[Congressional Record Volume 141, Number 172 (Thursday, November 2, 1995)]
[Senate]
[Pages S16624-S16625]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. D'AMATO:
  S. 1380. A bill to require forfeiture of counterfeit access devices, 
and for other purposes; to the Committee on the Judiciary.


                         forfeiture legislation

 Mr. D'AMATO. Mr. President, I introduce legislation that will 
close a 

[[Page S 16625]]

loophole which has proven to be a bonus to counterfeiters and a 
detriment to law enforcement. Simply stated, this legislation allows 
equipment used to counterfeit access devices to be treated like any 
other contraband and forfeited.
  Currently under law, certain items are designated as contraband. 
Narcotics, illegal firearms, and counterfeit currency often come to 
mind when the issue of contraband is raised. Contraband also includes 
property designed or intended as the means of committing a criminal 
offense. Since narcotics are contraband, illegal drugs can be seized 
from a suspected drug dealer, as well as the vehicle in which the drug 
transaction occurred.
  This bill would allow counterfeit access devices to be treated as 
contraband. Access devices are the means in which the account owner can 
access his or her own account, including credit cards and cellular 
phones. Counterfeiters can gain entry to this account and, in a matter 
of minutes, reach the owner's cash or use the owner's service. 
Criminals who perpetuate credit card fraud use equipment, such as an 
embosser and encoder, to imprint new numbers onto a piece of plastic. 
They are then able to use the credit cards to the limit for cash 
withdrawal using a valid credit card number. In telecommunications 
fraud, the offender can use an electronic serial number reader [ESN] to 
attract cellular phone numbers and store them for unauthorized use. By 
using a computer and a device called an E-chip, the offender can 
reprogram any cellular phone to call on another person's bill. Once the 
legitimate owner of the stolen cellular phone number realizes that 
their phone has been used by a criminal, the criminal is using another 
innocent owner's cellular number.
  Law enforcement agencies do all they can to catch the offenders. The 
New York Times reported on an imaginative operation devised by the U.S. 
Secret Service to find perpetrators of cellular phone fraud, through 
the use of a computer bulletin board. I ask unanimous consent that the 
text of this article be included in the Record, Mr. President, and I 
would like to take this opportunity to congratulate the Secret Service 
for working to end fraud on this and other fronts.
  The problem, however, is that when the perpetrators of credit card 
and cellular phone fraud are apprehended, and even convicted, the 
equipment used by the offenders is often returned to them after their 
sentence is served! Although this process seems preposterous, it is 
real. A credit card counterfeiter frequently receives his or her 
embosser and encoder once released from custody. The apparatus used to 
commit the cellular phone theft of services is also frequently remitted 
to the user, even if he or she was convicted. With their equipment 
intact, they are ready to commit fraud again if they so desire. The 
problem of counterfeit access devices costs the cellular phone 
companies and the banks billions of dollars every year. These costs get 
passed on to the customer.
  Remittance of equipment used in counterfeiting access devices is 
certainly not the intent of law enforcement or prosecutors. These 
dedicated officials work tirelessly to do the right thing. Why is it 
that the devices are not forfeited? It is simply because the law has 
not been updated to keep up with technology.
  The process is already in place for other contraband, such as 
narcotics, counterfeit currency and illegal firearms. It should not be 
too much of a stretch to extend the same procedures and safeguards that 
are available for these contrabands to counterfeit credit cards and 
cloned cellular phones.
  This legislation will not end the counterfeiting of access devices 
but it will end the practice of returning tools to those who may use it 
for illicit purposes. Any hurdle that we can create for the repeat 
offender should be clearly established in law. The message from this 
Congress must be: for every ingenious way that criminals can commit 
their crimes, Congress is prepared to stop them.
   Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                S. 1380

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. FORFEITURE OF COUNTERFEIT ACCESS DEVICES.

       Section 80302(a) of title 49, United States Code, is 
     amended--
       (1) in paragraph (4), by striking ``or'' the last place it 
     appears;
       (2) in paragraph (5), by striking the period and inserting 
     ``; or''; and
       (3) by adding at the end the following new paragraph:
       ``(6) a counterfeit access device, device-making equipment, 
     or scanning receiver (as those terms are defined in section 
     1029 of title 18).''.
                                                                    ____


               [From the New York Times, Sept. 12, 1995]

             Secret Service Goes on Line and After Hackers

                         (By Clifford J. Levy)

       It was a classic sting operation, the kind of undercover 
     gambit that has nabbed bad guys for decades: Federal agents 
     disguised as big-time thieves set up shop and put the word 
     out on the street that they were eager for business. Soon 
     shifty characters were stopping by, officials said, peddling 
     stolen goods that were worth millions of dollars.
       But as the agents revealed yesterday, the meeting place for 
     this subterfuge was not some grimy storefront. It was a 
     computer bulletin board that the United States Secret Service 
     has rigged together to troll for people who are illegally 
     trafficking in the codes that program cellular phones.
       The ``computer service,'' which led to the arrests of at 
     least six suspected hackers and the possibility of more, is 
     the latest indication that law enforcement agencies are being 
     forced to try novel strategies to keep up with the startling 
     growth in computer-assisted crime. Cellular-phone fraud alone 
     cost companies $482 million last year, the cellular-phone 
     industry estimates.
       According to the criminal complaint in the case, a Secret 
     Service agent used the Internet, the global computer network, 
     to announce that the bulletin board catered to those involved 
     in breaking into computers and in cellular-phone and credit-
     card fraud.
       ``People all over the country responded,'' said Peter A. 
     Cavicchia 2d, the special agent in charge of the Newark 
     office of the Secret Service, which ran the investigation. 
     ``They felt they could do this with impunity.''
       The Secret Service, which is the Federal agency charged 
     with going after cellular phone and credit card fraud, has 
     long been known to monitor commercial computer on-line 
     services like Prodigy and America Online, as well as smaller, 
     private computer bulletin boards, for illegal activities.
       But officials said this case represented the first time 
     that the Secret Service had created an entirely new computer 
     bulletin board, which is basically a system that links 
     different computer users, allowing them to chat with and 
     leave messages for each other. There have been a few 
     instances of other law enforcement agencies creating bulletin 
     boards for investigations.
       ``If they are selling the stuff in cyberspace, law 
     enforcement has to be willing to go there,'' said Donna 
     Krappa, an assistant United States Attorney in Newark, who 
     is on the team prosecuting the case. ``And the way to do 
     that is to have a fence in cyberspace.''
       As Federal law enforcement officials detailed it, the 
     investigation unfolded much like a traditional sting that 
     draws in people hawking stolen televisions, jewelry or cars. 
     The agents made contact with the suspects, then worked to 
     gain their confidence and allay their suspicions.
       The difference, of course, was that most of these 
     discussions were conducted with computers talking over 
     telephone lines.
       Last January, a Secret Service special agent, Stacey 
     Bauerschmidt, using the computer nickname Carder One, 
     established a computer bulletin board that she called Celco 
     51.
       It is relatively easy to put together a private computer 
     bulletin board, requiring only a computer, a modem, phone 
     lines and communications software. Special Agent Bauerschmidt 
     was assisted by an informer with experience as a computer 
     hacker, officials said. The equipment and phone line for the 
     scheme were located in a Bergen County, N.J., apartment 
     building.
       After buying hundreds of the stolen phone codes, the Secret 
     Service conducted raids in several states late last week, 
     arresting the six people and seizing more than 20 computer 
     systems, as well as equipment for making cellular phones 
     operate with stolen codes, said the United States Attorney in 
     Newark, Faith S. Hochberg.
       Officials said that of those arrested, two of them, Richard 
     Lacap of Katy, Tex., and Kevin Watkins of Houston, were 
     particularly sophisticated because they actually broke into 
     the computer systems of cellular phone companies to obtain 
     the codes.
       It is more common for thieves to steal the codes by using 
     scanners that intercept the signals that the phones send when 
     making calls.
       ``We consider this to be one of the most significant of the 
     wireless fraud busts that have come down so far,'' said 
     Michael T. Houghton, a spokesman for the Cellular 
     Telecommunications Industry Association, a trade group. 
     ``These guys took it another degree.''
       The others arrested were identified as Jeremy Cushing of 
     Huntington Beach, Calif., Al Bradford of Detroit, and Frank 
     Natoli and Michael Clarkson, both of Brooklyn.
                                 ______