Inside this Issue

Safeguarding America Through

Financial And Trade Investigations

www.ice.gov

Toll-Free Tip Line:

1-866-DHS-2ICE

Cornerstone is U.S. Immigration and

Customs Enforcement’s (ICE)

comprehensive investigative initiative

focusing on financial crime, trade fraud

and intellectual property crime.

Cornerstone also partners with the

business community to exchange

information on methods terrorists and

other criminal organizations use to earn,

move and store their illicit funding.

The Cornerstone Report is a quarterly

bulletin highlighting key issues related

to ICE financial and trade investigations.

‘Operation Roaming Charge’ 

Targets Telemarketing Fraud. . . . . . . . . . . 2

Garcia Testifies On ICE Efforts To 

Disrupt Terrorist Financing . . . . . . . . . . . . 2

Industry Alert: Counterfeit 

Automotive Parts A Growing Concern . . . 3

ICE Active In “STOP” Piracy Initiative. . . . 3

Cornerstone Investigations Update:

Selected Recent Cases . . . . . . . . . . . . . . . 4

Cornerstone Outreach: 

Recent/Upcoming Events . . . . . . . . . . . . . 5

Volume I: No. 4 • October 2004

Industry Alert: Fictitious Instrument Fraud

ICE Issues Warning About Bogus Government Bonds

“Sometime in the mid-1930s, a DC-10

belonging to the CIA crashed in the

Philippines . . . The crash site had gone

undiscovered until recently, when indigenous Filipino tribes discovered the existence of the wreckage and its cargo:

Boxes filled with Federal Reserve bearer

bonds issued by the U.S. government...

“For a small investment of $10,000 to

$30,000, investors can buy an interest

in one $100 million note. When the

Federal Reserve cashes the note in a

‘secret trading room,’ the investor will

make a 300 to 500 percent return... .”

Thus begins a recent “investment” pitchin a new fraud scheme that law

enforcement agencies call “Fictitious

Instrument Fraud” (FIF).

Fictitious Instrument Fraud involves the

sale or transfer of counterfeit or nonexistent financial securities, often based

on an elaborate back-story and

claims of extravagant returns on

one’s investment.

Typically, these phony securities bear

the name of the U.S. Federal Reserve,

but fraudulent securities instruments

have also been reported as coming

from the central banks of Japan,

Argentina, Germany, the Philippines

and other countries.

While this form of fraud has been

relatively uncommon in the past,

there is some evidence that it is

increasingly on the rise.

In one recent case, agents from U.S.

Immigration and Customs

Enforcement (ICE), the largest investigative arm of the Department of

Homeland Security, seized more than

$3 billion worth of the phony bonds

described in the pitch above.The perpetrators of the fraud claimed that

the fraudulent documents, part of a

“secret” agreement between the U.S. and

Chinese governments in the 1930s, were

supposedly lost when the plane taking

them to China crashed in the Philippines.

The con men peddling the bonds, which

were supposedly discovered in the wreckage of the plane by a Filipino tribe,

claimed that they could reap astronomical

returns for gullible investors—for a “modest” investment of $10,000 to $30,000.

There is concern that some investors may

have fallen prey to the scheme, but none

have yet been identified—perhaps because

the con artists have led investors to believe

that they will suffer serious consequences

if the government learns of their involvement in the scheme.

To learn more about Fictitious Instrument

Fraud, visit the U.S. Bureau of Public Debt

Web site at www.treasuryscams.gov. The 

site features examples of various types 

of fictitious instrument schemes and 

related scams.

$

An ICE agent shows a sample of the counterfeit

bonds used in a recent Fictitious Instrument Fraud

scheme. The worthless phony bonds, seized in

September in San Diego, were purportedly found in

the wreckage of a plane in the Philippines and

offered for sale to “investors” in the United States. 
ICE’s Cornerstone initiative is a key component of the federal government’s overall effort to detect

and disrupt terrorist financing

schemes, Assistant Secretary

Michael J. Garcia told a Senate

committee on September 29.

Mr. Garcia addressed the Senate

Banking, Housing and Urban

Affairs Committee along with

representatives from the FBI

and Treasury Department at a

hearing to evaluate the effectiveness of the government’s

fight against terrorist financing

in light of the recommendations of the 9/11 Commission

Report released July 22.

The illicit schemes that criminal organizations have used to

earn, move and store their

funding—including smuggling

and trafficking of contraband;

intellectual property crimes;

money laundering; and others—are equally vulnerable to

exploitation by terrorist

groups, Mr. Garcia said. ICE

employs a “forward looking”

approach to fighting terrorist

financing by seeking to identify and shut down such vulnerabilities, he added.

“As the 9/11 Commission

Report and other studies have

found, going forward we must

continually adapt our countermeasures and use all of our

enforcement tools and authorities to full effect,” Mr. Garcia

said. “For ICE, that means

addressing vulnerabilities that

could be exploited by terrorists to raise money.”

A full text of Garcia’s remarks is

available online at www.ice.gov.

$

The most extensiveglobal enforcement operation ever

directed at international

telemarketing fraud schemes has led to the

arrest of more than 135 individuals worldwide, ICE officials announced October 5.

“Operation Roaming Charge” was

launched in January 2004 as a combined

effort by ICE, the U.S. Department of

Justice, the Federal Trade Commission, the

U.S. Postal Service, foreign law enforcement

and others to coordinate the fight against

telemarketing fraud.

Telemarketing fraud schemes—including

bogus lottery and sweepstake schemes,

phony investment pitches and business

opportunities, tax fraud schemes and others—have grown increasingly sophisticated

and international in scope in recent years.

Telemarketing scammers often identify

themselves as lawyers, lottery officials or

Customs agents in order to make their

presentation appear authoritative.Typically,

the perpetrator will tell victims they’ve

won the lottery or a court settlement in

Canada and that they must first pay a tax,

fee or Customs duty in order to collect

their winnings.The victim, in turn, will

send a check or wire transfer to the scam

artist, who keeps the funds.

Under “Operation Roaming Charge,” U.S.

law enforcement agencies have partnered

with agencies in Spain, Canada, Costa Rica,

Nigeria, the United Kingdom and the

Philippines to shut down illegal telemarketing operations around the world.

A number of recent cases have also 

demonstrated that organized criminal 

operations are engaging in telemarketing

fraud, since it’s perceived as a relatively

low-risk but lucrative avenue for making

money. Many of the schemes prey on 

vulnerable seniors citizens.

Investigations under “Operation Roaming

Charge” have led to more than 100 arrests

in the United States and an additional 35

in other countries, along with the discovery of more than five million victims, who

suffered losses totaling more than $1 billion. In addition, various state attorneys

general have brought 279 criminal, civil

and regulatory actions against illegal telemarketing operations under this operation.

“I’m proud of ICE’s role in combating telemarketing fraud through Operation

Roaming Charge,” said Michael J. Garcia,

Assistant Secretary for ICE. “This crime is

particularly disturbing not only because it

targets the elderly, but also because the

callers frequently impersonate Customs

officials to give the appearance of legitimacy to their schemes.”

ICE has also played a leading part in fighting

telemarketing fraud through “Project COLT,”

a joint law enforcement initiative with the

FBI, the U.S. Postal Service and Canadian law

enforcement to intercept funds, track suspicious wire transfers, uncover fraud, and,

when possible, recover defrauded money

and return it to the victims.

For more information on telemarketing 

fraud schemes, visit the Federal Trade

Commission consumer Web site at

www.ftc.gov/ftc/consumer.htm.

$

Page 2 of 5

Volume I: No. 4

October 2004

‘Operation Roaming Charge’ Targets Telemarketing Fraud

Garcia Testifies On ICE Efforts To Disrupt Terrorist Financing

Michael J. Garcia, Assistant Secretary

for ICE, testifies to the Senate Banking

Committee on September 19.
I

n recent years, intellectual property

crimes have been 

associated largely 

with entertainment and technology products, such as CDs, computer software and

DVDs. But counterfeiters and intellectual

property fraud can strike any industry 

that depends on patented or copyrighted

products or processes.

The automotive parts industry, for example,

increasingly recognizes its own vulnerability

to counterfeiting and fraud—at an estimated

cost of up to $12 billion worldwide.That’s

according to the Motor and Equipment

Manufacturers Association (MEMA), a leading industry trade group representing auto

parts makers.

In September, representatives from ICE

briefed MEMA members about how the

agency’s Cornerstone investigations initiative can help to protect their intellectual

property rights. Auto parts makers have

seen a notable increase in counterfeit auto

parts being manufactured and distributed

in overseas markets.

ICE has encouraged auto parts makers to

report violations, as well as to pass along

information they may glean from their

own customers and investigations, in 

order to develop a unified front against

auto parts piracy.

The counterfeit auto parts market represents

more than lost profits for manufacturers. It

also leads to lost jobs for American workers,

and perhaps most alarmingly, opens up consumers to the possibility of inferior, defective and even dangerous merchandise.

The growth of intellectual property crime in

recent years is attributable to several causes—including the perception of less stringent enforcement, which has led criminal

organizations to view counterfeiting and

piracy as relatively low-risk avenues for making money. ICE and other law enforcement

agencies seek to counter that misperception

through vigorous enforcement of the laws

that protect intellectual property rights.

The lesson for auto parts manufacturers

applies to other industries as well—your

products may be vulnerable to piracy or

counterfeiting. Even small manufacturers

and makers of specialized parts are increasingly feeling the pinch.

If your company is victimized by counterfeit

products, we encourage you to share the

information with ICE. Call the IPR Hotline

Number of 202-344-2410, submit an IPR

violation report online at the ICE Web site at

www.ice.gov, or e-mail the IPR center directly

at iprcenter@dhs.gov.

$

Page 3 of 5

Volume I: No. 4

October 2004

Focus On Intellectual Property Crime

Industry Alert: Counterfeit Automotive Parts A Growing Concern

Spotlight On Investigative Resources:

The National Intellectual Property

Rights Center

The National Intellectual Property Rights

(IPR) Center is a multi-agency resource 

for investigations and outreach, responsible for coordinating a unified U.S. government response in enforcing intellectual

property laws.

Staffed with investigators from ICE and

the FBI, the IPR Center addresses a full

range of intellectual property rights violations, with a special emphasis on targeting major criminal organizations and the

use of the Internet to facilitate intellectual

property crimes.

In addition to coordinating U.S. law

enforcement responses to these crimes,

the IPR Center serves as a collection point

for intelligence on intellectual property

crimes provided by private industry. The

center also serves as a channel for cooperation between the U.S. government and

the private sector for fighting IPR crimes.

For more information, the IPR Center 

can be reached via e-mail at

iprcenter@dhs.gov.

ICE Active In “STOP” Piracy Initiative

ICEwill play a key role in a new government initiative to protect intellectual property rights (IPR)—the “Strategy

Targeting Organized Piracy” (STOP).

Developed over the last year, STOP is the

most comprehensive initiative ever

advanced to smash the criminal networks

that traffic in fakes, stop trade in pirated

and counterfeit goods at U.S. borders,

block the flow of bogus goods around the

world, and help small businesses to secure

their rights in overseas markets.

ICE, as the host agency for the Intellectual

Property Rights Coordination Center (see

sidebar on “IPR Center” at right), coordinates the U.S. fight against IPR crime both

in the domestic and international arenas.

Bogus products—including pirated CDs,

DVDs, software, electronic equipment,

clothing, auto parts and many others—are

estimated to account for up to seven percent of global trade and cost legitimate

rights holders around the world billions of

dollars per year.

The growing global trade in pirated and

counterfeit goods threatens America’s economy by stifling innovation and competitiveness in companies of all sizes. In addition, the dampening effect of counterfeiting and piracy ultimately leads to job losses

in the United States.

The STOP initiative was launched on

October 4 by Commerce Secretary Donald

Evans, DHS Under Secretary Asa

Hutchinson, Attorney General John

Ashcroft and U.S.Trade Representative

Robert Zoellick.

To learn more about the STOP initiative, visit

us online at www.ice.gov.

$
ICE Shuts Down

Arizona Smuggling

Scheme (Phoenix,

Ariz., October 4)—In early October, ICE

agents, working with officials in Arizona,

shut down a major smuggling operation

that was providing transport vehicles to

criminal smuggling organizations.

The multi-agency investigation led to 21

individuals being indicted for money laundering, participating in a criminal syndicate and other charges. In addition, 349

cars worth almost $1.4 million were seized

and 11 used car lots were shut down.

A task force comprised of ICE agents and

state officials uncovered an elaborate

scheme under which used car dealers provided criminal organizations with untraceable used cars that the criminal groups

could use to smuggle illegal immigrants,

cash or drugs.

ICE Cracks Major Cigarette

Smuggling Case (Los Angeles, Calif.,

July 9)—Two Los Angeles men were

charged July 9 with conspiracy and trafficking in counterfeit cigarettes after being

arrested by ICE agents—the culmination of

a year-long investigation.

ICE agents arrested Geoffrey Liu and Xing

Wu after they were caught delivering

more than 8,000 cartons of counterfeit

Marlboro cigarettes to a storage facility in

El Monte, Calif. During the investigation,

an ICE agent had purchased 900 cartons of

the counterfeit cigarettes from Liu and had

arranged for another $100,000 purchase.

The potential illegal profits from cigarette

smuggling are staggering. A carton of

counterfeit cigarettes can cost as little as

two dollars to produce in Asia; the same

carton can then be sold in the United

States for $70 or more.

Sixteen Charged in Phony Federal

Loan Conspiracy (San Francisco, Calif.,

September 14)—Sixteen individuals and

two companies were indicted in San

Francisco in September for their involvement in an elaborate conspiracy to obtain

fraudulent federal loans—the result of a

cooperative investigation between ICE and

several other federal and state agencies.

The indictment charges the defendants—

including a married couple who own and

control a chain of convenience stores in

Northern California and the Bay Area—

with entering into a series of separate but

interconnected conspiracies to defraud the

federal government by securing small

business and rural development loans to

which they are not legally entitled.The

conspirators were indicted on various

fraud and money laundering charges.

ICE, Colombian Authorities Seize 78

Properties Valued at $11.6 Million

(Washington, D.C., July 21)—ICE agents

in Colombia, working with their counterparts from Colombian law enforcement,

seized 78 properties valued at $11.6 million in July in association with a major

ongoing investigation into the laundering

of drug money.

The properties—including various residences, country houses, farms, businesses,

garages, expensive automobiles and

firearms—were titled in the name of or

otherwise tied to Harold Velez-Restrepo,

an accused member of Colombia’s Cali

drug cartel.

Velez-Restrepo was arrested in December

2003 and awaits extradition to the United

States. He was indicted in Florida on

charges of money laundering and conspiracy to distribute a controlled substance.

ICE’s Financial Investigations Unit lent its

expertise to this ongoing investigation,

working in conjunction with Colombian

law enforcement and the U.S. Drug

Enforcement Administration (DEA) to disrupt and dismantle the Cali drug cartel

over the last several years.

ICE, Chinese Government Break

Global DVD Piracy Ring (Washington,

D.C., July 30)—In July, ICE worked with

the Chinese government to break up a

major international distribution network

dealing in counterfeit DVDs, arresting six

individuals, including two U.S. citizens,

and seizing a substantial amount of cash

and more than 210,000 counterfeit DVDs.

That same investigation led to Chinese

authorities locating and destroying three

warehouses that were being used to store

those DVDs for distribution around the

globe, including into the United States.

The case was a joint effort between ICE,

the IPR Center and Chinese law enforcement. In addition, the Motion Picture

Association of America provided crucial

industry assistance. $

Page 4 of 5

Volume I: No. 4

October 2004

Cornerstone Investigations Update:

Selected Recent Cases 

An ICE agent inspects the vehicle identification number on a car seized as evidence

after ICE, working with authorities in 

Arizona, shut down a major smuggling 

transport scheme.
Recent Events

• From June 6–10,

2004, representatives from the ICE Financial

Investigations Cornerstone Unit and

the ICE Office of Public Affairs (OPA)

attended and participated in the

International Association of Financial

Crimes Investigators (IAFCI) Annual

Convention, in Chicago, Ill.These ICE

representatives operated an exhibit

booth outlining ICE’s financial investigative accomplishments and the

Cornerstone program.

•On September 9, 2004, field and

headquarters representatives from

ICE’s Commercial Fraud and

Intellectual Property Rights Unit met

with representatives from the automotive industry and the Motor

Equipment Manufacturing Association

(MEMA), at an ICE-Industry

Quarterly Meeting in Dearborn,

Mich., to address intellectual property

crimes facing that industry.

•On September 21, 2004, managers

from the ICE Financial Investigations

Cornerstone Unit conducted a financial presentation/outreach to attorneys and compliance officers at the

America’s Community Bankers (ACB)

Annual Compliance and Attorneys

Conference, in Philadelphia, Penn.

•On October 4, 2004, Marcy Forman,

ICE's Director of Investigations, spoke

at the International Banking Security

Association Conference in Dallas,Tx.,

offering an overview of Cornerstone

financial investigations for security

officers and investigators from the

financial industry.

Upcoming Events

•Representatives from the ICE

Financial Investigations Cornerstone

Unit will attend the America’s

Community Bankers (ACB) Annual

Convention in Washington, D.C.,

October 17–20, 2004. On October

19, 2004, Mr. Kevin Delli-Colli,

Acting Deputy Assistant Director of

the ICE Financial Investigations

Divisions, will co-chair a panel

focusing on financial crime.

•Field and headquarters representatives from ICE will attend the 

Annual Bank Secrecy Act Conference,

in Los Angeles, Calif., on October

21–22, 2004.

•Marcy Forman, ICE’s Director of

Investigations, will offer a special

presentation on ICE financial investigations at the American Bankers

Association (ABA) Annual Money

Laundering Enforcement Conference

in Washington, D.C., October 24–27,

2004. Representatives from the ICE

Financial Investigations Cornerstone

Unit and the ICE Office of Public

Affairs will also be on hand at the

conference to outline ICE investigative accomplishments and the

Cornerstone program.

Page 5 of 5

Volume I: No. 4

October 2004

U.S. Immigration and Customs Enforcement (ICE) is the largest investigative arm of the Department of Homeland Security (DHS).

ICE’s mission is to secure the homeland by enforcing immigration and

customs laws and by protecting U.S. commercial aviation and federal

facilities. Cornerstone, ICE’s comprehensive enforcement initiative

focusing on financial and trade fraud investigations, is a key component of that mission.

In addition to financial and money laundering investigations, Cornerstone targets commercial fraud, smuggling and trafficking, export and trade violations and intellectual property

crimes. ICE’s global reach allows the agency to investigate these crimes around the world.

The Secretary of Homeland Security has determined that the publication of this newsletter

is necessary in the transaction of business required by law of U.S. Immigration and

Customs Enforcement (ICE).

The Official Newsletter of Cornerstone

Cornerstone Calendar 

Invitation For Cornerstone

Report Article Submissions

The Cornerstone Report covers a

broad range of topics related to

financial investigations and potential

vulnerabilities in the financial and

trade sectors.

We strive to present clear thinking by

knowledgeable observers that can be

read with ease and pleasure by both

professionals and a general

audience, and we’re happy to review

unsolicited submissions for potential

publication in the newsletter.

If you would like to submit an article

for publication or simply find out

more about how you can participate

in the Cornerstone initiative, drop us

an e-mail at tripwire@dhs.gov for

more information.