It’s up a flight of stone steps, past the circulation desk and the Romance stacks, over in Science Fiction, far corner.
On a sunny Tuesday in October, federal officers entered the public library in the Glen Park section of this city and arrested a young man who they say ran a vast Internet black market — an eBay of illegal drugs.
Their mark, Ross William Ulbricht, says he is not the F.B.I.’s Dread Pirate Roberts, the nom de guerre of the mastermind behind the marketplace, Silk Road. And the facts, his lawyer says, will prove that.
However this story plays out, Silk Road already stands as a tabloid monument to old-fashioned vice and new-fashioned technology. Until the website was shut down last month, it was the place to score, say, a brick of cocaine with a few anonymous strokes on a computer keyboard. According to the authorities, it greased $1.2 billion in drug deals and other crimes, including murder for hire.
That this story intruded here, at a public library in a nice little neighborhood, says a lot about the dark corners of the Internet. Glen Park isn’t the gritty Tenderloin over the hills, or Oakland or Richmond out in East Bay. And that is precisely the point. The Dark Web, as it is known, is everywhere and nowhere, and it’s growing fast.
No sooner was the old Silk Road shut down than a new, supposedly improved Silk Road popped up. Other online bazaars for illegal guns and drugs are thriving.
And the Dread Pirate Roberts — the old one, a new one, who knows? — is back, taunting the authorities. (The pseudonym is a reference to a character in the film “The Princess Bride” who turns out to be not one man but rather many men passing down the title.)
“It took the F.B.I. two and a half years to do what they did,” the Dread Pirate Roberts wrote last week on the new Silk Road site. “But four weeks of temporary silence is all they got.”
So catch us if you can, the Dread Pirate is saying. The new Silk Road has overhauled its security and “marks the dawn of a brand new era for hidden services,” he wrote.
The question is, can anyone really stamp out the Dread Pirates? Like the rest of the Internet, the Dark Web is being shaped and reshaped by technological innovation. [Continue reading...]
Kevin Drum writes: When I started research for this story, I worked my way through a pair of thick criminology tomes. One chapter regaled me with the “exciting possibility” that it’s mostly a matter of economics: Crime goes down when the economy is booming and goes up when it’s in a slump. Unfortunately, the theory doesn’t seem to hold water — for example, crime rates have continued to drop recently despite our prolonged downturn.
Another chapter suggested that crime drops in big cities were mostly a reflection of the crack epidemic of the ’80s finally burning itself out. A trio of authors identified three major “drug eras” in New York City, the first dominated by heroin, which produced limited violence, and the second by crack, which generated spectacular levels of it. In the early ’90s, these researchers proposed, the children of CrackGen switched to marijuana, choosing a less violent and more law-abiding lifestyle. As they did, crime rates in New York and other cities went down.
Another chapter told a story of demographics: As the number of young men increases, so does crime. Unfortunately for this theory, the number of young men increased during the ’90s, but crime dropped anyway.
There were chapters in my tomes on the effect of prison expansion. On guns and gun control. On family. On race. On parole and probation. On the raw number of police officers. It seemed as if everyone had a pet theory. In 1999, economist Steven Levitt, later famous as the coauthor of Freakonomics, teamed up with John Donohue to suggest that crime dropped because of Roe v. Wade; legalized abortion, they argued, led to fewer unwanted babies, which meant fewer maladjusted and violent young men two decades later.
But there’s a problem common to all of these theories: It’s hard to tease out actual proof. Maybe the end of the crack epidemic contributed to a decline in inner-city crime, but then again, maybe it was really the effect of increased incarceration, more cops on the beat, broken-windows policing, and a rise in abortion rates 20 years earlier. After all, they all happened at the same time.
To address this problem, the field of econometrics gives researchers an enormous toolbox of sophisticated statistical techniques. But, notes statistician and conservative commentator Jim Manzi in his recent book Uncontrolled, econometrics consistently fails to explain most of the variation in crime rates. After reviewing 122 known field tests, Manzi found that only 20 percent demonstrated positive results for specific crime-fighting strategies, and none of those positive results were replicated in follow-up studies.
So we’re back to square one. More prisons might help control crime, more cops might help, and better policing might help. But the evidence is thin for any of these as the main cause. What are we missing?
Experts often suggest that crime resembles an epidemic. But what kind? Karl Smith, a professor of public economics and government at the University of North Carolina-Chapel Hill, has a good rule of thumb for categorizing epidemics: If it spreads along lines of communication, he says, the cause is information. Think Bieber Fever. If it travels along major transportation routes, the cause is microbial. Think influenza. If it spreads out like a fan, the cause is an insect. Think malaria. But if it’s everywhere, all at once — as both the rise of crime in the ’60s and ’70s and the fall of crime in the ’90s seemed to be — the cause is a molecule.
A molecule? That sounds crazy. What molecule could be responsible for a steep and sudden decline in violent crime?
Well, here’s one possibility: Pb(CH2CH3)4. [Continue reading...]
James Kilgore writes: Private corrections company The GEO Group celebrated the holiday season by opening a new 1,500 bed prison in Milledgeville, Georgia on December 12th. The $80 million facility is expected to generate approximately $28.0 million in annual revenues.
Though GEO (formerly Wackenhut) is hardly a household name, they are a major player in the private corrections sector, combining a self righteous amorality in profiting from human misery with a ruthless sense of just how to make a buck in this business. The GEO Group is so notorious that they were the target of an Occupy Washington D.C. action in early December. In addition, the United Methodist Church sold off more than $200,000 in stock in GEO Group over the holiday season, judging that holding these shares was “incompatible with Bible teaching.”
While such actions may irritate a few within the company’s rank, the GEO Group is thick-skinned. Over the years journalists have exposed a long history of violence, abuse and corruption in the company’s facilities. Such scandals would have driven most firms out of business, but GEO has always managed to find the way back to prosperity. While the U.S. economy has plummeted in the past eighteen months, GEO has been positioning itself for the future.
The Los Angeles Times reports: Armed with a search warrant, Nelson County Sheriff Kelly Janke went looking for six missing cows on the Brossart family farm in the early evening of June 23. Three men brandishing rifles chased him off, he said.
Janke knew the gunmen could be anywhere on the 3,000-acre spread in eastern North Dakota. Fearful of an armed standoff, he called in reinforcements from the state Highway Patrol, a regional SWAT team, a bomb squad, ambulances and deputy sheriffs from three other counties.
He also called in a Predator B drone.
As the unmanned aircraft circled 2 miles overhead the next morning, sophisticated sensors under the nose helped pinpoint the three suspects and showed they were unarmed. Police rushed in and made the first known arrests of U.S. citizens with help from a Predator, the spy drone that has helped revolutionize modern warfare.
But that was just the start. Local police say they have used two unarmed Predators based at Grand Forks Air Force Base to fly at least two dozen surveillance flights since June. The FBI and Drug Enforcement Administration have used Predators for other domestic investigations, officials said.
“We don’t use [drones] on every call out,” said Bill Macki, head of the police SWAT team in Grand Forks. “If we have something in town like an apartment complex, we don’t call them.”
The drones belong to U.S. Customs and Border Protection, which operates eight Predators on the country’s northern and southwestern borders to search for illegal immigrants and smugglers. The previously unreported use of its drones to assist local, state and federal law enforcement has occurred without any public acknowledgment or debate.
Matt Taibbi writes: Last week, a federal judge in Mississippi sentenced a mother of two named Anita McLemore to three years in federal prison for lying on a government application in order to obtain food stamps.
Apparently in this country you become ineligible to eat if you have a record of criminal drug offenses. States have the option of opting out of that federal ban, but Mississippi is not one of those states. Since McLemore had four drug convictions in her past, she was ineligible to receive food stamps, so she lied about her past in order to feed her two children.
The total “cost” of her fraud was $4,367. She has paid the money back. But paying the money back was not enough for federal Judge Henry Wingate.
Wingate had the option of sentencing McLemore according to federal guidelines, which would have left her with a term of two months to eight months, followed by probation. Not good enough! Wingate was so outraged by McLemore’s fraud that he decided to serve her up the deluxe vacation, using another federal statute that permitted him to give her up to five years.
He ultimately gave her three years, saying, “The defendant’s criminal record is simply abominable …. She has been the beneficiary of government generosity in state court.”
Compare this court decision to the fraud settlements on Wall Street. Like McLemore, fraud defendants like Citigroup, Goldman Sachs, and Deutsche Bank have “been the beneficiary of government generosity.” Goldman got $12.9 billion just through the AIG bailout. Citigroup got $45 billion, plus hundreds of billions in government guarantees.
All of these companies have been repeatedly dragged into court for fraud, and not one individual defendant has ever been forced to give back anything like a significant portion of his ill-gotten gains. The closest we’ve come is in a fraud case involving Citi, in which a pair of executives, Gary Crittenden and Arthur Tildesley, were fined the token amounts of $100,000 and $80,000, respectively, for lying to shareholders about the extent of Citi’s debt.
Neither man was forced to admit to intentional fraud. Both got to keep their jobs.
Anita McLemore, meanwhile, lied to feed her children, gave back every penny of her “fraud” when she got caught, and is now going to do three years in prison. Explain that, Eric Holder!
Matt Taibbi writes: Federal judge Jed Rakoff, a former prosecutor with the U.S. Attorney’s office here in New York, is fast becoming a sort of legal hero of our time. He showed that again yesterday when he shat all over the SEC’s latest dirty settlement with serial fraud offender Citigroup, refusing to let the captured regulatory agency sweep yet another case of high-level criminal malfeasance under the rug.
The SEC had brought an action against Citigroup for misleading investors about the way a certain package of mortgage-backed assets had been chosen. The case is very similar to the notorious Abacus case involving Goldman Sachs, in which Goldman allowed short-selling billionaire John Paulson (who was betting against the package) to pick the assets, then told a pair of European banks that the “designed to fail” package they were buying had been put together independently.
This case was similar, but worse. Here, Citi similarly told investors a package of mortgages had been chosen independently, when in fact Citi itself had chosen the stuff and was betting against the whole pile.
This whole transaction actually combined a number of Goldman-style misdeeds, since the bank both lied to investors and also bet against its own product and its own customers. In the deal, Citi made a $160 million profit, while its customers lost $700 million.
Goldman, in the Abacus case, got fined $550 million. In this worse case, the SEC was trying to settle with Citi for just $285 million. Judge Rakoff balked at the settlement and particularly balked at the SEC’s decision to allow Citi off without any admission of wrongdoing. He also mocked the SEC’s decision to describe the crime as “negligence” instead of intentional fraud, taking the entirely rational position that there’s no way a bank making $160 million ripping off its customers can conceivably be described as an accident.
“Why should the court impose a judgment in a case in which the SEC alleges a serious securities fraud but the defendant neither admits nor denies wrongdoing?” And this: “How can a securities fraud of this nature and magnitude be the result simply of negligence?”
Rakoff of course is right – the settlement is nuts. If you take Citi’s $160 million profit on the deal into consideration, what we’re talking about then is a $125 million fine for causing $700 million in damages. That, and no admission of wrongdoing.
Just imagine a mugger who steals $70 from some lady’s wallet being sentenced to walk free after paying back twelve bucks. Magritte himself could not devise a more surreal take on criminal justice.
The secretive business havens of Cyprus and the Cayman Islands face a potent rival: Cheyenne, Wyoming.
At a single address in this sleepy city of 60,000 people, more than 2,000 companies are registered. The building, 2710 Thomes Avenue, isn’t a shimmering skyscraper filled with A-list corporations. It’s a 1,700-square-foot brick house with a manicured lawn, a few blocks from the State Capitol.
Neighbors say they see little activity there besides regular mail deliveries and a woman who steps outside for smoke breaks. Inside, however, the walls of the main room are covered floor to ceiling with numbered mailboxes labeled as corporate “suites.” A bulky copy machine sits in the kitchen. In the living room, a woman in a headset answers calls and sorts bushels of mail.
A Reuters investigation has found the house at 2710 Thomes Avenue serves as a little Cayman Island on the Great Plains. It is the headquarters for Wyoming Corporate Services, a business-incorporation specialist that establishes firms which can be used as “shell” companies, paper entities able to hide assets.
Wyoming Corporate Services will help clients create a company, and more: set up a bank account for it; add a lawyer as a corporate director to invoke attorney-client privilege; even appoint stand-in directors and officers as high as CEO. Among its offerings is a variety of shell known as a “shelf” company, which comes with years of regulatory filings behind it, lending a greater feeling of solidity.
“A corporation is a legal person created by state statute that can be used as a fall guy, a servant, a good friend or a decoy,” the company’s website boasts. “A person you control… yet cannot be held accountable for its actions. Imagine the possibilities!”
Among the entities registered at 2710 Thomes, Reuters found, is a shelf company sheltering real-estate assets controlled by a jailed former prime minister of Ukraine, according to allegations made by a political rival in a federal court in California.
The owner of another shelf company at the address was indicted in April for allegedly helping online-poker operators evade a U.S. ban on Internet gambling. The owner of two other firms there was banned from government contracting in January for selling counterfeit truck parts to the Pentagon.
All the activity at 2710 Thomes is part of a little-noticed industry in the U.S.: the mass production of paper businesses. Scores of mass incorporators like Wyoming Corporate Services have set up shop. The hotbeds of the industry are three states with a light regulatory touch-Delaware, Wyoming and Nevada.
The pervasiveness of corporate secrecy on America’s shores stands in stark contrast to Washington’s message to the rest of the world. Since the September 11 attacks in 2001, the U.S. has been calling forcefully for greater transparency in global transactions, to lift the veil on shadowy money flows. During a debate in 2008, presidential candidate Barack Obama singled out Ugland House in the Cayman Islands, reportedly home to some 12,000 offshore corporations, as “either the biggest building or the biggest tax scam on record.”
Yet on U.S. soil, similar activity is perfectly legal. The incorporation industry, overseen by officials in the 50 states, has few rules. Convicted felons can operate firms which create companies, and buy them with no background checks.
Ahmed Wali Karzai, the brother of the Afghan president and a suspected player in the country’s booming illegal opium trade, gets regular payments from the Central Intelligence Agency, and has for much of the past eight years, according to current and former American officials.
The agency pays Mr. Karzai for a variety of services, including helping to recruit an Afghan paramilitary force that operates at the C.I.A.’s direction in and around the southern city of Kandahar, Mr. Karzai’s home.
The financial ties and close working relationship between the intelligence agency and Mr. Karzai raise significant questions about America’s war strategy, which is currently under review at the White House.
The ties to Mr. Karzai have created deep divisions within the Obama administration. The critics say the ties complicate America’s increasingly tense relationship with President Hamid Karzai, who has struggled to build sustained popularity among Afghans and has long been portrayed by the Taliban as an American puppet. The C.I.A.’s practices also suggest that the United States is not doing everything in its power to stamp out the lucrative Afghan drug trade, a major source of revenue for the Taliban.
More broadly, some American officials argue that the reliance on Ahmed Wali Karzai, the most powerful figure in a large area of southern Afghanistan where the Taliban insurgency is strongest, undermines the American push to develop an effective central government that can maintain law and order and eventually allow the United States to withdraw.
“If we are going to conduct a population-centric strategy in Afghanistan, and we are perceived as backing thugs, then we are just undermining ourselves,” said Maj. Gen. Michael T. Flynn, the senior American military intelligence official in Afghanistan. [continued...]
Editor’s Comment — Andrew Exum says this is the most important article on Afghanistan you’ll read this week:
Why, you ask? Because if this is true, and if the CIA is empowering Ahmed Wali Karzai at the same time in which NATO/ISAF is saying abusive local power-brokers are a threat to mission success, then this is yet another example of NATO/ISAF carrying out one campaign in Afghanistan while the CIA carries out another — with both campaigns operating at cross purposes to one another. I should say here that I am in no position to confirm or deny this report. I can, however, say that numerous military officials in southern Afghanistan with whom I have spoken identify AWK and his activities as the biggest problem they face — bigger than the lack of government services or even the Taliban. And so if AWK is “the agency’s guy”, that leads to a huge point of friction between NATO/ISAF and the CIA.
At some point, the CIA’s Congressional overseers — who’ve already complained that they have been misled by the agency on multiple occasions — should start asking some fundamental questions about the institution.
In this decade the CIA has had a central role in the biggest intelligence failure the US has ever had; it has implemented a torture program; operated ghost prisons; conducted kidnapping operations; and provided support for drug warlords. The list could I’m sure be made much longer. At what point will the conclusion be drawn that this Cold War anachronism does more to threaten than protect America’s national security?
Taliban gunmen stormed a guest house in central Kabul on Wednesday morning, killing six United Nations employees and two Afghan security officials, according to U.N. officials, the police and the Afghan Interior Ministry.
One of those killed was an American security guard who battled the attackers as they came through the front gate in the predawn hours, according to an American who was staying in the guest house and who joined in the gun battle before shepherding 25 other residents to safety.
The police said one of the victims, a woman, had been shot in the head, and another burned to death. A cellphone video taken by a security official and seen by a reporter showed just the head and torso of a third victim, apparently cut in half when one of the attackers detonated his suicide vest. [continued...]
Editor’s Comment — While the Taliban say this attack is intended to deter people from assisting in the November 7 runoff election it clearly also challenges the concept of a strategy based on protecting the most populated parts of Afghanistan. Reinforce the perception that the center of Kabul is unsafe and it gets hard to promote the idea that anywhere can be made safe.
Add to that the fact that the Taliban has the upper hand even when outnumbered by 12 to 1 and the argument that tens of thousands more American troops will enhance security becomes increasingly implausible.
The decision by both Afghan President Hamid Karzai and his main rival, former Foreign Minister Abdullah Abdullah, to accept a runoff election is a welcome development that provides the Afghan government with an opportunity to restore its damaged credibility. The runoff election now faces two main challenges: making the process more credible and ensuring the election actually contributes to security. Setting Nov. 7 as the date for the election makes both impossible.
Nationwide elections in any country are logistically difficult. In Afghanistan, they’re a nightmare. Funds need to be mobilized (the last elections cost more than $500 million), new poll workers need to be hired (or fired), observers have to be recruited, voters reassured, and security forces redeployed. Because ballots are often transported by donkey, it could take weeks to distribute them to Afghanistan’s remotest areas. A mad rush will be the only way to get all of this done, and such haste will not contribute to a credible process.
The first step in ensuring a credible election, therefore, is to postpone the date for the runoff. [continued...]
Apparent gaps in White House e-mail archives coincide with dates in late 2003 and early 2004 when the administration was struggling to deal with the CIA leak investigation and the possibility of a congressional probe into Iraq intelligence failures.
The gaps — 473 days over a period of 20 months — are cited in a chart prepared by White House computer technicians and shared in September with the House Reform and Government Oversight Committee, which has been looking into reports of missing e-mail.
Among the times for which e-mail may not have been archived from Vice President Dick Cheney’s office are four days in early October 2003, just as a federal probe was beginning into the leak of Valerie Plame’s CIA identity, an inquiry that eventually ensnared Cheney’s chief of staff.
Contents of the chart — which the White House now disputes — were disclosed Thursday by Rep. Henry Waxman, a California Democrat who chairs the House committee, as he announced plans for a Feb. 15 hearing. [complete article]
Justice Department officials have told Congress that they face serious legal difficulties in pursuing criminal prosecutions of Blackwater security guards involved in a September shooting that left at least 17 Iraqis dead.
In a private briefing in mid-December, officials from the Justice and State Departments met with aides to the House Judiciary Committee and other Congressional staff members and warned them that there were major legal obstacles that might prevent any prosecution. Justice officials were careful not to say whether any decision had been made in the matter, according to two of the Congressional staff members who received the briefing.
The staff members, who asked not to be identified, disclosed details of the meeting in interviews this week.
The December briefing took place after a federal grand jury had been convened in the case, suggesting that prosecutors had decided to begin hearing testimony with potential prosecution problems still unresolved. [complete article]
Highly promising figures that the administration cited to demonstrate economic progress in Iraq last fall, when Congress was considering whether to continue financing the war, cannot be substantiated by official Iraqi budget records, the Government Accountability Office reported Tuesday.
The Iraqi government had been severely criticized for failing to spend billions of dollars of its oil revenues in 2006 to finance its own reconstruction, but last September the administration said Iraq had greatly accelerated such spending. By July 2007, the administration said, Iraq had spent some 24 percent of $10 billion set aside for reconstruction that year.
As Gen. David H. Petraeus, the top American commander in Iraq, and Ryan C. Crocker, the American ambassador to Iraq, prepared in September to report to Congress on the state of the war, the economic figures were a rare sign of progress within Iraq’s often dysfunctional government.
But in its report on Tuesday, the accountability office said official Iraqi Finance Ministry records showed that Iraq had spent only 4.4 percent of the reconstruction budget by August 2007. It also said that the rate of spending had substantially slowed from the previous year. [complete article]
Town by town across the country, headlines have been telling similar stories. Lakewood, Wash.: “Family Blames Iraq After Son Kills Wife.” Pierre, S.D.: “Soldier Charged With Murder Testifies About Postwar Stress.” Colorado Springs: “Iraq War Vets Suspected in Two Slayings, Crime Ring.”
Individually, these are stories of local crimes, gut-wrenching postscripts to the war for the military men, their victims and their communities. Taken together, they paint the patchwork picture of a quiet phenomenon, tracing a cross-country trail of death and heartbreak.
The New York Times found 121 cases in which veterans of Iraq and Afghanistan committed a killing in this country, or were charged with one, after their return from war. In many of those cases, combat trauma and the stress of deployment — along with alcohol abuse, family discord and other attendant problems — appear to have set the stage for a tragedy that was part destruction, part self-destruction. [complete article]
A Houston, Texas woman says she was gang-raped by Halliburton/KBR coworkers in Baghdad, and the company and the U.S. government are covering up the incident.
Jamie Leigh Jones, now 22, says that after she was raped by multiple men at a KBR camp in the Green Zone, the company put her under guard in a shipping container with a bed and warned her that if she left Iraq for medical treatment, she’d be out of a job.
“Don’t plan on working back in Iraq. There won’t be a position here, and there won’t be a position in Houston,” Jones says she was told.
In a lawsuit filed in federal court against Halliburton and its then-subsidiary KBR, Jones says she was held in the shipping container for at least 24 hours without food or water by KBR, which posted armed security guards outside her door, who would not let her leave. [complete article]
America’s most ostentatious war profiteer is no longer a free man. In a long-anticipated move, FBI agents arrested bulletproof vest maker David H. Brooks in his Manhattan apartment at dawn on Thursday. In the tradition of Al Capone, Brooks was nabbed on allegations of financial shenanigans, despite strong suspicions that the defense contractor has much more serious crimes on his hands.
Brooks emerged as the poster boy for shameless war profiteering in November of 2005 when he blew some $10 million in profits from military contracts on a celebrity-studded party for his daughter. Leaked details of the bash drew national attention, including a description of Brooks’ pink suede suit and photos of his daughter on stage with the rapper 50 Cent. A New York Times editorial compared Brooks to the ill-fated Marie Antoinette.
And indeed, while Brooks won’t face a guillotine for his greed, he could spend up to 70 years in prison if convicted of all charges. The 71-page indictment alleges that while Brooks was chief executive of DHB Industries, a leading provider of military body armor, he pocketed more than $185 million from insider trading, fraud and tax evasion. He is also charged with using millions of dollars in DHB funds for personal expenses. [complete article]
From 2000 to 2006… there were large drops in the number of defendants related to environmental offenses (down 12 percent), organized crime (38 percent), white-collar crime (10 percent), bank robbery (18 percent) and bankruptcy fraud (46 percent), according to Justice Department statistics provided this week to The Washington Post. Money-laundering prosecutions related to drugs were also down nearly 25 percent, while the number of drug cases overall was stagnant.
There were simultaneous jumps in prosecutions related to immigration (up 36 percent), weapons cases (87 percent), official corruption (15 percent), and, most dramatically, terrorism and national security cases (876 percent). Indeed, Justice Department funds devoted to counterterrorism programs in Washington have tripled since the Sept. 11, 2001, attacks.
Department officials say the surge in resources for national security and terrorism probes, in particular, reflects the intense administration efforts to prevent another attack. But the number of terrorism-related defendants has been relatively small: Prosecutions peaked at 818 in 2003 and fell to 635 by 2006, and most of these were not for terrorist acts or plans. [complete article]