promote integrity and excellence in the Postal Inspection Service through independent internal investigations of its employees, and to protect the safety of postal employees and customers by providing security and preventative 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 18 Inspector-Attorneys supported by an administrative staff that includes paralegals, information disclosure specialists, a labor relations specialist, 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 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 in liaison activities with other government, law enforcement, and consumer agencies. Its Internet Web site provides weekly investigative news and consumer-oriented tips. An Intranet Web site, maintained by the Information Technology Division, facilitates confidential 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 with other agencies in joint task force investigations aimed at curtailing widespread criminal acts of an organized nature. For more information on the Postal Inspection Service, visit www.usps.com/postalinspectors. Fraud and Prohibited Mail Mail Fraud The Mail Fraud Statute is the oldest and the most effective consumer protection law, and the U.S. Postal Inspection Service is the federal law enforcement agency mandated to enforce it. To increase their efficiency in investigating suspected mail fraud, Postal Inspectors lead and participate in numerous joint law enforcement and consumer group initiatives aimed at safeguarding the public's confidence in the U.S. Mail. Educating the public about fraud schemes that involve the mail is an essential component of this goal. Postal Inspectors investigated 3,242 fraud cases in FY 2004, and Inspection Service analysts prepared nearly 82,000 letters in response to mail fraud complaints. Inspectors arrested 1,446 mail fraud offenders, and 1,245 were convicted as a result of investigations conducted during FY 2004 and prior fiscal years. 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. Operation Pushing the Envelope In December 2003, the Postal Inspection Service and the Federal Trade Commission announced a joint federal and state law enforcement sweep, Operation Pushing the Envelope, to crack down on purveyors of fraudulent business scams. The sweep targeted sellers of work-at-home schemes who steal money from consumers through their deceptive practices. The Postal Inspection Service reported five criminal and 22 civil cases. Operation Web Snare The results of Operation Web Snare, a nationwide enforcement operation directed at large-scale, computer-related crimes, was announced in August 2004 when Chief Postal Inspector Lee R. Heath participated in a press event with Attorney General John Ashcroft, Assistant Attorney General Christopher A. Wray, FBI Assistant Director Jana Monroe, and Federal Trade Commission Chairman Deborah Platt Majoras. The arrests and convictions of more than 150 suspects, as well as 117 criminal complaints, indictments, and "informations," were reported by Inspectors from 13 divisions. Operation Roaming Charge On October 5, 2004, Chief Postal Inspector Heath joined Attorney General John Ashcroft, Assistant Attorney General Christopher A. Wray, FBI Assistant Director Chris Swecker, and Chief Superintendent and Director General Peter German of the Royal Canadian Mounted Police's Financial Crime Division to announce the arrest of more than 135 suspects in a multinational enforcement endeavor titled Operation Roaming Charge. Beginning January 1, 2004, federal and international agencies coordinated operations to combat telemarketing fraud around the globe. Postal Inspectors contributed to the round-up of fraudsters with 75 investigations, 43 of which were domestic and 32 of which resulted from a cross-border initiative with Canadian authorities. Investigations by Postal Inspectors yielded 64 arrests and 64 convictions, and sentences of five months to more than 12 years in prison. Nearly one million victims suffered losses exceeding $650 million. Fraud Prevention Honor Postal Inspector Michele Culp, former Program Manager of Child Exploitation and Prevention, was one of 28 Service to America finalists announced in June 2004 by the Partnership for Public Service and Atlantic Media Company at a luncheon held at the Russell Senate Office Building in Washington, DC. Inspector Culp was selected as a finalist for the Justice and Law Enforcement Medal from nearly 500 contenders based in part on her contributions to the National Fraud Against Senior Citizens Awareness campaign. Mail Fraud Investigations Mail Fraud Against Businesses Postal Inspectors devote considerable resources to protecting the business community from mail fraud. At year end, Inspectors reported 494 arrests and 505 convictions. Following are examples of Inspectors' efforts in the past fiscal year. o John Richard Jamieson, Jr., the former director of viatical settlement company Liberte Capital Group in Toledo, Ohio, was sentenced in October 2003 to 20 years in prison. Jamieson was also ordered to pay $92.1 million to nearly 3,000 investors who lost money after Liberte purchased life insurance policies from terminally ill people for less than face value, and then sold the policies to investors. Postal Inspectors and agents from the FBI, IRS, and Ohio Department of Insurance found that hundreds of the policies had been obtained fraudulently by policyholders who hid the fact that they had HIV or AIDS. Insurance companies rescinded many of the policies after discovering applicants had lied, causing huge losses to investors, most of whom were elderly citizens. o An investigation by Postal Inspectors on the U.S. Attorney's Bankruptcy Fraud Task Force in Newark, New Jersey, resulted in a nine-year prison sentence in April 2004 for Ali Qaraeen, who was also ordered to pay $6.8 million in restitution. Qaraeen recruited people to join a credit card "bust-out" scheme by promising they could charge hundreds of thousands of dollars in cash, jewelry, and other valuables to their credit cards, then wipe out the debt by filing bankruptcy. He used proceeds from the scheme to pay for his children's college tuition and to purchase real estate in Jordan and Israel. o Postal Inspectors arrested Katherine Rider of Nebraska after finding she had submitted fraudulent loan requests, via the U.S. Mail, against her clients' life insurance policies without their knowledge or consent. Stolen funds totaling more than $1 million were deposited into several bank accounts controlled by Rider. She was sentenced on June 9, 2004, to three years in prison and two years' probation, and was ordered to pay $726,333 in restitution for her scheme, which defrauded several insurance companies and numerous policyholders in the Lincoln area over the past 20 years. o Tandy Hairston pled guilty to wire fraud and conspiracy and was sentenced in July 2004 to five years and four months in prison and three years' probation, and was ordered to pay more than $2.4 million in restitution to mortgage companies. Hairston owned and operated Mid-Town Mortgage, also known as The Loan Store, in St. Louis, Missouri. She solicited clients via telemarketing calls and then mailed false applications on their behalf to mortgage companies. Hairston and Mid-Town often inflated property values and pulled money out after the properties closed. Postal Inspectors worked with agents of the FBI, Housing and Urban Development's Office of Inspector General, and IRS to stop Hairston's scheme. o Rosaline Beverly Ledgister, a former pension administrator for MetLife in Tampa, Florida, was sentenced in August 2004 to three years and 10 months in prison and three years' supervised release, and was ordered to pay $2.1 million in restitution. Postal Inspectors found that Ledgister used her authority at MetLife to direct 11 checks, totaling $2.1 million, to be mailed to addresses belonging to her mother or to institutions where her mother had bank accounts. Ledgister used the money for real estate, cars, and vacations. Mail Fraud Against Consumers Consumers may be targeted by criminals via fraudulent sweepstakes, telemarketing fraud, work-at-home schemes, merchandise misrepresentations, vacation or real estate scams, and investment schemes. Postal Inspectors conducted 1,545 investigations of mail fraud against consumers, arrested 501 suspects, and reported 437 convictions in FY 2004. Examples of corporate fraud investigations from the past fiscal year follow. o A lengthy Inspection Service investigation of Robert Gomez, James Randall Nichols, Gwen Baker, and Corinne Conway resulted in prison sentences for the group, which had defrauded at least 4,000 people of more than $21 million. Inspectors learned that Gomez and Nichols initiated a scheme in 1996 to defraud church members by offering to sell them vintage cars at thousands of dollars below market value. Nichols and Gomez recruited Baker in 1999. Baker brought in Conway, who had contacts with churches in the United States via her Virtuous Women's International Ministry, helping expand the scheme nationwide. Proceeds passed from victims to Conway in Missouri, Baker in Memphis, and Nichols in Lakewood, California. Once the funds arrived in California, Nichols withdrew them from the account by check or wire transfer. Gomez spent most of the money at casinos in California. The defendants received sentences ranging from 14 months to 24 years in prison, and were ordered to pay between $4.9 million and $12.5 million in restitution. o Ronald Pellar was sentenced in April 2004 to six years and five months in prison and three years' supervised release, and was ordered to pay more than $45,000 in restitution for running Columbia State University, a diploma mill that offered college degrees in as few as 27 days. Postal Inspectors disrupted Pellar's activities in 1998 after learning that, between July 1996 and July 1998, the school received in excess of $20 million from people around the world. Pellar claimed the school was an accredited university in Louisiana, but, instead of a campus, Inspectors found only a warehouse in California. o Kenneth B. MacQueen of Orland Park, Illinois, was sentenced in January 2004 to more than 11 years in prison and was ordered to pay $5.2 million in victim restitution for defrauding nearly 100 investors. Postal Inspectors learned that MacQueen had told clients their money would go to dividend reinvestments and similar plans to earn high rates of return-more than 20 percent. Instead, MacQueen spent investors' funds on real estate, school tuition, and luxury cars. o Brian Pasqualini, a former broker and account manager at Evergreen International Spot Trading, Inc., was sentenced in September 2004 to five years' probation for his role as a salesperson in a $110 million currency-trading scheme. Pasqualini and other Evergreen brokers made false representations to more than 1,000 investors about brokers' professional qualifications, the availability of investors' funds, and the use of legitimate banks to trade investors' funds. Several Evergreen brokers and managers, including Pasqualini, were indicted in New York in May 2002 on mail fraud, wire fraud, and money laundering charges. Polina Sirotina, former managing director and chief financial officer of Evergreen, was sentenced in May 2004 to nearly 13 years in prison and two years' probation, and was ordered to pay $25 million in restitution. In June 2004, two former Evergreen executives were sentenced to prison terms of six years and seven years, respectively, with three years' probation each, plus an order for each to pay $25 million in restitution. The case was investigated by Postal Inspectors and FBI agents. o Maria Garza, Enrique Elizondo, and Maria Bautista were sentenced in Texas on July 6, 2004, for defrauding undocumented, alien immigrants seeking work permits from the U.S. Immigration and Naturalization Service (INS). After an investigation by Postal Inspectors and agents of the Bureau of Immigration and Customs Enforcement (ICE), mastermind of the scheme Maria Garza was sentenced to eight years and one month in prison and was ordered to be deported after her release. Her son, Enrique Elizondo, and sister, Maria Bautista, received sentences of more than three years and nearly four years in prison, respectively. Each was ordered to pay more than $172,000 in restitution. The three were convicted of mail fraud, conspiracy, and impersonating a federal immigration employee to solicit fees from unsuspecting immigrants. Victims paid Garza $200 to prepare and file immigration benefit applications. Garza mailed them fraudulent INS forms confirming the applications were approved and demanding "penalty fees" to finalize the deal. Corporate Fraud Since the White House named the Postal Inspection Service a member of its Corporate Fraud Task Force in July 2002, Postal Inspectors have been increasingly involved in corporate fraud investigations, which, according to former United States Attorney General John Ashcroft are "…among the most significant issues facing our nation and our economy." Postal Inspectors are aggressively pursuing and stopping those responsible for such fraud, as shown in the examples that follow. o Timothy Kramer, Todd Reid, and Brian Lavielle, all former employees of Duke Energy Corporation in Houston, Texas, were indicted in April 2004 on 18 counts, including racketeering and wire and mail fraud related to manipulating the records of a Duke subsidiary. U.S. Postal Inspectors on the President's Corporate Fraud Task Force arrested the three after an investigation determined the men tried to create the appearance of profitable trading in order to collect large company bonuses. Kramer was vice president of the subsidiary company's Financial Portfolio Management, and Reid was senior vice president of natural gas and electricity trading. Lavielle was a trader in the group and reported directly to Kramer and through a New York broker, who executed many of the trades named in the indictment. Kramer and Reid controlled more than 400 trades, representing approximately $50 million in fraudulent profits. The Duke subsidiary based the size of employee bonuses on the performance of its trading activities, so Reid collected a $5 million bonus, Kramer got $4 million, and Lavielle received $340,000. Postal Inspectors worked with FBI agents and attorneys from the Atlanta District Office of the Securities and Exchange Commission and the Washington, DC, Office of the Commodity Futures Trading Commission. o A case investigated by Postal Inspectors and other agents on the President's Corporate Fraud Task Force concluded on March 25, 2004, with the sentencing of former executive Jamie Olis of Dynegy, Incorporated, in Houston, Texas, to 24 years in prison, without parole, and a $25,000 fine for conspiracy, securities fraud, mail fraud, and wire fraud. Olis concealed a $300 million loan from investors, and his sentencing was influenced by his victims' extensive losses, totaling $105 million. o Thomas Giacomaro, the de facto president of the now-defunct Wellesley Services, Inc., of Montvale, New Jersey, was sentenced in February 2004 to 14 years in prison and was ordered to pay $70 million in restitution. Giacomaro pled guilty to mail fraud and conspiracy to commit mail and tax fraud. Postal Inspectors determined that Wellesley Services was founded by Giacomaro in 1995, and that he and others enlisted investors by issuing private placements and promissory notes that guaranteed a 15 percent annual return, plus a 50 percent "kicker" on repayment. Lulling letters mailed to investors misrepresented the health of the company and requested that the notes be rolled over for increased amounts. More than 200 people invested a total of $80 million in Wellesley, but, instead of using the money legitimately, Giacomaro and his co-conspirators systematically looted the company. Giacomaro took nearly $30 million via a sham consulting agreement and used company funds to cover personal expenses. Giacomaro, who was previously convicted on fraud charges, hid his involvement by installing others as officers of record. o Seven senior executives and the general counsel of a large, publicly traded technology firm in Holtsville, New York, were indicted in June 2004 on charges of mail, wire, and securities fraud. Postal Inspectors determined the defendants and others manipulated accounting data, generated false entries, and reported inflated revenues of more than $200 million in a three-year scheme to hide financial results from Wall Street analysts. Three defendants pled guilty when the indictment was unsealed. The company previously entered into an agreement with the government to admit guilt, cooperate with the investigation, adopt significant reforms, and pay $138 million to compensate victim shareholders. o The former chairman, chief executive officer, and president of Enterasys Network Systems Inc. pled guilty in Concord, New Hampshire, in September 2004 to one count of conspiracy to commit mail, wire, and securities fraud. Postal Inspectors found the defendant and three others inflated the company's reported revenue by altering documents, making secret side deals, and issuing false and misleading statements to the Securities and Exchange Commission (SEC) in company press releases and to outside auditors. News reports of revenue problems and an SEC investigation dropped Enterasys' market value by $1.3 billion. The case was investigated by the U.S. Postal Inspection Service and the FBI in coordination with a civil investigation by the SEC. Mail Fraud Against Federal, State, and Local Government The U.S. Mail has been used to commit fraud against government agencies at all levels, including Medicare or Medicaid fraud, false claims for tax refunds, and false claims for benefits related to education, housing, and welfare. Inspectors arrested 451 suspects and reported 303 convictions for such fraud in FY 2004. Summaries of cases follow. o A grand jury returned a 22-count indictment in December 2004 against former Illinois Governor George Ryan for mail fraud, racketeering, tax fraud, and making false statements during his tenure as Illinois secretary of state from 1991 to 1999 and as governor from 1999 to 2003. An investigation by Postal Inspectors and agents from the FBI, IRS, and the Department of Transportation found the defendant and his family illegally received cash payments, gifts, vacations, and personal services totaling nearly $167,000. He allegedly directed payments of more than $300,000 to another defendant. The former governor is the 66th defendant in a case that has identified numerous other former state employees and officials as potential co-conspirators. o On June 21, 2004, former Baltimore Police Commissioner Edward T. Norris and his former Chief of Staff John Stendrini were sentenced for using funds from a police department account to finance affairs with women, on whom they spent thousands of dollars for luxury hotels, expensive meals, clothing, and gifts from Victoria's Secret, Coach, and other stores. Norris and Stendrini were each ordered to pay a $10,000 fine and perform 500 and 300 hours of community service, respectively. Norris was sentenced to six months in prison, and both will serve home detention with electronic monitoring for six months, plus three months' probation. Norris and Stendrini will pay $12,000 in restitution to the city of Baltimore. At sentencing, the judge expressed outrage that two "stars" of law enforcement began spending city monies almost immediately after their swearing in, used an executive-protection detail as personal staff, and violated the trust of the people of Baltimore. o Operation Headwaters, led by Postal Inspectors and other federal agents, resulted in the May 2004 guilty plea of a medical products manufacturer in St. Louis, Missouri, for conspiracy to commit Medicare fraud. The company encouraged customers to use miscellaneous billing codes to disguise products that were ineligible for payment under Medicare. In addition to the guilty plea, the company will pay the government a civil settlement and criminal fines exceeding $12 million, and will be permanently barred from doing business with Medicare. o Schering Sales Corporation, a Kenilworth, New Jersey, subsidiary of drug manufacturer Schering-Plough Corporation, pled guilty in July 2004 to criminal charges and agreed to pay a $52.5 million fine for violating the Anti-Kickback Act when it paid a client to get preferred treatment for its blockbuster-selling drug, Claritin. Postal Inspectors showed that Schering offered incentives to two of its largest managed-care customers when they threatened to discontinue Claritin sales due to its high price. The incentives indirectly lowered the price of Claritin for managed-care groups, but not for Medicaid and the Public Health Service, as required by law. Schering-Plough agreed to pay the United States, the 50 state Medicaid programs, and public health entities more than $292 million for failing to disclose pricing data. The company must also correct its pricing to conform with the Department of Health and Human Services and fix Medicaid rebate reporting failures. Deceptive Mail The Postal Inspection Service examined questionable promotions during FY 2004 and reviewed consumer complaints for compliance with the Deceptive Mail Prevention and Enforcement Act. Postal Inspectors stopped 60 deceptive mail operations. Examples of Inspectors' work during the past fiscal year follow. o On March 8, 2004, Gabriel Sanchez and Timothy Lyons of California were each sentenced to 15 years in prison and three years' supervised release for operating commercial fundraisers for fake charities, such as U.S. Firefighters, the Police and Sheriffs' Support Fund, and the Disabled Children's Charity. Postal Inspectors learned that Sanchez, Lyons, and others solicited customers through a telemarketing scheme. They collected more than $8 million via the mail, but used the money for their own gain rather than for any charity. Two others in the scheme, Steven Delatorre and Roger Lane, were each sentenced to three years and three months in prison and three years' supervised release. o The operator of a nationwide envelope-stuffing scheme was found guilty of 11 counts of mail fraud and one count of conspiracy on September 17, 2004, in Oklahoma City. Postal Inspectors found the operator ran classified ads under various bogus business names, offering to pay people to work at home stuffing envelopes. Respondents received promotional material and a request to mail back $25 to participate. Those who mailed in the fee received instructions to mail the same misleading solicitations to others, using their own names and at their own expense. About 100,000 victims lost more than $3 million. Confidence in the Mail The Postal Inspection Service takes a lead role in partnering with the mailing industry to reduce fraud and theft that target the business community via the mail. Formed to increase customers' confidence in the mail, task force initiatives, such as the Business Mail Industry Task Force and the Financial Industry Mail Security Initiative, include representatives of the Postal Inspection Service, major commercial mailers, suppliers from targeted industries, and postal representatives. In addition to reducing fraud and theft, task force members work to decrease processing problems by identifying and exchanging information on "best practices," fraud trends, and loss-prevention strategies, as well as by developing improved processes and procedures. Both initiatives focus on facilitating criminal investigations and prosecutions where warranted. During FY 2004, Postal Inspectors investigated 19 cases of rebate fraud. Actions resulted in agreements by five operators to voluntarily discontinue fraudulent rebate activity. Examples of investigations in the past fiscal year follow. o A Cease and Desist Order was issued on October 15, 2003, against a San Antonio, Texas, man after Postal Inspectors found he used the Internet and U.S. Mail to defraud Bristol-Meyers Squibb. The man designed a computer program that allowed him to enroll his family 7,900 times in a rebate-coupon program on the Internet, entitled "Enfamil: Family Beginnings For You." The Bristol-Meyers Squibb program was meant to assist families with newborns by providing them with merchandise and rebate checks. The man's family received about $12,000 in rebate checks and $10,000 in merchandise via the mail. He signed a Consent Order to cease and desist his actions and make restitution to Bristol-Meyers Squibb. o A West Virginia convenience store owner and a tobacco company salesperson were sentenced in May 2004 to 37 months and 13 months in prison, respectively, for defrauding a tobacco company of approximately $1 million via the fraudulent redemption of cigarette coupons. Inspectors discovered that the tobacco company salesperson supplied the coupons to the convenience store owner in return for a kickback equal to one third of the coupons' face value. The owner redeemed the coupons via the U.S. Mail. Both defendants were ordered to pay more than $950,000 in restitution to the tobacco company. Postal Inspection Service investigations of fraud targeting the business industry via the mail in FY 2004 resulted in 22 arrests, 10 Withholding Mail Orders, and 25 Voluntary Discontinuances. Samples of Inspectors' cases in the past fiscal year follow. o Scott W. Collins was sentenced in Newark, New Jersey, in October 2003 to one year and one day in prison and two years' supervised release, and was ordered to pay more than $84,000 in restitution to BMG and Columbia House Music, as well as a $5,000 fine. Postal Inspectors learned Collins and others fraudulently opened hundreds of BMG and Columbia House accounts under false names and addresses. Collins received about 48,198 CDs by using addresses of family members, at least 50 Post Office boxes, and commercial mail receiving agency boxes. o Christopher G. Mace of Missouri was sentenced in May 2004 to six months in prison, two months of home confinement with electronic monitoring, and three years' supervised release, and was ordered to pay more than $25,000 in restitution to DirecTV for defrauding the company of subscription and pay-per-view services. Postal Inspectors learned that Mace bought access-card programmers over the Internet and held Internet "chats" to discuss how to illegally obtain satellite TV services. Reshipping Fraud Reshipping fraud is a relatively new type of mail fraud that targets not only businesses, but credit card owners and people seeking work-at-home jobs. It is a favorite of criminals primarily operating from Russia and the Ukraine, and involves bogus job postings, fraudulent credit card orders, and the reshipping of illegally obtained merchandise to hide the identities of the crooks. Reshippers are promised substantial amounts of money to receive, repackage, and then mail merchandise to other addresses. The recruits get their jobs by responding to work-at-home ads and are often unaware the items were stolen and that they are participating in a crime. Reshipping fraud relies on various tactics to succeed. Criminals may use stolen credit cards to order high-dollar items, such as computers, cameras, and electronic equipment, from Internet merchants, such as Amazon, Gateway, or eBay. They have the items shipped to addresses in the United States-addresses of people recruited to repackage and reship the orders to Russia, the Ukraine, Estonia, Lithuania, Romania, and Germany. o Postal Inspectors tracked down and arrested Brandon Boring, ringleader of a reshipping cell in Pennsylvania, as well as his Romanian conspirator, who was indicted in December 2003. Inspectors alleged the Romanian suspect bought computer parts by hacking into a wholesaler's ordering system. Boring and others in the United States received shipments of the illegally obtained merchandise, repackaged it, and reshipped it to Romania. The wholesaler lost more than $4 million, and Inspectors to date have arrested 18 others in the scheme. Boring was convicted and sentenced on December 18, 2003, to six months' home confinement and five years' probation, and was ordered to pay more than $96,000 in restitution. o A company in Delaware notified Inspectors in early 2003 that several of its customers' credit card numbers (later found to total about 1,500) were stolen and used to fraudulently order items, such as expensive computers and electronics, via the Internet. The billing addresses of the true cardholders had been changed to the addresses of people recruited to take "work-at-home" jobs as reshippers. Inspectors tracked down hundreds of the reshippers, many of whom got their jobs from ads at Internet job sites. At first, the reshippers were told to mail items to addresses of other reshippers in California, but were later instructed to send items to a commercial mail receiving agency or to addresses in Russia, Ukraine, and other Eastern European countries. Some reshippers mailed as many as 750 packages of stolen items in about six months. The investigation is continuing. Fraud on the Internet The Internet is teeming with fraudulent schemes, and swindlers use a variety of methods to exploit people online. Fraud on the Internet often results in mail fraud, as "cyberscammers" use the mail to receive victims' payments and ship stolen items. The Postal Inspection Service actively participates in the Internet Crime Complaint Center, a project established by the FBI and a nonprofit group, the National White Collar Crime Center. The cases that follow were investigated by Postal Inspectors in FY 2004. o Ten Illinois and two Wisconsin residents were indicted on November 20, 2003, for mail fraud, wire fraud, interstate transportation of stolen merchandise, and other offenses stemming from a theft ring that moved more than $2 million in stolen goods. The suspects allegedly auctioned items over the Internet that had been stolen from home improvement stores and mailed them to customers in at least 11 states. The investigation was conducted by the Postal Inspection Service and other agencies as part of a Department of Justice crackdown on computer crime, dubbed Operation Cyber Sweep. o On June 18, 2004, Rolland Eddy was sentenced in New York to nearly four years in prison and three years' supervised release, and was ordered to pay more than $214,500 in restitution for an Internet auction scam that defrauded nearly 100 people. Postal Inspectors found that Eddy was doing business as Executive Travel Limousine Sales & Buses and Executive Sale/Advantage Limousines. From May 2000 through April 2002, he offered limos for sale via the Internet and in trade magazines. Eddy issued contracts for the limos through faxes and e-mails transmitted across interstate lines, and accepted deposits via the U.S. Mail and wire transfers. However, Postal Inspectors found he did not have any limousines. Eddy also listed items for sale online at eBay under the name Payalotless. He told bidders to send payments by U.S. Mail or electronic transfer, but winning bidders never received a thing. o An investigation by Postal Inspectors, FBI agents, and Newport News police identified three suspects in Virginia who had defrauded consumers, software makers, and multimedia manufacturers by selling bootlegged or pirated items on eBay and Yahoo. Victims lost more than $500,000. Sean C. Fitzgerald was sentenced in July 2004 to four years and three months in prison and three years' supervised release, and was ordered to pay more than $29,000 in restitution. Barry Wilklow was sentenced in June 2004 to three months in prison, three months' home detention, and three years' supervised release, and was ordered to pay $2,191 in restitution. Michael Truong was sentenced in May 2004 to five years' probation. Telemarketing Fraud A priority for Postal Inspectors in FY 2004 was to disrupt telemarketing scams that target large numbers of victims. In fact, Inspectors reported 202 such investigations, 73 arrests, and 85 convictions. Case examples follow. o Victor Wilcox, Belinda Sweeney, Troy Kisling, and Lee Churchill were sentenced in January 2004 on charges of mail fraud and money laundering. Postal Inspectors found the four published ads across the country as Approved Credit Alliance, offering a Visa or MasterCard for $59 to $129 each. The group not only sold the cards, but asked for customers' bank account information "so that Approved Credit Alliance could electronically debit their accounts." None of their customers received a credit card; instead, they got a kit in the mail with a list of banks that offered credit cards. The scheme defrauded about 60,000 people of $8 million. Wilcox was sentenced to eight years and four months in prison and was ordered to pay $1.9 million in restitution. Kisling was sentenced to two years and six months in prison, and the others received probation. o An investigation by Postal Inspectors in Philadelphia and New Jersey resulted in the sentencing of Mark Kleinman on April 16, 2004, to two years and six months in prison and an order to pay more than $795,000 in restitution for two fraud schemes. Kleinman ran a telemarketing scam in which he bribed employees at businesses to buy overpriced maintenance products in exchange for kickbacks. He also ran a false-billing scheme in which he mailed bills to hospitals for items they had not ordered. The restitution relates to the two largest victims of the bribery scheme, Bell & Howell Postal Systems of Chicago, Illinois, and Sodexho Marriot of Atlanta, Georgia. Former company employees were convicted of accepting bribes. o Postal Inspectors working with FBI and IRS agents investigated Mediatech, a company that employed telemarketers to sell partnerships in "900" pay-per-use phone numbers, Internet-based malls, and Internet service providers. Although the offers were advertised as low-risk investments, respondents received back only 15 percent of their money, along with the names of people who allegedly would assist them with the promised "project." The remaining 85 percent of investors' money was used as commissions for promoters, Independent Sales Office (ISO) owners, and telemarketers. Roughly 3,000 investors lost $49 million. Robert Hart, co-owner of a Mediatech ISO in Florida, was sentenced in May 2004 to two years in prison and three years' probation, and was ordered to pay $9 million in restitution. Rodney Shehyn, manager of a Las Vegas ISO, was sentenced in April 2004 to three years and one month in prison and three years' probation, and was ordered to pay $3 million in restitution. o CSC company owner Larry Harber and employees Michael Sees, Carlos Cruz, and Randi Lyons Wassmer were sentenced in June and July 2004 in Camden, New Jersey, for conspiracy, money laundering, and mail and wire fraud. Postal Inspectors found the group defrauded about 10,000 victims of more than $12 million when they sold maintenance products via the mail to employees at targeted companies, urging them to buy the products at inflated prices in return for kickbacks. Harber was sentenced to nearly four years in prison and three years' supervised release, and was ordered to pay a $2.9 million forfeiture and $100,000 in fines. His co-conspirators received lesser sentences. Administrative Actions The following chart provides statistics on administrative actions taken during FY 2004 as the result of investigations conducted by Postal Inspectors. Administrative Actions FY 2004 Complaints filed by USPS Law Department 48 Consent Agreements signed 27 Temporary Restraining Orders issued 3 Civil Injunctions 2 False Representation Orders issued 29 Cease and Desist Orders issued 41 Withholding Mail Orders issued 47 Voluntary Discontinuance Agreements signed 68 o A Cease and Desist Order was issued against Lee Burch, doing business as Legit Mailing and Ideal Publishing in Royston, Georgia, on October 23, 2003, after Postal Inspectors learned he had scammed people via the U.S. Mail. Burch allegedly mailed promotional materials advertising an envelope-stuffing scheme, although his customers complained they never received anything after mailing him their money. Burch signed a Voluntary Discontinuance on October 9, 2002, agreeing to close his business, but then opened another Post Office box and continued the scam. Following another visit with Postal Inspectors, Burch again agreed to shut down the envelope-stuffing business and signed a settlement agreement on September 17, 2003, to cease and desist. o A Cease and Desist Order was issued in February 2004 against the New Hampshire Firefighters Dependent Fund, Advance Marketing Consultants, Inc., Charles S. Holmes, Susan Friese, and Alma J. Senn. Inspectors began receiving reports in October 2001 of solicitations mailed to residents in New Hampshire and Maine, advertising a charity for the New Hampshire Firefighters Dependent Fund (purportedly related to the September 2001 terrorist attacks). The solicitations falsely claimed that donations would go to dependents of deceased and disabled firefighters in New Hampshire. About 500 people responded, mailing in more than $330,000. The operators and related entities entered into a Consent Agreement with the U.S. Postal Service to cease and desist the bogus promotions. o A False Representation Order and a Cease and Desist Order were issued in May 2004 after Postal Inspectors found that Morris James, operating the National Resource Information Center, Inc., in Montezuma, Georgia, tried to obtain money or property via the mail, using false representations. Postal Inspectors and IRS agents learned that James solicited African Americans via the mail, alleging they were entitled to a federal tax refund as a reparation for slavery. In fact, no provision for such reparations was ever passed, or even initiated, by Congress. James also alleged that every African American was entitled to $50,000 to $62,500 as the result of a class action lawsuit filed on behalf of African-American farmers. Inspectors found that James had no connection with the lawsuit and no means of obtaining money for anyone not named in the lawsuit. Roughly 6,000 people lost $2 million to the schemes. Child Exploitation via the Mail Postal Inspectors arrested 329 suspects and identified and stopped 97 child molesters in FY 2004 as part of the U.S. Postal Inspection Service's work to rid the U.S. Mail of child pornography. Inspectors also rescued 158 children from incidents of sexual abuse and exploitation. During the past fiscal year, Inspectors initiated 431 new investigations involving child sexual exploitation, and 793 other investigations are ongoing. Postal Inspector Martin Vega, in Wallingford, Connecticut, and Detective James Smith of the Connecticut State Police's Internet Crimes Against Children Task Force each received an award from NCMEC for halting a child pornography ring in Hartford and rescuing numerous child victims. Critical to the success of the case was the tremendous work of NCMEC's Exploited Children's Unit, which identified clues from a child pornography videotape that led to Hartford and, finally, the arrest of ringleader Ismael Cohen. Other examples of child exploitation investigations in FY 2004 follow. o Steven Prentice of Hillsborough, North Carolina, was sentenced in October 2003 to 32 years in state prison. A jury had deliberated only 38 minutes before finding him guilty of raping a three-year-old girl. The crime was recorded on videotape and occurred at Prentice's home between October 1999 and September 2000. Postal Inspectors discovered the videotape while serving a search warrant when Prentice received child pornography in the mail. Prentice previously served a 17-year sentence for child pornography violations. o Postal Inspectors arrested a former Catholic priest at a church-sponsored rehabilitation facility in Robertsville, Missouri, in November 2003. A grand jury had indicted him two days earlier for receiving child pornography via the U.S. Mail. Postal Inspectors identified the man when his name surfaced during another investigation in Clovis, California. He was arrested and incarcerated in 1993 for molesting a child from his parish. Following his release from prison, he resided at the rehabilitation facility, but continued to correspond with other pedophiles and traffic in child pornography. o In April 2004, John Paul Brown of Tucson, Arizona, was sentenced to 450 years in prison after a jury found him guilty of 45 counts of sexual exploitation of a minor less than 15 years old. In March 2002, Postal Inspectors and FBI agents executed a search warrant on Brown's home after he mailed a tape of child pornography. Brown was not arrested at that time. Later that month, Brown entered a Denny's restaurant, killed a patron, and seriously wounded another man. He was convicted of first-degree murder, but did not plead guilty to the child pornography charges, saying he wanted his day in court "to speak out for oppressed pedophiles." o Ronald Johnson of Redding, California, was sentenced on March 12, 2004, to three years in prison and was ordered to register as a lifetime sexual offender. In January 2003, Johnson was arrested on charges of child pornography after he responded to an Internet posting concerning sex videos of young boys. Postal Inspectors found he provided access to a collection of child pornography, including photos that appeared to be taken at his home. Johnson identified several of the boys during questioning. At the time of his arrest, he was employed as a counselor at a county grade-school camping program, as a registered mentor for "at risk" boys, and as a volunteer teacher's aide at two elementary schools. o Prolific child pornography producer and mail order distributor Angel Rafael Mariscal was sentenced in September 2004 to 100 years in prison after pleading guilty to all seven counts of an indictment against him. Operation Lost Innocence, a two-year undercover operation by Postal Inspectors, dismantled an international child pornography ring and netted 45 child pornographers and molesters in 35 states, Puerto Rico, Cuba, and Ecuador. Five co-conspirators-four in Cuba and one in Ecuador-were prosecuted based on information developed by Inspectors in Miami. Mariscal produced child pornography videos in Ecuador and Cuba and imported them to Florida for U.S. customers. Some customers sent Mariscal fantasy scripts for child pornography movies. He filmed the movies and sold them for about $1,000 apiece, sexually abusing 150 children in the process. Mariscal, who is HIV positive, pleaded to the judge, "I'm not a freak of nature. I'm just an average guy." He asked for leniency, admitting he did the "unthinkable," but did not want to die in prison. The judge was unmoved and imposed the maximum sentence allowable. o On May 5, 2004, Postal Inspectors, ICE agents, and local law enforcement officials executed a search warrant at the home of a Maryland man following allegations of sexual activities with a 13-year-old boy. Inspectors seized videotapes from the man's home that depicted him in sexually explicit conduct with minor males. The investigation identified 10 other victims between nine and 16 years of age, as well as about 200 other children featured in his collection of more than 96,000 computer-generated movies. On May 6, the man contacted a lawyer and turned himself in to the custody of police. The child molestation investigation continues, and federal charges are pending related to the production of child pornography. The suspect was held on a $1 million bond. o A multi-agency task force of Postal Inspectors, ICE agents, and IRS agents arrested eight suspects for violating federal money laundering statutes. The case began with a child pornography investigation, when task force members made undercover purchases of child pornography at Web sites hosted by a New Jersey company and other U.S. firms. They traced the payments to the distributor's bank accounts in Latvia and found the suspects had mailed about $32,000 worth of money orders to a California company to pay for child pornography tapes. The money was laundered through a shell company operating from an attorney's office in Encino, California, then wired to the distributor's accounts. Inspectors and agents seized $1.1 million from a Florida credit card-processing company involved in the scheme. Three suspects accused of processing financial transactions for a child pornography distributor in Belarus pled guilty in January and October 2004 to charges of money laundering and failing to report criminal activity. Two principals of the distributor company are in custody in Europe awaiting extradition, another is at large, and the fourth is facing trial in New Jersey. Obscenity in the Mail The U.S. Postal Inspection Service has been charged with investigating the mailing of obscene matter for more than a century. Today, the Internet is perhaps the most most-used venue for advertising obscene material and introducing it into American homes. From the Internet, it can easily reach young children, exposing them to graphic, sexually oriented matter. While obscenity is advertised on the Internet, obscenity dealers may use the U.S. Mail to deliver the product to their customers, in violation of federal law. The U.S. Department of Justice has called for a renewed focus on obscenity prosecutions to deter individuals from producing and distributing obscene material. Examples of significant investigations by Postal Inspectors in FY 2004 follow. o A West Virginia man pled guilty in May 2004 to charges of mailing obscene material. Postal Inspectors, FBI agents, IRS agents, and local police determined the man netted more than $300,000 in a year and a half by selling obscene matter at three Web sites he operated. The obscene material was distributed to his customers via the U.S. Mail. o Garry and Tamara Ragsdale of Ft. Worth, Texas, were sentenced on March 5, 2004, to 33 months and 30 months in prison, respectively, for using the Internet and the U.S. Mail to distribute obscene material. Postal Inspectors found that former Texas Police Officer Garry Ragsdale and his wife owned and operated a Web site to advertise and distribute obscene videotapes depicting rape, bondage, and torture. The couple mailed the tapes, known as the "Real Rape" and "Brutally Raped" series, to customers worldwide. o Two Web site operators in Ohio pled guilty in July 2004 to seven counts of mailing and transporting obscene material. Postal Inspectors executed a search warrant at the suspects' home, where they ran a mail order business via a Web site. Inspectors seized more than 340 videotapes and DVDs of sexually explicit conduct, including sadomasochism and bestiality. Illegal Drugs and Trafficking The U.S. Postal Inspection Service interdicts mailings of illegal drugs and drug proceeds to protect postal employees from the violence related to drug trafficking and to preserve the integrity of the U.S. Mail. Postal Inspectors, often working with other law enforcement officials, arrested 1,724 suspects for drug trafficking and 139 for money laundering via the U.S. Mail during FY 2004. Inspectors' investigations also resulted in the seizure of more than eight tons of illegal narcotics and 178,613 units of steroids from the mail, as well as more than $6.4 million in cash and monetary instruments, 26 firearms, and 16 vehicles. The Organized Crime Drug Enforcement Task Force (OCDETF) selected Postal Inspector Bryan Witt as the 2004 recipient of its national award for his outstanding work as a member of Operation Yankee Clipper. The operation targeted a ring that distributed pseudoephedrine from Canada to methamphetamine manufacturers in Missouri, Nevada, and Oklahoma. Inspector Witt and other task force members seized more than 4 million pseudoephedrine pills during the investigation, which also resulted in the forfeiture of more than $1 million and the indictment of seven suspects in Missouri. Operation Yankee Clipper comprised 15 state and local law enforcement agencies, two law enforcement agencies in Canada, and one in England. Postal Inspector Kenneth Wiloch was the recipient of the 2004 National Award for Outstanding OCDETF Investigation for his work in Operation Counter Strike. The investigation dismantled an international drug-trafficking ring that distributed in excess of 1 million ecstasy pills to the Netherlands, Canada, Pennsylvania, Maryland, New Hampshire, New York, Maine, and Ohio. The drug was manufactured in the Netherlands, secreted in large mirror frames, and shipped to addresses in the United States. Inspector Wiloch and other task force members arrested 17 suspects and seized more than 73,000 ecstasy tablets and three luxury vehicles. The investigation was coordinated through the U.S. Attorney's Office for the Western District of Pennsylvania and involved the collaboration of the U.S. Postal Inspection Service, Drug Enforcement Administration (DEA), U.S. Bureau of Immigration and Customs Enforcement (ICE), Pennsylvania State Police, Internal Revenue Service, Dutch Kennemerland Police, Dutch Customs Service, Toronto Metro Police Department, and German Customs Service. Other examples of Inspectors' casework during FY 2004 follow. o A task force comprising more than 300 law enforcement personnel from the U.S. Postal Inspection Service, DEA, FBI, and other federal and state law enforcement agencies executed 23 search warrants and arrested 24 suspects in October 2003 related to the large-scale distribution of methamphetamine and marijuana in Houston, Texas, and surrounding areas. The two-year investigation identified shipments of methamphetamine that originated in Asia and entered the country in California. The drugs were transported to Houston via the U.S. Mail, UPS, FedEx, and other carriers. Investigators seized three houses, 100 firearms, more than $600,000 in cash, 16 vehicles, three motorcycles, and illegal drugs. o Postal Inspectors and DEA agents in San Diego, California, and Honolulu, Hawaii, arrested 30 suspects on April 1, 2004, for distributing cocaine, marijuana, and methamphetamine via the U.S. Mail. Inspectors and DEA agents seized approximately $600,000 in U.S. currency, several pounds of marijuana, a quantity of methamphetamine, and weapons. o Postal Inspectors, DEA agents, and ICE agents arrested a suspect in June 2004 following a controlled delivery of five liters of sassafras oil to a Post Office box in Buffalo, New York. Sassafras oil contains high concentrations of safrole, a precursor for the illegal drug ecstasy, and the single shipment was enough to make an estimated 20,000 units of the drug. Inspectors and agents searched the suspect's home and seized significant quantities of chemicals used to manufacture ecstasy, including an estimated $10,000 worth of precursor chemicals, $50,000 worth of lab equipment, $27,000 in cash, and evidence leading to a storage facility in Lockport, New York, with chemicals, lab equipment, and ecstasy tablets. o New York Postal Inspectors and members of the New York City Police Department's Bronx Narcotics Unit arrested two Colombian nationals in July 2004 following the delivery of an Express Mail parcel of clothes containing approximately two kilos of heroin. The suspects extracted the heroin by soaking the clothes in an alcohol solution. As the solution dried, it converted back to solid form. The heroin originated in Colombia and was brought into the country by U.S. Mail, private couriers, and human smugglers. o Postal Inspectors arrested nine Web site operators in Arizona, Georgia, California, Virginia, and Nevada in July 2004 for conspiracy to distribute controlled substances. Inspectors linked drugs sold on the Web sites to two fatal, and 14 non-fatal, overdoses. One suspect deposited more than $1.2 million to a business account between April 1999 and May 2003. Web site customers received the drugs through the U.S. Mail. Additional arrests are anticipated. o In March 2004, Postal Inspectors arrested the operator of a Web site and three co-conspirators offering pharmaceutical drugs for sale without a prescription. Web site customers completed an on-line questionnaire, allegedly reviewed by a doctor, to purchase the drugs, and were offered links to sites offering other pharmaceuticals. The group manufactured, smuggled, and distributed controlled substances, prescription medications, and counterfeit drugs to customers around the world. Inspectors identified about 100,000 Express Mail, Priority Mail, and Global Express parcels containing illegal pharmaceutical drugs en route to about 60,000 customers. o Postal Inspectors arrested 16 suspects in November 2003 for distributing hundreds of pounds of methamphetamine and marijuana in Iowa. By fiscal year end, 13 of the suspects were convicted. Inspectors intercepted an Iowa-bound parcel containing marijuana after receiving a tip about the mailing. Inspectors and other members of OCDETF identified a ring believed responsible for the mailings, for possessing and distributing illegal drugs, and for using minors to violate drug laws. Inspectors coordinated the arrest of the ringleaders in Laredo, Texas, and task force members found a meth lab at a suspect's home. o Seven members of a Chicago drug ring were indicted in September 2004 for mailing approximately 60,000 ecstasy tablets from Spain and the Netherlands via dozens of International Registered Mail and private courier parcels. Inspectors and other investigators found the tablets secreted in ceramic windmills and picture frames. Ring members bought the drugs from a supplier in Spain for $5 to $12 a tablet and sold them to club goers in Chicago for $25 to $30 a tablet. The indictments were the result of a four-year OCDETF investigation named Operation Crazy Horse and conducted by Postal Inspectors, ICE agents, DEA agents, and Chicago police. Money Laundering The U.S. Postal Inspection Service investigates criminals who use postal money orders to launder illicit funds and avoid federal reporting requirements in violation of the Money Laundering Control Act and the Bank Secrecy Act. Illicit proceeds may include money gained through narcotic sales, smuggling illegal aliens, tax evasion, or selling counterfeit merchandise. During FY 2004, Postal Inspectors arrested 139 suspects on charges related to money laundering, and 61 convictions were reported during the same period. Following are examples of cases in FY 2004. o Postal Inspectors and other investigators arrested four suspects between January 6 and January 8, 2004, related to a heroin distribution and money laundering network in New York, New Jersey, and Washington, DC. Investigators determined that couriers posed as musicians to smuggle heroin from Nigeria to the United States, and used postal money orders to buy the drugs. Between 1997 and 2004, one defendant deposited more than $57,000 worth of money orders into business bank accounts to launder drug proceeds. The U.S. Postal Inspection Service, DEA, Department of State Diplomatic Security Service, and the Montgomery County and Prince George's County, Maryland, Sheriff's Departments assisted with the investigation. o A Postal Inspection Service investigation identified more than $311,000 in postal money orders that had been purchased in structured transactions at Post Offices in Los Angeles between June and December 1999. Inspectors found the money orders, plus several thousand dollars' worth of travelers' checks purchased in structured amounts, in one suspect's bank account. The man used cashier's checks from the account to buy three properties and a business. A settlement reached on February 19, 2004, ordered that $480,000 of the money be forfeited to the Postal Inspection Service. o New York Postal Inspectors executed nine search warrants and arrested 12 suspects, including 10 West Africans, in June 2004 for conspiracy to commit money laundering and unlicensed money remitting in five states. The case began in July 2002 when Inspectors determined that approximately $500,000 worth of postal money orders purchased in New York had been deposited into a Columbus, Ohio, bank account. The suspects were allegedly part of a ring that trafficked counterfeit goods, produced and distributed false IDs, and laundered the proceeds through postal money orders. Ring members deposited more than $1 million a month and transferred the money out of the United States illegally via Express Mail or wire transfer to cohorts in China, Hong Kong, Vietnam, Russia, India, Thailand, Belgium, and the United Arab Emirates. Postal Inspectors seized approximately $150,000, along with a substantial inventory of counterfeit merchandise. o Postal Inspectors and other members of the El Dorado Money Laundering Task Force in New York executed search warrants in August 2004 and arrested the owners of a Woodside, New York, company following a year-long investigation of a Colombian money laundering ring. The owners allegedly laundered narcotics proceeds and produced and trafficked counterfeit alien green cards. The ring operated a licensed money-remitting and real estate business, and used various methods to move the illicit drug proceeds to Colombia, including structured purchases of postal money orders, structured wire transfers, and couriers who ingested currency. o An employee of a DVD and CD distributor in West Orange, New Jersey, pled guilty on September 23, 2004, to structuring financial transactions to evade reporting requirements. The employee structured the purchase of more than $150,000 worth of postal money orders at Post Offices in central New Jersey. She deposited most of the money orders into her employer's business account. Postal Inspectors and agents with the IRS and the FBI identified other employees who had deposited more than $3 million from structured transactions into the company's business accounts at banks in northern New Jersey. Asset Forfeiture The U.S. Postal Inspection Service uses asset forfeiture laws and regulations to target the financial incentive that criminals gain from postal-related crime. When Postal Inspectors investigate drug trafficking, identity theft, and other financial crimes, they may subsequently uncover money and assets obtained from this activity. In FY 2004, the Postal Inspection Service provided training to 42 Forfeiture Specialists and support staff, and 137 Postal Inspectors. During FY 2004, Postal Inspectors seized 706 assets and secured 589 forfeitures. U.S. Postal Inspection Service forfeiture activity during FY 2004 netted $3.7 million. As a result of successful asset forfeiture cases, the Inspection Service was able to share $2.2 million with other federal, state, and local law enforcement agencies. Postal Inspectors were also successful in seizing assets identified in criminal cases and using the proceeds to pay victim restitution. Postal Inspector Stephen Hofheins was the recipient of the National Award for an Outstanding Asset Forfeiture Case at the OCDETF National Leadership Conference at Washington, DC, on July 20, 2004. Inspector Hofheins was a member of Operation Headhunter, which targeted companies selling drug paraphernalia. Some of the companies operated near colleges and universities and enlisted "student reps" to promote products at social functions and "raves." The investigation dismantled eight Iowa distributors and 14 national distributors or manufacturers. Twenty suspects were arrested, with fines imposed in excess of $520,000. Hofheins and others seized drug paraphernalia worth more than $4 million, and property and cash worth more than $650,000 were forfeited. The investigation required extensive coordination with numerous law enforcement agencies and the U.S. Attorney's Office. Inspector-Attorney Terrence Finley of the Chicago Division received an award for Sustained Exceptional Service to the Asset Forfeiture Program. Inspector Finley was recognized for his extensive assistance and guidance to other Postal Inspectors, Forfeiture Specialists, and staff from the U.S. Attorney's Office. Through his legal knowledge, leadership qualities, and high ethical standards, Inspector Finley greatly improved the quality of Postal Inspection Service asset forfeiture cases. Postal Inspectors Dennis Berger, Dana Kimbrough, and Ron Redus; Forfeiture Specialist Charlotte Kimbrough; and Operations Technician Valerie Hinton received awards for their roles in the Clyde Hood case. A retired electrician from Mattoon, Illinois, Hood created a fictitious investment business he called Omega Trust and Trading Limited. He presented himself as one of eight people in the world who could conduct secret, multimillion-dollar trades in debentures and prime bank notes with foreign banks, and ingratiated himself with victims by exploiting their Christian beliefs. Omega investors were promised a 50 to 1 return on their investments in under a year. Instead, Hood and his cohorts enriched themselves with investors' money. Postal Inspectors tracked Hood's expenditures, resulting in the successful prosecution of Hood and others in the scam. Following an order for the forfeiture and liquidation of more than $3 million in assets, combined with the use of the Department of Justice's victim restoration policy, Hood's victims received the full restitution of $1.7 million from the sale of the forfeited properties. The following paragraphs highlight other Inspection Service asset forfeiture cases from FY 2004. o Postal Inspectors executed search warrants on April 2, 2004, at the home and business of a Maryland podiatrist suspected of submitting false claims to the District of Columbia (DC) Medicaid program, beginning in 1999. Inspectors determined the woman billed Medicaid for services provided to dead recipients, a DC resident who was out of the country at the time, and an excessively large number of people in a single day, among other anomalies. Losses totaled about $1.2 million. During a search of her home, Inspectors seized $6,900 in cash and identified several personal and business accounts they suspected the woman had used to launder the proceeds of her scheme. On April 5, Postal Inspectors served warrants on two of her accounts and seized about $407,220. The money and bank accounts were administratively forfeited on September 23, 2004. o Postal Inspectors investigated a New Jersey man who bought $600,000 worth of postal money orders, many of which were "structured" purchases from Post Offices in Vermont, New York, and New Jersey. He was suspected of laundering proceeds from an international bookmaking scheme. On June 3, 2004, Inspectors executed federal seizure warrants on two of his annuity accounts and seized more than $739,210. The forfeiture of the funds will be handled through the civil judicial forfeiture process. The disposition of the forfeiture case is pending. o Four defendants were sentenced in New York in November 2003 for an insider trading scheme. From 1997 through 1999, two of the defendants paid employees of a business magazine to give them information on publicly held companies before it was made public. They used the information to buy and sell securities of covered companies. The trades exceeded $40 million, and their profits exceeded $1.8 million. Postal Inspectors seized 13 assets valued at about $888,000. A final order of forfeiture was issued in February 2004 on four of the seized assets valued at approximately $607,000. As the sole investigative agency, the U.S. Postal Inspection Service applied for an 80 percent share of the forfeited proceeds. o Subsequent to a narcotics-detecting canine alert, Inspectors executed a federal search warrant in May 2003 on an Express Mail parcel mailed from Michigan to Phoenix, Arizona, containing more than $205,000 in cash. Inspectors and other agents located and arrested five suspects in Arizona and Detroit for possessing controlled substances with the intent to deliver them. In November 2003, a 28-count indictment was issued against 16 suspects in Detroit, Phoenix, and California. Charges included controlled substance violations, money laundering, and forfeiture. Inspectors seized about $1.5 million in assets, and the Postal Inspection Service has successfully forfeited more than $313,000 worth of assets to date. o At the request of the Department of Labor's Office of Inspector General, Postal Inspectors investigated allegations of fraudulent unemployment insurance. Inspectors found that, between February 1998 and April 2003, 24 suspects defrauded the state of California and unemployment agencies by filing false claims via the U.S. Mail to receive millions of dollars in unemployment insurance benefits. Benefit checks were sent to Post Office boxes controlled by the suspects and deposited into their bank accounts. The suspects filed fraudulent claims in the names of more than 1,000 victims, and losses to the government were estimated at more than $8 million. Of the 14 suspects convicted of conspiracy, four were sentenced between March and June 2004 to terms ranging from six months to five years in prison and three years' probation. One man was ordered to be deported, and another was ordered to pay more than $58.7 million in restitution. Approximately $1.5 million in currency and financial investments were forfeited to date. Financial Whiz Kid Meets His Match: U.S. Postal Inspectors Uncover $43 Million Embezzlement at Merrill Lynch Executives from an energy services company in New York contacted the U.S. Attorney's Office in late 2001 about allegedly fraudulent financial transactions conducted by one of its employees, Daniel L. Gordon. The U.S. Attorney's Office turned to local Postal Inspectors to investigate the case. During their investigation, Inspectors uncovered a completely unrelated scheme-one that totally eclipsed the original case. As a result of exhaustive work conducted by the Postal Inspection Service's New York Fraud Team, Dan Gordon, a 27-year-old so-called "financial whiz kid" and one-time president of Merrill Lynch's Global Energy Markets (GEM) trading desk in New York, pled guilty in December 2003 to an "information" that included charges of wire fraud, money laundering, and conspiracy to falsify books and records. An information is a formal accusation of a crime issued by a prosecutor, in lieu of an indictment by a grand jury. Gordon, who received a master's degree in economics from Yale University when he was just 22 years old, admitted to stealing $43 million from Merrill Lynch by masking the transaction as an energy trade. It is the largest embezzlement reported by a major U.S. financial institution in the past 10 years, and Merrill Lynch is the world's largest securities firm. Gordon created his own company, Falcon Energy Holdings, S.A., which he incorporated in Anguilla, part of the British Virgin Islands. He convinced Merrill Lynch to pay a $43 million premium to Falcon for a bogus energy supply insurance contract. Gordon hid his ownership of Falcon and told Merrill Lynch the company was affiliated with a French conglomerate that would supply energy insurance. Per Gordon's instructions, Merrill Lynch transferred $43 million to Falcon's account-actually Gordon's account-in Zurich, Switzerland, in August 2000. In October 2000, Gordon wired $30 million from his Swiss account to one in New York and used the money to buy a 70 percent ownership in Daticon, Inc., a Connecticut firm. Gordon became Daticon's chairman of the board, collecting a salary, bonuses, commissions, and other income over a three-year period. Daticon gave Gordon another venue for hiding the money he had stolen from Merrill Lynch. In December 2000, Merrill Lynch sold the GEM trading desk to Allegheny Energy Services (AES), a Maryland firm with New York offices. Gordon became president of the AES energy trading desk when it acquired GEM from Merrill Lynch in 2001. He terminated the $43 million insurance contract with Falcon, supposedly in exchange for Falcon's payment to Allegheny of $550,000, and then transferred that amount from his own account to pay Allegheny. Throughout the scheme, Gordon used the mail to exchange a variety of fraudulent documents in support of his bogus claims. Gordon is free on a $500,000 personal recognizance bond, pending sentencing, and has agreed to forfeit $43 million of all real and personal property related to the money laundering charge. Postal Inspectors to date have seized assets from Gordon valued at about $33.5 million, and he faces a maximum of 55 years in prison. The U.S. Postal Inspection Service is the sole investigative agency in the case. In May 2004, Postal Inspector Steven Sadowitz (right) and Senior Special Agent Perry Woo (center) of the Bureau of Immigration and Customs Enforcement (ICE), with former Attorney General John Ashcroft, each received the prestigious Officer of the Year award from the National Center for Missing and Exploited Children (NCMEC) for uncovering a child-sex tourism business, based in Dyer, Indiana, that preyed on homeless children in Mexico. The investigators' extraordinary work not only dismantled the illicit, international sex enterprise, but resulted in the rescue of more than 30 children from further sexual abuse and exploitation. Investigators spent several years on the case, traveling throughout the United States and Mexico to find and interview child victims and gather critical evidence. As the investigation unfolded, they identified numerous co-conspirators and child molesters. To date, one man was sentenced to 27 years in prison, and another to 60 years in prison. Child pornographer Angel Rafael Mariscal, who is HIV positive, was sentenced to 100 years in prison in September 2004 after pleading guilty to recording his sex acts with at least 120 children, some as young as seven years old, in Cuba and Ecuador, and distributing the videos and CDs to at least 300 U.S. customers. Postal Inspectors in Phoenix and Los Angeles ran a drug interdiction program, dubbed Operation March Madness, targeting suspicious Express and Priority Mail over a one-week period in March 2004. The operation was deemed a success: Inspectors seized more than half a million dollars in cash and money orders (for illegal drug payments) and roughly 257 pounds of marijuana. Inspectors also arrested seven suspects who accepted mail containing illegal drugs. Postal Inspectors arrested a Mexican man on drug charges in El Cajon, California, in August 2004 related to an investigation of a pharmaceutical drug-trafficking ring. Inspectors began tracking activities of the Seattle Pharmacy in Tijuana, Mexico, after learning the company rented mailboxes at commercial mail receiving agencies (CMRAs) to anonymously receive drug payments and drug orders, as well as mail drugs. The man Inspectors arrested was paid about $150 a week for picking up drug packages at the CMRAs, plus $15 for each order he shipped. In January 2004, Inspectors and DEA agents seized thousands of pills from a storage facility, and subsequent laboratory analysis disclosed the pills were a Schedule III controlled substance. Shown here are some of the hundreds of Express Mail labels used by the ring. Retired law enforcement officer Lee Cantrell (right) was presented with a $10,000 reward check by Postal Inspector William A. Bonney after leading Inspectors to Bobby Frank Shamburger, suspected of buying insurance companies over a five-year period and then stripping the companies of their assets. More than 16,000 policyholders lost about $200 million. While watching "America's Most Wanted" in May 2001, Cantrell recognized Shamburger to be a man he knew as James Tyler. Cantrell notified officials, and Postal Inspectors arrested Shamburger five days later. Shamburger fled to avoid prosecution, but he was captured and pled guilty in New Orleans, Louisiana, in August 2003 to conspiracy and money laundering. Shamburger is now serving 10 and one-half years in prison and was ordered to pay $70 million in restitution to his victims. Inspectors also arrested 15 of Shamburger's associates, who are also serving jail time. Under the Postal Inspection Service Reward Program, eligible claimants may receive up to $10,000 under the Money Laundering Offense. Internal and External Investigations Mail Theft 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. When the process is interrupted by theft, rifling, obstruction, or destruction of the mail, investigative responsibility 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 690 million letters travel across the country. The mail is delivered to about 150 million addresses six days of every week (with 1.8 million new addresses added every year). 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. More than 200 billion pieces of U.S. Mail are delivered yearly to 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 versions of ingenious, homemade mailboxes crafted to meet 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 or 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. U.S. Postal Inspectors deploy the best security available. They also use preventive tactics to help protect and educate postal employees and the public about mail theft. Volume Attacks The Postal Inspection Service devotes significant resources to preventing and investigating mail theft. Mail theft rings are its biggest concern. Postal vehicles, collection and relay boxes, apartment mailbox panels, and neighborhood delivery and collection box units (NDCBUs) are commonly targeted by thieves in volume mail attacks. The attacks constitute a threat to postal employees and postal customers, and the Postal Inspection Service must devote considerable resources to protecting them and securing the U.S. Mail. Americans everywhere depend on Postal Inspectors to keep mail thieves off the streets and, in fact, identifying and arresting these criminals are essential to Inspectors' duties. In FY 2004, Postal Inspectors arrested 6,618 suspects for mail theft, and in the same period 5,351 suspects were convicted on such charges. But criminals never cease looking for new strategies to attack the nation's mail, and Inspectors must respond with ever-more formidable counterattacks to ward off their advances. Postal Inspectors and staff from the Postal Service's Engineering, Delivery, and Retail offices cooperated on a major project over the past two years that yielded huge benefits in the mail theft arena. New security features for collection boxes were researched and tested and, as of FY 2004, 5,716 high-security CBUs were deployed nationwide at a cost of $12 million. In recent years, the Phoenix, Arizona, Postal District suffered exceedingly high rates of attacks, attributed to a steep rise in methamphetamine addicts in the area. Accordingly, numerous NDCBUs in that district were replaced with high-security CBUs. Postal customers can be pleased with the results. To date, not a single high-security CBU has been compromised, though Inspectors have received several reports of attempts to pry open the units. The Arizona District saw a phenomenal 70 percent drop in mail volume attacks over the past several years. Following are case examples from FY 2004. o A task force of Postal Inspectors, Kissimmee police, Osceola County sheriffs, and investigators from the Florida Attorney General's Office conducted a seven-month investigation of volume mail attacks, identity theft, a $100,000 theft, and fraud. At least seven national merchants and financial institutions suffered high-dollar losses. Task force members arrested two suspects in April 2004 on charges of racketeering and fraud, and arrest warrants were issued against two co-conspirators. o Postal Inspectors arrested two suspects in March 2004 who tried to "fish" mail from collection boxes outside a San Antonio, Texas, postal station. A criminal complaint against the two was filed on March 18 for mail theft. On March 20, Postal Inspectors arrested two other suspects for possessing stolen mail. During a consent search of the suspects' home, Inspectors seized stolen mail, "washed" (altered) money orders, chemicals used to wash the money orders, and related items. The investigation is continuing. o Postal Inspectors in San Jose, California, arrested six suspects in June 2004 on charges of forgery and identity theft after receiving numerous complaints from customers about stolen mail. Inspectors and San Jose fraud detectives executed two search warrants and three probation searches (searches of a parolee's home) and recovered a large quantity of stolen mail. The suspects were meth addicts who would get high and steal mail from collection boxes outside Post Offices. Most of the thefts occurred on Sunday night or early Monday morning, because the thieves knew mail was not collected on Sundays. Postal Inspectors brought the issue to the attention of Postal Service managers, and recommended they add Sunday mail collection and use larger collection boxes at problem locations. o In February and March 2004, Postal Inspectors in San Antonio, Texas, arrested four men on charges of mail theft, forgery, bank fraud, and possession of stolen mail. Inspectors and Secret Service agents executed search warrants at motel rooms rented by one suspect and seized more than 500 personal and corporate checks totaling about $500,000, three postal tubs containing more than 150 pieces of stolen First-Class Mail, three laptops, and a scanner that still contained a counterfeit check. 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. When identity theft involves the U.S. Mail, Postal Inspectors have investigative jurisdiction. Prevention remains a key component in combating identity theft. Inspectors team with bank and credit card issuers, financial institutions, industry investigators, retail merchants, credit bureaus, and government agencies to educate merchants and consumers about identity theft and provide guidance to victims. Examples of cases from FY 2004 follow. o An investigation by the Postal Inspection Service, Denver District Attorney's Office, Colorado State Patrol, Colorado Bureau of Investigation, and the Louisville, Colorado, Police Department resulted in a guilty plea by a mail theft suspect, who was sentenced in December 2003 to five years in prison. Eight of nine other ring members pled guilty to related charges and received terms ranging from 32 months to three years in prison. Ring members stole checks from mailboxes, counterfeited the checks, and negotiated approximately $130,000 worth of them at financial institutions and businesses. o In January 2004, the Los Angeles Division's Identity Theft and Economic Crimes Task Force arrested a man and executed 10 search warrants related to access-device fraud. The case was initiated in October 2003 after a suspect fraudulently applied for credit cards, then used them to get cash and buy gold bars and coins from businesses and the U.S. Mint. Inspectors have identified about $450,000 in losses, but the total could exceed $1 million. The suspect rented 11 apartments and used addresses at seven commercial mail receiving agencies (CMRAs) to conduct the scheme. Inspectors seized 240 one-ounce gold coins (valued at more than $84,000), jewelry, $25,000 in cash, emeralds, sapphires, rubies, pearls, a two-carat diamond, Rolex watches, 30 one-ounce platinum coins, and 422 gold coins. o Two identity theft suspects were arrested by Postal Inspectors in California for embezzlement, counterfeit securities, bank fraud, and the improper use of Social Security numbers. The suspects deposited counterfeit checks into accounts at four banks. Each worked at a bank and had access to customers' personal accounts. Using stolen account numbers, the two applied for and received cashier's checks through the mail. One suspect was sentenced in June 2004 to 15 months in prison and three years' probation, and was ordered to pay $210,994 in restitution. The second was sentenced in February 2004 to five months in prison, five months of home monitoring, and three years' supervised probation, and was ordered to pay $21,000 in restitution. o After a four-day trial in August 2004, a Missouri man was found guilty of three counts of bank fraud, three counts of misusing a Social Security number, and one count of computer-related fraud. Postal Inspectors and other agents on the Eastern District of Missouri's Identity Theft Task Force arrested the man in January 2004 after finding he had defrauded Dell Computer Corporation of more than $107,000. He paid a Southwestern Bell employee for lists of customers' personal identifiers, which he used to open fraudulent Dell credit accounts. The man bought computers and other electronics with the fraudulent cards and had them shipped via the U.S. Mail to addresses in St. Louis. o Inspectors in San Francisco investigated a case involving 135 stolen and forged convenience checks. The checks were taken from curbside mailboxes in the San Francisco and East Bay areas, washed with chemicals, forged with victims' names, and deposited into bank accounts. They ranged in value from $1,500 to $7,200. Inspectors identified six main suspects and 43 co-conspirators, and estimated losses at more than $100,000. Eighteen suspects were arrested in April and May 2004, and 16 others indicted. Mail Theft by Employees and Contractors U.S. 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 mail theft cases from FY 2004. o Postal Inspectors investigated a part-time, flexible letter carrier from the Waycross, Georgia, Post Office in March 2004 after receiving a tip that she was stealing mail from her route. When Inspectors observed the carrier place a mail tub in the back of her personal vehicle, they performed a consent search of her car and found numerous pieces of stolen mail. The carrier was indicted in May 2004 on 10 counts of mail theft by an employee and one count of resisting an officer. She resigned from the Postal Service. o Postal Inspectors arrested a clerk in Atlanta in February 2002 for stealing more than 100 U.S. Treasury checks worth more than $100,000. The clerk was sentenced to more than four years in prison and three years' supervised release, and was ordered to pay restitution of $89,908 to his victims. o Postal Inspectors proved that, between March and August 2002, a former postal clerk and union steward in Chicago with access to various mail processing operations had stolen 96 checks from the mail. He gave them to five co-conspirators to negotiate at various banks. In May 2004, the clerk was sentenced to 30 months in prison and three years' supervised release, and was ordered, with the five co-defendants, to pay restitution of $85,222. U.S. Secret Service agents assisted with the investigation. o Postal Inspectors arrested an aviation services manager in February 2004 at the Philadelphia International Airport for rifling and stealing First-Class Mail. A few months earlier, Inspectors had arrested a co-conspirator for stealing greeting cards at the same location. The first arrest revealed the cards were lifted from the mail and used at stores in Philadelphia. The manager admitted he had rifled at least 50 greeting cards and had stolen about $200 that day. o Postal Inspectors investigated two temporary postal workers at the Main Post Office in Columbus, Ohio, suspected of stealing bank statements and smuggling them from the office. The women and seven others allegedly printed counterfeit checks with stolen account numbers on a home computer. They cashed the checks and bought clothing, gift cards, and groceries. Once the group had run up $2,000 to $3,000 on an account, they moved on to another one. The ring reportedly stole $74,000 in cash and purchases, using the accounts of 38 victims. Members of the ring, many of whom are related, used the counterfeit checks at stores in Columbus, Cincinnati, and Dayton, Ohio, from June 2001 to December 2002. Four women admitted involvement in the scheme, and the remaining five suspects were indicted in September 2004. Miscellaneous Crime Miscellaneous crime may include counterfeit postal money orders, "raised" postal money orders (when the dollar amount is altered), vandalism of postal property, and theft of postal property. In FY 2004, Postal Inspectors saw a dramatic increase in the number of counterfeit postal money orders, the result of increasingly more sophisticated scanning and digital reproduction technology. In FY 2004, Postal Inspectors reported 3,733 illegally cashed counterfeit money orders, compared to 1,419 in FY 2003. Another 3,539 raised money orders were cashed in FY 2004, compared to 435 in FY 2003. The dollar value of counterfeit postal money orders rose from $1.5 million in FY 2003 to $6.5 million in FY 2004. Inspectors are working with the Postal Service and the financial industry to design new security measures for postal money orders. Following are examples of miscellaneous crime investigated by Postal Inspectors in FY 2004. o Postal Inspectors arrested the leader of a major counterfeit money order ring in Inglewood, California, on April 21, 2004. He was believed responsible for manufacturing and distributing more than 900 counterfeit postal money orders in California, Washington, Oregon, Louisiana, North Carolina, and Georgia. He was indicted in the state of Washington in March 2004 and pled guilty to fraud and conspiracy in June. He was sentenced to 41 months in prison and five years' supervised release, and was ordered to pay $230,060 in restitution. o A Louisiana mother and her two daughters were charged in April 2004 with conspiracy to possess and negotiate counterfeit postal money orders. The trio cashed two counterfeit postal money orders worth $1,500 at Ace America and Cash Express in Lake Charles. When Postal Inspectors and local police interviewed the mother, she stated that she had paid $50 in California for four postal money orders worth $2,550. o Inspectors in Houston arrested a suspect who had used a cut-and-paste technique to alter the face value of postal money orders. In April 2004, he altered 19 money orders to a total value of $7,319. The postal money orders were negotiated in Shreveport, Louisiana. Inspectors believe he recruited as many as 10 others to buy money orders in low-dollar amounts and cash them for him. More arrests are anticipated. Homicides, Assaults, and Threats The U.S. Postal Inspection Service is committed to ensuring employee safety in the workplace. Postal Inspectors investigated 796 postal-related assaults and credible threats during FY 2004 and made 359 arrests. Inspectors seek prosecution in assault cases when appropriate. Following are examples of case activity by Inspectors in FY 2004. o On January 27, 2003, a man driving a pick-up truck in South Amboy, New Jersey, followed a letter carrier down the block after the carrier had delivered mail to his home. He accused the carrier of walking on his lawn and threatened to kill him, then struck the carrier in the face twice, knocking him to the ground. Local police initially arrested the attacker on state assault charges, and he was held at the Middlesex County Correctional Facility in North Brunswick in lieu of a $50,000 bail. Postal Inspectors obtained a federal indictment against the man for assaulting a government employee. He pled guilty and was sentenced in August 2004 to 37 months in prison. o A man entered the lobby of the Lakeside, California, Post Office on May 28, 2003, and took four employees hostage. Postal Inspectors and San Diego County Sheriff's deputies responded to the scene. Hostage negotiators from the sheriff's office spoke with the suspect via cell phone and eventually convinced him to release the employees. The incident lasted about four hours, and there were no physical injuries. On February 4, 2004, the man was sentenced to 13 years in prison for the kidnapping and for using a firearm in the commission of a crime. o Capital murder charges were brought against a man in September 2003 suspected in the murder of an employee of Earl's True Value Hardware store in Fredericksburg, Virginia. The woman was found dead on July 14, 2003, in a contract postal unit in the store. She was completing "close-out" duties when she was attacked, but there were no eyewitnesses to the crime. Postal Inspectors and other members of the Homicide Task Force identified the man from evidence gathered at the crime scene and arrested him after executing a search warrant at his home. If convicted of capital murder, he will face the death penalty. The judge postponed the trial until May 2005. Robberies Robberies pose 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 employees and facilities against criminals, but the U.S. Mail and Post Offices will likely remain compelling targets 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. Facility Carrier Other TOTAL Robberies FY 03 FY 04 FY 03 FY 04 FY 03 FY 04 FY 03 FY 04 with physical injury 7 1 3 3 1 4 11 8 with death 2 0 0 0 0 0 2 0 without physical injury 28 39 9 10 19 15 56 64 TOTAL 37 40 12 13 20 19 69 72 Inspectors aggressively and thoroughly investigate all postal robberies and attempted robberies. Following are examples of cases from FY 2004. o A former postal employee in Texas was sentenced to 46 years in prison for the 2003 and 2004 armed robberies of the South Oak Cliff, Joe Pool, Juanita Craft, and Parkdale postal stations. The suspect's wife was sentenced to nearly 10 years in prison and five years' supervised release for her role in the crimes. The robberies were solved by Ft. Worth Division Postal Inspectors, who arrested the couple as they were attempting to flee the scene of the Parkdale Station robbery. The former employee received 14 years for each of the four armed robberies, seven years for using a firearm in the commission of a violent crime, and a mandatory 25 years for a second firearm count. He was also ordered to pay $48,767 in restitution to the Postal Service. o Two men were sentenced in June 2004 to 33 years and four months in prison, and 30 years in prison, respectively, for the armed robbery of the Kinards, South Carolina, Post Office on October 7, 2003. The men took about $1,200 in cash and ordered the postmaster to imprint 10 postal money orders at $700 each and another 10 at $1,000 each. During the robbery, they bound the postmaster in duct tape and threatened to kill her if she revealed any information about them. On October 22, Postal Inspectors from the Charlotte Division were notified by Newberry County and Laurens County Sheriffs that the men had visited a bail bondsman, who alerted the deputies about the fugitives' presence. Inspectors arrested the suspects after a high-speed chase when they crashed their Cadillac, which was bought with the stolen money orders. o In March 2004, a juvenile from Amelia Courthouse, Virginia, was indicted on state charges of attempted capital murder, felony abduction, aggravated malicious wounding, and robbery of a rural carrier. The 15-year-old attacker severely injured the carrier, who was delivering mail when the incident occurred. The carrier required extensive surgery as a result of multiple stab wounds sustained during the attack. Washington Division Postal Inspectors and deputies from the Amelia County Sheriff's Office immediately identified the juvenile, who lived on the route. Evidence from the scene matched latent prints on the victim's vehicle to the suspect. The case was scheduled for trial on November 30, 2004. o Chicago Division Inspectors arrested three suspects, including a letter carrier from the Grand Crossing Postal Annex, for the armed robbery of a motor vehicle services operator in August 2003. The robbery occurred at the postal annex and was carried out by two non-employees, who stole registered remittances worth about $19,000. One of the non-employees was identified from fingerprints left at the scene. After his arrest, he identified two co-conspirators. He stated that the carrier was the "brains" behind the robbery and drove the getaway vehicle. In March 2004, the three men were indicted for conspiracy and the armed robbery of a Post Office. Burglaries The rate of postal-related burglaries remained relatively stable in FY 2004, although Inspectors reported that break-ins persisted in rural areas of the country. About 86 percent of the burglaries in the past fiscal year resulted in losses of less than $1,000, or the theft of fewer than 100 postal money orders. The graph on the next page depicts postal burglary trends over the past five years. Following are case examples from FY 2004. o Postal Inspectors in Puerto Rico arrested a man in August 2004 for burglarizing three Post Offices in San Juan. The suspect entered the Cabo Rojo Post Office by removing an exterior grill that led to the postmaster's office. Once inside, he disconnected the closed-circuit TV, cable, and telephone line. After rifling mail and rummaging through the window services area, he took 160 blank postal money orders. He later solicited others to cash the money orders at local establishments. Similar methods had been used in an attempted burglary at the Guanica Post Office on September 30, 2003, and in burglaries at the Villalba, Guayanilla, and Penuelas Post Offices one month later. The suspect was held without bond, and the investigation is continuing. o A year-long investigation by San Francisco Division Postal Inspectors resulted in the arrest of a fugitive burglary suspect and two associates in June 2004. The fugitive's backpack, which Inspectors recovered during a search of a residence, contained a stack of stolen postal money orders. Inspectors also seized stolen and forged checks and a MAC-10 automatic weapon from the home. The case began in July 2003 when a money order imprinter, 433 money orders, stamp stock, and the station remittance were stolen from the Salinas, California, Postal Contract Station. One suspect cooperated in the investigation and was sentenced to 150 days in jail and ordered to pay the Postal Service $6,896 in restitution. His co-conspirator became a fugitive when he failed to appear for a hearing in December 2003. While on the run, the fugitive had associates negotiate stolen money orders in Monterey County. In August 2004 he was sentenced to 92 months in prison and ordered to complete drug rehabilitation. One associate pled guilty and was sentenced to six months in prison and three years' probation, and the other pled guilty. o Postal Inspectors and Ft. Bend County Sheriff's deputies arrested two men in May 2004 in connection with the burglary of the Simonton, Texas, Post Office. The Post Office was burglarized on or about May 1, 2004, when a 2,200 pound safe containing 753 blank postal money orders, a money order imprinter, $4,284 worth of stamp stock, and other valuables were hauled off. Inspectors determined that a local man, suspected of three other burglaries, had attempted to cash postal money orders at a country store. Bloodhounds from the sheriff's office, brought in to determine whether the suspect had been in the Post Office, alerted on the suspect and trailed to him when presented with scent pads taken from the entry to the office. In June 2004, a Texas grand jury indicted the man on state burglary charges. Federal charges are pending. Revenue Investigations Postal Inspectors determine which products and sources of revenue pose the highest financial risks to the Postal Service and target their investigations accordingly. Inspectors measure the effectiveness of their revenue investigations by the number of postage fraud schemes they identify and successfully resolve. In addition to stopping a 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. Revenue Investigation Results in FY 2004 Criminal cases 114 Criminal convictions* 78 Civil cases resolved* 3 Amount ordered or agreed to be paid as a result of a civil prosecutive action* $13.4 million Voluntary restitution* $171.6 thousand Court-ordered restitution-criminal* $2.5 million * May be related to cases from prior reporting periods. U.S. Postal Inspectors concluded three major investigations in FY 2004 involving the underpayment of postage by large-scale, commercial mailers. Postage fraud schemes are generally complex due to the many postal operations and postage rate structures, and can pose a problem for prosecutors trying to present the case to a jury. Examples of Inspectors' cases in FY 2004 follow. o The owner of a mailing house in Salem, Utah, was sentenced in November 2004 to 60 months of supervised release and was ordered to pay more than $94,000 in restitution for meter fraud. Postal Inspectors found that, although the owner had reported a lost postage meter in December 1996, he had instead manipulated the meter and continued to print postage until August 1998. Losses to the Postal Service were based on the company's business records. o A man in Pasadena, California, pled guilty in March 2004 to bank fraud, money laundering, and conspiracy. He was the ring leader of a $1.6 million counterfeit-check scheme affecting Post Offices in six western states. The suspect and his co-conspirators called Post Offices to request large numbers of stamps in the name of a business. A private courier picked up the checks from the business and used counterfeit checks at Post Offices to pay for the stamps. The stamps were later sold to commercial stamp and coin shops in Los Angeles. Prosecution is pending for four co-conspirators. 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 addressing unique law enforcement issues that can arise in complicated fraud cases. ACE also grants triple damages and penalties for false claims, as shown in the cases that follow. o An $8.4 million civil false claims settlement was signed by Cushman & Wakefield, Inc., Interior Systems, Inc. (ISI), and Vice President William Marcellino in August 2004 in Dallas, Texas. Postal Inspectors found that ISI employees withheld postage statements from the mail unit clerk and did not properly presort mail to earn discount postage rates as claimed. Revenue losses from more than 25 million pieces of mail, presented to the Postal Service between 1998 and 2000, totaled nearly $6.2 million. o A $4.5 million civil false claims settlement was signed by The Vantage Group, two of its subsidiaries, and its chief executive officer and chief financial officer in October 2003. Postal Inspectors found that the Boston firms had improperly claimed millions of pieces of mail at a reduced, non-profit mail rate, although they knew the mailings were ineligible for the discount. The firms also made false statements to cover up their actions. o Medco Health Solutions signed a $540,511 settlement under the Program Fraud Civil Remedies Act in May 2004. Postal Inspectors discovered that the mail-service pharmacy provided two types of window envelopes and preprinted inserts to customers. Business reply mail (BRM) envelopes were provided for prescription orders, and courtesy envelopes were provided for bill payments. When customers instead used BRM envelopes for payments, the mail went to a Post Office Box and bypassed the Postage Due Unit, where payments are collected. Medco failed to make the requisite changes to its envelopes or cease distributing the two envelopes. Postal losses were incurred in Pennsylvania, New Jersey, Florida, Nevada, Texas, Washington, and Ohio. Financial Investigations The majority of financial investigations conducted by the U.S. Postal Inspection Service comprise employee embezzlements. Postal Inspectors have uncovered a range of embezzlement schemes used 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 bogus or inflated business expenses. Postal Inspectors conducted 543 embezzlement investigations in FY 2004 and identified more than $3.1 million in postal losses. Examples of Inspectors' casework follow. o A former window clerk in Park City, Utah, was sentenced in November 2003 to one year in prison and was ordered to pay more than $166,000 in restitution for embezzling postal funds. Postal Inspectors found the clerk concealed the theft for six months by misreporting stamp stock shipments and falsifying reporting documents. She was removed from her position with the U.S. Postal Service. o Inspectors found that a former postmaster in Arnett, Oklahoma, had falsified account book and quarterly statement entries. She underreported postal sales and bulk mail revenue, posted negative balances to various accounts, and overreported money order sales. She was sentenced to six months in prison and was ordered to pay $144,092 in restitution in February 2004 for her crimes. o Postal Inspectors determined that a vending technician in Youngstown, Ohio, had been stealing money over a four-year period from machines he serviced at six Post Offices. He got away with the theft because his managers failed to properly audit the stamp stock. The technician lost his job and was sentenced in November 2003 to six months' home detention and three years' probation, and was ordered to pay more than $101,000 in restitution for embezzling postal funds. o Postal Inspectors identified a sales and services associate (SSA) at a Philadelphia, Pennsylvania, postal station and a co-conspirator who had bought stamps with checks drawn on a closed bank account. The stamps were transferred to the SSA, who sold them to postal customers at the station. Rather than recording the sales, he took the money for personal use. The SSA lost his job and was sentenced in December 2003 to six months of house arrest and five years of probation, and was ordered to pay about $65,000 in restitution for stealing government property. o Postal Inspectors determined that a clerk at the El Paso, Illinois, Post Office stole more than $17,800 by failing to report stamp sales, Post Office box rental fees, and COD funds. She took the money in the form of postal money orders that she issued in her own name. The clerk lost her position with the Postal Service and was sentenced in July 2004 to three years of probation for misappropriating postal funds. Workers' Compensation Fraud Monetary compensation and medical benefits paid to postal employees who sustain injuries while on duty are a major expense to the Postal Service, which is responsible for funding workers' compensation benefits. The Postal Service has accrued approximately $7.5 billion in future liability for workers' compensation claims since its reorganization in 1971. The Postal Service fully supports the Office of 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 from the U.S. Department of Labor (DOL) for fraudulent claims and administrative costs. As a proactive measure to identify and eliminate fraudulent claims early in the claims process, Postal Inspectors' efforts this past fiscal year emphasized continuation-of-pay (COP) investigations. COP compensation is provided to injured employees, who continue to receive paychecks from the Postal Service for up to 45 days following a claim. U.S. Postal Inspection Service investigations in FY 2004 resulted in $146.2 million in long-term, cost-avoidance savings and another $19.8 million in COP cost savings, totaling $166 million in cost savings for the Postal Service. The Postal Inspection Service initiates criminal investigations when it suspects individuals of defrauding the Federal Employees' Compensation Act (FECA) and refers to the Postal Service matters that may require administrative action. Inspectors work closely with the Postal Service's 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 analysts to assist Inspectors in investigating suspect claims. During investigations this past fiscal year, Postal Inspectors identified 760 individuals for defrauding the workers' compensation program and arrested 41 employees for workers' compensation fraud. Employment Fraud Postal Inspectors primarily seek criminal 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 is generally based on showing that the claimant is receiving outside earnings and concealing them from DOL and the Postal Service. The following are examples of court actions resulting from Inspection Service investigations in FY 2004. o A full-time garnishment clerk in the Southern Maryland Processing and Distribution Center was sentenced to 40 months in prison after a jury convicted him for workers' compensation fraud and aiding and assisting in the preparation of false tax returns. He was also ordered to pay $144,443 in restitution to DOL's Office of Workers' Compensation Program and the Internal Revenue Service. Postal Inspectors and IRS agents conducted a two-year investigation of the man after he began collecting workers' compensation for an on-the-job injury in the early 1990s. In order to continue receiving disability benefits, he was required to notify DOL of any change in his work status. He falsely certified that he was not working, but Postal Inspectors determined he was, in fact, running a tax preparation and accounting business and was preparing fraudulent tax returns. o A custodian at the George W. Young General Mail Facility in Detroit, Michigan, pled guilty in September 2004 to making false statements to obtain workers' compensation. Postal Inspectors arrested him while he was working at the Detroit Police Department in April 2004. The custodian had claimed he was disabled and could not perform even limited-duty work for the Postal Service due to constant pain. Inspectors, however, observed him on the job as a reserve police officer, playing on a bowling league, doing yard work, and visiting a local amusement park. As a result of the investigation, DOL terminated the man's benefits, and the Postal Service realized a future cost savings of $479,133. Administrative action is pending, and sentencing was set for January 2005. Misrepresentations of Physical Limitations Another form of fraud that Postal Inspectors investigate in the workers' compensation program involves employees who misrepresent the extent of their physical limitations. The efforts of Postal Inspectors in obtaining prosecution in these cases have been increasingly successful, as seen in these summaries. o A Bronx, New York, window clerk was convicted after a four-day trial of making false statements to obtain federal employees' compensation and committing mail fraud. Postal Inspectors learned the clerk had tripped over a hand-truck at the Post Office and claimed he injured his knee, elbow, shoulder, and back. Inspectors conducted a surveillance of the clerk and observed him sitting, walking, squatting, standing, and sprinting effortlessly. When interviewed by Inspectors, however, he remained standing and held his arm rigidly, stating that if he sat it would take him an hour to get moving again. He alleged he was unable to move his arm, sit, stand, or walk without tremendous pain. The clerk was sentenced in December 2003 to 15 months in prison and three years' supervised release, and was ordered to pay restitution to the Postal Service of $83,017, with a $2,000 special assessment. As a result of the investigation, the Postal Service achieved a future cost savings of $56,794. The former employee was permanently barred from receiving workers' compensation benefits. o A letter carrier in Chicago, Illinois, filed a COP claim, alleging she was injured when a cart fell on her arm. DOL accepted the claim. After three days' absence from work, she submitted a doctor's note, condoning her absence and injury. When Postal Inspectors checked the claim and discovered the doctor was unaware of the note, the carrier admitted she had written it. The clerk was removed from the Postal Service and is barred from receiving workers' compensation benefits. o A full-time custodian in Aspen, Colorado, filed a COP claim after injuring her back while mopping the floor. She was initially placed off duty, but returned to limited duty for two hours a day, based on her doctor's orders. Postal Inspectors, however, found that she and her husband ran a cleaning service, and Inspectors saw her vacuuming and dusting a client's place of business. When confronted by Inspectors, the woman denied working and claimed that she only supervised others, but the doctor changed her orders to allow eight hours of full duty with only minor restrictions. She was terminated from her job on December 5, 2003, and the case was accepted for federal prosecution. Postal Inspectors determined that a Nigerian man employed by Southwest Airlines at the Baltimore-Washington Airport was regularly mailing Express Mail packages bearing fictitious return addresses to Brooklyn, New York, and other locations. Inspectors intercepted a package and learned the employee was mailing stolen credit cards. They served search warrants at the man's home in Maryland and at the Brooklyn addresses and recovered more than 150 stolen credit cards and 450 stolen checks (pictured at left). Known losses to date conservatively exceed $10 million, and Inspectors have identified more than 1,000 victims, many of whom had their identities stolen; about 100 financial institutions also were victimized. Inspectors have arrested three other Nigerian men in the case, and a fifth remains a fugitive. Three of the four arrested were denied bail until trial and, if convicted, face sentences of up to 30 years in prison. Postal Inspectors in Pittsburgh obtained an indictment in April 2004 against a convicted felon who illegally owned a .380 Bryco handgun, which was used in the homicide of full-time Letter Carrier Clayton Smith. The woman was arraigned on April 14 and released on her own recognizance with several conditions. The homicide occurred when she left her eight-year-old daughter and nine-year-old son alone in the house, and the children discovered the gun in her bedroom closet. The boy later retrieved the weapon and aimed it out of a kitchen window at a wooded area. Letter Carrier Clayton Smith, who was standing outside his postal vehicle, sustained a fatal gunshot wound. Above, Pittsburgh Division Inspector in Charge A. Richards (left) and U.S. Attorney M. Buchanan announced the resolution of the homicide at a press conference in Pennsylvania. A letter carrier in Fort Myers, Florida, had his duties modified after he reported being injured on the job, but he called in sick on his first night in the new assignment. Postal Inspectors began a surveillance of the carrier and found him at a local bowling alley with his league. The carrier showed no difficulty or discomfort while playing in 77 games from September 2003 through May 2004. Inspectors informed postal managers of the carrier's activities, and he lost his job with the Postal Service on July 30, 2004. Dangerous Mail and Homeland Security Biological or Chemical Hazards in the Mail It is unlikely that anyone in the United States will receive a harmful biological or chemical agent through the mail. Poison has been sent by mail only a few times in the past several decades, typically in candy or other food and meant to target a particular person. In fact, Postal Inspectors report that only twice in the history of the U.S. Postal Service have terrorists attempted to use the mail to deliver a biological or chemical weapon. The Postal Service delivers approximately 203 billion pieces of mail each year. In the past three years, that translates to odds of one in 100 billion that an item of mail contains a biological or chemical weapon. Keeping the mail free of hazards is one of the highest priorities of Postal Inspectors. Since October 2001, when letters contaminated with anthrax were mailed to media and congressional representatives, through FY 2004, reports of suspected hazards in the mail have ballooned, reaching a total of more than 20,000 incidents. Inspectors take every report seriously, as they relate directly to the safety of postal employees and customers. Despite the fact that a scarce 99.9 percent of all suspicious mail incidents in FY 2004 were false alarms or hoaxes, they caused 133 evacuations of postal facilities and more than 18,745 lost workhours. Harmless substances-sugar or baby powder found in or around mail-were the main culprit, and most mailers were unaware the items could create problems. In a few instances, the harmless substances found in mail were intended to be misconstrued as threats. Such mailings are federal offenses, and Inspectors aggressively pursue anyone who attempts to use the mail to threaten, harass, or disrupt. Inspectors' investigations of these incidents in FY 2004 resulted in 28 arrests, and 25 convictions were reported during the same period. Explosive Devices in the Mail Dangerous mail investigations include explosive devices, such as bombs, found in the mail. Cases involving mail bombs are often complex, particularly if evidence is destroyed when a device explodes. Postal Inspectors investigated 26 incidents of explosive devices sent via the U.S. Mail in FY 2004. That includes a case from September 2004, when 21 incendiary letters were mailed from a Nevada correctional facility to a long list of state officials. During the same period, Inspection Service investigations resulted in four arrests and three convictions. If a mail bomb detonates, Postal Inspectors first tend to anyone injured in the blast and then secure the crime scene. Inspectors intensively comb the area for clues and submit the evidence to the Postal Inspection Service's National Forensic Laboratory for analysis. Document and forensic experts examine postmarks, postage, handwriting, fingerprints, and any other evidence that might yield investigative leads for Inspectors. In one notable bomb case, Forensic Analysts were able to lift only a partial fingerprint from the back of a stamp, yet still managed to identify the bomber. The chart below provides statistics on mail bombs over the past five years. Mail Bomb Incidents: Five-Year Trend FY 00 FY 01 FY 02 FY 03 FY 04 Incidents 7 3 0 2 26 Explosions 4 3 0 1 6 Injuries 2 2 0 0 4 Deaths 0 1 0 0 0 In FY 2004, Postal Inspectors responded to 1,013 incidents of explosive devices placed in private mail receptacles, hoax bomb devices, and suspicious items found in postal facilities or equipment. The investigations resulted in 81 arrests, and 55 convictions were reported during the same period. Most of the incidents involved juveniles who were targeting mailboxes with homemade explosives or common fireworks. The majority of suspicious material turned out be hoaxes, false alarms, or items inadvertently left behind by customers. The U.S. Postal Inspection Service has greatly expanded training for Inspectors who investigate dangerous mail. Because their work may be conducted in contaminated areas, these Inspectors have been given hazardous material training and are equipped to respond to chemical, biological, or radiological attacks affecting postal employees, postal customers, the U.S. Mail, and postal facilities. Following are dangerous mail investigations conducted in FY 2004. o Postal customers in Lafayette, Louisiana, began receiving threatening letters in the mail in April 2002. Some of the letters contained a white powder, but all threatened that 25 bombs, strategically placed around the city, would