News / Press Releases

San Francisco Chronicle
Friday, May 27, 1994

Author: Timothy Ziegler, Chronicle Correspondent
Page: A17, Col. 5

PATROLLING THE CYBER BEAT
Elite Unit Tracks Computer Crime

With his broad shoulders, full mustache and a gun holstered at his hip, San Jose police Sergeant Jim McMahon has the aura of a cop. But instead of walking a beat, McMahon patrols the dark alleys of cyberspace, searching for child pornography, pirated software and stolen trade secrets.

McMahon’s four-member unit is a national leader in computer-crime investigations, a field of law enforcement that is spreading from Silicon Valley to police departments across the country and into the upper reaches of the Clinton administration.

Leading the biggest computer fraud unit in the nation, except for that of the FBI, McMahon has cracked cases that range from industrial espionage to out-and-out theft.

Last year he posed as a 13 year-old boy named “Martin” on a computer bulletin board and was pursued by a man looking for sex. After 2 ½ months of trading messages, the man told him how to duck school and lie to his parents.

They arranged a meeting, and when 51-year-old insurance broker Donnell Howard Hughes arrived at a hotel room with lubricating jelly, condoms and a deck of playing cards, the high-tech heat was waiting for him.

“Unfortunately, I had as much gray hair as he did, and we busted him,” McMahon said. In February, Hughes pleaded guilty to one felony charge of soliciting a minor.

Catching high-tech criminals takes expertise. Investigators must know computer products, from source code to sound boards, which chips are hot and which models are passé. They learn to search seized computers for child pornography or stolen trade secrets without setting off booby traps that can erase stored information.

The crimes cut across all areas of law enforcement; Customs looks out for illegal imports and exports; the FBI tracks ill-gotten goods crossing state lines; the Department of Commerce watches copyright violations; the Internal Revenue Service searches out tax fraud and local police departments look for everything.

But the true experts are members of a group from a national array of agencies who have the best experience and information and pool their resources.

“There’s a lot of faith and trust and knowledge that we share. We take care of business. It’s a team effort,” said Kevin Fairchild, who has been a private high-tech investigator since he was shot as a Santa Clara police officer during a 1982 bank robbery.

A Small Family
IRS Agent Lee Curtis, who with 20 years’ experience is one of the group’s elders, agreed. “It’s a small family,” he said. “These are people we call at 3 in the morning” if help is needed. San Jose’s McMahon is considered a big player in the national group, which includes a couple of ex-cops who work for computer companies and a few agents from the FBI and Customs.

These officers used to work in a vacuum, but in the past few years the federal government has provided serious support. Both Michael Yamaguchi, U.S. attorney for Northern California, and the FBI have announced technology crime as a major focus, calling it their “high-tech initiative.”

A number of successful prosecutions have followed, including the first case for making counterfeit CD-ROMs, the first criminal case for software piracy (illegally reproducing software) and a separate case in which for the first time someone saw jail time for software piracy.

Assistant U.S. Attorney Kent Walker has been drafted from San Francisco by the Department of Justice’s Washington office to focus on high-tech crimes from there.

No More Chasing Russians
Resources that once were trained on foreign governments have been freed up since the demise of the Cold War. “They’re not chasing around Russians anymore,” said the IRS’ Curtis. “What they’re concentrating on is the technology drain (to other countries) and our lead in technology secrets.”

Some say the new focus is political payback to the Silicon Valley companies that supported President Clinton in his presidential campaign. But Yamaguchi said the need is self-evident. “No one came to me and said ‘Do this,’” he said. “I wanted to protect the intellectual property and technology industry from piracy, theft and copyright violations.”

Those violations include illegally copying software to sell it, stealing industry secrets such as program design for foreign governments and competing companies, and electronically breaking into telephone companies to steal credit card numbers and confidential documents.

The most visible crimes the patrols pursue are not on-line but on the street: a recent wave of computer-chip thefts, often by armed Asian gangs that invade an office and steal the inventory.

Computer chips are a new currency in organized crime, and investigators inevitably compare them to drugs. As small as a thumbnail and worth as much as $800 or $900 apiece, they are compact, valuable and easy to sell. And what’s more, they are not illegal to possess.

“A handful of chips could be worth more than the same handful of cocaine or heroin,” said Curtis, of the IRS.

Millions in Chips
A recent chip robbery in Fremont and another near Portland, Ore., each netted about $2 million. In April, three men made off with a load worth nearly $4 million in Greenock, Scotland.

According to Austin, Texas, Deputy Chief Paul Brick, who is modeling that city’s high-tech department after San Jose’s, “Most officers wouldn’t recognize a million dollars’ worth of chips if they saw them out there.”

But authorities are making some gains. San Jose police and the FBI stopped six people allegedly trying to hijack a truck carrying $6 million worth of chips in December, and in February a man was sent to prison for buying more than $2 million of computer printers stolen from a San Jose warehouse.

High-tech companies themselves can sometimes hinder law enforcement. “A lot of the victims of high-tech crimes don’t necessarily report them,” said Assistant U.S. Attorney Walker. “They’re either embarrassed or they’re afraid of copycats. The last thing you want is publicity about how your system is vulnerable.” Even when firms do report thefts, nearly all of the desirable goods are virtually untraceable.

And Silicon Valley companies are known for their “open campus” atmospheres that make them more vulnerable. In recent years, however, a call for tighter security has gone out. Intel Corp. of Santa Clara – the world’s largest manufacturer of computer chips – announces in the fall that it will begin marking its chips with identifying numbers.

It is impossible to estimate overall losses to computer-related crimes because they are hard to define-computers can be used in almost any crime-and because many losses are not traceable. But estimates are in the billions of dollars. The FBI guesses that $30 million to $40 million of computer chips are stolen each year in Silicon Valley alone.

Staying a Step Ahead
As law enforcement advances its own techniques and sets up training centers to teach advanced skills, criminals try to stay one step ahead. “We’re finding as we’re becoming more sophisticated, so are the bad guys. And they’re more sophisticated than we are,” said Curtis.

Just as old-time gamblers used to keep records on flash paper that could be burned the instant law officers showed up, today’s criminal have ways of erasing computer flies at the last minute, Curtis said.

The IRS is a big player in this arena, because although criminal often ace only a few months of jail time, the IRS can thwart plans for future crimes by confiscating money and property under tax evasion statues, Curtis said.

Although technology has ushered in a new era of crime fighting, investigators said, things are not so different from the days when one computer filled an entire room: They are still out chasing crooks.

And when veteran investigator Fairchild compliments McMahon, he praises more than just his technical skill.

“He’s a street cop,” Fairchild said. “You’ve got to have that street-cop sense.”