Posts Tagged Federal Bureau of Investigation
An FBI Dad’s Misadventures With Spyware Exposed School Principal’s Child Porn Searches
Thanks to spyware, an FBI dad got a gift-wrapped child porn case
Like any dad, Joseph Auther was worried about what his son might get up to while exploring the wilds of the World Wide Web. So when his 7th grade son got a school-provided laptop from Whispering Palms School in Saipan in the U.S. territory of the Northern Mariana Islands, Auther decided to install a monitoring program on it. He went with a spyware program called eBlaster from SpectorSoft, a company based in Vero Beach, Florida. Unbeknownst to his son, the program captured his website visits, his keystrokes, and every email, chat, and instant message he sent and received. This was all delivered up to his dad in emails, while giving the monitored person no hint that it was doing so.
Auther has a special appreciation for the benefits of a surveillance. He’s an FBI special agent. In April, he discovered he was being transferred to the FBI office in Denver. At the end of the school year, Auther let Whispering Palms principal Thomas Weindl know that his family was moving and that they would be returning the school’s laptop. Weindl, 67, was actually a friend of the Auther family; when he got married earlier that year, Auther’s wife gave a reading at the ceremony. Auther told Weindl that he would return the laptop after he removed all of his son’s files, programs and games.
Auther first took the laptop to his FBI office and asked his colleagues how to wipe it clean. Apparently they don’t have many cyber experts in the Mariana Islands, because they were unsuccessful. So Auther had to instead take it to a computer repair shop, which cleaned out the old files and allegedly reimaged the hard drive to return it to its original settings. Auther didn’t tell the shop about eBlaster being on the computer — perhaps feeling a little Big Parent shame — but assumed that it would be wiped along with everything else. He then returned the computer to Weindl.
A week later, Auther was surprised to get an email from eBlaster which had survived the attempts to kill it. SpectorSoft claims that eBlaster is as easy to remove as any other program, such as Microsoft Word, though the company wouldn’t comment on this case or elaborate on exactly how to remove it. I consulted computer geek friends who suggested that a re-imaging should have removed it, but that the computer repair shop may not have done a good job of it.
The eBlaster report revealed that someone was using the computer again and that the person was much naughtier than Auther’s son had been. The report revealed Internet searches for child pornography and visits to sexually explicit websites, including a few that featured young Asian girls having sex with older men.
“An FBI dad getting email notifications of child porn activity [is] like a gift-wrapped present for a law enforcement official,” noted Eric Goldman, who brought the case to my attention.
While Auther wasn’t sure who was using the computer, he became suspicious of Weindl based on the type of porn involved because Weindl had “married a Korean woman, and he now had an 11-year-old Korean stepdaughter,” according to court documents. That seems like the point at which Auther should have opened an official FBI investigation, but that’s not what happened.
Auther then called Weindl, pretending he wanted to buy the laptop, to find out whose possession the computer was in. Weindl claimed the laptop had been returned to the Public School System, an agency that provides federally-funded laptops to students at public and private schools, and lets them keep them if they graduate. Auther continued his informal investigation. He stopped by the PSS office, where he showed his FBI credentials, and found out the laptop had not in fact been returned. He also contacted his Internet Service Provider to see if it could tell him, based on IP information in the eBlaster report, where the laptop was being used. They refused to disclose that to him, even though “he may have shown his FBI credentials” to them.
Despite getting all flashy with his FBI badge, Auther still considered this digging being done by a concerned parent, rather than a professional investigation. Meanwhile, Auther continued to get emails about the laptop’s activity, and they continued to involve child porn.
Auther then had another conversation with Weindl, telling him he was concerned about inappropriate content on the laptop. Weidl responded that he had “done some checking of his own” and that some “‘hanky panky’ was going on at PSS.” Since Auther had already visited PSS, he knew Weidl was lying. At that point, Auther finally shared his evidence with another agent at the FBI and contacted the Mariana Islands’ attorney general saying protective services should check on Weindl’s stepdaughter. (It’s probably worth noting here that the act of looking at child porn is not necessarily correlated with child abuse.)
It was all downhill from there for Weindl. Auther and another FBI agent confronted him at his office at the school, where he admitted to viewing child porn and claimed that he had since “destroyed the [laptop] and threw the pieces in the jungle.” Weindl was then arrested and charged with receiving child porn and with accessing child porn with an intent to view it. “When asked why he performed Google searches on 11-year-old girls, Weindl stated it was his own ‘morbid curiosity’ or ‘inappropriate curiosity,’” reports the Saipan Tribune.
Whispering Palms got itself a new principal. Weindl meanwhile is trying to fight his child porn charges. He called foul on an FBI agent putting spyware on his computer without any kind of legal authorization. A judge in the District Court for the Northern Mariana Islands was unsympathetic.
“Auther’s installation of eBlaster on the laptop in June 2011 was unrelated to the performance of his duties as an FBI special agent,” writes Judge Ramona Manglona. “Auther was acting as a devoted father, not a law enforcement officer.”
Because Auther’s leaving the spyware on the computer when he returned the laptop to Weindl was “inadvertent,” and not “a sting [operation],” it was kosher, and it was okay for Auther to look at the first eBlaster report that he received, ruled Manglona.
“The intrusive conduct — the installation of eBlaster — was not by the government but by Auther the private citizen,” writes Manglona, and thus Weindl can’t claim that his right to be free of unreasonable search and seizure was violated (though he might want to consider a civil invasion of privacy suit against his FBI frenemy). At least with the first eBlaster report that Auther looked at. After that first report turned up child porn activity though, Auther’s investigation took on professional color and should have been handed over to his colleagues at the FBI, writes Manglona. While those subsequent reports should be subject to Fourth Amendment scrutiny, Manglona says Weindl’s rights still weren’t violated because of the fact that he was doing his child porn searches on a computer he didn’t own. It was a computer owned by PSS that was intended to be used by students not by principals or administrators, and so Weindl had no right to expect what he did on it to remain private, according to Manglona’s reasoning.
“Sometimes, people delude themselves into thinking that they have a right to things that don’t belong to them,” writes Manglona. “A person cannot have a reasonable expectation of privacy in a computer he stole or obtained by fraud.”
She does say that he would have a higher expectation of privacy had the computer actually been assigned to him.
This principal is going to be getting into serious trouble. Two lessons to be learned here:
· Don’t do your porn searches on other people’s computers.
· Be wary of used computers given the sensitivity around what we do on our computers; the fact that both FBI agents and a computer repair shop failed to wipe eBlaster from this computer is troubling. Who knows what a computer’s previous owner has in mind for you?
- An FBI Dad’s Misadventures With Spyware Exposed School Principal’s Child Porn Searches (forbes.com)
- Child porn operation spanned 2 decades (timesfreepress.com)
- Teacher pleads guilty to surfing child porn at school (sunnewsnetwork.ca)
- FBI hopes QT cup breaks child porn case (kshb.com)
- FBI seeks man with information on child porn case (stltoday.com)
- Dad Says Principal Taught Daughter About Porn (fox8.com)
- FBI using viruses, spyware to track suspects online (lissakr11humanelife.wordpress.com)
- CHILD PORN: FBI Asks For Public’s Help (whotv.com)
- 21 Charged in Massive Child Porn Sting (fox8.com)
- No Bond for Masury Man Facing Toddler Porn Charges (wytv.com)
Sarah Palin Reports Mysterious White Rolled Up Items On Front Lawn
October 11, 2012
Former Alaska Governor and Fox News Contributor Sarah Palin, rightfully already on edge about recent mysterious white powder sent to her daughter Bristol’s dressing room on the “Dancing With The Stars” set, reported to the FBI that mysterious white rolled up items are now appearing on her front lawn on a daily basis.
“Well, I’m seeing these things and they’re out on my lawn. They’re white, rolled up, things. It’s the craziest thing! It looks like there might even be words on them. The one on Sunday was the biggest and that’s what had me really worried. Then the Monday one was a good amount smaller…and the same with the Tuesday one. You can never be too careful with all of these haters out there, sending their chicken pox vaccines and things to ABC where my daughter works, trying to scare people, ” she told the Associated Press in a Tuesday night interview.
A FBI stake-out early Thursday morning resulted in the brief detention of 12-year-old Billy Pearson, who was later released after it was confirmed that he was simply the delivery boy for The Wasilla Times. The FBI considers the case to be closed.
- Free Wood Post – Sarah Palin decries Islamic influence on Moose population (mbcalyn.com)
- Mysterious Package Sent To Bristol Palin Being Treated Seriously By Officials (contactmusic.com)
- Sarah Palin Reads The National Enquirer (wtfplanet.com)
- Why is Sarah Palin in Arizona Today? (mbcalyn.com)
- Sarah Palin writing a fitness book (politico.com)
- Very Slim Sarah Palin Says She’s Writing Fitness Book With Family (washington.cbslocal.com)
- Want To Look Gaunt Like Sarah Palin? Now You Can! (contactmusic.com)
- Sarah Palin to Write a Fitness Book (washingtonian.com)
- WTF: Sarah Palin’s Dramatic Weight Loss (collegecandy.com)
- ‘Our Sarah: Made In Alaska’ Sarah Palin Memoir Features Praise From Father And Brother (contactmusic.com)
FBI launches $1 billion nationwide facial recognition system
By Sebastian Anthony on September 7, 2012
The US Federal Bureau of Investigation has begun rolling out its new $1 billion biometric Next Generation Identification (NGI) system. In essence, NGI is a nationwide database of mugshots, iris scans, DNA records, voice samples, and other biometrics, that will help the FBI identify and catch criminals — but it is how this biometric data is captured, through a nationwide network of cameras and photo databases, that is raising the eyebrows of privacy advocates.
Until now, the FBI relied on IAFIS, a national fingerprint database that has long been due an overhaul. Over the last few months, the FBI has been pilot testing a facial recognition system — and soon, detectives will also be able to search the system for other biometrics such as DNA records and iris scans. In theory, this should result in much faster positive identifications of criminals and fewer unsolved cases.
According to New Scientist, facial recognition systems have reached the point where they can match a single face from a pool of 1.6 million mugshots/passport photos with 92% accuracy, in under 1.2 seconds [PDF]. In the case of automated, biometric border controls where your face and corresponding mugshot are well lit, the accuracy approaches 100%. Likewise, where DNA or iris records exist, it’s a very expedient way of accurately identifying suspects.
So far, so good — catching criminals faster and making less false arrests must be a good thing, right? Well, yes, but there are some important caveats that we must bear in mind. For a start, the pilot study has only used mugshots and driving license photos of known criminals — but the FBI hasn’t guaranteed that this will always be the case. There may come a time when the NGI is filled with as many photos as possible, from as many sources as possible, of as many people as possible — criminal or otherwise. This might be as overt as parsing CCTV footage and collating every single face into a database; or maybe you’re just unlucky and your face ends up in the system because you’re in the background of a photo starring a known criminal.
Imagine if the NGI had full access to every driving license and passport photo in the country — and DNA records kept by doctors, and iris scans kept by businesses. The FBI’s NGI, if the right checks and balances aren’t in place, could very easily become a tool that decimates civilian privacy and freedom. Time to invest in a hoodie, I think…
- Next Generation Identification (NGI) System: FBI Launches $1 Billion Nationwide Biometric Database (cryptogon.com)
- FBI plugs $1 billion into facial recognition tech to turn America into its own game of ‘Where’s Waldo?’ (bgr.com)
- FBI Launches $1 Billion Nationwide Face Recognition System (yro.slashdot.org)
- FBI launches $1 billion face recognition project (newscientist.com)
- FBI begins installation of $1 billion face recognition system across America (rt.com)
- FBI begins installation of $1 billion face recognition system across America (talesfromthelou.wordpress.com)
- FBI begins installation of $1 billion face recognition system across America (EndtheLie.com)
- FBI Launches $1Billion Face Recognition Project (eurasiareview.com)
- FBI to Share Facial Recognition Software with States (blacklistednews.com)
- Privacy hawks fret as FBI upgrades biometrics capacities (news.cnet.com)
Va. Veteran Detained After Strident Facebook Posts
By LARRY O’DELL Associated Press
RICHMOND, Va. August 21, 2012 (AP)
A former Marine involuntarily detained for psychiatric evaluation for posting strident anti-government messages on Facebook has received an outpouring of support from people who say authorities are trampling on his First Amendment rights.
Brandon J. Raub, 26, has been in custody since FBI, Secret Service agents and police in Virginia’s Chesterfield County questioned him Thursday evening about what they said were ominous posts talking about a coming revolution. In one message earlier this month according to authorities, Raub wrote: “Sharpen my axe; I’m here to sever heads.”
Police — acting under a state law that allows emergency, temporary psychiatric commitments upon the recommendation of a mental health professional — took Raub to the John Randolph Medical Center in Hopewell. He was not charged with any crime.
A Virginia-based civil liberties group, The Rutherford Institute, dispatched one of its attorneys to the hospital to represent Raub at a hearing Monday. A judge ordered Raub detained for another month, Rutherford executive director John Whitehead said.
“For government officials to not only arrest Brandon Raub for doing nothing more than exercising his First Amendment rights but to actually force him to undergo psychological evaluations and detain him against his will goes against every constitutional principle this country was founded upon,” Whitehead said.
Raub’s mother, Cathleen Thomas, said by telephone that the government had overstepped its bounds.
“The bottom line is his freedom of speech has been violated,” she said.
Thomas said her son, who served tours as a combat engineer in Iraq and Afghanistan, is “concerned about all the wars we’ve experienced” and believes the U.S. government was complicit in the Sept. 11 terrorist attacks. One of his Facebook posts, she said, pictured the gaping hole in the Pentagon and asked “where’s the plane?”
Whitehead said he found nothing alarming in Raub’s social media commentaries. “The posts I read that supposedly were of concern were libertarian-type posts I see all the time,” he said.
The big concern, Whitehead said, is whether government officials are monitoring citizens’ private Facebook pages and detaining people with whom they disagree.
Dee Rybiski, an FBI spokeswoman in Richmond, said there was no Facebook snooping by her agency.
“We received quite a few complaints about what were perceived as threatening posts,” she said. “Given the circumstances with the things that have gone on in the country with some of these mass shootings, it would be horrible for law enforcement not to pay attention to complaints.”
Whitehead said some of the posts in question were made on a closed Facebook page that Raub had recently created so he questioned whether anyone from the public would have complained about them.
A “Support Brandon Raub” Facebook page had 244 “likes” by Monday afternoon and other Internet sites had numerous comments from people outraged by the veteran’s detention.
Raub’s supporters characterized the detention as an arrest, complaining he was handcuffed and whisked away in a police cruiser without being served a warrant or read his rights. But authorities say it wasn’t an arrest because Raub doesn’t face criminal charges.
Col. Theirry Depuis, the county police chief, said Raub was taken into custody upon the recommendation of mental health crisis intervention workers. He said the action was taken under the state’s emergency custody statute, which allows a magistrate to order the civil detention and psychiatric evaluation of a person who is considered potentially dangerous.
He said Raub was handcuffed because he resisted officers’ attempts to take him into custody.
- Va. veteran detained after strident Facebook posts (wtvm.com)
- Va. Veteran Detained After Facebook Posts (blacklistednews.com)
- Former Marine Brandon Raub Is Locked In A Psych Ward Over His 9/11 Facebook Posts (conservativeread.com)
- Former Marine Brandon Raub Is Locked In A Psych Ward Over His 9/11 Facebook Posts (fromthetrenchesworldreport.com)
- HOT: Ron Paul Supporter Grabbed by Police (economicpolicyjournal.com)
- Statement from attorneys on Brandon Raub detention (wtvr.com)
- Attorney Statement on Brandon Raub; Raub to Be Detained Indefinitely (dailypaul.com)
- Former Marine Detained By FBI For Facebook Posts About 9/11 And ‘The Revolution’ (informationliberation.com)
- RUTHERFORD INSTITUTE DEFENDS MARINE ARRESTED: Statement on Hearing (virginiacopblock.org)
- Former U.S. Marine arrested for Facebook posts exposing the 9/11 inside job and chemtrails (hangthebankers.com)
FBI arrests dozens in credit card fraud sting
By Brendan Sasso - 06/26/12 04:20 PM ET
Police around the world arrested 24 people in a massive crackdown on online fraudsters, the Justice Department announced Tuesday.
The sting, codenamed “Operation Card Shop,” led the FBI to arrest 11 people in California, New York and five other states. Officials in seven foreign countries, including the United Kingdom and Bosnia, nabbed another 13 people in the operation.
The authorities accuse the defendants of stealing credit card numbers and other personal financial information.
According to court documents, the FBI set up an undercover website called “Carder Profit” in 2010, which pretended to be a forum for fraudsters to buy and sell financial information and exchange tips about hacking.
The site was designed to allow the FBI to monitor and record all of its discussion threads and private messages.
To make the site seem safe from police, new users could only access it if they were recommended by two existing users.
The FBI monitored the site and its users’ communications for two years.
The United States shared the evidence it collected with the foreign authorities for Tuesday’s coordinated crackdown.
The U.S. Attorney’s Office for the Southern District of New York said the operation was the “largest coordinated international law enforcement action in history aimed at ‘carding’ crimes” — offenses in which criminals traffic stolen credit cards on the Internet.
Officials claimed the sting protected more than 400,00 victims and prevented the theft of more than $205 million.
- FBI Announces 24 Arrests in Credit Card Fraud Probe Dubbed “Operation Card Shop” (creditcardprocessing.net)
- Dozens Said to Be Arrested in FBI Sting Operation Into Credit Card Fraud (forbes.com)
- Two Dozen Arrested in Global Credit Card Fraud Sting – Businessweek (businessweek.com)
- FBI Smashes Global Credit Card Fraud Ring (blogs.voanews.com)
- FBI hauls in 24 credit card hackers in online sting (arstechnica.com)
- FBI Nabs 24 in Credit Card Fraud Scheme (theepochtimes.com)
- F.B.I. Says 24 Are Arrested in Credit Card Theft (nytimes.com)
- FBI nabs 24 in credit card sting (guardian.co.uk)
- FBI cyber-crime sting snares 24 (bbc.co.uk)
- FBI busts 2 dozen in massive online fraud ring- Cyber bank robbers attempt billion-dollar heist (foxnews.com)
Large Group of “Cannibals” Killed by Orlando Police
June 2, 2012
Disturbing news today out of Orlando, Florida. The Orlando Police Department has confirmed that a large group of “cannibals” were shot and killed outside a Republican cocktail mixer in Lake Mary.
The large group was first seen on top of multiple patrons of the cocktail mixer, until a security officer fired his gun which made the group scatter. Witnesses at the event described the scene as “bloody” and that the large group tore apart numerous amounts of people. ABC affiliate WFTV interviewed a woman who lost her husband in the attack. Betty Roker of Kissimmee stated, “This group of people, or monsters just swarmed into the event and started to jump on people. There were so many of them. One grabbed me but my husband jumped in between and began fighting with the guy. I saw my husband die in front of my eyes. The beast started to bite and claw my husband’s head, and began chewing on his scalp. All I have left of him now is his Tea Party Patriot hat. I can’t believe this.
Orlando Police released a statement.
“Today we can confirm that 15 people were brutally attacked and killed. We arrived at the scene when the large group of suspects were running down the street. We gave the group three warnings to stop, then when all attempts were exhausted, we opened fire. The group numbered anywhere between 10 to 18 people. The bodies of the victims are unidentifiable due to the nature of the attack, so we can not speculate on identities but we are using our Republican Voter Database because most likely they were all there. For the suspects killed, we are examining them at the moment and information will be released soon. We can not connect this to the incident that took place in Miami.”
The area in which the incident took place has been cordoned off and an evacuation has taken place for the residents of the area. The Florida National Guard stated this is a safety measure for the police and the FBI involved in the investigation. You can find a map of the cordoned off area on the Florida National Guard website.
Senator Marco Rubio went to Twitter to give his view of the incident. @MRubio stated “This incident sounds like a group of welfare state, Occupy participants got fed up and finally snapped.”
- Mayor Dyer’s Oath of Office Address (thehotspotorlando.com)
- Man shot, killed outside Orlando nightclub ID’d (clickorlando.com)
- Zip Orlando (pulseofcentralflorida.com)
- Man interviewed in Orlando woman’s disappearance (clickorlando.com)
- Finding oxycodone orlando (elijahjackson17.typepad.com)
- Kissimmee school principal arrested on drug charges (tbo.com)
- We are seeking cannibal victim’s head… it could be in post (thesun.co.uk)
- Family pleads for answers in son’s murder (clickorlando.com)
- Pillars That Hold The Roof of Orlando Transport System (onlineadvisory.typepad.com)
- Scrapbook Expo Orlando (kittiekraft.typepad.com)
AusCERT2012: Modems at risk in DNSChanger cut-off – Hackers – SC Magazine Australia – Secure Business Intelligence
AusCERT2012: Modems at risk in DNSChanger cut-off
ISPs urged to bolster user support.
Up to 100,000 customer modems are at risk of losing their internet connection from July 9 when the FBI disables rogue DNS servers seized late last year.
The affected customer modems make up about a third of the 350,000 to 400,000 internet users believed to still have the DNSChanger malwareon either their modems or Windows computers.
The FBI believes that up to four million users were infected at the height of the Estonian advertising scam, which redirected legitimate searches by computer users to malicious sites via rogue DNS servers located in Chicago and New York.
Six Estonian nationals have been arrested and are currently subject to extradition procedures to face charges in the United States.
US authorities have interim control of the rogue DNS servers but expect to shut them down on July 9, after a four-month court ordered extension of the program expires.
Any computer still infected with DNSChanger – believed to be more than 300,000 users in July – will not be able to connect to the internet.
The US-hosted server used by Estonian scammers in the DNSChanger.
The modem problem
While remediation support for infected users had largely focused on solving the Windows infection, Paul Vixie of the Internet Systems Consortium told AusCERT 2012 attendees this week that internet service providers would have to “truck-roll” new modems to those believed to be affected by the malware outside their PC.
“The CPE [customer premises equipment] – the DSL or cable modem – tends to be one of a small number of things that all come out of Taiwan or that part of the world and even if they’re made by different companies they will have a similar web interfaces when viewed from the inside,” he said.
The scammers, he said, “scripted [the web] interface and changed the DNS settings in the CPE”.
He noted it was “very difficult to get these re-programmed”.
ISC founder Paul Vixie.
Vixie and the ISC have a direct contract with the FBI to coordinate the investigation, which ultimately lead to police seizing the rogue DNS servers and operating them while they attempt to remove remaining infections worldwide.
Internode chief technology officer John Lindsay told SC Magazine the iCode framework, developed by the Internet Industry Association in 2010 and implemented by major service providers, proved effective in dealing with those affected at both the PC and modem level.
Those modems found to have changed DNS settings on Internode’s network specifically are flashed with factory settings or new firmware. In some cases, Lindsay said the ISP preffered to replace the infected modem with newer equipment to avoid further problems.
“We have probes in our network that look for these sorts of problems and contact customers who appear affected and provide assistance to fix the problem and help them prevent future incidents,” he said.
The action taken by Internode differs from the “walled garden” approach suggested in the framework.
While take-down of the DNS servers was “carefully choreographed” between the FBI and Estonian police, Vixie conceded that fixing the continued problem of infected computers and modems had not been great.
ISC believes more than 300,000 users will remain infected on July 9
The 300,000 users believed to retain the infection on July 9 would leave internet service providers with a growing support problem, he said.
The underlying botnet malware used in the scam, Alureon, also remains at large with the potential to infect more computers in future.
“We didn’t put any time into how remediation was going to work or how we were going to do the charts and diagrams and population estimates,” he said.
“We had none of that in place on day one. after we had the name servers running and we were collecting the data someone finally said ‘shouldn’t we be analysing this?’”
Like the similarly malicious Conficker botnet, which still boasts six million victims, Vixie said the issue remained in user trust.
“They don’t trust us, they don’t know us… they don’t trust their ISP,” he said.
“Their plan, if you can dignify it with the name plan, is to just keep using their computer until it doesn’t work anymore, and then they’ll buy a new one.”
The saving grace for Vixie, he said, was that the scammers behind DNSChanger could have been “much more evil than they were”.
- DNSChanger malware victims may face internet switch off: ACMA (computerworld.co.nz)
- Vixie warns: DNS Changer ‘blackouts’ inevitable (go.theregister.com)
- Renewed efforts to revert DNSChanger in effect (reviews.cnet.com)
- Taking Down DNSChanger: A First Person Account (it.slashdot.org)
- Oz launches DNSChanger testing site (go.theregister.com)
- Update to “DNSChanger – Cleaning Up 4 Million Infected Hosts” (securelist.com)
- DNSChanger to knock 350,000 users off Internet this July (zdnet.com)
- Computers infected with DNSChanger get a reprieve from internet cut off (theverge.com)
- Hey, who stole the Internet? Ways to avoid being forcibly unplugged (thestar.com)
- Feds Ask for DNSChanger Deadline Extension As Millions of PCs Could Be Cut Off from the Web (circleid.com)
MAY 15, 2012
F.B.I. Begins Preliminary Inquiry Into JPMorganBEN PROTESS
The investigation, which is at an early stage, will focus on several possible lines of inquiry, the people briefed on the matter said. Among other things, investigators will examine JPMorgan’s accounting practices and public disclosures about the trades that prompted the loss.
These people cautioned that the inquiry was preliminary and that it was routine for the Justice Department to open a case after a big bank disclosed a huge blunder. The case is being led out of the F.B.I.’s New York office.
No one at JPMorgan has been accused of wrongdoing. A JPMorgan spokeswoman did not immediately respond to a request for comment.
News of an F.B.I. investigation comes at an awkward time for JPMorgan. On Tuesday, the bank’s top executives gathered in Tampa, Fla., for the annual shareholder meeting, where the trading loss took center stage.
The revelation also follows a similar acknowledgement last week that civil regulators at the Securities and Exchange Commission had opened an inquiry into JPMorgan’s disclosures and accounting practices. Another potential avenue for the S.E.C. to explore is whether the bank’s risk controls broke down. The commission has a lower bar to bring a case than federal prosecutors.
Both inquires are likely to examine JPMorgan’s regulatory filings that mention the internal unit that placed the trades, as well as recent statements from the firm’s top executives.
As media reports surfaced about the chief investment office in early April, Jamie Dimon, the bank’s chief executive, publicly played down the concerns, calling them a “complete tempest in a teapot.”
After Mr. Dimon and other senior executive learned more, he sounded a more contrite tone. On Thursday, when disclosing the loss in a conference call with analysts, Mr. Dimon acknowledged that the bank had made “egregious mistakes.
Investigators are also examining an accounting measure known as value-at-risk. JPMorgan disclosed earlier this year that it changed the calculation for the metric, which may have masked some of the risks surrounding this trade.
The Financial Times reported earlier that the F.B.I. had opened an inquiry into JPMorgan.
- F.B.I. Begins Preliminary Inquiry Into JPMorgan – NYTimes.com (mbcalyn.com)
- DealBook: F.B.I. Begins Preliminary Inquiry Into JPMorgan (dealbook.nytimes.com)
- F.B.I. Inquiry Adds to JPMorgan’s Woes (dealbook.nytimes.com)
- Red Flags Said to Go Unheeded by Bosses at JPMorgan – NYTimes.com (mbcalyn.com)
- Subdued Dimon is confronted over $2B trading loss (seattlepi.com)
- FBI Investigates $2bn JPMorgan Trading Loss (news.sky.com)
- JPMorgan under FBI investigation (todayonline.com)
- Subdued Dimon is confronted over $2B trading loss (news.yahoo.com)
- JPM CEO confronted over $2B trading loss (abcactionnews.com)
- Subdued Dimon is confronted over $2B trading loss (timesleader.com)