Sanders Research Associates, Limited
May 13, 2008
Few Americans pay attention to the Bush administration’s effort to better monitor terrorist communications. In short, federal authorities want to indirectly void the 4th Amendment to the U.S. Constitution, which requires a warrant signed by a judge before they can search a person’s home and other personal information. This seems harmless to most law abiding citizens, so why is this opposed by many in the U.S. Congress? The answer is that most people have skeletons in their closet, as New York Governor Eliot Spitzer recently demonstrated. Congressmen know that the U.S. government wants to learn every detail about everyone’s private life through the growth of massive computer databases and new search technology that allows “data mining.”
Prior to the “war on terror,” the “war on drugs” was the excuse to gradually errode the U.S. Bill of Rights. Since drug lords do business in cash, a database called the Financial Crimes Enforcement Network (FinCEN) was established to monitor cash transactions in the USA. Banks must submit a report on persons who make a cash transaction of $10,000 or more. Drug lords learned of this, so they limited transactions to less than $10,000. As a result, laws were passed that require banks to also report “suspicious” or multiple cash transactions below $10,000. Since money was often laundered through casinos and money transfer companies like Western Union, they are required to submit reports to FinCEN too.
This data provided federal agents with leads to possible criminal activity, but they were often unable to link cash transactions to a specific crime. As a result, a vague law prohibiting “structuring” was enacted, in which it became illegal to structure transactions to avoid the $10,000 reporting requirement. This little understood law is a favorite tool of law enforcement because few Americans know that depositing or withdrawing a few thousand dollars in cash a few times a year may land them in prison. Once such activity is detected, federal agents demand an explanation, while threatening to imprison the suspects for “structuring.” As a result, thousands of uncooperative or unconvincing Americans have been imprisoned for nothing more than suspicious cash transactions.
A good example occurred in 2003 when famous talk show radio host Rush Limbaugh was investigated. He had become addicted to pain killers and purchased them on the black market with the help of his maid. He withdrew cash 30 to 40 times from his bank account at amounts just under the $10,000 bank reporting requirement. FinCEN tipped off federal officials and an investigation was launched. "I was not laundering money. I was withdrawing money for crying out loud," Limbaugh said in his three-hour broadcast, soon after he returned from five weeks of drug rehab. Limbaugh is an influential multi-millionaire with close ties to President Bush, so criminal charges were never filed.
However, there are thousands of cases where law enforcers abused the intent of money laundering laws. Foreign exchange dealers, car dealers, or local wire transfer dealers may be offered a bonus by undercover agents if they promise not to file the required report. If they agree, they are arrested. People attempting to hide money from the IRS or their wife or debt collectors are often investigated. Large cash withdrawals by Eliot Spitzer for his expensive prostitution flings were detected by FinCEN, which led to his downfall.
Money laundering is a federal crime with heavy penalties. It was sold to Congress as an essential tool to use against elusive drug dealers and organized crime bosses. Nowadays, it is part of almost every federal indictment that involves cash transactions as part of criminal activity. It is routinely abused by federal prosecutors to entice a guilty plea for minor crimes. Suspects, who insist on innocence and a trial, face the prospect of ten years in prison for money laundering, even though the penalty for their root crime is less than a year in prison. The most serious count facing Eliot Spitzer is money laundering.
Most federal agents and prosecutors are not zealots, but professionals doing their best. They want every tool Congress will allow, which is why most criminal laws in the USA are not written by congressmen responding to concerns of citizens, but by federal employees in the U.S. Justice Department. The 9-11 terror attack provided them with a unique opportunity to amass a wish list of new powers that became known as the “Patriot Act.” This further weakened the Bill of Rights, but did not eliminate the requirement for search warrants.
The 4th Amendment requirement for search warrants has become the key issue in a political battle between the Bush administration and Congress. Law enforcers desperately want authority to engage in widespread “data mining.” New computer search-engine technology now allows massive databases to be easily mined for information. Data mining is routinely used by private companies for marketing and credit reporting purposes. It is also used by government agencies to pursue tax evaders and criminals using their own databases, such as FinCEN. However, using government computers to browse private sector databases is illegal, since judges refuse to issue a blanket warrant allowing the random search of all information of all American citizens.
The media has produced hundreds of stories about “warrantless wiretapping” during terrorist investigations. However, the central issue is not terrorism, but the desire by federal agencies to engage in unlimited data mining. There are numerous examples where agencies already conduct private sector data mining without obtaining search warrants or complying with federal laws such as the Privacy Act. This was revealed in a 2005 report from the General Accounting Office, which reviewed the policies of five government departments in regards to data mining and found clear violations of federal law. The report did not delve into data mining details, but a graphic toward the end shows that the IRS already mines data from state driver’s license records and telephone databases.
Credit Card Money Laundering
In recent years, the IRS became aware of the widespread use of credit cards to evade taxes and launder money. Credit card payments are not scrutinized like bank deposits, and records exist in computers separate from traditional banking records. Thousands of small businessmen discovered that they can mail a customer check as a payment to their personal credit card account, so that taxable income disappears from their business books. In addition, criminals can mail money orders purchased with cash to pay credit card bills.
This is small-time money laundering, yet the problem is massive and IRS and other federal agencies have no legal authority to sift through credit card records without a specific warrant, while banks have no obligation to report suspicious activities. The credit card payment process is completely automated, so payments are accepted even if the payee name does not match the cardholder.
Credit cards were a favorite method of obtaining money from secret overseas bank accounts until 2004. Customers used them to pay for anything and even take cash advances using a system outside traditional banking channels. This infuriated the IRS until they found a judge with no fondness for the Bill of Rights, probably one with serious tax problems. He brazenly waived the 4th Amendment and issued a blanket summons to secure all offshore transaction data from MasterCard International Inc. and Visa USA for 31 countries that are known tax havens.
A blanket summons for all records is certainly a violation of the 4th Amendment and the Privacy Act. In these cases, the IRS does not pursue a lead against a specific taxpayer; it uses data mining to fish for information. Now that a legal precedent has been set, the IRS wants access to all domestic bank credit card computer systems for data mining. This would allow income claimed on returns to be matched with spending. In addition, airline travel, automobile fuel charges, and hotel stays could be matched against travel claims.
The IRS Loves Data Mining
The American people have no desire for the IRS to sift through their credit card records, so a “telecommunications” act to allow warrantless searches is the best route to legalize what the IRS already does to some extent. The IRS already data mines its own database and several others with software called “REVEAL” to spot anomalies in tax returns. If someone earned $50,000 in 2006 plus $45 in bank interest, yet in 2007 they earned $14,000 in interest, the IRS wants to know where that money came from. Or if they have a $30,000 mortgage interest deduction, the IRS wants to know how they afford such a huge house.
The IRS does not need proof of income tax evasion to assess taxes and penalties. It simply makes allegations that a taxpayer must disprove, which is why accountants tell taxpayers to keep all records for their entire life. “Lifestyle Audits” are extremely intrusive as they require taxpayers to refute anomalies detected by IRS computers. While the IRS is restricted to audits going back just three years, it can demand proof of income for everything a persons owns, meaning one must keep a financial record of their entire life. If the taxpayer refuses or is unable to prove how his assets were obtained with declared income, an agent assesses a tax based on speculation.
The IRS refuses to disclose what other databases it mines, but does pay private sector data miners for information. Databases exist that detail every car, boat, airplane and property each taxpayer and their children own. Databases of insurance policies and claims offer additional clues. Even frequent flyer databases are of interest, because the IRS considers frequent flyer awards as income.
Snooping Technology Keeps Growing
Even more intrusive technology has appeared over the past couple of years. Several court cases revealed that companies like Yahoo and Google keep a record of every search term ever made from every computer address, and links it to an account if that person is logged on. Their databases keep copies of all e-mails as well, even after the user deletes them. Most people do not even realize copies of deleted e-mails remain in their account within their SENT or the TRASH section. Even if these are cleared, the data remains on their computer hard disk and can be retrieved by experts.
Experts had long assumed that federal agencies could infect personal computers with “spyware” programs that automatically forward all activity for government review. This was confirmed last year in a court affidavit where:
“FBI agent Norman Sanders describes the software as a ‘computer and internet protocol address verifier,’ or CIPAV. Sanders wrote that the spyware program gathers a wide range of information, including the computer’s IP address; MAC address; open ports; a list of running programs; the operating system type, version and serial number; preferred internet browser and version; the computer’s registered owner and registered company name; the current logged-in user name and the last-visited URL. The CIPAV then settles into a silent ‘pen register’ mode, in which it lurks on the target computer and monitors its internet use, logging the IP address of every computer to which the machine connects for up to 60 days.“
Since this was used in common case of an e-mail bomb threat to a high school, citizens must assume it is used in all cases. Many techies fear that the newest version of the unwanted Yahoo toolbar is part of a government program because it collects user information. This toolbar has infected most personal computers and Yahoo’s instructions on methods to remove this data collection “spyware” do not work for the new version.
Databases of medical records are mined by insurance companies to verify applicant information so the sickly can be denied coverage. Mining medical databases may uncover embarrassing details, like: treatment for venereal diseases, treatment for drug or alcohol abuse, psychiatric counseling, cosmetic surgery, and what prescription drugs a person has used. Some fear databases that include DNA will soon exist so that insurers can deny coverage to healthy people who have a greater genetic chance of succumbing to deadly diseases.
Internet usage by employees is widely monitored by businesses to prevent hours of casual browsing and shopping on company time. In addition, e-mail sent from company computers is considered company property, and can be read by bosses. Data mining technology under development by the U.S. Air Force monitors e-mail traffic to uncover social networks among employees and outsiders. Unusual traffic or a change in traffic indicates a troubled or disgruntled employee, who warrants investigation. E-mails that express interest in a sensitive topic may indicate espionage or a whistleblower.
A major problem is that these databases are filled with errors caused by data entry typos, identity theft, or similar names. One can see this problem by paying any of the dozens of on-line background check companies to provide a report on oneself. The data provided by these simple checks is frightening, as well as the large number of errors. The ease in which this personal data can be retrieved explains why identify theft has become rampant. As a result, each year millions are denied jobs, loans, or medical coverage, or are investigated and even arrested because of database errors. Mass illegal immigration to the USA has made this problem far worse as undocumented workers use documents from citizens to function in society.
Last year, an article in Sanders Research explained the growing danger of databases for blackmail. This may explain why most Congressmen are afraid to confront abuses by the executive branch led by President Bush. Julian Sanchez recently provided an excellent overview of why Congress passed various laws in support of the 4th amendment over the years:
“…for decades, intelligence analysts — and the presidents they served — had spied on the letters and phone conversations of union chiefs, civil rights leaders, journalists, antiwar activists, lobbyists, members of Congress, Supreme Court justices — even Eleanor Roosevelt and the Rev. Martin Luther King Jr. The Church Committee reports painstakingly documented how the information obtained was often ‘collected and disseminated in order to serve the purely political interests of an intelligence agency or the administration, and to influence social policy and political action.’"
Former New York Governor Eliot Spitzer is a recent example of a prominent American whose career was destroyed by intrusive government surveillance. He had harmed no one, yet his desire to have sex with beautiful women is deemed criminal. Like most Americans, he had violated one of thousands of federal statutes that can be legally interpreted as a heinous offense. On the other hand, this particular case is ironic since Spitzer was known for abuse of statute intent during his years as a federal prosecutor.
While the Spitzer story received widespread media coverage, the intriguing inner story was ignored, even after it was mentioned in the Washington Post, which revealed: "The FBI placed a surveillance team on Spitzer at the Mayflower Hotel for the first time on Jan. 26, after concluding from a wiretapped conversation that he might try to meet with a prostitute when he traveled to Washington to attend a black-tie dinner, the source said Tuesday."
Americans have a federal government near bankruptcy, yet it dispatches several $100,000 a year FBI agents to spy on a senior political rival in hopes of ruining his career. This is the same government that continually informs citizens that a major terror attack is imminent, and claims that all available resources are focused on this threat. The American media did not critically pursue this story, perhaps because owners, editors, and reporters fear they may become “data mined” and placed under surveillance. This fear was confirmed when it was recently revealed that the FBI searches telephone records of reporters in hopes of finding their sources of information. One must read news from Hong Kong where Asia Times writer, F. William Engdahl, clarified the issue with an article entitled “Why Spitzer was Bushwhacked,” where he wrote:
“Spitzer was likely the target of a White House and Wall Street dirty tricks operation to silence one of the most dangerous and vocal critics of their handling of the current financial market crisis. A useful rule of thumb in evaluating spectacular scandals around prominent public figures is to ask who might want to eliminate that person”
Spitzer was quoted as saying “The Bush administration let the housing bubble inflate and now that it’s deflating we’re dealing with the consequences. The real failure, the genesis, the germ that has spread, was the subprime scandal,” Spitzer has made no bold comments in recent weeks, as he hopes to stay out of jail. Meanwhile, fear has assured that no other prominent American political figure or journalist suggests that the Bush administration is to blame for the current financial crisis.
 “FBI’s Secret Spyware Tracks Down Teen Who Made Bomb Threats”; Wired; Jul.18, 2007.
 “Sniffing Out Insider Threats May Improve Public Safety, Prevent Terrorism”; Medical News Today; Feb. 23, 2008;
 “Wiretapping’s True Danger”; LA Times; Mar. 16, 2008; http://fairuse.100webcustomers.com/itsonlyfair/latimes0160.html
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