Picower’s Madoff Take Now Estimated to Be $7.2 Billion

by Jake Bernstein, ProPublica

As a man who cherishes his privacy, the attention Jeffry Picower received on Thursday must have made him wince. On the same day that Forbes revealed he had earned a coveted spot in the magazine’s list of the 400 wealthiest Americans, a new court filing added $2.1 billion to the $5.1 billion he is alleged to have earned from his participation in Bernard Madoff’s Ponzi scheme.

Forbes, which listed Picower at No. 371, placed his net worth at $1 billion, although the magazine acknowledged that the former lawyer and accountant is "likely worth billions more." Irving Picard, the court-appointed trustee charged with recovering cash from Madoff’s scheme, wants to claw back Picower’s Ponzi profits. Picard contends that Picower is one of a select group that benefited from the Ponzi scheme and knew or should have known that they were participating in a fraud.

The trustee’s latest filing states categorically what ProPublica first reported in June ― Picower made more money than anyone else from the Madoff Ponzi. Picower was "the biggest beneficiary of Madoff’s scheme, having withdrawn either directly or through the entities he controlled more than $7.2 billion of other investors’ money," the filing said.

If Forbes had included all of Picower’s alleged Ponzi profits in this year’s total, it would have had to bump him up to the 32nd richest American. Instead, the media-shy investor is making his first appearance on the Forbes list. One reason for this may be that calculating Picower’s net worth has proven extremely difficult. In 2002, Forbes itself put Picower’s wealth at a little more than $300 million. That same year, according to court filings, Picower’s quarterly withdrawals from Madoff alone totaled $895 million.

The trustee’s latest judicial move is a response to a July 31 filing by Picower which urged the court to dismiss the Trustee’s complaint. (See, our "Picower: Charges of Complicity with Madoff 'Baseless."") In that filing, Picower argued that he himself was a victim of Madoff’s crime. He asserted that it would have been illogical for Madoff to have "compensated" Picower with such exorbitant sums because that would have undermined the scheme. Picower also noted that he still had half a billion dollars invested with Madoff when the now-convicted fraudster first confessed.

Although the trustee’s brief is heavy on legal citations, it nonetheless marshals plenty of outrage at Picower’s arguments. "Given that Picower withdrew more of other investors’ money than any other customer" of Madoff, "Picower’s repeated references to himself as a 'victim' ring hollow," the brief states. "Picower’s premise that making billions of dollars from a Ponzi scheme is a badge of innocence is dubious at best."

The trustee notes that Picower’s largest withdrawals were quarterly, allowing Madoff to plan ahead for them. The trustee also adds a new detail to the story. As early as 2003, Madoff was having trouble paying Picower the full amount the investor was demanding every quarter.

Madoff’s "failure to pay Picower sums that purportedly were in his accounts or otherwise available to him is further evidence that Picower knew or should have known of Madoff’s fraud," states the brief. "This evidence becomes more compelling given Picower’s apparent lack of complaint about his inability to access billions of dollars reported" on Madoff's account statements.

Picard summarizes his objection to the motion to dismiss with a flourish: "Picower’s motion is a concoction of irrelevant counter-facts, arguments that ignore both the allegations in the Complaint and the relevant legal standards, and factual challenges that are not properly before the Court on a motion to dismiss."

Not surprisingly, a statement from Picower's lawyer William Zabel takes issue with Picard’s latest brief: "Trustee continues to make false and outrageous claims about Mr. Picower based on a misreading of the purported 'facts.' When the true facts are known, the Court will see that Mr.
Picower was deceived by Bernard L. Madoff like the SEC and thousands of other investors, as many as half of whom took out more money than they put in."

In the statement, Zabel also leaves open the possibility that a settlement can be reached.

"The Picowers in good faith have initiated discussions with the Trustee to reach a settlement in order to avoid years of extensive litigation," Zabel said.

A hearing on the motion to dismiss before Judge Burton R. Lifland of U.S. Bankruptcy Court for the Southern District of New York has been scheduled for Oct. 27.

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How Did Organ Trafficking Scheme Stay Hidden?

By Emily Witt, ProPublica

The arrest of Levy Izhak Rosenbaum, the Brooklyn resident charged last month with acting as a "matchmaker" for buyers and sellers of human organs, spotlights the issue of live donor organ trafficking in the United States. It also raises a question: How could Rosenbaum ply his trade for as long as a decade, according to statements in the criminal complaint filed against him, without being caught?

The 1984 National Organ Transplantation Act states clearly that the buying and selling of organs is illegal: Violators face up to five years in prison and a $50,000 fine. The prohibition is intended to prevent exploitation of the poor or others who might be tempted to sell an organ out of desperation.

When it comes to enforcing the law, however, transplant centers are essentially left to police themselves. The law doesn't offer guidelines about how transplant centers should proceed if they suspect a live donor has been paid.

"Other countries have mobilized the justice system around the traffic, and the U.S. has in my estimation turned a blind eye," said Nancy Scheper-Hughes, an anthropologist from the University of California, Berkeley, who has documented the international organ trafficking business for more than a decade. The Daily News in New York reported that Scheper-Hughes had informed the FBI about Rosenbaum's business seven years before he was finally arrested.

Some who follow the donation process aren't surprised by the lack of enforcement interest.
Alex Capron, a professor of health care law, policy and ethics at the University of Southern California, said reports of potentially illegal organ transactions are rare within the medical community because doctors feel bound by a confidential relationship with their patients.

"My guess is the doctor would simply drag his feet, and the patient would disappear rather than having the police swoop in," Capron said.

The United Network for Organ Sharing, a nonprofit organization under contract with the Department of Health and Human Services, has established guidelines for members of its Organ Procurement and Transplantation Network. To gain membership in the network, which is mandatory to receive Medicare payments, transplant centers must demonstrate that they make sure a recipient isn't purchasing the organ. They also must have an independent donor advocate on staff and conduct psychosocial assessments prior to surgery. The organization conducts occasional audits to make sure members comply.

But the network's guidelines don't specify how rigorous an investigation must be. They state only that the center should get "confirmation of the voluntary nature of proceeding with the evaluation and the donation."

A network spokesman acknowledged that the burden of proof can vary from center to center. He also said that tips about suspicious activity have been passed on to federal authorities in the past.

Dr. Gabriel Danovitch, medical director of the kidney transplant program at University of California, Los Angeles, said that the process of live organ donation is effectively governed by trust, and that more regulation could deter legal donors. Doctors and hospitals know their reputations would be destroyed if they broke the law, he said.

"We are not police, and we are not the FBI, and we do not do, for instance, Social Security background checks or identification checks — and we haven't found that necessary to do so because we use our best judgment," Danovitch said.

As an example, he recalled refusing a suspicious donation of a kidney by a gardener to his multimillionaire employer. "It didn't smell right," he said.

The charges against Rosenbaum go beyond a single illegal exchange. According to the criminal complaint, he claimed to have been in the business of brokering live organ sales for 10 years. He allegedly charged the kidney recipient $150,000 to find a donor.

To justify the cost, the complaint says, Rosenbaum cited the expense of medical examinations in Israel, visa fees and the donor's care in recovery. From the information available thus far in the case, it's unclear who else was involved. The only other person cited in the complaint is a lab worker whom Rosenbaum paid in cash to verify recipients' blood types.

Danovitch said there are three possible scenarios for how such a long-standing scheme could exist: The hospitals and the doctors were successfully hoodwinked into believing the emotional relationship between the donors and the recipients; they turned a blind eye to signs of impropriety; or they were complicit.

Danovitch said there's no evidence that doctors or hospitals have been complicit in such schemes. If the Rosenbaum case or others end up revealing systemic wrongdoing, he said he would support stricter rules and greater oversight.

The criminal complaint alleges that Rosenbaum helped coach a donor and a recipient to fool doctors and create a fictitious relationship. He called it "the easy part," the complaint says.

Scheper-Hughes said investigations by her and by various news investigations (such as this one from Newsweek) indicate that the sale of live organs isn't as widespread in the U.S. as it is in some other countries, but it does exist here.

"This has been known," Scheper-Hughes said. "It's not a secret."

She expressed frustration that the transplant community worked to keep oversight "inside the fold."

"That's just not the way justice works in the world," she said.

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Picower: Charges of Complicity With Madoff “Baseless”

By Jake Bernstein, ProPublica

The man who Bernard Madoff’s Ponzi scheme may have enriched the most responded in court filings today to allegations that he was complicit in the fraud. In a statement, a lawyer for Jeffry Picower called the charges by Madoff trustee Irving Picard "baseless," "inflammatory" and "riddled with significant factual errors."

"In the Trustee’s zeal to clawback money for other victims, he fails to recognize that the Picowers are honorable people who were deceived by the same fraud that for many years eluded thousands of other investors, financial professionals and regulators that had access to Madoff’s files," said Picower lawyer William Zabel.

A ProPublica report in June detailed the allegations in the trustee’s complaint and what is publicly known of Picower, a media-shy investor who has worked both as a certified public accountant and lawyer. The 68-page motion to dismiss filed in U.S. Bankruptcy Court in the Southern District of New York directly rebuts only a few of the factual charges detailed in the ProPublica story. The bulk of the brief is filled with challenges to the legal merits of Picard’s case.
Picower does not dispute in the brief that between 1995 and 2008 he and his family withdrew $5.1 billion more than they invested with Madoff. While Picard’s complaint states that the Picowers benefited from their association with Madoff for more than 20 years, the brief puts the time span at more than 30 years.

The motion to dismiss gives no explanation for the quarterly withdrawal patterns Picard revealed in an exhibit to his complaint. Nor does it explain why the Picowers’ withdrawals peaked in 2003, when they removed a combined $1 billion from their Madoff accounts.
The brief does posit that "[t]here is no rational reason why Madoff would have compensated Mr. Picower" for withdrawing money from the Ponzi scheme, thereby potentially undermining its growth. It also questions why Picower would have left more than half a billion dollars in the scheme if he knew a turn in the economy would be the Ponzi’s undoing.

One of the allegations detailed by ProPublica involved the elevated returns Picower allegedly received on his investments with Madoff. The motion to dismiss provides examples of non-Madoff investors who also received high returns during that time period, as evidence that the Madoff results were within the realm of possibility. Specifically, Picard alleged that one Picower account, Decisions #2, "purported to earn over 950% in 1999." The Picower motion states that the account only earned 37.6% in 1999.

In another instance, the trustee claimed that two other accounts earned more than 100% over a four-year period. The Picower motion alleges that neither account earned 100% in any of those years. Neither the trustee nor Picower provide evidence that could be used to check their respective claims.

Perhaps the most serious allegation by the trustee was that Picower or his associates engaged in backdating when they ordered up "returns." Picard cites faxes and notes between Madoff’s office and Picower representatives as proof of these claims. The motion to dismiss dispatches with these charges in a few sentences.

"As with the Trustee’s other unsupported fraud allegations, he pleads no facts to support his rank speculation that the Defendants believed those trades to be fictitious and concluded, based on those trades, that Madoff was running a Ponzi scheme. No facts have been alleged to support the Trustee’s groundless conclusions, and the Court need not, and should not, accept them as true."

Research Director Lisa Schwartz contributed to this report.

Picower's motion to dismiss.

Madoff Client Jeffry Picower Netted $5 Billion—Likely More Than Madoff Himself

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California Crime Lab Escapes Budget Cuts

By Emily Witt, ProPublica, and Benjamin Protess, Huffington Post Investigative Fund

Good financial news out of California is rare these days, but one key crime-fighting agency has emerged from the state's recent budget slashing unscathed: the state crime lab.

In June, ProPublica and the Huffington Post Investigative Fund revealed how a proposed $20 million cut to the lab would be likely to halt or delay the testing of rape kits, DNA and other crucial crime scene evidence in many California counties. Advocates for crime victims worried that testing delays would allow violent criminals to remain on the streets.

Although the cut was small in the face of the state's $26 billion shortfall, it would have represented half the lab's budget.

But California's budget was finalized this week, and funds for the crime lab remained intact. The lab's budget also dodged the ink of Arnold Schwarzenegger's line-item veto pen.

Gail Abarbanel, who heads the rape treatment program at the Santa Monica-UCLA Medical Center, had called the cuts "a public safety emergency." Today, Arbabanel said she was "ecstatic and relieved."

The decision was unexpected. The proposed cut was approved by the state's budget committee in June and seemed a lock for inclusion in the finalized budget. But then law enforcement agencies lobbied lawmakers and state Assemblyman Ted Lieu intervened.

"It was a team effort," Lieu, a Democrat from Southern California, told us. He said he went to state Assembly Speaker Karen Bass "and said we need to restore this money because the cut goes against everything we stand for."

If it had passed, the lab would have had to charge law enforcement agencies in 47 of the state's 58 counties for evidence tests it has always provided for free, even though many of those agencies are facing budget cuts of their own.

As we've previously reported, the lab already has one of the largest backlogs of untested DNA evidence in any state lab. It hasn't tested more than 150 DNA samples from crime scenes and 60,000 from people arrested or convicted of crimes.

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Video: Baby girl, Ripped From Womb, Found Alive

A baby girl who was cut from her mother's womb has been found alive and two people were arrested in the woman's killing. Police in Worcester, Mass., say that the baby girl is in fairly good health at a hospital in New Hampshire.

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New Advance In Revolutionary 'Bullet Fingerprinting' Technique

'Bullet fingerprinting' technology developed at the University of Leicester in collaboration with Northamptonshire Police is now being advanced in new ways.

John Bond, from Northamptonshire Police Scientific Support Unit and an Honorary Research Fellow at the University of Leicester's Forensic Research Centre developed -- in collaboration with University scientists -- a method to 'visualize fingerprints' even after the print itself has been removed.

The revolutionary technique was named last year as one of Time Magazine's top 50 inventions of the year.

Now continuing work exploring this forensic technique in the Department of Chemistry at the University of Leicester is uncovering new ways of recovering fingerprints from metal surfaces.

Researcher Alex Goddard has uncovered a natural technique that he believes is so simple, which can explain why it has been overlooked until now.

The technique involves studying the chemical and physical interactions occurring between the metal and the fingerprint sweat deposit. Using advanced surface imaging techniques, such as an Atomic Force Microscope, nanoscale observations of fingerprinted brass samples can identify optimum conditions to promote the natural enhancement of the fingerprint, vastly improving their recovery rate. It has also proven that components of the sweat deposit survive washing and wiping of the surface.

Goddard explains, "Once a finger has touched the metal surface, a residue remains behind, this starts to react with the metal and an image of the fingerprint can be developed by use of elevated temperature and humidity, with the resultant image becoming a permanent feature on the surface of the metal."

"Currently, fingerprint recovery from bullets is very low; less than 1 percent. This uses a natural process and even if it only leads to small increase in success rate, then that would be significant.

"Previous recovery methods include applying powder to the material which can actually damage the evidence. This new technique promotes a naturally occurring process which does not involve adding anything to, or damaging, the evidence. Instead, it employs heat and humidity to promote the enhancement of the fingerprint image, there are also indications that it could be used after other techniques have failed, perhaps as a last resort."

John Bond says: "I am delighted that this research in the Chemistry Department is producing really interesting and useful results. This is an important area of forensic research and Northamptonshire Police is proud to be associated with the University. I look forward to further developments".

Alex Goddard recently presented his findings at the University of Leicester's Postgraduate Research Festival.

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Businessman Sentenced For Supplying Indian Government With Controlled Technology

Parthasarathy Sudarshan, 47, the owner of an international electronics business, was sentenced
in the District of Columbia to 35 months in prison for his role in a conspiracy to illegally export controlled electronic components to government entities in India that participate in the development of ballistic missiles, space launch vehicles, and fighter jets.

That's according to federal law enforcement officials.

On March 13, Sudarshan, a resident of Simpsonville, S.C., pleaded guilty in the U.S. District Court for the District of Columbia to the felony charge of conspiracy to violate the International Emergency Economic Powers Act and the Export Administration Regulations; and to violate the Arms Export Control Act and the International Traffic in Arms Regulations. Sudarshan was sentenced today by the Honorable Ricardo Urbina.

According to court documents filed by the government, Sudarshan did business as Cirrus Electronics and held himself out to be Cirrus' CEO, Managing Director, and President and Group Head. Cirrus has offices in Simpsonville, South Carolina, Singapore, and Bangalore, India.
Among the recipients of U.S. technology in this case were the Vikram Sarabhai Space Centre (VSSC), an enterprise within the Department of Space of the Government of India, and Bharat Dynamics, Ltd. (BDL), an enterprise within the Ministry of Defence of the Government of India.

The U.S. government has determined that VSSC participates in India's space launch vehicle program and that BDL participates in India's development and production of ballistic missiles. As such, both VSSC and BDL are on the Department of Commerce's Entity List and exports of
U.S.-origin commodities to these entities are restricted and require prior authorization in the form of a license from the Department of Commerce.

Between 2002 and 2006, Sudarshan acquired electrical components with applications in missile guidance and firing systems in the United States for VSSC and BDL. In particular, in the case of at least two U.S. vendors, Sudarshan and others at Cirrus provided the U.S. companies with fraudulent certificates that claimed that the end-users of these electrical components
were non-restricted entities in India, when, in fact, the items were for VSSC. There were no export licenses for any of the shipments to VSSC and BDL. To further conceal from the U.S. government that goods were going to entities in India on the Department of Commerce Entity List, Sudarshan would route the products through its Singapore office and then send the
packages on to India.

In addition to supplying VSSC and BDL with components, Sudarshan acquired microprocessors for the Tejas, a fighter jet under development in India. The microprocessors were necessary for the navigation and weapons systems of the Tejas. Because the microprocessors are on the U.S. Munitions List, the State Department must license any export of the products. On two
occasions in 2004 and 2006, Cirrus caused the shipment of a total of 500 microprocessors to the Aeronautical Development Establishment, an enterprise within the Ministry of Defence of the government of India responsible for the development of the Tejas. There were no licenses for
these shipments.

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FTC Report on ID Theft Shows Need for Stronger Consumer Protections

A new report released by the Federal Trade Commission today estimates that 8.3 million Americans fell victim to identity theft in 2005. The report underscores the need to provide consumers with stronger protections against identity fraud, according to Consumers Union, nonprofit publisher of Consumer Reports.

"Identity theft is a huge headache that continues to plague millions of Americans every year," says Gail Hillebrand, director of Consumers Union's Financial Privacy Now campaign. "It's time to require businesses and government agencies to safeguard sensitive personal data and to give
consumers the protection they need."

While the FTC's estimate of identity theft victims is lower than its 2003 report, the agency noted that the decline was not statistically significant. The FTC found that 37 percent of identity theft victims reported that they experienced problems beyond the time and money spent
recovering from the fraud, such as harassment by debt collectors and denial of new credit. Sixty-eight percent of new account fraud victims reported experiencing these kinds of problems. The report found that nearly one-quarter of new account fraud victims did not find out about the misuse of their information until at least six months after it started.

As of Nov. 1, consumers nationwide have the ability to thwart new account fraud by freezing access to their credit files. Thirty-nine states and the District of Columbia have enacted laws requiring credit reporting agencies to allow consumers to protect their credit files with a security freeze. The credit reporting agencies are now making this safeguard available to consumers in the remaining states.

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Center for Identity Management and Information Protection to Release Landmark Study

On Monday (Oct. 22), Utica College's Center for Identify Management and Information Protection (CIMIP) will release the results of a landmark study of closed U.S. Secret Service cases involving identity theft.

The study, which will reveal new findings about identity theft perpetrators, victims, and methods, marks the first time the U.S. Secret Service has allowed review of its closed case files on identity theft and fraud. The research will be of particular value to government, law
enforcement and corporate entities whose mission is to prevent, detect, investigate or prosecute identity theft crimes, says Gary Gordon, executive director of CIMIP and professor of economic crime at Utica College. Information on insider threats, points of compromise, and vulnerabilities will be of specific interest to chief security and chief information officers across many industries, including financial services and retail corporations, Gordon says.

The results will be released at the 18th annual ECI Conference. This year's event, "Identity Management and Information Protection: Research to Action" will be held October 21-23 at the Ritz-Carlton Hotel, Tysons Corner, McLean, Va.

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Hot Wheels: Vehicle Theft in Third Year of Decline

Hot Wheels, the National Insurance Crime Bureau's companion study to its annual Hot Spots auto theft report examines data reported to the National Crime Information
Center (NCIC) and determines the vehicle make, model, and model year most
reported stolen in 2006.

For 2006, the most stolen vehicles in the nation were:

1. 1995 Honda Civic
2. 1991 Honda Accord
3. 1989 Toyota Camry
4. 1997 Ford F-150 Series Pickup
5. 2005 Dodge Ram Pickup
6. 1994 Chevrolet C/K 1500 Pickup
7. 1994 Nissan Sentra
8. 1994 Dodge Caravan
9. 1994 Saturn SL
10. 1990 Acura Integra

In 2006, 1,192,809 motor vehicles were reported stolen which is 42,417 fewer than in 2005. Using the FBI's average valuation of $6,649 per stolen vehicle, this amounts to over $7.9 billion in losses in 2006 -- just in vehicle value alone.

"The decrease in vehicle thefts is certainly welcome news to law enforcement, the insurance industry and vehicle owners nationwide," says Robert Bryant, NICB's president and chief executive officer. "At NICB, we have been providing the latest technology in auto theft detection and recovery equipment to law enforcement agencies from California to Florida. Through the support of our member insurance companies, NICB acquires and deploys License Plate Recognition systems and bait vehicles in an effort to reduce vehicle theft."

Although overall thefts are down for the third consecutive year, only 59% of stolen vehicles were recovered last year -- the lowest recovery rate in over a decade. Thus, the question becomes, what happens to the over 700,000 vehicles still outstanding? The short answer is that they fuel a number of related insurance fraud and vehicle theft activities, the insurance organization says.

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$58 Billion Damage, 373,000 Jobs Lost in U.S. Due to Copyright Piracy

Pandemic theft of copyright-protected products, including motion pictures, video games, sound recordings as well as business and entertainment software, has cost the U.S. $58 billion in annual economic output and 373,375 jobs, according to a report released by the Institute for Policy Innovation (IPI).

The report, "The True Cost of Copyright Industry Piracy to the U.S. Economy," sheds light on the injuries from copyright piracy to the national economy as a whole, not just to U.S. copyright producers and industries.

Because of global and U.S.-based piracy of copyrighted material:

• The U.S. economy loses $58 billion annually;
• U.S. workers lose 373,375 jobs;
• U.S. workers lose $16.3 billion in earnings annually, including $7.2 billion in earnings from workers in the copyright industry or "downstream" retail industries, and $9.1 billion in earnings by workers in other U.S. industries; and
• The U.S. government loses at least $2.6 billion in tax revenues annually, including $1.8 billion in personal income tax and $800 million in lost corporate income and production taxes.
  

"As policy makers turn their attention to the competitiveness of the U.S. economy in the global marketplace, it is clear that the problem of copyright piracy should be afforded a prominent place on the policy agenda," says Stephen Siwek, author of the report and principal with Economists, Inc.

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Watchdog Group Uncovers 300 Apparently Pirated Films Viewed More Than 22 Million Times

The National Legal and Policy Center (NLPC) sent a report to members of Congress
detailing their research effort to examine the extent of apparent copyright
violations on Google Video.

Earlier this summer, the National Legal and Policy Center (NLPC) researched the extent of copyrighted material being hosted on Google Video and released a "Top 50" list of apparently copyrighted movies. In the latest "spot check" of the site conducted from September 10 to September 18, NLPC says it discovered 300 additional instances of apparently copyrighted
films, including more than 60 movies released this year.

Several popular summer releases including Shrek the Third, Oceans Thirteen, The Bourne Ultimatum, and Knocked Up were easily found on the video sharing site, the oranization says. Receiving more than 22 million views in the past year, the 300 apparently pirated films as
well as many other copyrighted works continue to make their way to Google Video despite Google's cited claim that it respects the rights of copyright holders and is continuing to take the lead in providing state-of-the-art tools for all copyright holders to identify and remove their intellectual property from the site, the watchdog group says.

"While Google faces numerous legal challenges related to the posting of copyrighted content on its video sharing websites, there is also a growing chorus who believe that evidence of Google's seemingly indifferent attitude towards Internet video piracy has resulted in a legitimization or
'mainstreaming' of video piracy which will have broad and damaging implications for all intellectual property owners," the letter, signed by NLPC Chairman Ken Boehm, accompanying the report reads. "We share those concerns."

"Since [we originally identified evidence of copyright infringement], the number of apparently copyrighted movies being hosted by Google Video appears to have grown substantially," the letter adds. "During the past two weeks, NLPC again conducted random spot checks of Google Video in an attempt to identify clearly copyrighted works that continue to be hosted on
the site. What we found raises serious questions about Google's oft-stated commitment to prevent apparently copyrighted content from being hosted on its video sharing site."

Boehm's letter also questions Google's repeated announcements that it intends to install video filtering technology on its video sharing services. "Google has been promising video filtering technology to screen for copyrighted content since at least the fall of 2006," says Boehm. "On
July 27 of this year, Google again announced that it would launch a filtering system by September of this year to prevent pirated material from being uploaded to its YouTube video sharing site. As of this Monday however, it appeared that Google still had not implemented the promised technology either for its YouTube or Google Video sites."

Estimates credit Internet piracy theft for nearly $2.3 billion in lost revenue to the U.S. film industry. "As you continue to debate intellectual property issues in the months ahead, we urge you to pay close attention to the 'mainstreaming' of video piracy by Internet leaders such as Google, and urge you to continue taking strong and enforceable measures to protect the
intellectual property of American businesses," the letter concludes.

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Military Contractor Faces Jail Time For Fraud

The president and owner of Jacobi Industries Inc., a Medford, N.Y. company, has pleaded guilty to conspiring to rig bids on U.S. Department of Defense (DOD) contracts for military tie-down equipment and cargo securing systems, the U.S. Department of Justice says.

Jacobi Industries provided military tie-down equipment and cargo securing systems to DOD. These products are used to secure vehicles, aircraft, munitions, shipping containers and other
specialized military cargo requirements for land, sea, and air transportation.

Roger Jacobi pleaded guilty in the U.S. District Court in Islip, N.Y., to a felony charge of bid rigging. Under the plea agreement, Jacobi has agreed to pay a criminal fine of $20,000, and to cooperate with the Justice Department's ongoing investigation. Jacobi could also serve up to six
months in prison. The terms of the plea agreement are subject to court approval.

Jacobi participated in the bid-rigging conspiracy from November 2001 to January 2005, during which time he and co-conspirators discussed and agreed among themselves not to compete by agreeing not to submit prices or bids against each other on certain contracts.

"Today's charges demonstrate our ongoing commitment to prosecute those who deprive the U.S. military of the benefits of competitive bidding on taxpayer funded contracts," says Thomas Barnett, assistant attorney general in charge of the Justice Department's Antitrust Division.

Jacobi is charged with carrying out the conspiracy with co-conspirators by:

-- Attending meetings and engaging in discussions regarding the sale of
military tie-down equipment and cargo securing systems;
-- Agreeing during those meetings and discussions not to compete on
certain contracts with the DOD by not submitting prices or bids on those
contracts;
-- Submitting bids in accordance with the agreements reached;
-- Selling military tie-down equipment and cargo securing systems to
the DOD under those agreements at collusive and non-competitive prices; and
-- Accepting payment for military tie-down equipment and cargo securing
systems sold at the collusive and non-competitive prices.

Jacobi is charged with bid rigging in violation of the Sherman Act, which carries a maximum sentence of 10 years of imprisonment, and a fine of $1 million for individuals and $100 million for corporations. The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than the statutory maximum fine.

The charge against Jacobi represents the fourth case to arise from an ongoing investigation into the military restraints industry, the Justice Department says.

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Report: Cybercrime Costs $67.2 Billion A Year

Cybercrime has significant economic impacts and threatens U.S. national security interests. Various studies and experts estimate the direct economic impact from cybercrime to be in the billions of dollars annually. The annual loss due to computer crime was estimated to be $67.2 billion for U.S. organizations, according to a 2005 FBI survey, cited by a recent federal report.

In addition, there is continued concern about the threat that U.S. adversaries, including nation-states and terrorists, pose to our national security, says the report, prepared by the Government Accountability Office (GAO). GAO is the nonpartisan investigative arm of Congress.

"For example, intelligence officials have stated that nation-states and terrorists could conduct a coordinated cyber attack to seriously disrupt electric power distribution, air traffic control, and financial sectors. Also, according to FBI testimony, terrorist organizations have used cybercrime to raise money to fund their activities," the GAO says.

Despite the estimated loss of money and information and known threats from adversaries, the precise impact of cybercrime is unknown because it is not always detected and reported, GAO finds.

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Video: Teens Fall Victim To Identity Theft

A growing number of teens are falling victim to the pernicious, digital age crime of identity theft.

Watch how teens are falling prey and how you and your teens can avoid this trap.

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Brother, Sister Sentenced In ID Theft Scheme

A brother and sister from Dorchester, Mass., were sentenced in federal court for bank fraud, identity theft and witness tampering.

United States Attorney Michael Sullivan and Peter Zegarac, postal inspector in charge of the U.S. Postal Inspection Service, announced that Alvin Reeves, 29, and his sister, Alvenia Reeves, 44, were sentenced by U.S. District Judge Joseph Tauro as a result of their August 14, 2006, guilty pleas to charges of bank fraud, identity theft and witness tampering.

Alvin Reeves also pleaded guilty to aggravated identity theft and committing a crime while on pretrial release. Alvin Reeves was sentenced to five years in prison; and Alvenia Reeves to one year and three months in prison.

At the earlier plea hearing, the prosecutor told the court that had the case proceeded to trial, the government's evidence would have proven that from November 7, 2003 (the date that Alvin Reeves was released from federal prison after a prior conviction) through September 15, 2004, Alvin Reeves obtained the names, Social Security numbers, dates of birth, mothers' maiden names, credit card number and/or bank account information of numerous people.

The defendants then used this information to create fake licenses with the victims' identity information and the photographs of co-conspirators. The defendants directed the co-conspirators to enter banks and withdraw money or otherwise conduct banking activity in the victims' names. In addition, the defendants stole checks and had co-conspirators cash these stolen checks and withdraw the proceeds from area banks. After Alvin Reeves was arrested in connection with this scheme, the defendants contacted some of the co-conspirators and attempted to convince them to testify that a person other than Alvin Reeves was the leader of the bank fraud andidentity fraud scheme. In total, this scheme resulted in a loss or intended loss of more than $200,000.

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U.S. Must Do More To Improve Cyber Security, Industry Group Says

The U.S. federal government must significantly enhance its efforts to ensure the security of sensitive information, improve the security and resiliency of the critical information infrastructure and increase federal information assurance this year, according to the Cyber Security Industry Alliance.

"While the government has taken some positive steps forward to improve the state of information security, action has been decidedly mixed," says Liz Gasster, acting executive director and general counsel of CSIA. "CSIA commends the government for moving forward on several key initiatives including the Senate's ratification of the Council of Europe's Convention on Cyber Crime and the appointment of an assistant secretary for cyber security and telecommunications. However, we are discouraged by Congress' inability to pass a comprehensive federal law to protect sensitive personal information, even in the face of more than 100 million Americans having their data records exposed. In 2007, CSIA will work even harder to urge swift action from Congress to pass this much-needed legislation."

CSIA gave the federal government a grade of "D" for its cyber security efforts.

Members of the CSIA include Application Security, Inc.; CA, Inc. (NYSE:CA); BSI Management Systems; Citrix Systems, Inc. (Nasdaq: CTXS);Crossroads Systems, Inc. (OTCBB Pink Sheets: CRDS.PK); Entrust, Inc.(Nasdaq: ENTU); F-Secure Corporation (HEX: FSC1V); Fortinet, Inc.; IBMInternet Security Systems Inc. (NYSE: IBM); iPass Inc. (Nasdaq: IPAS);McAfee, Inc. (NYSE: MFE); Mirage Networks; MXI Security; PGP Corporation;Qualys, Inc.; RSA, The Security Division of EMC (NYSE: EMC); SecureComputing Corporation (Nasdaq: SCUR); Surety, Inc.; SurfControl Plc (LSE:SRF); Symantec Corporation (Nasdaq: SYMC); TechGuard Security, LLC; andVontu, Inc.


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Survey: 2 of 5 Identity Theft Victims Know Source of Crime

Two out of five identity theft victims surveyed by the Identity Theft Assistance Center (ITAC) know how their personal data was stolen, providing valuable insight about how identity theft occurs.

"This information is important because the more we know about the sources of identity theft the more successful we all will be in fighting this crime," says ITAC Executive Director Anne Wallace. "These documented cases provide real world perspective on identity theft."

ITAC surveyed 275 identity theft victims who used the ITAC's free service over a one-month period. Of the 275 cases, 160 consumers (58%) did not know the source of their identity theft. Another 115 consumers (42%) did know how their information was compromised. The 115 consumers attributed their identity theft to the following sources:

-- Friends, relatives, in-home employees 26 cases 22.61%
-- Computer hacker/virus/phishing 25 cases 21.74%
-- Mail (stolen or fraudulent address change) 24 cases 20.87%
-- Lost/stolen wallet, checkbook or credit card 15 cases 13.04%
-- Corrupt business or employee 12 cases 10.43%
-- Data breach 8 cases 6.96%
-- House burglarized 4 cases 3.48%
-- Instant credit 1 case 0.87%

Getting accurate information about the sources of identity theft is difficult because identity theft -- the opening of a fraudulent new account or account takeover -- is often confused with other types of fraud, like the unauthorized use of a credit card, accoding to ITAC.

ITAC says it is in a unique position to gatherdata about identity theft because it deals in verified cases of identity theft. The companies that belong to ITAC refer customers to ITAC once thefraud is resolved at the member company. ITAC then helps the customer identify other fraudulent accounts and assists in restoring their financial identity.


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