Counterintelligence Awareness

The FBI vigilantly investigates cases of industrial espionage and theft of intellectual property, but the Bureau also places great emphasis on preventing such crimes by educating industry on ways to keep trade secrets safe. One such innovative program in North Carolina’s Research Triangle is a collaborative effort with other federal partners called RED DART.

	Learn More - Collaborative Approach Yields Intelligence Sharing- The Insider Threat: Two Cases

The threat to America’s trade secrets—and to our national security—is real, whether it comes in the form of international spies, hackers probing online security systems, or disgruntled employees out for revenge. RED DART seeks to mitigate the threat by raising counterintelligence awareness.
Through briefings to cleared defense contractors and others in technology-rich North Carolina, RED DART makes executives and employees aware of how counterintelligence works and how they can spot suspicious activity both inside and outside their companies.

	Protecting Your Business from Espionage Here are a few precautions business executives and employees can take to protect trade secrets: -  Recognize there is an insider and outsider threat to your company. -  Identify trade secrets and implement a plan for safeguarding them. -  Secure physical and electronic versions of your trade secrets. -  Confine intellectual knowledge to a need-to-know basis. -  Provide training to employees about your company’s intellectual property plan and security. -  Do not store private information vital to your company on any device that connects to the Internet. -  Use up-to-date software security tools. Many firewalls stop incoming threats but do not restrict outbound data. -  Educate employees on e-mail tactics such as spear phishing. Establish protocols for quarantining suspicious e-mail. -  Remind employees of security policies on a regular basis through active training and seminars. Use signs and computer banners to reinforce security policies. - Ask the FBI or other security professionals to provide additional awareness training.

“Everybody wants to emulate U.S. technology,” said Brent Underwood, a special agent with the Naval Criminal Investigative Service who helped create RED DART. “If countries can shortcut 10 or 20 years’ worth of research and development by stealing our technology, that puts them at an obvious advantage.”
Despite the occasional high-profile case where a spy accesses highly classified documents, the majority of stolen technology is unclassified, said FBI Special Agent Lou Velasco, who manages the program out of our Charlotte Division. “With the right amount of information,” he explained, “state actors can reverse-engineer our products or build them from scratch.”
When that happens, our adversaries can be more competitive on the battlefield as well as in the global marketplace. “A big part of our program is putting information out there about the threat so that people understand just how serious it is,” Velasco said. “When a company’s trade secrets are compromised, it can threaten national security, but it can also hurt that company’s bottom line and its ability to keep people employed.”
The threat from inside a company may be employees secretly sent by foreign countries to steal secrets. RED DART briefings help employees spot suspicious behavior, such as a staffer working odd hours, asking inappropriate questions, or making frequent trips overseas. Externally, foreign agents may pose as potential investors or customers to gain access to technical information that could compromise a company’s trade secrets. And weak online security is always an invitation to hackers.
Griff Kundahl, executive director of the Center of Innovation for Nanobiotechnology in North Carolina, a state-funded organization that fosters new technology in the region, has worked closely with the RED DART program to help educate the center’s members.
“Our core constituents are early-stage companies,” Kundahl said. “They developed a product that might treat cancer, for example. They are trying to raise money and get their product to market. They don’t have much time or the resources to consider security risks. If RED DART can get them to understand these risks, it helps everybody. When they realize that all their efforts could be for naught if their technology is stolen or compromised, it can be eye-opening for them.”
“Our challenge is to show how real the threat is,” Velasco said. “We arm people with tools so that they can make appropriate business decisions.”
Michelle Brody, a special agent with the Defense Security Service and a founding member of RED DART, added, “When RED DART helps a company protect itself a little better, it not only helps them, it helps our national security.”

Preying on the Weak

It was a despicable scheme—stealing identities of terminally ill individuals to fraudulently obtain millions of dollars from insurance companies and bond issuers.
Attorney Joseph Caramadre, president and CEO of his own estate planning company in Rhode Island—along with Raymour Radhakrishnan, an employee—pled guilty earlier this month in federal court to conspiracy to commit identity theft and wire fraud.
Caramadre’s investment strategies depended on lying to terminally ill individuals and their loved ones to obtain identity information. He abused two financial instruments—variable annuities and death put bonds (see sidebar)—to carry out these strategies. In addition to buying annuities from insurance companies listing terminally ill individuals as annuitants, he also purchased bonds of distressed companies for significantly below face value listing terminally ill individuals as “co-owners.” When the terminally ill person died days or weeks later, he would exercise the death benefits associated with the investments.
Caramadre recruited investors by falsely telling them he found a loophole which permitted the use of terminally ill patients as annuitants on annuities and co-owners on brokerage accounts used to purchase death put bonds. He then entered into profit-sharing agreements with them, but received a significant percentage of the profits himself.

	Financial Instruments Misused in the Scam - Variable annuities: Investments akin to mutual funds with death benefits. These death benefits include a guaranteed return of all money invested plus a guaranteed profit—even if the market went down—and various other bonuses and enhancements upon the death of the person named as the annuitant. - Death put bonds: Corporate bonds with survivor options purchased through a brokerage account. Under the terms of these bonds, the owner of a bond is able to redeem it at face value years or even decades prior to the bond’s maturity date upon the death of the bond’s co-owner. The financial success of Caramadre’s schemes depended entirely on the imminent death of the person named as the annuitant or co-owner.

In recruiting terminally ill individuals for his scheme, Caramadre was only interested in those with a life expectancy of six months or less. He looked for victims in several ways: visiting AIDS facilities, putting ads in a local religious newspaper offering cash to terminally ill individuals, and even looking through his own company files.
The ads purchased by Caramadre were especially fruitful…in them, he claimed to be a philanthropist and offered the terminally ill a few thousand dollars to assist with their funeral expenses. The ads also got him access to hospice care facilities, nurses, and social workers who could spread the word about his offer.
Radhakrishnan would visit patients and their families to supposedly determine whether they qualified for the donation, but he was actually assessing their life expectancies…the shorter the time, the better for the scheme.
Patients who accepted Caramadre’s cash offer were asked to sign a document, ostensibly because the philanthropist needed it for tax records, but in reality it was so their signatures could be forged later on. Sometimes, they were asked to sign signature pages from actual annuity and brokerage account applications that were disguised as something else. Sometimes, they were told that actual accounts would be open, but that all profits would go to other terminally ill people. And they were always asked for personal information, like Social Security number, birthdates, driver’s license numbers, etc.
Once armed with the fraudulently obtained identity information, Caramadre purchased annuities and death put bonds. And both he and Radhakrishnan took numerous steps to deceive the insurance companies and brokerage houses to hide Caramadre’s true ownership interest.
Caramadre’s scheme went on for about 15 years—from 1995 to 2010—until some of the insurance companies and brokerage houses he defrauded filed complaints, and investigators with the FBI, U.S. Postal Inspection Service, Internal Revenue Service, and U.S. Attorney’s Office began looking into the matter.
Lesson to be learned. If you or a family member is suffering, physically or financially, don’t make quick business decisions….you still need to do your due diligence.

North to Alaska Part 4: The Shot that Pierced the Alaska Pipeline

Located less than 200 miles from the Arctic Circle, our resident agency in Fairbanks is one of the FBI’s most remote offices—but its three investigators cover an expansive amount of territory and help safeguard some of the country’s most valuable infrastructure.
Within the office’s area of responsibility is the Trans-Alaska Pipeline, an 800-mile engineering marvel that has carried billions of gallons of crude oil from Prudhoe Bay to Valdez since it began pumping in 1977.
“For as long and as exposed as the pipeline is, it is definitely not a soft target on the ground or in the air,” said Special Agent Bruce Milne. That’s because the pipeline’s owner, Alyeska Pipeline Service Company, provides extensive security and maintains strong ties with local and federal law enforcement.

	FBI Agent and Dog Musher Special Agent Bruce Milne has spent 25 years in the FBI, and most of that time has been in Fairbanks—Alaska’s second largest city with about 32,000 residents. “Inside the city limits it’s like any other small town,” he said, “but go 10 minutes out of town and it’s just about complete wilderness.” Even though winter temperatures can plummet to 60-below zero and highway signs caution drivers to beware of moose, Milne is happy to be in Fairbanks because he has a passion for training and racing sled dogs. Alaskans call it “mushing,” and Milne has done more than his share. In 2007, the Boston native competed in the famous Iditarod—known as “the last great race”—and he has also raced multiple times in the equally grueling Yukon Quest. The Iditarod begins in Anchorage each year on the first day of March and ends more than 1,000 miles away in Nome. It is an extreme test of skill and endurance, pitting man and his dog team against the elements and the clock. “Being known in dog mushing circles has helped me as an FBI agent,” Milne said. “The residents here appreciate the fact that I am a member of their community, not just somebody who will leave after a few years.”

“We all take the security of the pipeline very seriously,” said Milne, a 25-year FBI veteran who was drawn to Alaska in part because of his interest in dog sledding (see sidebar). “Our Joint Terrorism Task Force coordinates closely with Alyeska and Alaska State Troopers to protect the pipeline,” he added.
One case that stands out for Milne occurred in October 2001, when a resident of Livengood—a town of less than two dozen people about 50 miles north of Fairbanks—shot a hole in the pipeline with a high-powered rifle.
A bullet would not ordinarily breach the pipeline’s exterior, which is constructed of thick steel and lined inside with several inches of high-density insulation. But the single shot from Daniel Lewis’ rifle somehow did penetrate the pipeline, and oil began streaming out with tremendous force. “If you would have put your hand in front of the leak,” Milne said, “the pressure would have taken it off.”
Lewis, described later in court as a career criminal, had been released from jail only weeks before the shooting incident. He was detained by troopers after he and his brother were spotted near the spill.
Milne and his colleague, Special Agent Mark Terra, were called in to investigate. They recovered the rifle—the scope had blood on it where it had recoiled against Lewis’ face—made plaster foot casts at the crime scene, and began interviewing people who knew the Lewis brothers. “Alyeska security and local troopers did a tremendous amount of work on this case as well,” Milne said.
Meanwhile, oil spewed from the pipeline for days before engineers could stop it. More than 285,000 gallons of crude were spilled as a result of that small bullet hole and—according to press reports at the time—the cleanup took many months and cost $13 million.

A stretch of the 800-mile Trans-Alaska Pipeline.

Lewis was charged with a range of federal and state crimes, from weapons offenses to oil pollution, criminal mischief, and driving while intoxicated. In 2002 he received a 10-year federal sentence; the following year in state court, he was sentenced to 16 years in prison. His sentences are running concurrently.
Coming less than a month after the 9/11 terror attacks, the pipeline shooting served as a reminder that protecting the country—whether from terrorists or other criminals—requires constant vigilance. “Everyone here recognizes that the stakes are as high in Alaska as anywhere else,” Milne said. “That’s why we work so closely with our partners to maintain the highest level of security.”

North to Alaska Part 2: An Explosive Situation in the Dead of Winter

The call came in to the Anchorage Field Office early on a Sunday morning in January 2010. An explosion had taken place at a Fairbanks residence, and a 21-year-old man had been seriously injured.
After consulting with local authorities on the scene, our weapons of mass destruction (WMD) coordinator and other FBI personnel were not sure if the explosion was related to a drug manufacturing operation or linked to a terrorism threat. But everyone understood that our assistance was required, because the house contained a variety of hazardous, unstable materials.
Members of our Evidence Response Team (ERT), the Joint Terrorism Task Force (JTTF), and others from the Anchorage office gathered their equipment and prepared to drive to Fairbanks—365 miles to the north—in the middle of a violent winter storm.
“It was 58 degrees below zero, with high winds, blizzard conditions, and black ice on the highway,” said Special Agent Derek Espeland, the WMD coordinator who is also one of Anchorage’s two special agent bomb technicians.
Based on the description of materials in the house, agents initially thought the man was making methamphetamine—meth labs are an unfortunate reality in many rural communities. The victim, who walked to a nearby fire station despite the sub-zero temperature, was burned and bleeding. He claimed he was building a rocket when it blew up. Before he could be questioned further, he was flown to a burn unit in Seattle for treatment.
After a harrowing drive from Anchorage that took more than seven hours, FBI personnel arrived on scene along with bomb techs from the Air Force and local law enforcement. The meth lab theory was ruled out, “but then you almost had to conclude that the guy could be a terrorist,” Espeland said. “Everything we saw in the house we had seen being used by terrorists in Iraq and Afghanistan.”
As it turns out, the 21-year-old was neither a drug maker nor a terrorist. He was just fascinated with explosives and blowing things up. He had legally purchased all his ingredients—of course, our agents didn’t know that at the time. And because the house was a public safety threat, Espeland said, “we couldn’t just walk away.”
To neutralize the threat, it was decided to employ several render-safe techniques using specialized equipment. But that was easier said than done. Robots and other battery-powered equipment were inoperable in the nearly 60-below temperature because the batteries were frozen. Espeland’s evidence camera froze to his face when he tried to take a picture—inside the house. Vehicles had to be kept running for fear they would freeze if turned off, even with warming blankets and engine block heaters. An extension cord designed for extreme cold snapped and disintegrated.
“The cold was drier than anything I ever felt before,” said Vicky Grimes, an ERT member. “It almost took your breath away.”
A command post was established at the nearby fire station, and after a joint effort, the house was finally rendered safe. “Responding to this incident reinforced our understanding that we have to rely on our state and local partners for assistance, just as they rely on us,” said Special Agent Sandra Klein, Anchorage’s JTTF supervisor.
The 21-year-old recovered from his injuries, and—since he had committed no federal crimes—was not charged. “This was a public safety threat that could have been something far more serious,” Espeland said. “That’s why we responded, despite the conditions. That’s what we’re here for.”