Around the globe today, criminals are seeking to exploit the lack of transparency associated with U.S. companies to harm our national and economic security. Major drug trafficking cartels, arms traffickers and other criminal organizations have employed shell corporations to further their illegal activities and launder their ill-gotten proceeds. 

The Department of Justice joins our partners at the Departments of Treasury and Homeland Security in welcoming the introduction of an important bill  (PDF) this week in Congress to “combat U.S. corporations with hidden owners” that would require disclosure of beneficial ownership information in the company formation process.

Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division noted:

“It is essential to our national and economic security that we close the loophole enabling some of the world’s worst actors in the criminal underworld to use shell companies established in the United States to move and hide their money. The proposed legislation represents an important step toward that goal.”

This proposed legislation would facilitate the transparency of the financial system by making it more difficult for criminal organizations to hide behind front companies and shell corporations, an objective referenced in the President’s Strategy to Combat Transnational Organized Crime announced last week.

On July 22, 2011, the Computer Crime and Intellectual Property Section (CCIPS) of the Criminal Division hosted the fifth annual law enforcement and industry meeting on intellectual property (IP) enforcement at the Robert F. Kennedy Justice Building.  Attorney General Holder delivered the opening remarks at the meeting along with Assistant Attorney General Lanny A. Breuer of the Criminal Division. 

Attorney General Holder emphasized the Department’s ongoing commitment to intellectual property protection.  He outlined the continued growth of Department’s intellectual property criminal enforcement program, highlighting:

• The establishment of a Department-wide Task Force on Intellectual Property;
• The expertise provided by 40 prosecutors and four computer forensics experts in CCIPS, who guide the Department’s overall intellectual property and computer crime strategy and prosecute key cases;
• The addition of 15 new prosecutors to the Computer Hacking and Intellectual Property (CHIP) Network, which includes over 260 specially-trained prosecutors and 25 CHIP units located in U.S. Attorney’s Offices throughout the country;
• The addition of 51 specially-trained FBI Special Agents to investigate intellectual property crime;
• Ongoing support to the National Intellectual Property Rights Coordination Center (IPR Center);
• Increased international engagement as well as coordination with state and local law enforcement; and
• Ongoing partnerships with a broad range of IP rights holders.

Speaking to the modern challenges of enforcing IP crimes and the need for collaboration and continued vigilance, Attorney General Holder stated:

“Although recent technological advances – particularly in methods of manufacturing and distribution – have created new opportunities for innovation and growth, this process has also created new vulnerabilities that tech-savvy criminals are eager to exploit. Only by working together – in partnership with industry leaders, law enforcement officials, and IP crime victims – will we be able to anticipate, understand, and overcome the new methods and technologies being employed by those who seek to profit from the innovations of others.” 

The meeting also included brief remarks by senior law enforcements officials followed by an open discussion that provided members of the IP community with an opportunity to communicate directly with senior prosecutorial and law enforcement officials most responsible for federal criminal enforcement of IP law at the national level.  The annual IP meeting is part of the Department’s efforts to foster a strong relationship and ongoing dialogue with the victim-industry community.

Senior law enforcement officials who participated in the meeting included: Assistant Director Gordon Snow, Cyber Division, FBI; Deputy Director Kumar Kibble, U.S. Immigration and Customs Enforcement; Assistant Commissioner Allen Gina, U.S. Customs and Border Patrol, Office of International Trade; and Acting Director Kathy Martin-Weis, Food and Drug Administration, Office of Criminal Investigations; and Jason Weinstein, Deputy Assistant Attorney General, Criminal Division.

The event was attended by close to 80 individuals, including senior representatives from more than 40 companies and associations representing a broad range of the intellectual property industry, such as pharmaceuticals, business and entertainment software, luxury goods, electronics, apparel, motion pictures, music, sports, certification mark, consumer goods and automobiles. 

For more information on the Department’s efforts to combat intellectual property crimes, please visit: justice.gov/dag/iptaskforce.

It is becoming increasingly common for criminals to commit their crimes in one country and launder illicit proceeds in another.  Law enforcement partners from around the globe must work together to locate and forfeit the proceeds of these criminal activities, increasing the need for cooperation and collaboration.

To foster this cooperation and collaboration, forfeiture experts from the United States and Latin American countries are gathering in Lima, Peru, to discuss the use of asset forfeiture to fight international crime, including drug cartel operations in Latin America. The event is hosted by the Asset Forfeiture and Money Laundering Section in the Justice Department’s Criminal Division, in partnership with the Bureau of International Narcotics and Law Enforcement (INL) of the U.S. Department of State and the Public Ministry-Fiscalia de la Nacion of Peru.

Many of the countries represented at the conference have successfully investigated and assisted in the restraint and forfeiture of criminal funds related to narcotics trafficking, fraud, smuggling and other serious crimes.  Speakers from Colombia, Mexico and the United States, as well as panelists from Peru, Paraguay, Brazil and Guatemala, will describe their experiences in using asset forfeiture as a tool in combating these types of crimes, including sharing successful investigative techniques and discussing current challenges.

U.S. Ambassador to Peru Rose M. Likins and U.S. Deputy Assistant Attorney General Kenneth Blanco from the Justice Department’s Criminal Division stressed in their opening remarks the importance of international cooperation, the need to understand national confiscation procedures throughout the region, and the importance of fostering international collaboration to effectively fight organized crime.  Peruvian Attorney General José Peláez Bardales also addressed the more than 60 attendees of the conference, which is scheduled to run from June 21 through June 23, 2011.

A preliminary injunction (PDF)  has been entered against the operators of the Coreflood botnet –  a network of hundreds of thousands of computers infected with a malicious software program  — continuing the equitable relief granted on April 12, 2011, in a temporary restraining order issued by the U.S. District Court for the District of Connecticut.  This preliminary injunction prohibits the defendants from using Coreflood to commit fraud and to engage in unauthorized interception of electronic communications, and it authorizes the U.S. Marshals Service and FBI to enforce the injunction by using a substitute server to stop Coreflood from running on infected computers.

In support of the preliminary injunction, the Department of Justice filed papers showing that the coordinated law enforcement operation has reduced the size of the Coreflood botnet by nearly 90 percent in the United States.

According to the documents filed with the court (Read the Preliminary Injunction (PDF) or the Mem0 in Support (PDF) ) , the reduction in the size of the Coreflood Botnet was attributed to two factors.  First, because Coreflood was no longer running, it was no longer able to update itself and avoid detection by anti-virus software.  Second, the FBI, with the assistance of Internet service providers, has made significant efforts to identify and notify the victims of Coreflood, who in turn have taken measures to remove Coreflood from thousands of infected computers. 

The recently identified victims of Coreflood have included approximately 17 state or local government agencies, including one police department; three airports; two defense contractors; five banks or financial institutions; approximately 30 colleges or universities; approximately 20 hospital or health care companies; and hundreds of businesses.  According to one of the victims, a hospital health-care network, approximately 2,000 of its 14,000 computers were infected with Coreflood.  Because of the restraining order granted by the district court, which prevented Coreflood from running, the hospital was able to focus on investigating and repairing the damage caused by Coreflood instead of trying to prevent the further loss of data on an emergency basis.

The department continues to strongly encourage computer users to ensure they are using security software on their computers and that users regularly update their security and routinely scan their computers for viruses. To learn more about what you can do to protect your computer, including how to download and receive updates on security vulnerabilities, the public may go to the following sites operated by U.S. Computer Emergency Readiness Team (CERT) and the Federal Trade Commission.

People with information concerning the Coreflood and those responsible for its malicious use can contact their local FBI field office: www.fbi.gov.

Attorney General Holder lays a wreath at the International Monument to the Camp Victims at the Auschwitz-Birkenau Memorial and State Museum.

Attorney General Eric Holder travelled to Krakow, Poland for meetings with counterparts from Poland, France, Germany, Italy, Spain and the United Kingdom as part of the G6 Conference. At the G6 Conference, Attorney General Holder met with European leaders to discuss cooperation on counterterrorism and fighting transnational organized crime and cyber crime, as well as other national security issues.

Attorney General Holder met with Polish Minister of Interior Jerzy Miller and Justice Minister Krzysztof Kwiatkowski to discuss U.S.-Poland law enforcement and legal cooperation.

While in Poland, Attorney General Holder also visited the Auschwitz-Birkenau Memorial and State Museum.

 “Over the past three decades, the Department of Justice has vigorously pursued justice on behalf of the victims of Auschwitz and has won court decisions that denaturalized and removed Auschwitz perpetrators from the United States.  Not only must we never forget what happened here, we must ensure that such crimes against humanity are never again allowed to occur.”

 The former Office of Special Investigations (OSI) within the Justice Department’s Criminal Division, now part of the Human Rights and Special Prosecutions Section (HRSP), identified, investigated and took legal action against wartime participants in acts of Nazi-sponsored persecution who came to the United States after World War II.

Since operations began in 1979, the department has won cases against 107 participants in Nazi persecution, including 10 former SS personnel from the Auschwitz-Birkenau concentration camp complex. In addition, attempts by more than 180 suspected Axis persecutors to enter the United States have been thwarted as a result of the department’s “watchlist” efforts in cooperation with the Department of Homeland Security.

On March 30, 2010, the Criminal Division announced the formation of HRSP as part of the U.S. government’s efforts to bring human rights violators to justice and deny those violators safe haven in the United States. The new section represents a merger of the Criminal Division’s Domestic Security Section (DSS) and OSI.

 Additional photos from the Attorney General’s visit are available in the Auschwitz-Birkenau Memorial and State Museum Photo Gallery.

Attorney General Eric Holder announced today the results of Operation Broken Trust, a nationwide operation organized by the Financial Fraud Enforcement Task Force to target investment fraud.  To date, the operation has involved enforcement actions against 343 criminal defendants and 189 civil defendants for fraud schemes that harmed more than 120,000 victims throughout the country.

The operation’s criminal cases involved more than $8.3 billion in estimated losses and the civil cases involved estimated losses of more than $2.1 billion.  Operation Broken Trust is the first national operation of its kind to target a broad array of investment fraud schemes that directly prey upon the investing public.

Below are some examples of the cases were part of Operation Broken Trust:

$485 Million Investment Scam Defrauded Thousands
Joseph Blimline pleaded guilty in the Eastern District of Texas on Aug. 31, 2010, for his role in one of North Texas’ largest oil and gas investment Ponzi schemes defrauding 7,700 investors of more than $485 million. Blimline was a majority owner of Provident Royalties, an investment company. Beginning in 2006, Blimline and others involved at Provident Royalties made false representations and failed to disclose other material facts to their investors to induce the investors into providing payments to Provident. The investors were not told that Blimline had received millions of dollars of unsecured loans and had been previously charged with securities fraud. Blimline issued approximately 20 oil and gas offerings, and used a significant amount of the money raised in these offerings to purchase oil and gas assets from earlier offerings and to pay dividends to earlier investors in order to facilitate the scheme. Blimline also pleaded guilty to charges related to a separate, but similar oil and gas scheme based in Michigan that defrauded investors out of $50 million. The criminal case against Blimline was brought by the U.S. Attorney’s Office for the Eastern District of Texas and was investigated by the FBI, in coordination with the U.S. Securities and Exchange Commission (SEC), which previously had filed a civil action to freeze the assets of Blimline and others.

Chicago Ponzi Scheme Operator Victimized Elderly Italian Immigrants
Frank Castaldi was sentenced on Sept. 15, 2010, in the Northern District of Illinois to 23 years in prison for operating a Ponzi scheme that resulted in more than $30 million in losses to hundreds of victims, including many elderly Italian immigrants. As part of his scheme, Castaldi guaranteed investors that he would pay them annual returns between 10 and 15 percent. He made false representations to most investors about investing their principal in his various businesses, and about the source of the funds that he used to make their interest payments. Castaldi used new investors’ principal payments to make interest payments to other investors, without disclosing the true source of the interest payments. Castaldi also lost investors’ money by funding a failed banquet hall and other failing businesses, and by purchasing stocks. The case was prosecuted by the U.S. Attorney’s Office for the Northern District of Illinois and investigated by the FBI and Internal Revenue Service Criminal Investigation (IRS-CI).

Florida Man Stole Millions from Investors to Fund His Lavish Lifestyle
Nevin Shapiro, the former owner and chief executive officer of Capitol Investments USA Inc., pleaded guilty on Sept. 15, 2010, in the District of New Jersey, for his role in a multimillion dollar Ponzi scheme. From January 2005 through November 2009, Shapiro solicited investors from New Jersey and throughout the United States through Capitol, telling them that he would use their money to fund his wholesale grocery distribution business. As a result of these solicitations, investors sent more than $880 million to Shapiro and Capitol during this time period. Capitol had virtually no income generating business at that time and Shapiro used new investor funds to make principal and interest payments to existing investors, as well as to fund his own lavish lifestyle. Shapiro used investor funds to pay illegal sports gambling debts, to purchase floor seats at Miami Heat basketball games and to make payments on his Riviera yacht and his residence in Miami Beach. Shapiro also used investor funds to make payments to student athletes attending a local university in the Miami area and to make donations to the university. The Ponzi scheme resulted in an estimated loss of $89 million to 75 victims. The case was prosecuted by the U.S. Attorney’s Office for the District of New Jersey and investigated by the FBI and IRS-CI, with coordination from the SEC, which previously had filed parallel civil charges.

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