DEPARTMENT OF HOMELAND SECURITY

Semiannual Report

to the Congress

OFFICE OF INSPECTOR GENERAL

October 1, 2002 - March 31, 2003
DEPARTMENT OF HOMELAND SECURITY

Office of Inspector General

Washington, DC 20528

April 30, 2003

The Honorable Tom Ridge

Secretary

The Department of Homeland Security

Washington, DC 20528

Dear Mr. Secretary:

The Inspector General Act of 1978 (Public Law 95-452), as amended (the “Act”), requires the 

preparation of a Semiannual Report to the Congress summarizing the activities of Offices of 

Inspector General (OIG). I am pleased to enclose a report for the period March 1, 2003 to March 

31, 2003. The Act also mandates that you transmit this report to the appropriate committees of 

Congress within 30 days of receipt, together with any comments thereon you may wish to make.

The Department of Homeland Security (DHS), and DHS OIG likewise, came into being on 

March 1, 2003. Hence, this first semiannual report covers only one month of the standard six 

month reporting period. However, to provide a more complete picture of the issues facing DHS, 

I have included brief summaries of the audits, investigations, and inspections completed by the 

“legacy” agency OIGs during the period October 1, 2002 through February 28, 2003. The legacy 

agency Inspectors General will issue their own respective reports for this six month period. 

During this reporting period, I spent a significant percentage of my time meeting with those 

OIG and General Accounting Office (GAO) officials who oversaw departments or parts thereof 

that are now incorporated into DHS. Each of them has detailed the applicable component’s 

top management challenges and other significant issues relating to the economy, efficiency, 

and/or effectiveness of the components’ respective programs and operations. In the Executive 

Summary of this report is a consolidated list of these management challenges. This list will be 

used to set DHS OIG’s own priorities for audits and inspections or evaluations of DHS programs 

and operations. In addition, to the extent there are recommendations from legacy OIGs relating 

to such challenges, we will undertake to track compliance for them. 
Another priority for me during the first few weeks of DHS OIG’s operations has been 

demarcating the line between the investigative authority of my own office and that of DHS’ 

various internal affairs offices. The Act assigns to DHS OIG the dominant role in investigating 

criminal and non-criminal allegations against department employees, contractors, and 

grantees relative to department programs and operations, and it requires DHS OIG to oversee 

such investigations as are conducted by internal affairs offices. Accordingly, DHS OIG has 

signed memoranda of understanding regarding this matter with two of the four relevant DHS 

components, namely, the Border and Transportation Security directorate and the Bureau of 

Citizenship and Immigration Services as to the practicalities of how any given allegation should 

be handled. We are seeking to conclude similar agreements with the United States Secret Service 

and the United States Coast Guard in the near future. Our aim is to ensure that DHS OIG can 

carry out its statutory responsibilities, and, in so doing, provide DHS and the Congress with an 

independent assurance that matters meriting investigation are thoroughly pursued.

I am grateful to you for the support that you have provided me and my office to date. My staff 

and I are committed to working closely with you and other senior DHS leadership toward the 

goal of promoting economy, efficiency, and effectiveness in the department’s programs and 

operations.

Sincerely,

Clark Kent Ervin

Acting Inspector General

Enclosure
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Table of Contents

Executive Summary...........................................................................1

Department of Homeland Security ...................................................14

Office of Inspector General................................................................15

Border and Transportation Security...................................................16

Emergency Preparedness and Response ............................................32

Information Analysis and Infrastructure Protection...........................32

Science and Technology.....................................................................32

Management.......................................................................................32

Coast Guard .......................................................................................33

Secret Service.....................................................................................34 

Bureau of Citizenship and Immigration Services..............................35 

Investigations Statistics......................................................................37

Investigation Narratives.....................................................................39

If you would like to read the entirety of any one of the reports summarized in this 

document, please go to the respective legacy Office of Inspector General web site:

www.oig.dot.gov

www.treas.gov/offices/inspector-general

www.usdoj.gov/oig

www.fema.gov/ig
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Executive Summary

Major Management Challenges Facing DHS

Over the course of the first few weeks of DHS’ existence, I spent a significant 

percentage of my time meeting with those OIGs and GAO officials who oversaw 

departments or parts thereof that are now incorporated into DHS. Each of them 

has detailed the applicable component’s top management challenges and other 

significant issues relating to the effectiveness, efficiency, and/or economy of the 

components’ respective programs and operations. Following, based largely on 

those inputs, is a consolidated list of management challenges. These challenges 

will be used in setting DHS OIG’s own priorities for audits and inspections or 

evaluations of DHS programs and operations. In addition, to the extent there are 

relevant recommendations from “legacy” OIGs relating to such challenges, we 

will undertake to track compliance for them.

ESTABLISHING THE DEPARTMENT OF HOMELAND SECURITY

Perhaps the biggest challenge facing DHS is integrating 22 separate components 

into a single, effective department. Appropriate plans (including workforce 

plans), goals, objectives and meaningful performance measures must be 

established as soon as possible to guide that process and track progress. 

Complicating the process is the fact that some of the more important components 

were already undergoing transformation. For example, prior to 9/11, homeland 

security related matters consumed 14% of the Coast Guard’s resources. After 9/

11, that percentage rose to 58%. Congress has expressed a concern as to whether, 

with the transfer of the Coast Guard from the Department of Transportation 

(DOT) to DHS, its non-homeland security related missions (marine environmental 

protection, fisheries enforcement, aids to navigation, and illegal drug and migrant 

interdiction) will be neglected. DHS OIG is required to conduct an annual review 

of the Coast Guard, with a particularly focus on whether the Coast Guard is 

meeting such missions.

Further, combining these entities will present opportunities for integrating 

systems and operations for greater economy and efficiency. For example, DOT 

OIG recommended that DHS take advantage of the economies of scale that 

can come from combining the Transportation Security Administration (TSA), 
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the Immigration and Naturalization Service (INS), and the Customs Service 

(Customs). Administrative services, such as contracting, budgeting, legal, human 

resources, and internal affairs, should be consolidated. Likewise, airport space 

requirements for functions like office space, break rooms, training facilities, and 

detention cells should be consolidated. Finally, TSA should work with other DHS 

agencies, the airports, and other federal, state, and local law enforcement agencies 

before expanding its law enforcement duties (such as the current proposal 

for extending the federal air marshal program to conducting surveillance and 

patrolling at airports). 

CONTRACT AND GRANTS MANAGEMENT

Contract Management

DHS will be integrating the procurement functions of many constituent programs 

and component missions, some lacking important management controls. For 

example, as reported by GAO, Customs has not begun to establish process 

controls for determining whether acquired software products and services satisfy 

contract requirements before acceptance, nor to establish related controls for 

effective and efficient transfer of acquired software products to the support 

organization responsible for software maintenance. At TSA, where contracts 

totaled $8.5 billion at the end of calendar year 2002, the DOT OIG found that 

procurements were made in an environment where there was no pre-existing 

infrastructure for overseeing contracts. TSA had to rely extensively on contractors 

to support its mission, leading to tremendous growth in contract costs. A recent 

review by TSA of one subcontractor found that, out of $18 million in expenses, 

between $6 million and $9 million appeared to be attributed to wasteful and 

abusive spending practices. 

Also, some agencies have large, complex, high-cost procurement programs 

under way that need to be closely managed. For example, Customs’ Automated 

Commercial Environment (ACE) project will cost $5 billion, and Coast Guard’s 

Deepwater Capability Replacement Project will cost $17 billion and take two to 

three decades to complete. 
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This $17 billion, multi-year project to upgrade the Coast Guard’s fleet of ships, 

aircraft and communication systems for use far off shore in an integrated package 

was planned before 9/11, but no changes were made in project requirements 

after 9/11 and before awarding the contract in June of last year. DOT OIG has 

argued that post 9/11 changes in the Coast Guard’s mission requirements argue 

for re-evaluating aspects of the project (for example, whether to arm more of 

its helicopters, whether to add more secure information handling capability, and 

ensuring that its systems can communicate with other DHS systems). Any such 

re-evaluation should be done sooner rather than later, especially now that the DHS 

Act has passed, requiring that consideration be given to accelerating the timetable 

for Deepwater from 20-25 years to 10. In addition to re-evaluating requirements, 

the Coast Guard should stabilize and prioritize the requirements, lest Deepwater 

investments crowd out other needed investments (plugging gaps in Rescue 21, the 

911 system for mariners in distress, modernizing aids to navigation, rehabilitating 

aged buildings, piers, and other shore facilities, and replacing boats used close to 

shore).

On its $1 billion IT infrastructure project, TSA did not issue a statement of work 

detailing its requirements. Instead, it asked vendors to bid based on a “statement 

of objective” containing no specific requirements. While this approach enabled 

TSA to select a vendor (Unisys) quickly, it places total reliance on contractors not 

only to deliver them but also to decide the agency’s requirements. As a result, it 

may be difficult for the agency to evaluate the contractors’ performance. 

Further, some contracts, regardless of their earlier merits, may no longer be 

necessary in accomplishing DHS’ mission. 

Grants Management

Essentially, DHS will absorb five distinct emergency preparedness grant 

programs: (1) a $3.5 billion First Responder Program; (2) a $300 million 

Assistance to Firefighters Grant Program; (3) a $300 million Domestic 

Preparedness Grant Program; (4) a $500 million Public Health Emergency 

Preparedness Program; and (5) a $300 million Emergency Management 

Preparedness Grant Program. Previous FEMA and Department of Justice 
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(DOJ) OIG reports have identified significant shortcomings in the pre-award 

process, cash management, monitoring, and grant closeout processes. Further, 

each of these programs has redundant or similar features, i.e., emergency 

planning, training, and equipment purchases and upgrades for emergency 

management personnel (state and local police, firefighters, and health care 

workers). Nevertheless, these programs are to be divided between two separate 

DHS directorates. Preparedness for terrorism will be placed in the Border 

and Transportation Security directorate, while other preparedness efforts will 

be located in the Emergency Preparedness and Response directorate. This 

bifurcation will create additional challenges related to inter-departmental 

coordination, performance accountability, and fiscal accountability. Furthermore, 

program managers have yet to develop meaningful performance measures 

necessary to determine whether the grant programs being absorbed by DHS have 

actually enhanced state and local capabilities to respond to terrorist attacks and 

natural disasters.

BORDER SECURITY

The INS has about 9,000 agents along the border with Mexico, augmented by 

fences and a substantial automated sensor and surveillance infrastructure. On 

the Canadian border, however, INS is under-resourced in both personnel, with 

approximately 500 agents, and equipment. GAO has estimated that it will take 

years before INS can fully implement its border strategy.

Entry/Exit Tracking: INS has no effective system to determine whether noncitizens who enter the country subsequently leave it. Many aliens enter under 

temporary visas and then remain past the expiration date (“visa overstays”). Prior 

INS efforts tracked only travelers entering and exiting at airports by collecting 

paper forms, which proved to be an expensive failure. DOJ OIG has found in its 

reviews that INS lacks project management skills and the information technology 

(IT) capability to ensure successful acquisition and deployment of such a system. 

INS has initiated the National Security Entry-Exit Registration System 

(NSEERS), a targeted tracking system for male nationals from 25 designated 

countries that includes photographing, fingerprinting, and location reporting. The 
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system is intended to enable INS to check the individual against criminal history 

and immigration record databases, to verify reported location and activities, and 

to determine whether the alien overstayed his/her visa. The Senate’s Fiscal Year 

2003 budget markup expressed a concern that INS’ claim of success for this 

program needs to be verified. In addition, the DOJ OIG has received indications 

that the program is unevenly administered and misapplied by INS personnel who 

do not fully understand the program’s criteria.

Student Visa Tracking: INS is developing the Student & Exchange Visitor 

Information System (SEVIS), a computerized student tracking system designed 

to tighten INS monitoring of foreign students. DOJ OIG’s review expressed 

concerns over computer difficulties SEVIS has experienced, noted that the 

accreditation of schools involves only a superficial review with many schools yet 

to be reviewed, and pointed out that the success of SEVIS depends on schools’

willingness to provide data relative to their foreign students.

Joint INS-FBI Fingerprinting Initiatives: INS has used a two-print fingerprint 

scanning and automated search system (IDENT) to identify repeat illegal entries 

by aliens and to conduct a criminal history check against a limited INS database. 

The INS and the FBI have been working for several years to integrate IDENT

with the Federal Bureau of Investigation’s (FBI) Integrated Automated Fingerprint 

Identification System (IAFIS), which is a ten-print full criminal history check. 

This integration is critical to identifying illegally entering aliens on lookout lists 

or with criminal histories, but progress has been slow. DOJ OIG is beginning 

its fourth review of this project (focusing on the FBI angle); it was also one of 

the four major INS systems that GAO studied, reporting poor oversight and 

management.

High-Technology Equipment: The Remote Video Inspection System (RVIS) is 

designed to expedite the clearance of low-risk travelers and to enhance security 

at remote northern border crossings. RVIS is designed to transmit images of the 

person, vehicle, documents, and passengers to an inspector located miles away 

at the main monitoring, 24-hour port of entry. As of September, 2001, only seven 

sites were capable of operating RVIS equipment. Poor contractor performance and 
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a lack of strong oversight caused delays in the deployment of RVIS. Since 9/11, 

Customs has relied primarily on inspectors at these northern border sites. 

Treasury OIG completed audits on Customs’ use of two other high-tech systems, 

trace detection equipment and radiation detection systems. With respect to the 

former, Treasury OIG found that Customs was not effectively or efficiently using 

the equipment because management did not ensure that the detectors were placed 

in locations most conducive to their use, failed to maintain them adequately, and 

failed properly to train inspectors on their use. For radiation detection systems, 

Customs does not have a documented strategic plan to ensure proper acquisition 

and deployment of the equipment, and it has not been collecting data on the usage 

or performance of the equipment. Also, most of the radiation detection equipment 

currently being used by Customs inspectors is focused on detecting gamma 

radiation and is unable to detect neutron radiation. 

The Advance Passenger Information System (APIS) is a border enforcement 

tool used by both Customs and INS at our nation’s airports to identify and detain 

high risk travelers on flights bound for the United States. The system is intended 

to collect biographical information such as name, date of birth, and country of 

residence from international airline passengers and crewmembers entering the 

United States at airports around the country. Prior to arrival, these people are 

matched against law enforcement databases to identify people who should be 

detained and examined for violation of U.S. law. 

Treasury OIG completed an audit report on APIS. The report concluded that 

the value of APIS is dependent on several factors beyond Customs’ control. 

First, the authenticity of passenger and crew information is dependent on other 

governments’ source documents (passports, visas, etc.), and the integrity of those 

documents is sometimes questionable. Second, Customs depends on INS to make 

referrals based on INS’ initial screening of arriving passengers and crewmembers. 

Third, APIS depends on the FBI’s National Crime Information Center (NCIC) and 

Interagency Border Inspection System (IBIS) data to match APIS data for “hits” 

to occur; however, NCIC and IBIS may require data, like birth dates, that APIS 

does not always contain.
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INTERIOR ENFORCEMENT/DETENTION

INS is thinly positioned to fulfill its non-border enforcement responsibilities. The 

effectiveness of systems like SEVIS and NSEERS depends on INS’ using the 

information the systems generate to locate and remove aliens who overstay their 

visas or otherwise violate the terms of their admission. DOJ OIG concluded in a 

recent study that, on average, INS is deporting only about 13% of all non-detained 

aliens under final orders of removal. The study also sampled high-risk categories 

and found that INS had removed only 6% of aliens with final removal orders who 

came from countries listed as sponsors of terrorism. And, only 35 % of aliens 

with criminal records and final removal orders were removed. To complicate 

matters further, INS has other daunting interior enforcement responsibilities that 

include investigating document fraud and counterfeiting, preventing the illegal 

employment of undocumented aliens, and attacking sweatshops and smuggling 

enterprises that exploit undocumented aliens. 

On average last fiscal year, the INS had 188,547 aliens in detention facilities 

each day. In addition to its own facilities, INS houses detainees in state, local, 

and contractor operated jails, for which INS pays a daily rate to the facility. INS 

recently obtained clearance to pay a profit to state and local jails with which it 

does business. The practice is likely to cause a significant increase in its detention 

costs as other suppliers seek comparable treatment. 

State and local correctional institutions also hold many aliens who are removable 

at the conclusion of their criminal sentence. INS’ institutional removal program 

seeks to identify such persons and to conclude the INS removal process before 

these aliens are released from state or local prison. If INS does not conclude 

the removal process before the inmate’s release, INS must detain such aliens 

in an INS facility until removal and absorb the costs of doing so. Avoidable 

detention costs could reach $200 million annually, according to DOJ OIG. DOJ 

OIG also found that INS lacked comprehensive information about deportable 

aliens, and, as a consequence, many of them can pass through detention facilities 

undetected. DOJ OIG found instances where inmates not identified by the INS 

as potentially deportable went on to commit more crimes after being released 
8 

into the community, including child molestation, aggravated assault, and cocaine 

trafficking. 

DOJ OIG has also reviewed INS’ implementation of its policies for escorting 

criminal aliens who are being removed from the United States. The report 

concluded that the INS has placed the traveling public at risk because it does not 

consistently follow its own escort policy. Some INS field supervisors disregarded 

provisions of the policy, resulting in the transportation of violent aliens on 

commercial airlines without escorts. 

INFORMATION TECHNOLOGY AND SECURITY

Information technology will be a major management challenge for DHS. Initially, 

the CIO will need to establish a department-wide IT infrastructure that will enable 

communications among approximately 180,000 employees. In addition, the CIO 

will face the challenge of identifying the agency’s IT assets, determining what 

IT assets are needed to meet mission requirements, and consolidating hundreds 

of systems from transferred agencies. In addition, the CIO, as required by the 

Federal Information Security Management Act (FISMA), will have a major 

challenge in developing and implementing an agency-wide information security 

management program that addresses the risks and vulnerabilities facing the 

agency’s IT systems.

For example, INS has 87 different computer systems that handle sensitive 

information. INS has not managed IT acquisition or deployment well. DOJ OIG 

audits have shown that INS has failed to establish cost baselines, conduct lifecycle development planning, and control costs and delivery schedules. INS also 

has often lacked comprehensive performance measures to ensure that completed 

projects meet intended goals and uses. 

Another example is the Automated Commercial Environment (ACE) project. ACE 

is intended to enable Customs to release cargo more efficiently by integrating 

international law enforcement intelligence, commercial intelligence, and data 

mining results to focus attention on high-risk importers and accounts. Treasury 

OIG audit reports have concluded, among other things, that Customs did not have 
9

the people and systems in place adequately to manage the development of ACE. 

Because controls were not being implemented and base line reviews were not 

being performed, Customs could not identify problems in a timely manner. And, 

Customs was emphasizing scheduled completion dates at the expense of quality 

and completeness. 

Computer security is a related concern. For example, DOJ OIG found numerous 

vulnerabilities in two key INS systems that were reviewed pursuant to the 

Government Information Security Reform Act. Further, Customs has not 

established effective controls to protect its law enforcement related data against 

unauthorized modification, loss, or disclosure. Any compromise in the security 

of the law enforcement data contained in Customs’ databases would have a 

detrimental effect on Customs’ ability to perform its law enforcement duties. 

FINANCIAL MANAGEMENT

The department quickly must integrate and establish effective controls over the 

financial systems and operations of the incoming components, each of which 

brings with it longstanding weaknesses in need of correction. Some components 

have received unqualified audit opinions on their financial statements; however, 

they expend tremendous manual efforts and costs to prepare for their financial 

statements, and weaknesses exist in financial preparation and control. For 

example, INS has poor databases upon which to calculate accurate fees and 

to ensure that the fees are spent on the services for which they were paid. INS 

collects and processes its own fees, but it has been found to have poor cash 

collection processes at virtually every kind of intake facility. INS has had to halt 

normal business operations for up to two weeks each year in order to conduct 

manual counts of millions of applications to calculate its earned revenue figures 

for its annual financial statement.

In addition, the Customs Service is the second largest revenue producer for the 

federal government. Total net revenues (duties, excise taxes, user fees, licenses, 

and other revenue, less refunds, drawbacks and other credits) collected during 

fiscal year 2002 were $22.1 billion. Ongoing weaknesses in the design and 

operation of Customs’ controls over trade activities and financial management 
10 

and information systems continue to inhibit the effective management of these 

activities and protection of trade revenue. 

Also, Customs has been losing between $151 and $432 million per year in 

uncollected duties related to international mail. Further, Customs had difficulty 

in collecting outstanding duties already collected by the Postal Service, primarily 

due to problems in reaching agreement with the Postal Service on the amounts 

due. 

TRANSPORTATION SECURITY 

Gap between security costs and security funding: DHS has requested $4.8 

billion for aviation security in fiscal year 2004. This is projected against fiscal 

year 2003 and 2004 passenger security fee revenues of about $1.7 billion annually 

and $300 million annually in contributions from the airlines. DOT OIG has 

recommended strongly against increasing passenger security fees further, noting 

that government taxes and fees already constitute 26% of airline ticket costs. DOT

OIG also recommended against tapping the airport improvement grants program 

further, observing that doing so would negatively affect airports’ ability to fund 

needed capacity enhancing projects. The alternative is to tap the general fund, at 

a time when it is already strained by competing demands throughout the federal 

government.

Screeners: Before 9/11, there were only about 28,000 screeners at the nation’s 

airports. In the last year TSA has hired 62,000. Having augmented the numbers 

significantly, DOT OIG has recommended that TSA: (1) develop a screener 

performance measurement system and use it to target training resources to where 

they are most needed; (2) expand the skills of existing staff and keep them at peak 

performance levels; (3) determine the proper balance of training between existing 

and new staff; and (4) “transition” the 45% of screeners who are “temporary” 

employees into permanent positions or replace them with new employees (who 

will have additional training needs). 

Checking Bags for Explosives: TSA’s largely successful effort to implement the 

requirement that all checked bags be screened by explosives detection equipment 
11

by December 31, 2002 has cost $1.6 billion to date. Remaining to be done is: (1) 

deploying such equipment to the remaining airports where alternative screening 

methods are in use today; and (2) integrating explosives detection systems 

into baggage handling systems at the largest airports (at a cost of more than $3 

billion); and (3) using research and development funds to develop and deploy 

more effective and economical equipment to address current and future threats 

and risks. 

Other Transportation Modes: Appropriately, TSA focused its first year 

efforts on aviation security. This year more focus should be given to mass 

transit, rail, and intermodal containers. DHS needs to develop meaningful risk 

assessments and to target limited resources to the areas of greatest vulnerability. 

Progress is being made on the container vulnerability issue, but this will require 

implementation. 

DOT’s continuing responsibilities for transportation safety and efficiency, 

including transportation of hazardous materials (HAZMAT) will overlap with 

DHS responsibilities for transportation security, requiring close coordination 

between the two departments and between the departments and industry. As a 

start, DHS and DOT should finalize a Memorandum of Agreement outlining their 

respective security roles and responsibilities. 

PORT SECURITY

While Customs has taken positive steps to address the terrorist threat, additional 

steps are needed. Specifically, Treasury OIG found that vessel containers were 

not properly secured from the time of entry into port until the time of release 

by Customs. Physical security at the port and terminals was lax. Customs 

did not maintain adequate control over targeted containers being delivered 

for examination. The time between targeting and examination was unduly 

long. Certain Customs identified security upgrades were not being adequately 

implemented. Examinations performed were not in accordance with established 

guidelines, and the results were not always properly recorded in Customs 

databases. Customs targeting units were either understaffed, poorly trained, and/or 

given many collateral duties that diverted focus from targeting.
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Treasury OIG took note of new Customs initiatives in the area of port security, 

including CSI, C-TPAT, and ATS, suggesting that further OIG evaluative work in 

each area is advisable. CSI (Container Security Initiative) is a partnership with 

other governments to target and inspect high-risk vessel containers in foreign 

ports before those containers are shipped to the United States. C-TPAT (Customs 

Trade Partnership Against Terrorism) is a joint government-business initiative 

designed to build cooperative relationships that strengthen overall supply chain 

and border security. Businesses ensure the integrity of their security practices and 

communicate their security guidelines to their business partners, thereby taking 

an active role in the war against terrorism. In return, Customs provides specific 

“benefits,” such as a reduced number of inspections. Another initiative is to 

improve ATS, the Automated Targeting System, by revising rules and rule weights 

to enhance capabilities for identifying cargo that might conceal weapons of mass 

destruction and other instruments of terrorism.

Treasury OIG has found that Customs management controls are not sufficient 

to mitigate the significant safety, smuggling, and terrorism risks associated with 

the importation of hazardous materials. Customs’ ability to examine HAZMAT 

cargo is limited due to the inherent danger in handling these materials and 

the lack of training on the part of personnel. HAZMAT teams are not actively 

making internal risk assessments concerning dangerous cargo, visiting importers’ 

premises, and providing advice on obtaining samples. Furthermore, both 

headquarters and port personnel have an aging Automated Commercial System 

(ACS) that does not provide the information necessary best to allocate HAZMAT 

resources or to determine which port or what type of HAZMAT shipments may be 

at highest risk for smuggling drugs or becoming instruments of terrorism. 

Since 9/11, Customs has expanded the use of high-tech equipment to search for 

radioactive materials, explosives, chemicals, and biological materials. These 

pieces of equipment – which includes various vehicle and rail x-ray systems, 

radiation detection systems, trace detection systems, video systems, and the like 

– permit Customs officials to inspect cargo and conveyances for contraband 

without having to perform the costly and time consuming process of unloading 

cargo or drilling through or dismantling conveyances. 
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Treasury OIG has been unable to determine whether use of the equipment is 

meeting Customs’ goals. Customs had not developed performance measures 

or otherwise evaluated the effectiveness of the equipment. Moreover, Customs 

needed to do a better job of monitoring equipment utilization; the limited data 

available indicated that equipment was being underutilized. In addition, Treasury 

OIG found that Customs needed better to track and account for equipment and 

better plan deployment to avoid installation problems. 

INTERNATIONAL MAIL

Each year a huge volume of international mail transported by foreign postal 

administrators - approximately 160 million letters and parcels - enters the United 

States at 14 international mail branches (IMB). These IMBs are dispersed 

throughout the country, but are often co-located with international airports, 

seaports, and land ports. All international mail is subject to Customs examination, 

and IMBs are staffed with Customs inspectors, mail specialists, and mail 

technicians - a total staff of 164 at the 14 locations - who inspect the mail for 

both contraband and duties owed. Customs uses automated screening equipment, 

such as x-ray and radiation detection devices and dogs, to assist inspectors in 

examining the mail. 

Treasury OIG audits have found both enforcement and revenue problems. IMBs 

lacked controls for ensuring that all mail was delivered to Customs for inspection. 

In some locations, mail bypassed Customs before being delivered to addressees, 

and in other cases mail was not being adequately safeguarded. Customs needs to 

take action to ensure that all mail is delivered to IMBs for inspection. Customs 

also needs to ensure adequate inspector resources and screening equipment is in 

place adequately to assess potential threats.
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Department of

Homeland Security

The creation of DHS is the most significant transformation of the U.S. 

government since 1947, when President Truman merged the various branches of 

the armed forces into the Department of Defense better to coordinate the nation’s 

defense against military threats. 

DHS represents a similar consolidation, both in style and substance. In the 

aftermath of the terrorist attacks against America on September 11th, 2001, 

President Bush determined that 22 disparate domestic agencies needed to be 

coordinated into one department to protect the nation against threats to the 

homeland. 

The new department’s first priority is to protect the nation against further terrorist 

attacks. Component agencies will analyze threats and intelligence, guard our 

borders and airports, protect our critical infrastructure, and coordinate the 

response of our nation to future emergencies. 

Besides providing a better coordinated defense of the homeland, DHS is also 

dedicated to protecting the rights of American citizens and enhancing public 

services, such as natural disaster assistance and citizenship services, by dedicating 

offices to these important missions.

The 22 agencies have been reconfigured into the following nine divisions: Border 

& Transportation Security, Emergency Preparedness & Response, Information 

Analysis & Infrastructure Protection, Science & Technology, Management, 

Coast Guard, Secret Service, Citizenship & Immigration Services, State & Local 

Government Coordination, and Private Sector Liaison.
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Office of

Inspector General

Congress enacted the Inspector General Act of 1978, as amended, to promote 

integrity and efficiency in government. The Homeland Security Act of 2002, as 

amended (the Act), established an Office of Inspector General in the Department 

of Homeland Security. The Inspector General is appointed by the President and 

subject to Senate confirmation.

The Inspector General is responsible for conducting and supervising audits, 

investigations, and inspections relating to the programs and operations of the 

department. The OIG is to examine, evaluate and, where necessary, critique these 

programs and operations, recommending ways for the department to carry out its 

responsibilities in the most effective, efficient, and economical manner possible. 

The Act also assigns to DHS OIG the dominant role in investigating criminal and 

non-criminal allegations against department employees, contractors, and grantees 

relative to department programs and operations, and it requires DHS OIG to 

oversee such investigations as are conducted by internal affairs offices. 

On March 1, 2003, DHS OIG acquired personnel and assets from OIGs that had 

exercised oversight authority over agencies or parts thereof that were merged into 

DHS. All 200 FEMA OIG full-time equivalent employees (FTEs), 195 Treasury 

Department OIG FTEs, 45 Transportation Department OIG FTEs, 15 Justice OIG 

FTEs, and 2 FTEs each from the General Services Administration and Agriculture 

Departments OIGs were transferred to DHS. Of the total number of 459, 186 are 

located in Washington, D.C., and 273 are located in 21 field offices throughout 

the country. DHS OIG’s budget for the balance of fiscal year 2003 is $45 million; 

we are requesting a budget of $80 million for fiscal year 2004. A copy of the DHS 

OIG organization chart with additional detail is attached.
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Border and

Transportation Security

INS Reemployment of Annuitants

Normally, federal annuitants rehired by the federal government must have 

their salary offset by an amount equal to the annuity they receive from the 

government. In 1996, the Office of Personnel Management (OPM) granted the 

INS emergency authority to rehire federal annuitants, waive the offset, and pay 

annuitants their full salary. The Department of Justice (DOJ) OIG audited the 

INS’ rehiring of annuitants in response to a request by the Chairmen of the House 

Judiciary Committee and the Subcommittee on Immigration, Border Security, and 

Claims. The DOJ OIG found that the INS did not accurately track the number 

of federal annuitants it rehired, lacked sufficient accounting controls to confirm 

the compensation paid to them, had not documented its rationale for hiring each 

annuitant, and had not developed an effective plan to reduce its dependence 

on rehired annuitants. Based on records it obtained from the National Finance 

Center, the DOJ OIG reported that the INS employed 379 annuitants and paid 

them approximately $49 million in salary (including overtime) in FY 1996 

through FY 2002. Of those 379 annuitants, 294 received waivers and salary 

compensation totaling $39.5 million. The full report, 03-16, was issued by the 

DOJ OIG, in February 2003.

Quality Control Reviews of TSA’s Audited 2002 Financial Statements 

DOT OIG publicly released its quality control review of the audit of TSA’s FY 

2002 financial statements. The audit was completed by KPMG LLP, Washington, 

DC. KPMG gave TSA an “unqualified” opinion on its financial statements. 

The TSA audit report cited five “material internal control weaknesses,” one 

“reportable internal-control condition,” and one “material noncompliance” with 

accounting laws and regulations. KPMG made 18 recommendations to TSA 

for corrective actions. DOT OIG agreed with the recommendations and found 

KPMG’s audit work complied with applicable government accounting standards. 

DOT OIG asked TSA to specify its actions and estimated completion dates. The 

full report, QC-2003-OIG, was issued by the DOT OIG on January 27, 2003.
18 

IG Testifies Regarding TSA’s Aviation Security Costs Before Senate 

Commerce Aviation Subcommittee 

 

The DOT Inspector General testified before the Senate Commerce, Science, and 

Transportation Aviation Subcommittee regarding TSA’s aviation security costs. 

In the last 14 months TSA has made noteworthy accomplishments without any 

pre-existing infrastructure for overseeing contracts or managing human resources. 

However, controlling costs must be a priority. The DOT Inspector General 

testified that TSA will need at least $3 billion to integrate explosives detection 

into baggage handling systems at the largest airports, and the need to deploy more 

effective equipment to meet threats will be ongoing. He urged caution before 

adding more air travel fees or taxes, saying the most likely option for meeting 

TSA’s financial requirements above existing revenues was to continue using the 

General Fund to pay a large portion of security costs. The full report, CC-2003-

066, was issued by the DOT OIG, February 5, 2003.

TSA’s Progress in Implementing the Aviation and Transportation Security 

Act 

DOT OIG issued its review of TSA’s progress in implementing provisions 

of Sections 106 and 138 of the Aviation and Transportation Security Act, as 

requested by Representative James L. Oberstar, Ranking Minority Member of 

the House Transportation and Infrastructure Committee. Section 106 requires 

all individuals, goods, property, vehicles, and other equipment to be screened 

before entering a secure area of an airport in the U.S. Section 138 requires an 

employment investigation, including a criminal history check, on anyone who has 

regular escorted access to aircraft or a secure area of an airport. DOT OIG found 

TSA is taking steps to implement the two sections. This report contains sensitive 

security information and will not be publicly released.1 The full report was 

completed by the DOT OIG, February 27, 2003.

_____________

1

 The number of any report denoted as containing sensitive security information is not disclosed.
19

TSA’s Oversight of Security Screener Contracts

DOT OIG’s audit of TSA’s oversight of its security screener contracts found that, 

based on their hourly rates, six of 13 large contractors charged TSA about $305 

million more for passenger screening services than they previously charged air 

carriers for similar work. TSA deployed a federal workforce to screen passengers 

at all airports but has not yet negotiated final contracts with 18 of 74 contractors 

as of February 26, 2003, including 11 large contractors. TSA is withholding 

more than $90 million in payments to contractors that had significantly increased 

their rates to TSA, pending completion of an audit by the Defense Contract 

Audit Agency, and it reported contract management as a “material internal 

control weakness.” The full report, FI-2003-025, was issued by the DOT OIG on 

February 28, 2003.

Review of TSA’s Screener Security Program

DOT OIG audited TSA’s hiring and training of aviation screeners. TSA has made 

great strides in hiring and training passenger and checked baggage screeners at 

the nation’s commercial airports, but it needs to take additional actions to build 

a “world class” security workforce. TSA has already moved to correct several 

weaknesses, but there are four areas where it still needs to take action. TSA 

agreed to take corrective action and concurred with most of the OIG’s findings 

and recommendations. This report contains sensitive security information and 

will not be publicly released. The full report was completed by the DOT OIG on 

February 28, 2003.

Review of Proposed Aviation Security Technologies

DOT OIG issued the results of its review of proposed technologies to improve 

aviation security, a study requested by Representative Martin Sabo. DOT OIG 

reviewed technologies for their potential to improve aviation security in the 

airport, aircraft, checked baggage, screening checkpoint, and cargo and mail. 

DOT OIG recommended actions to foster the development and deployment of 

aviation security technologies in the near, intermediate, and long term. This 
20 

report contains sensitive security information and will not be publicly released. 

The full report was completed by the DOT OIG on February 28, 2003.

Review of Security at Aircraft Repair Stations

As part of DOT OIG’s larger audit of air carriers’ use of aircraft repair stations, 

they reviewed security controls at these stations. The audit disclosed security 

vulnerabilities at repair stations located at commercial and general aviation 

airports and off airport property. DOT OIG recommended that TSA conduct risk 

based security assessments as a first step in determining the actions needed to 

address repair station security. This report contains sensitive security information 

and will not be publicly released. The full report was completed by the DOT OIG 

on February 28, 2003. 
21

Customs’ Advance Passenger Information System (APIS) Is A Valuable 

Enforcement Tool But Relies On Factors Outside Its Control

APIS provides airport inspectors from both the INS and Customs with 

biographical information on airline passengers and crewmembers from foreign 

countries. While initially a voluntary program under a November 2001 law, all 

carriers are now required to provide this information. Customs is responsible 

for ensuring that air carriers comply with APIS requirements and Customs is 

authorized to issue penalties to airlines that do not comply. 

APIS identifies individuals to intercept and examine. INS and Customs 

personnel intercept targeted passengers or crew for examination. Treasury OIG 

found concerns with the system that hindered Customs’ enforcement efforts. 

Treasury OIG also noted that penalties for non- compliance were administered 

inconsistently. Treasury OIG recommended that Customs take a more uniform 

approach to enforcing compliance with APIS requirements. To enhance 

enforcement efforts, Treasury recommended that INS and Customs monitor the 

usefulness of APIS as an enforcement tool. Treasury OIG recommended that 

Customs work with DOJ and Treasury to eliminate any possible weaknesses 

in the program. Customs has taken appropriate action to address these 

recommendations. On March 1, 2003, APIS became the responsibility of DHS. 

The full report, OIG-03-059, was issued by the Treasury OIG.

The Customs National HAZMAT Program Needs To Be Strengthened 

This audit was the third and final report in a series of audits on the United States 

Customs Service (Customs) hazardous materials (HAZMAT) Program. The 

objective of this series of audits was to determine whether Customs had sufficient 

processes in place to ensure the safe and legal transport and inspection of cargo 

containing hazardous materials. The Department of the Treasury OIG’s first report 

(OIG-02-123 dated September 30, 2002) provided recommendations for a better 

HAZMAT program at the Port of Brownsville. Its second report (OIG-03-049 

dated January 22, 2003) provided recommendations to strengthen the program at 

the Port of Houston. 
22 

A hazardous material is a substance or material that has been determined by the 

Secretary of Transportation to be capable of posing an unreasonable risk to health, 

safety and property. Customs developed the HAZMAT Handbook to provide safe, 

uniform, and environmentally sound procedures for processing this type of cargo, 

and to ensure compliance with all statutes and regulations pertaining to hazardous 

materials. 

The audit found that Customs management controls are not sufficient; HAZMAT 

training records were not adequately documented and maintained; and Emergency 

Action Plans at port facilities were missing or needed to improve required 

Occupational Safety and Health Administration (OSHA) elements. 

Treasury OIG made five recommendations to correct the deficiencies in the 

HAZMAT program. Customs concurred with the five recommendations and 

agreed to take corrective action, including having the HAZMAT Headquarters 

Administrator and HAZMAT personnel take a more active role in the HAZMAT 

program activities at the ports and revising the HAZMAT Handbook. The third 

and final report of this series, OIG-03-065, was issued by the Treasury OIG, on 

March 17, 2003.

Utilization of Trace Detection Equipment

Trace detection technology makes use of the minute amounts of vapors given 

off and the microscopic particles left behind when narcotics and explosives 

contraband are packaged and handled. This technology provides Customs 

with the capability to screen and search in a non-intrusive manner for the trace 

quantities of narcotics and explosives on people, baggage, cargo, vehicles, 

containers, tickets and identification cards. Prior to the attacks of September 

11, 2001, trace detection technology was used by Customs with an emphasis on 

narcotics interdiction.

Trace detection equipment was delivered to the field as part of the initial 

deployment of non-intrusive inspection equipment in the late 1990s, per the 

Customs’ Five-Year Technology Plan. The objective was to add this technology 

to the ports’ arsenal of tools, providing a “layered defense” against smuggling. 
23

Treasury OIG’s review of trace detection equipment concluded that Customs is 

not using trace detection equipment in the most efficient and effective manner. 

This was caused by: (1) a lack of management direction to ensure that the 

detectors were placed in locations most conducive to their use; (2) a lack of 

required maintenance necessary to produce reliable readings; and (3) inspectors’

operating detectors without adequate training.

Treasury OIG recommended that Customs: (1) re-deploy the equipment to the 

most optimum sites within locations; (2) ensure that inspectors are adequately 

trained; and (3) ensure that trace detection equipment is utilized, and its usage and 

maintenance recorded.

Responsibility for trace detection equipment transferred with Customs to DHS. 

The full report, OIG-03-068, was issued by the Treasury OIG, March 24, 2003.

Enforcement of Export Controls

This review was conducted in partnership with the OIGs at the Departments of 

Commerce, Defense, State, and the Central Intelligence Agency. The overall 

objective was to evaluate the adequacy and effectiveness of Treasury’s export 

enforcement activities concerning the transfer of militarily sensitive technology 

to countries of concern, including its efforts to: (1) prevent the illegal export of 

dual use items and munitions; and (2) investigate and assist in the prosecution of 

export control violators. 

Treasury OIG found that Customs has devoted limited resources to export 

enforcement. OIG identified numerous factors that impaired Customs’ ability to 

enforce export controls effectively, some of which were beyond Customs’ control. 

They also found that, though Customs implemented certain corrective steps to 

address recommendations made in a 1999 OIG audit report, problems remained. 

Therefore, Treasury OIG believes that corrective actions taken were not always 

effective in correcting the deficiencies cited in the prior report.

Treasury OIG also found that a Treasury bureau, the Office of Foreign Assets 

Control (OFAC), could benefit from better coordination with the State Department 
24 

and Customs. In addition, OIG found that the State Department did not always 

timely process OFAC referrals. OIG also maintained that Customs needs to keep 

OFAC apprised of the status of referred cases. OIG made 11 recommendations to 

improve the effectiveness of Treasury’s enforcement of export controls. The full 

report, OIG-03-069, was issued by the Treasury OIG, March 25, 2003.

Examination of International Mail for Contraband and Revenue

All international mail arriving for delivery in the United States and U.S. Virgin 

Islands is subject to Customs inspection and release. Inspection is performed 

at Customs International Mail Branches (IMB). The 14 IMBs are located at, 

or close to, United States Postal Service (USPS) facilities. Mail is examined to 

prevent contraband or other illegal articles from entering the U.S. and to collect 

revenue on dutiable items.

Customs screens the mail using visual inspection, x-ray equipment, x-ray 

equipment with mounted radiation detectors, personal radiation detectors, isotope 

identifiers, and detector dogs.

Treasury OIG found, however, that Customs cannot guarantee that all mail 

arriving in the U.S. is properly transported, secured, and presented to the IMBs for 

examination. Many IMBs have not established adequate techniques to monitor 

the mail prior to its presentation to Customs. Specifically, a number of the IMBs 

have not properly identified the vulnerabilities in the mail transportation process 

and worked with USPS to secure the mail during transport.

The need to examine parcels properly is also important for identifying dutiable 

parcels in the mail, since Customs continues to lose significant amounts of 

revenue. Customs often relies on values on mail declarations, which Customs 

found during its mail revenue survey are not always accurate. The results of 

Customs mail revenue survey for Fiscal Year (FY) 2001 showed that Customs 

continues to lose an estimated $184 million a year based on values stated on the 

mail declarations, and $494 million per year based on examination of the contents 

of the parcels.
25

Some IMBs have developed new targeting strategies using the results of the 

survey to detect dutiable parcels, and others are continuing to use their current 

methods. Because of the lack of resources, the IMBs are at a disadvantage in 

identifying revenue in the mail.

To correct the problems above, OIG recommended that Customs: (1) examine 

the transportation route of all international mail and work with Postal Service to 

ensure that mail is properly secured; (2) implement a plan for screening tools and 

detector dogs to be used at all of the IMBs that addresses the potential threats; and 

(3) continue to work on a strategy to increase revenue collection from the mail.

Customs concurred with the recommendations and will work with the 

Postal Service and other customs and postal administrations to improve mail 

examination procedures. The full report, OIG-03-072, was issued by the Treasury 

OIG, March 27, 2003.

Customs Deployment of Radiation Detection Equipment

Customs has made progress since the terrorist attacks of September 11th in 

improving detection of radioactive materials that may be smuggled into the 

U.S. at the ports of entry. Customs has deployed, or is in process of deploying, 

several different radiation detection devices to the ports of entry. These devices 

range from personal radiation detectors, which are somewhat limited and not 

very costly, to more sophisticated, capable, and costly portal radiation detection 

systems. Customs believes that these systems are complementary, and each is 

thought to be as valuable in its own right in detecting radioactive materials at the 

ports.

Treasury OIG believes, however, that Customs’ radiation detection capability 

has been hindered because Customs has not developed a documented strategic 

plan for the acquisition and deployment of radiation detection equipment. In 

addition, Customs has not been collecting data on the usage or performance of 

this equipment in detecting illegally imported radioactive materials.
26 

Customs concurred with Treasury OIG’s findings and recommendations and plans 

to have a draft strategic plan by September 2003. In addition, Customs is currently 

collecting data on significant detections made with the equipment. Audit followup is the responsibility of DHS OIG. The full report, OIG-03-073, was issued by 

the Treasury OIG, March 27, 2003.

Improved Management of Customs ACE Business Process Reengineering 

Needed 

The development of the Automated Commercial Environment (ACE) is a massive 

and multifaceted effort that is critical to the long-term success of the U.S. 

Customs Service mission. ACE is planned to be a customer-oriented, accountcentric process that provides real time access to internal and external information 

through a secure global channel for travel and trade. The aim is for the federal 

government to provide a “single window” for the trade on border cargo regulation 

to reduce the complexity, redundancy, and burden on the trade. The objective 

of the audit was to determine whether the Customs commercial processes were 

appropriately reengineered prior to ACE software development. 

Treasury OIG’s audit concluded that Customs’ efforts to define existing system 

requirements for its core processes (enforcement, management, import/export, and 

financial) were sufficient to allow the contractor to begin development of future 

ways of conducting business. However, they found that improved management 

of reengineering was needed in three areas. First, there was insufficient detail 

identified in the development of the different increments to allow e-Customs 

Partnership (eCP) to manage work and for Customs to measure the quality of 

contract deliverables. Second, the Customs’ Modernization Office (CMO) web 

portal was not available to all contractor and CMO employees. Third, a multiagency reengineering effort has not been performed to establish requirements for 

integrating International Trade Data System functionality into ACE. 

In addition, two other issues were brought to management’s attention, which 

were not in the audit scope. First, there were indications that improvements 

were necessary in the staffing, utilization and management of Customs Subject 

Matter Experts. Second, there were indications that the aggressive ACE 
27

schedule was affecting the quality of work products. Treasury OIG made three 

recommendations to improve management of the reengineering of business 

processes. Customs concurred with OIG’s recommendations and has initiated 

actions to require the contractor to prepare and maintain an Integrated Allocation 

Matrix; to provide Customs and contractor employees with a functional CMO 

Web Portal; and Customs has initiated actions to gather system requirements from 

other agencies participating in ACE. The full report, OIG-03-058, was issued by 

the Treasury OIG, February 13, 2003.

U.S. Customs Railcar Inspection Program at Port Huron, MI, Needs Further 

Improvement 

In response to a prior OIG audit, Customs agreed to implement changes to its rail 

interdiction activities along the northern border. Treasury OIG’s review of the 

current rail inspection program in Port Huron, Michigan showed that corrective 

actions were implemented. However, the railcar inspection program at this major 

port of entry was not adequately targeting or inspecting high-risk shipments. 

Customs’ long-range plans are to increase significantly inspections through 

the use of non-intrusive inspection equipment. However, this equipment is not 

scheduled for deployment in Port Huron until June 2004. Interim measures need 

to be taken to reduce the risk of contraband entering the country through this port. 

To address these issues, Treasury OIG made seven recommendations. Customs 

agreed with these recommendations and established target dates for completing 

corrective actions. Audit follow-up is the responsibility of DHS OIG. The full 

report, OIG-03-071, was issued by the Treasury OIG, March 26, 2003. 

The INS’ Primary Inspections at Air Ports of Entry

Most arriving international passengers at air ports of entry (POE) are examined 

by INS inspectors at a primary inspection station. During a primary inspection, 

the INS inspector conducts a brief interview, examines travel and identity 

documentation, and checks the traveler against lookout databases. The goal of the 

primary inspection is to admit legitimate travelers into the United States quickly 
28 

and refer high-risk travelers and inadmissible aliens to a secondary inspection for 

a more detailed review. 

The DOJ OIG that found the INS needs to improve its operational capability to 

perform passenger analyses prior to flight arrival. Additionally, the DOJ OIG 

found that INS’ lookout system does not always provide primary inspectors with 

critical information known to the INS. For example, in October 2002, the INS 

had a backlog of more than 1,800 reports of lost or stolen passports that had not 

been entered in the databases used by the inspectors. The DOJ OIG also found 

that some passengers who were referred for secondary inspection left the airport 

without appearing and, further, that such incidents were not entered in the lookout 

systems. 

The DOJ OIG also found that primary inspectors did not always query lookout 

databases as required and identified training deficiencies and an inexperienced 

inspections workforce as contributing causes. The DOJ OIG made 26 

recommendations for changes to the INS operation. The full report, 03-15, was 

issued by the DOJ OIG in February 2003.

Follow-Up Audit of the INS’ Airport Inspection Facilities

In December 2000, the DOJ OIG found deficiencies in INS inspection facilities 

at 42 international airports in the United States. Airports were vulnerable to 

illegal entry, escapes, injuries, and the smuggling of aliens and contraband. In 

a follow-up audit, the DOJ OIG found that, at the 12 airports it examined, the 

INS took insufficient action to implement the recommendations from the prior 

audit. The INS failed to advise many of the airports and airport authorities of 

needed improvements, failed to apply sanctions against airlines that did not 

provide suitable inspection facilities, and did not develop a program to review 

and improve airport inspection facilities. All airports reviewed in this follow-up 

audit had repeat deficiencies. For example, some airports did not have intercoms 

between access control points and the command center, emergency exits with both 

local and central alarms, or hold rooms that could be unlocked easily during an 

emergency. In addition, the DOJ OIG found inspection areas that lacked adequate 

camera coverage, inoperable alarms, and security features that had been turned 
29

off, were not monitored, or had not been installed. The full report, 03-15, was 

issued by the Department of Justice OIG in January 2003.

The Norfolk Ship Jumping Incident

The DOJ OIG examined the actions of INS employees in connection with a “ship 

jumping” incident. When a Russian cargo ship docked in Norfolk, Virginia, four 

of the 27 crewmen failed to return to the ship prior to its departure on March 18, 

2002. The four deserters, referred to as “ship jumpers,” were from Pakistan. 

Generally, each crewmember is required to have an individual visa, and a waiver 

of this requirement was subject to a tightened authorization process that the INS 

had promulgated in November 2001. In the Norfolk incident, however, the waiver 

was granted by a subordinate official who was no longer authorized to do so.

The DOJ OIG found that the Norfolk immigration inspectors had not been 

informed of the INS policy change, primarily due to inaction by the INS 

Washington District Office and, to a lesser extent, the INS Norfolk Office. The 

DOJ OIG concluded that the Norfolk incident highlighted a longstanding problem 

in the INS that its Office of Internal Audit had documented two years earlier – that 

INS policies and changes in policy are not distributed to INS field offices and 

employees in a uniform or effective way. The full special report was issued by the 

Department of Justice OIG in December 2002.

Protecting The Public: Security, Inspection, and Targeting of Vessel 

Containers at the Ports of New York and Newark Can Be Improved

The concern that weapons of mass destruction and other contraband or 

implements of terrorism can enter our country through our seaports has been the 

subject of much discussion and action by various federal agencies, national media 

sources, and congressional committees. Millions of vessel containers enter this 

country every year at the nation’s seaports carrying legitimate cargo. However, it 

is recognized that due to their sheer numbers and the effort that must be expended 

to inspect these containers, they are highly vulnerable to exploitation by terrorists. 

The Treasury OIG recently issued a report focused on our enforcement efforts 

at the combined Ports of New York and Newark. The objective of the audit was 
30 

to determine whether Customs targets, secures, and inspects vessel containers to 

prevent the smuggling of implements of terrorism, drugs, and other contraband in 

an effective manner.

The Port of New York/Newark is the largest port complex on the east coast and 

it processed approximately 800,000 inbound containers between April 2001 and 

March 2002. To manage the mission during this period, the number of inspectors 

assigned to Contraband Enforcement Team (CET) ranged between 63 and 71, 

with approximately seven inspectors assigned to the Advanced Targeting Unit, 

whose responsibility is to target high-risk cargo for examination. The primary 

mission of the CET is to target and inspect high-risk cargo and conveyances for 

implements of terrorism and narcotics.

Treasury OIG determined that Customs management had not implemented 

oversight procedures to ensure that the security of vessel containers and certain 

aspects of physical security over the containers would be improved. OIG also 

reported that the inspection process for vessel containers could be improved in 

the areas of non-intrusive inspection, timeliness, and examination data recording 

and reporting. Finally, OIG discussed certain concerns related to the targeting 

efforts and potential areas for improvement. OIG made nine recommendations 

with which Customs concurred. Customs port management initiated immediate 

corrective actions to improve conditions at the port. This report was one of a 

series of reports initiated by the Treasury OIG last year. The full report, OIG-03-

066, was issued by the Treasury OIG, March 20, 2003.
31

Follow-up Review on the Status of SEVIS Implementation

This review assessed the INS’ progress in implementing the Student and 

Exchange Visitor Information System (SEVIS) since issuance of the DOJ OIG’s 

May 2002 report, The Immigration and Naturalization Service’s Contacts With 

Two September 11 Terrorists: A Review of the INS’ Admissions of Mohamed Atta 

and Marwan Alshehhi, its Processing of their Change of Status Applications, and 

its Efforts to Track Foreign Students in the United States. The DOJ OIG found 

that the INS has made progress in implementing SEVIS to track foreign students. 

However, the reviewers found continued problems with the INS’ certification 

of schools to accept foreign students, training of contractors and INS personnel, 

oversight of contractors conducting school site visits, oversight of schools’

compliance with SEVIS requirements, procedures for identifying and referring 

potential instances of student or school fraud, and resource levels for investigating 

potential fraud. The DOJ OIG concluded that the INS had not fully implemented 

SEVIS by January 1, 2003, the congressionally mandated deadline. The full 

report, I-2003-003, was issued by the DOJ OIG in March 2003.

The INS’ Removal of Aliens Issued Final Orders

The DOJ OIG conducted a review to follow up on a 1996 report that assessed 

the INS’ effectiveness in removing aliens with final orders. It found that the INS 

remains successful at removing detained aliens, but is unsuccessful at removing 

non-detained aliens. Detained aliens are currently removed at a rate of 92 percent, 

while non-detained aliens are currently removed at a rate of 13 percent. These 

removal rates are similar to those found in 1996. Further, the DOJ OIG examined 

the removal rate of several high-risk subgroups of non-detained aliens under final 

orders of removal. The INS removed 35 percent of aliens with criminal records, 

six percent of aliens from countries identified by the State Department as sponsors 

of terrorism, and three percent of aliens denied asylum. The DOJ OIG concluded 

that the INS was unsuccessful at removing non-detained aliens, and that it had 

failed to implement the corrective actions recommended in the OIG’s 1996 report. 

The full report, I-2003-004, was issued by the DOJ OIG in February 2003.
32 

Emergency Preparedness and 

Response

• Benson County, North Dakota

The county received an award of $1.49 million from the North Dakota 

Division of Emergency Management for damages caused by flooding 

and ground saturation. The county’s claim included questioned costs of 

$111,844, consisting of uncompleted projects and uncompleted scopes 

of work. The OIG recommended that the Regional Director disallow the 

questioned costs. The report, DD-01-03, was issued by the Department of 

Homeland Security OIG on March 28, 2003.

The Federal Emergency Management Agency issued its final Semiannual 

Report reflecting the period October 1, 2002 – February 28, 2003.

Information Analysis and 

Infrastructure Protection

• There was no legacy OIG work relevant to this directorate.

Science and Technology

• There was no legacy OIG work relevant to this directorate.

Management

• There was no legacy OIG work relevant to this directorate.
33

Coast Guard

Coast Guard’s Actuarial Estimates for Retired Pay and Medical Benefits 

DOT OIG released a study conducted by the Hay Group, which concluded that 

the Coast Guard properly reported $29 billion in military retirement liabilities 

as of September 30, 2002. The study also reported that the liabilities and annual 

actuarial activity of the Coast Guard’s military retirement system were reasonable 

and reliable as of September 30, 2001, thereby satisfying the principal objective 

of the study. FY 2001 data were used because they were the most recent year 

for which data was available. The study is part of DOT OIG audit of the DOT 

FY 2002 Consolidated Financial Statements. The full report was issued by the 

DOT OIG, January 22, 2003. (Report number was not available at the time of 

distribution.)

Computer Security and Controls of U.S. Coast Guard’s Aircraft Repair and 

Supply Center

DOT OIG publicly released its audit report on computer security and controls 

at the U.S. Coast Guard’s Aircraft Repair and Supply Center in Elizabeth City, 

NC. DOT OIG found the center needs to: (1) establish a disaster recovery and 

business continuity plan; (2) strengthen security governing access to its computer 

systems and the physical complex; (3) strengthen its process for controlling 

changes to production systems; and (4) enhance security administration, including 

background checks on key personnel. DOT OIG identified five priority actions 

the Coast Guard should take and asked the Coast Guard to provide its action plan 

and estimated dates for resolving the action items to the DHS OIG. The audit was 

conducted by PricewaterhouseCoopers LLP. The full report, FI-2003-022, issued 

by the DOT OIG, February 25, 2003.
34 

Secret Service

Controls Over Secret Service’s Law Enforcement Data Need Improvement

The use of law enforcement data is vital to the missions of several Treasury 

bureaus, including the Secret Service, now a part of the Department of Homeland 

Security. The Secret Service had not established adequate controls to ensure 

the security and integrity of its law enforcement data. For example, the Secret 

Service did not: (1) certify and accredit business applications used to access law 

enforcement data; (2) implement access control software parameters; (3) properly 

restrict access to law enforcement data; and (4) perform a comprehensive analysis 

of audit trail activity.

In addition, the Secret Service did not document its continuity of operations 

process for law enforcement data. Consistent with prior findings, weaknesses 

associated with the Secret Service’s ability to establish and formalize a 

change management process still existed, particularly for changes made to law 

enforcement databases.

Treasury OIG recommended that the Director of the Secret Service ensure 

that individual security plans, risk assessments, and system certifications and 

accreditations are completed for two business applications used to access law 

enforcement database information; access control software settings be revised; 

and user access to law enforcement data be controlled. Treasury OIG also 

recommended that the Secret Service develop a policy and standard operating 

procedures for operating system and database audit trails; correct a problem that 

prohibits the generation of database activity logs; and revise the procedure for 

reporting computer security incidents and vulnerabilities. Finally, Treasury OIG 

noted that printed material should be properly safeguarded, and the Continuity 

of Operations Plan be documented, tested, and a copy be stored off-site. 

Management agreed with the recommendations. The full report, OIG-03-002, was 

issued by the Treasury OIG, October 2, 2002.
35

The INS’ Premium Processing Program

The Premium Processing Program was established in June 2001 to allow certain 

employment based immigration applications to be processed expeditiously for 

an additional payment of $1,000. Although the immediate goal of Premium 

Processing is to expedite premium petitions, the long-term objective is to reduce 

or eliminate backlogs in the INS’ total adjudications workload. The DOJ OIG’s 

audit concluded that the Premium Processing program has lengthened the time 

required to adjudicate routine applications and petitions and that the backlog of 

routine petitions at INS service centers has increased steadily, reaching 3.2 million 

in September 2002. 

The DOJ OIG also found that, though the INS mandated checks against the 

Interagency Border Inspection System (IBIS) database on all petition types 

starting on January 28, 2002, the service centers did not comply promptly. As 

a result, 11,830 Premium Processing petitions were adjudicated without IBIS 

checks between January 28, 2002, and March 18, 2002. (An IBIS check is a 

search of criminal history and national security lookout databases.) Finally, the 

DOJ OIG reported that the INS lacks reliable data about the Premium Processing 

workload and the resources it requires. The full report, 03-24, was issued by the 

DOJ OIG in February 2003.

The INS’ Ability to Provide Alien Information to the Social Security 

Administration

The DOJ OIG assessed whether the INS timely posts information about aliens 

in the INS databases that it shares with the Social Security Administration 

(SSA). The SSA uses the databases to issue Social Security numbers to 

aliens. The OIG examined two systems used by the INS to provide the SSA 

with aliens’ immigration status: (1) Immigrant Visa DataShare (DataShare); and 

(2) the Nonimmigrant Information System (NIIS).

The INS estimated that the entire process of uploading nonimmigrant information 

into NIIS and making it available to the SSA should take approximately 11 to 

13 workdays. The DOJ OIG endorsed the INS’ estimate as reasonable. The OIG 

Bureau of Citizenship

and Immigration

Service
36 

also concluded that the INS is prepared to implement the enumeration phase of 

the DataShare process and provide the SSA immigrant status using DataShare. 

The full report, I-2003-001, was issued by the DOJ OIG in November 2002.
37

The following information is a summary of the investigative activity performed 

by the legacy Offices of Investigations. Investigative activity that is not relevant 

to DHS is not included.

Department of Homeland Security, Office of Investigations 

(Legacy Agency FEMA Statistics)2

March 1, 2003 – March 31, 2003

Funds Recovered (Investigative Recoveries) $18,300

Fines and Restitutions $4,031,573

Administrative Cost Savings and Recoveries $0

Investigative Cases Opened 28

Investigative Cases Closed 27

Arrests 13

Indictments 19

Convictions 19

Personnel Actions 2

Complaints Received 347

Hotline Complaints Received 169

Complaints Referred (to program or other agencies) 8

2

 The complete investigative statistics for this six month reporting period for FEMA OIG are 

contained in the final FEMA OIG report referenced earlier.

Investigation

Statistics
38 

Transportation Security Administration and U.S. Coast Guard Semiannual 

Statistics. These statistics reflect work of the DOT Office of Inspector General 

for the reporting period October 1, 2002 through February 28, 2003. The Coast 

Guard statistics involved cases of contract and grant fraud and employee integrity. 

The TSA statistics are from airport security sweeps conducted by DOT OIG and 

other federal and local officials, including the FBI, SSA OIG, INS, Customs 

Service, local law enforcement, and airport law enforcement officials.

Indictments 228 (224 TSA, 4 CG)

Convictions 220 (214 TSA, 6 CG)

Jail (Months) 298 (286 TSA, 12 CG)

Probation (Months) 1206 (1122 TSA, 84 CG)

Recoveries $56,541 ($8,535 TSA, $48,006 CG)

Referred for Prosecution 289 (264 TSA, 25 CG)

Accepted 288 (264 TSA, 24 CG)

Declined 1 (1 CG)

Pending 1 (1 CG)

Treasury OIG Statistics 

March 1, 2003 – March 31, 2003

OIG Activity Number / $ Amount

Reports Issued & Oversight Reviews 

(Investigations) 10

Monetary Benefits (Investigations)

a) Fines/Restitutions 0

b) Recoveries 0

(We were not able to obtain Treasury OIG’s investigation statistics for the rest of 

this period.)
39

Investigation

Narratives

Department of Homeland Security, Office of Investigations 

(Legacy Agency FEMA)

FEMA Program Fraud

A DHS OIG investigation determined that the owner of a company that provided 

bomb detection dogs in support of the World Trade Center investigation 

overcharged for services and defrauded the Federal Emergency Management 

Agency of the Emergency Preparedness and Response directorate of $11,000 in 

disaster assistance funds. A joint investigation by the Treasury Inspector General 

for Tax Administration, the Federal Reserve Office of Inspector General, and the 

State Department Office of Inspector General determined that the subject also 

committed similar contractual violations at those respective agencies, totaling 

approximately $700,000 in fraud losses. On March 13, 2003, the individual was 

indicted in U.S. District Court on 26 counts of 18 USC 1343 (wire fraud) and 

two counts of 18 USC 287 (false claims). The subject was arrested pursuant to a 

federal arrest warrant and will stand trial on May 14, 2003.

Department of Transportation

The following material reflects the work of the Department of Transportation 

Office of Inspector General between October 1, 2002 and February 28, 2003.

7 Arrested in Security Sweep at Detroit Metropolitan Airport

In October 2002, arrest warrants were issued for seven people charged with 

making false statements or misusing a social security number in order to obtain 

employment at the Detroit Metropolitan Airport. OIG special agents participated 

in the arrests. OIG participated in the arrest of 618 people and the indictment 

of 781 people (including those arrested) in 22 operations at 27 airports since 

September 11, 2001. 

Airport Sweep Update

In October 2002, two former checkpoint security screeners at Logan International 

Airport, Boston, MA, pleaded guilty in U.S. District Court in Boston to falsifying 
40 

their applications for an airport security badge. An illegal foreign national pleaded 

guilty to falsifying his eligibility to work in the United States. Separately, another 

foreign national also pleaded guilty to making false statements on a security 

badge application about his work eligibility, as well as using a fictitious alien 

registration card and a social security number that was not his. Both men were 

scheduled for sentencing in January 2003. 

Former Security Guard Sentenced for Misusing DOT ID

A foreign national was fined $2,500 and placed on six years probation by a U.S. 

District Court judge in Concord, NH in October 2002, after pleading guilty to 

misusing official identification. A former contract security guard at Volpe National 

Transportation Systems Center in Cambridge, MA, he failed to surrender his 

Transportation Department identification when he resigned in 1999. During a 

routine traffic stop in May 2002, he displayed the ID and a constable’s badge 

to Portsmouth, NH police and falsely identified himself as a Transportation 

Department law enforcement officer. The Volpe Center is implementing measures 

to prevent similar incidents. The case was investigated by the OIG with assistance 

from local police. 

Airport Sweep Update

A former baggage handler at Miami International Airport (MIA) was sentenced in 

U.S. District Court in Miami to a $1,000 fine, two months in prison, three years’ 

supervised release, and 750 hours of community service. He was convicted in 

October 2002 by a federal jury in Miami for using a fraudulent social security 

number. He and 16 other employees were charged in September, 2002 with 

various federal crimes involving their access to secure areas of MIA. The 

investigation was conducted by OIG, Customs Service, SSA, and INS. 

 

A checkpoint security screener was sentenced in October 2002 in U.S. District 

Court in Boston, MA to 14 days time served in jail and one year’s probation 

after pleading guilty to falsifying his application for a security badge at Logan 

International Airport in Boston. He was charged with lying about his alien 

registration status and altering an alien registration card. He had been living and 
41

working illegally in the U.S. since 1998. He is one of 20 charged in a security 

sweep at Logan. 

Twenty-Nine People Arrested in Philadelphia Airport Sweep

In November of 2002, the indictments of 29 current or former workers at 

Philadelphia International Airport were made public and 13 people arrested in 

the latest investigation of security at the nation’s airports. Of those indicted, 17 

people employed in various positions at the airport, such as ramp agents, baggage 

handler, maintenance, food service and skycaps, were charged with failure to 

disclose prior convictions. One of these 17 defendants had in his possession at 

the time of his arrest two firearms that had been stolen from two law enforcement 

officers’ luggage checked at the Philadelphia International Airport. After his 

arrest, he was additionally charged with possession of firearms by a convicted 

felon. In addition, 12 food service employees were charged with false use of a 

Social Security number. 

21 Newark Airport Employees Charged, 11 Arrested in Latest Sweep

In November 2002, eleven workers at Newark (NJ) Liberty International Airport 

were arrested and 10 others were being sought in the latest airport security sweep. 

All 21 were charged with using false identification to get jobs at the airport that 

gave them access to high-security areas. The employees, all of whom worked for 

private contractors in cleaning and security jobs, had access to restricted areas 

around aircraft and in and around baggage handling facilities. The defendants 

were charged with Social Security fraud, document fraud, or making false 

statements on their application for a security badge. The investigation was 

conducted by OIG, the FBI, INS, SSA OIG, Customs Service, U.S. Marshals, 

police with the Port Authority of New York and New Jersey, and local law 

enforcement. 

127 Charged at JFK and LaGuardia Airports

In November 2002, federal authorities arrested or obtained warrants for the arrests 

of a total of 127 current or former employees at John F. Kennedy International 
42 

Airport and LaGuardia Airport in New York City in an airport security sweep. 

Indictments ranged from using false social security numbers and providing false 

information on their immigration status to failing to disclose criminal histories 

on their applications for airport security badges. The defendants held a variety 

of jobs, including passenger service agent, ramp and cargo agents, janitorial 

workers, and utility and maintenance workers. The operation was conducted by 

OIG, the FBI, INS, U.S. Customs Service, SSA OIG, the Secret Service, and local 

authorities. 

60 Arrested at Dallas/Fort Worth International Airport

In November 2002, 60 employees at Dallas/Fort Worth International Airport were 

arrested for using bogus social security numbers to gain employment giving them 

access to secure and restricted areas of the airport. A total of 99 defendants were 

charged by criminal complaints. Those arrested included baggage handlers, ramp 

workers, cargo agents, and food service and custodial workers. The investigation 

was conducted by DOT OIG, the FBI, INS, Social Security Administration OIG, 

U.S. Marshals Service, the Texas Rangers, and the airport’s Department of Public 

Safety. 

Connecticut Airport Checkpoint Screener Arrested for Concealing Criminal 

History

In December 2002, a security checkpoint screener at Bradley International Airport 

in Windsor Locks, CT, was arrested for concealing his criminal record on his 

employment application with the TSA. He had three previous arrests and four 

convictions, including sexual assault, “threatening,” and breach of peace. The 

investigation was conducted jointly by OIG and the SSA OIG, with assistance 

from TSA. 

Airport Sweep Update

In January 2003, a former checkpoint security screener at Boston’s Logan 

International Airport was sentenced in U.S. District Court in Boston for making 

false statements and using a false Social Security number and alien registration 
43

card on his application for a security badge. He was sentenced to three years 

probation and is subject to deportation. This prosecution is one of 20 resulting 

from a joint airport security sweep by DOT OIG, SSA OIG, and INS.

 

A former passenger services agent at Miami International Airport pleaded guilty 

in January in U. S. District Court in Miami to providing a false Social Security 

number on an application for a security badge. She and seven other airport 

workers were arrested in September 2002 for various federal crimes involving 

their access to secure and sterile areas of the airport. To date, seven defendants 

have been convicted. The remaining defendants are to be tried in the near future.

Ten Contract Workers Arrested for Concealing Disqualifying Backgrounds

Ten contract employees in Stratford, CT, were arrested in January 2003 for lying 

about their criminal history, identity, or immigration status on their background 

applications. Because the company is a federal contractor with access to 

classified information, its employees must complete background applications. The 

employees worked for one of four contractors that provide a variety of services, 

including maintenance. Each had an electronic “key” card giving them access 

to the facility. The company manufactures and supplies replacement parts for the 

Coast Guard’s H.60 Jayhawk helicopter, used in search and rescue operations 

and offshore law enforcement and drug interdiction. This ongoing investigation 

was conducted by OIG and the Defense Criminal Investigative Service, with 

assistance from the SSA OIG, and INS. 

Flight School Owner Jailed for Four Years for Wide-Ranging Fraud

In January 2003, the owner and president of a flight school, was sentenced in U.S. 

District Court, Central Islip, NY, to 44 months in jail and $26,056 in restitution. 

In July 2002, a foreign national pleaded guilty to representing himself falsely as 

a certified flight instructor for instrument training and a U.S. citizen on Federal 

Aviation Administration (FAA) forms. He also pleaded guilty to wire fraud 

relating to an insurance claim for a plane that crashed prior to being insured and 

to access device fraud for unauthorized use of credit card account numbers to 
44 

obtain aircraft equipment, aviation fuel, and computer products. The case was 

investigated by OIG and the FBI with assistance from FAA.

15 Employees Arrested in Austin-Bergstrom International Airport Security 

Sweep

An airport security sweep at Austin-Bergstrom International Airport in Texas 

resulted in the arrests of 15 employees in January 2003, on federal charges of 

misuse of a Social Security number and making false statements and providing 

false immigration information on airport security badge applications. Six other 

workers were arrested on state charges of tampering with a government record in 

connection with their airport security badge applications. This was a multiagency 

operation involving OIG, the FBI, Treasury OIG for Tax Administration, U.S. 

Postal Inspection Service, the Customs Service, the Secret Service, the Austin 

Airport Police, and the Austin Police Department. 

Foreign National Sentenced for Falsifying Airman’s Medical Applications

A student enrolled in a pilot training program at a flight school, was sentenced in 

U.S. District Court in January 2003, in Orlando, FL, to two years probation and 

fined $400 for falsely claiming U.S. citizenship and failing to disclose a past DUI 

charge on three airman’s medical applications. He was taken into INS custody 

and is being detained pending the results of a deportation proceeding. 

Fifth Defendant in Airport Baggage Theft Case Pleads Guilty

In February 2003, an agent contracted to load and unload passengers’ luggage 

and belongings, pleaded guilty in U.S. District Court in Miami to using his 

airport security badge to steal items from the luggage of passengers at Miami 

International Airport. He was one of six defendants arrested by OIG, Customs 

Service, and the Miami-Dade Police Department on December 11, 2002. Five 

defendants have pleaded guilty, and the remaining defendant was scheduled for 

trial February 24. 
45

Airport Worker Pleads Guilty to Airport Security Badge Fraud

In February 2003, an employee at the Long Island MacArthur Airport in New 

York pleaded guilty in U.S. District Court in Central Islip, NY, for failure to 

disclose a felony conviction for robbery on his application for a security badge. 

As the employee, he performed and certified the required background checks of 

other employees. This case was investigated by OIG, with TSA’s assistance. 

Airport Security Sweep Update

Following up on the January security sweep at the Austin-Bergstrom International 

Airport in Texas, 19 former airport employees were sentenced on February 20 in 

U.S. District Court or Travis County (state) Court in Austin to time served and 

deported. After pleading guilty to federal charges of providing false statements to 

FAA or to state charges of tampering with government documents, all were placed 

on unsupervised probation, which means re-entry into the United States can be 

considered a violation of probation. During the sweep, 53 people were charged 

with allegedly falsifying information on their airport security badge applications. 

Of these, 29 are fugitives and five have pleaded not guilty and await trials. OIG 

conducted this investigation with the FBI, INS, SSA OIG, Treasury OIG for Tax 

Administration, and state and local authorities.

A carpenter for a private corporation doing renovation work at the Miami 

International Airport pleaded guilty in February 2003 in U.S. District Court in 

Miami, to making false statements on her application for an airport security badge 

by using a false Social Security number. She is the ninth defendant to plead guilty 

among 17 former employees netted during a September 2002 security sweep. A 

sentencing date has not been scheduled. This investigation was conducted by 

OIG, the Customs Service, SSA OIG and INS. 

Sixth Defendant in Airport Baggage Theft Case Pleads Guilty

In February 2003, the last of six defendants charged with conspiracy to use 

his airport security badge to steal items from the luggage of British Airways 

passengers pleaded guilty in U.S. District Court in Miami. The defendants were 
46 

employees of an airport contractor that loaded and unloaded luggage for British 

Airways at Miami International Airport. He is scheduled for sentencing on April 

30. The other five defendants will be sentenced on April 11. OIG conducted the 

investigation with the Miami-Dade Police Department, the Customs Service, and 

British Airways. 

Airport Security Sweep Update

In February 2003, a cargo handler at Philadelphia International Airport, was 

sentenced in U.S. District Court in Philadelphia after pleading guilty to lying 

about a felony conviction on his security badge application. He was sentenced 

to 24 months’ probation. He is the 15th defendant to plead guilty of 29 former 

workers netted during a November 2002 security sweep at the airport. The 

investigation was conducted by OIGs from DOT, the Department of Labor, the 

SSA, the FBI, the Customs Service, and INS.

Department Of Justice

As of October 1, 2002, the DOJ OIG had 172 cases in an open status and had 

opened an additional 79 investigations through March 1, 2003. The criminal 

investigations cover a wide range of offenses, including INS document fraud, 

bribery of a public official, alien and drug smuggling, and theft of government 

funds. The administrative investigations include serious allegations of 

misconduct, including allegations against high-level employees. Following are 

some of the cases investigated during this reporting period.

Sham Marriage Scheme Exposed

An INS adjudications officer assigned to the Miami District Office and a 

civilian were arrested in connection with the arrangement of sham marriages 

for the purpose of obtaining resident alien cards. An investigation by the DOJ 

OIG Miami field office led to a criminal complaint alleging that the civilian 

paid $3,000 to the adjudications officer and $3,000 to the sham spouse to 

perpetuate the scheme. Subsequently, the adjudications officer would approve 

the applications for adjustment of status to legal permanent resident and then 
47

stamp the respective passports and I-94 forms (Record of Arrival and Departure) 

to reflect legal permanent residency when, in fact, the persons were not legal 

permanent residents. Judicial proceedings continue.

Theft Of Government Funds

An INS information officer assigned to the INS’ Newark District Office was 

arrested and pleaded guilty to criminal information charging him with theft of 

government funds. A joint investigation by the New York field office and the U.S. 

Attorney’s Office for the District of New Jersey identified 49 immigration cases 

in which the information officer stole money orders worth more than $15,000 sent 

by aliens to pay immigration application fees. Sentencing is pending.

Contract Employees Destroy INS Documents

Two INS contract employees were arrested on charges of willfully destroying 

documents that had been filed with the INS. The contract employees were 

assigned to the INS Service Center in Laguna Niguel, California, and were 

responsible for processing incoming INS mail. One served as the assistant 

manager in charge of the file room and the other was the file room’s senior 

supervisor. A joint investigation by the Los Angeles field office and the INS 

developed evidence that in January 2002 the assistant manager ordered the 

senior supervisor and other file room supervisors to shred approximately 

90,000 unprocessed file room documents. By late March 2002, the backlog 

was eliminated; however, the assistant manager instructed the senior supervisor 

and other employees to continue shredding incoming unprocessed documents 

to prevent any further backlog. The types of documents shredded include U.S. 

and foreign passports, birth and marriage certificates, and INS applications and 

notices. Judicial proceedings are pending.

Employment Authorization Document Scheme

An INS supervisory immigration inspector, an immigration consultant, and 

five civilian co-conspirators were arrested pursuant to a criminal complaint and 

immigration warrants in the Southern District of California for conspiracy to 
48 

commit fraud; manufacture and misuse of visas, permits, and other documents; 

and reentry after deportation. A joint investigation by the El Centro Area 

Office, INS, FBI, USAO, and Department of State developed information 

that the immigration consultant and co-conspirators obtained employment 

authorization documents for their clients by submitting false information and 

other fraudulent documents with their applications. The investigation disclosed 

that the supervisory immigration inspector, who is assigned to the Calexico, 

California, port of entry, assisted the immigration consultant by falsely submitting 

cancellation of removal documents for aliens who were not eligible to receive 

them. Aliens paid from $3,000 to $14,000 for these services. Judicial proceedings 

continue.

Special Report On Travel Voucher Abuse

On January 8, 2003, the DOJ OIG released a special report on travel voucher 

abuse by INS Border Patrol agents detailed to assist “Operation Safeguard,” an 

extensive border enforcement initiative, in Tucson, Arizona. The investigation 

found that some Border Patrol agents falsified the amount of rent they paid and 

accepted amenities or cash rebates from lodging providers without reducing their 

claims for reimbursement. Further, the OIG found that supervisory Border Patrol 

agents improperly rented rooms to subordinate agents and in some cases provided 

the agents with falsely inflated receipts. The DOJ OIG report made several 

recommendations to the INS for reducing the abuse of travel reimbursements in 

connection with long-term details.

Treasury, Customs and Secret Service

Deli Owner Indicted on Bank Fraud-Update

On July 19, 2002, as a result of a joint investigation by the Office of 

Investigations, the Department of Labor and the United States Secret Service, a 

Philadelphia, PA, deli owner was indicted on one count of bank fraud involving 

forged U.S. Treasury checks, totaling $140,053, from the Philadelphia Financial 

Management Center. On January 15, 2003, the deli owner entered a plea of 
49

guilty to conversion of government property, and aiding and abetting. Sentencing 

was scheduled for April 15, 2003. 

U.S. Customs Officials Identified Mislabeled Korean Auto Parts

An investigation conducted by the Office of Investigations focused on the 

detection and interception of a shipment of mislabeled auto parts being shipped 

from a Canadian contractor to a U.S. contractor. It was determined that the 

Canadian contractor had re-labeled parts manufactured in Korea to indicate 

Canadian origin, and that the U.S. contractor underpaid approximately $4,708 in 

duties. As a result of the investigation, the U.S. contractor subsequently paid the 

additional duties in the amount of $4,708.

Three U.S. Customs Senior Managers Disciplined For Failing To Follow U.S. 

Customs’ Policy

An Office of Investigations investigation disclosed that a Group Supervisor, 

a Resident Agent in Charge, and the Special Agent in Charge of the Office of 

Investigations, the Customs Service, failed to notify the Customs Office of 

Internal Affairs, as required by Customs’ policy, that four OIG Special Agents 

traveled in government owned vehicles to a restaurant/bar to consume alcoholic 

beverages after completing a surveillance operation. As previously reported, 

three of the agents admitted to driving their government vehicles and storing 

their government issued firearms in the trunk of the government vehicle after 

consuming alcoholic beverages, in violation of Customs’ policy. The fourth 

agent, who was a passenger, also admitted to consuming alcoholic beverages.

The Group Supervisor was suspended without pay for ten days, the Resident 

Agent in Charge resigned in advance of proposed disciplinary action, and the 

Special Agent in Charge was suspended without pay for 15 days.
Additional Information and Copies

To obtain additional copies of this report, call the Office of Inspector General (OIG) 

at (202) 254-4100, fax your request to (202) 254-4285, or visit the OIG web site at 

www.dhs.gov.

OIG Hotline

To report alleged fraud, waste, abuse or mismanagement, or any other kind of criminal 

or noncriminal misconduct relative to department programs or operations, call the OIG 

Hotline at 1-800-323-8603; write to Department of Homeland, Washington, DC 20528, 

Attn: Office of Inspector General, Investigations Division – Hotline. The OIG seeks to 

protect the identity of each writer and caller.