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  4. Statement for the Record, U.S. Immigration and Customs Enforcement, on "Homeland Security Investigations: Examining DHS's Efforts to Protect American Jobs and Secure the Homeland"

Statement for the Record, U.S. Immigration and Customs Enforcement, before the U.S. House of Representatives Committee on Homeland Security, Subcommittee on Oversight, Investigations, and Management on "Homeland Security Investigations: Examining DHS's Efforts to Protect American Jobs and Secure the Homeland"

Release Date: July 28, 2011

Cannon House Office Building


Chairman McCaul, Ranking Member Keating, and distinguished Members of the Subcommittee:

Simply put, American business is threatened by those who pirate copyrighted material and produce counterfeit trademarked goods. From counterfeit pharmaceuticals and electronics, to pirated movies, music, and software, intellectual property (IP) thieves undermine the U.S. economy, erode U.S. competitiveness in the world marketplace and in many cases threaten public safety. All the while, transnational organized criminal networks are profiting from their increasing involvement in IP theft.

ICE's Role

ICE has a legacy of engagement in enforcement against IP theft that spans our past as U.S. Customs Service investigators to our present role as Homeland Security Investigators. ICE is a leading agency in the investigation of criminal intellectual property violations involving the illegal production, smuggling, and distribution of counterfeit and pirated products, as well as associated money laundering violations. We target pirated and counterfeit goods entering the United States through our ports from various countries overseas. We seize the counterfeit goods that infringe trademarks, and pirated goods that infringe copyrights. In addition, we investigate the criminals engaged in IP theft. ICE has become increasingly innovative in how we combat counterfeiting and piracy. Our goal is to disrupt the manufacturing, distribution, and financing segments of criminal organizations.

ICE recognizes that no single U.S. law enforcement agency can succeed in the fight against IP theft. Rather, it is essential that all relevant federal agencies work together and with industry to confront this challenge. ICE formed the Intellectual Property Rights (IPR) Center to leverage government resources to combat IP theft.

The IPR Center

The mission of the IPR Center is to address the theft of innovation that threatens U.S. economic stability and national security, undermines the competitiveness of U.S. industry in world markets, and places the public's health and safety at risk. The IPR Center promotes coordination and communication across the many U.S. government agencies with roles in enforcing IP laws. The IPR Center brings together key domestic and foreign investigative agencies to efficiently and effectively leverage resources, skills and authorities to provide a comprehensive response to IP theft.

The IPR Center, located in Arlington, Virginia, is an ICE-led task force of 19 relevant federal and international partners. The IPR Center includes embedded team members from, among others: U.S. Customs and Border Protection (CBP), the Food and Drug Administration Office of Criminal Investigations (FDA OCI), the Federal Bureau of Investigation (FBI), the U.S. Postal Inspection Service (USPIS), the Department of Commerce International Trade Administration, the U.S. Patent and Trademark Office, the Defense Criminal Investigative Service, the Naval Criminal Investigative Service, the Army Criminal Investigative Command Major Procurement Fraud Unit, and the Inspector General's Office from the General Services Administration. In 2010, the Government of Mexico and INTERPOL joined the IPR Center as our first international partners.

Thus far in 2011, the IPR Center has welcomed the following new partners: the U.S. Consumer Product Safety Commission, the Defense Logistics Agency Office of Inspector General, the U.S. Department of State Office of International Intellectual Property Enforcement, the U.S. Air Force Office of Special Investigations, and our third international partner, the Royal Canadian Mounted Police. While the U.S. Department of Justice (DOJ) is not an official partner at the IPR Center, trial attorneys from the Computer Crime and Intellectual Property Section (CCIPS) regularly provide counsel on ongoing enforcement operations and policy. Together, the partners at the IPR Center and DOJ have created a one-stop shop for industry and victims of IP theft, reducing duplication and allowing us to leverage and benefit from our different areas of expertise.

Recent Enforcement Successes

Operation In Our Sites

Last year, the IPR Center launched Operation in Our Sites, a new initiative targeting websites being used to sell counterfeit goods and distribute pirated merchandise and copyrighted digital materials. During the first enforcement action as part of this initiative, ICE special agents, working with the U.S. Attorney's Office for the Southern District of New York, obtained judicially authorized seizure warrants and seized seven illegal domain names providing access to more than 500 movies and television programs. The operation's second phase, launched around the 2010 holiday season, targeted online retailers of counterfeit goods, including sports equipment, shoes, handbags, athletic apparel and sunglasses, as well as illegal copies of copyrighted DVD boxed sets, music and software. ICE and DOJ obtained federal court orders to seize the domain names of 77 internet sites selling counterfeit goods, five websites selling pirated movies, music and software, and one server. In 2011, ICE conducted three additional rounds of Operation In Our Sites. On February 4, 2011, which coincided with the Super Bowl, ICE seized 10 domain names of websites that provided access to pirated telecasts of the National Football League (NFL), the National Basketball Association (NBA), the National Hockey League (NHL), World Wrestling Entertainment (WWE), and the Ultimate Fighting Championship (UFC). On March 3, ICE and DOJ announced the arrest of the operator of one of these websites on charges of federal copyright violation.

Since the initial seizures in June 2010, there have been more than 60 million hits to the banner that notifies viewers that a federal court order has been issued for the domain name and educates them that willful copyright infringement is a federal crime. After the seized domain names are forfeited to the U.S. government, a new banner is placed on the sites notifying the public that the sites have been forfeited and linking the viewers to the ICE public service announcement. To date, over 75 of the 125 seized domain names have been forfeited. The resulting public education about IP theft is a significant benefit of this enforcement operation, and can help to deter future crimes and raise awareness.

ICE's efforts through this operation successfully disrupt the ability of criminals to purvey copyrighted materials illegally over the internet. In addition to the domain names that are seized through this operation, evidence suggests that the operation has a deterrent effect. In fact, following Operation in Our Sites v. 1.0, ICE was notified that 81 of the most active websites that had been offering pirated material voluntarily stopped offering illegally pirated content.

Other notable investigative successes against IP theft

ICE's IP theft enforcement efforts have continued to increase under this Administration. In fiscal year (FY) 2010, ICE initiated 1,033 intellectual property infringement investigations—a 42 percent increase over FY 2009— resulting in 365 arrests, 216 indictments and 170 convictions. In FY 2010, indictments stemming from ICE-initiated intellectual property investigations increased by 86 percent over the previous year. These figures include both federal and state prosecutions. The following cases illustrate some of our notable IP enforcement successes.

In the past year, ICE special agents continued to seize millions of dollars in counterfeit items as a result of significant criminal investigations including an investigation into a criminal organization smuggling counterfeit shoes and luxury goods through the Port of Baltimore, with an estimated manufacturer's suggested retail price (MSRP) of more than $219 million (had the products been legitimate goods). This investigation resulted in eight federal arrests. ICE was able to develop evidence on a parallel operation in the United Kingdom (UK), and our ICE Attaché in London passed the information on to relevant UK law enforcement. This resulted in six arrests, seizures of 50,000 counterfeit luxury items and approximately $617,000 in U.S. equivalent currency, making it one of the largest IP theft enforcement cases in UK history.

We have broadened our reach by partnering with foreign counterparts, such as the Mexican Tax Administration Service, which seized 306 tons of counterfeit merchandise at mail facilities and land, air and sea ports of entry during just one joint operation.

In June 2010, ICE and CBP completed the U.S. portion of Operation Global Hoax, a three-month multilateral enforcement action proposed by the IPR Center and coordinated with the World Customs Organization (WCO). Global Hoax is the first-ever worldwide enforcement action targeting counterfeit DVDs and CDs as they are shipped around the world. The five-day surge operation at mail and express courier facilities resulted in the seizure of more than 140,000 pirated DVDs, 28,000 CDs, and more than 270,000 other counterfeit items worldwide. Domestically, ICE and CBP seized 22,371 pirated DVDs, 2,658 pirated DVD box sets, 133 pirated CDs and 8,556 other counterfeit items worth a total MSRP of approximately $5.3 million.

In October 2010, the IPR Center coordinated U.S. efforts in Operation Pangea III, a global operation targeting illegal pharmaceutical sales over the Internet that involved the participation of ICE, CBP, Food and Drug Administration (FDA), U.S. Postal Inspection Service (USPIS), Drug Enforcement Administration (DEA), authorities in 45 other countries, the WCO, INTERPOL, international organizations, and industry. The U.S. operation was conducted at mail facilities in several U.S. cities. Internet monitoring revealed more than 820 websites engaged in illegal activity, including those offering controlled substances or prescription-only drugs. Nearly 300 of these websites have been taken down and investigations continue. Participants inspected approximately 278,000 packages, seizing more than 11,000 packages containing more than 2.3 million illicit and counterfeit pills worth $6.77 million. Globally, 130 search warrants were executed and 87 individuals were either arrested or are under investigation for a range of offenses.

ICE remains steadfast in its efforts to prevent IP theft from supporting those who seek to harm the United States or our interests abroad. In November 2009, ICE and the FBI worked with the New Jersey State Police and the Philadelphia FBI Joint Terrorism Task Force on a case that identified: a three-cell criminal organization, a U.S.-based stolen property and counterfeit goods group, an overseas procurement group, and an international group tied to Hezbollah procuring weapons, counterfeit money, stolen property, and counterfeit goods. Ultimately, the investigation resulted in 25 indictments, 16 criminal arrests, 15 administrative arrests, and 10 INTERPOL Red Notices.

ICE's Partnership with the Private Sector

In addition to our investigative efforts, we are working with the Intellectual Property Enforcement Coordinator (IPEC) and other agencies to support efforts to establish voluntary agreements with payment processors, ad networks, and other intermediaries to combat IP theft. When combined with our law enforcement efforts, the private sector's voluntary action against infringers can have a tremendous effect on online crime. No one has a greater incentive for protecting intellectual property rights than private industry who want to protect their investments in research, development, manufacturing, sales, marketing, and product distribution.

To help enhance and facilitate productive partnerships within both the public and private sectors, the IPR Center provides industry with valuable information about ICE's efforts to combat the importation of hazardous and counterfeit and pirated products, and it provides points of contact in ICE field offices that industry can use to provide ICE with leads and tips. For FY 2009 through April 2011, the IPR Center and ICE special agents have conducted approximately 604 outreach efforts, formal presentations, and meetings, in total speaking with more than 33,000 industry representatives.

Pharmaceutical Cases

A challenge we face is that criminals are willing to counterfeit and pirate and market any product if it will sell, regardless of whether such sale could result in serious and significant injury to consumers or the public. ICE has investigated cases involving counterfeit toothpaste that contained a component found in antifreeze. Likewise, in 2007, ICE and the FDA arrested Kevin Xu, one of the world's most prolific counterfeiters of pharmaceuticals. Xu has been linked to distribution of counterfeit medications such as Plavix, Zyprexa, and Casodex that are used to treat blood clots, schizophrenia, and prostate cancer, respectively. In 2009, Xu was sentenced to six and a half years in prison. This April, Xu's conspirator in the United Kingdom, British citizen Peter Gillespie, was sentenced to eight years in prison for his role in this international scheme. Earlier this month, following a joint ICE, FDA and USPIS case, a Chinese national was sentenced to seven years in prison for trafficking in a counterfeit version of Alli, a weight loss drug. The drugs he trafficked contained undeclared active pharmaceutical ingredients, including Sibutramine, a non-narcotic controlled substance. One victim suffered a stroke after taking the counterfeit medication.

Military and Counterproliferation Investigations

ICE is the only federal law enforcement agency with full statutory authority to investigate and enforce criminal violations of all U.S. export laws related to military items, controlled "dual-use" commodities and sanctioned or embargoed countries. Through its predecessor agency, U.S. Customs Service, ICE has enjoyed more than 30 years of success as the nation's lead law enforcement agency investigating violations of export control laws. But the magnitude and scope of the threats facing our country have never been greater than they are today.

ICE counter-proliferation investigations (CPI) focus on the trafficking and illegal exportation of the following commodities and services: Weapons of Mass Destruction (WMD) materials; Chemical, Biological, Radiological, Nuclear (CBRN) materials; military equipment and technology; controlled dual-use commodities and technology; firearms and ammunition; and financial and business transactions with sanctioned and embargoed countries and terrorist organizations.

One recent example of our counter-proliferation efforts involves the diversion of U.S. manufactured pressure transducers – a critical component of a Uranium Gas Centrifuge. In April 2009, ICE identified a dual Iranian/Canadian Citizen who was requesting pressure transducers from a named U.S. company. The lead was a result of an ICE Project Shield America Industry Outreach presentation. ICE launched a joint investigation with Canadian law enforcement to identify the suspect. The suspect was later arrested attempting to ship numerous pressure transducers with the labels removed. A subsequent search of his residence revealed additional pressure transducers and procurement instructions from his Iranian handlers. In July of 2010 this individual was sentenced under Canadian law to 51 months confinement.

A second example, which involved multi-agency cooperation, was a joint ICE, CBP, FBI, and DOJ investigation targeting the potential sale of counterfeit Cisco Gigabit Interface Converters to the U.S. Department of Defense for use by U.S. Marine Corps personnel operating in Iraq. Failure of these counterfeit devices on the battlefield would have endangered the lives of American service members. The defendant's profit would have been only approximately $120,000, showing the callousness with which many counterfeiters treat human life. I am pleased to report one defendant in this case investigated by ICE was recently sentenced to more than four years in prison.

Another great example of a successful ICE investigation involved Marc Knapp, of Simi Valley, California, who on January 13, 2011, pleaded guilty in the District of Delaware to a two-count information charging him with violating the Arms Export Control Act and the International Emergency Economic Powers Act. The information, filed on Nov. 22, 2010, charges that Knapp engaged in a seven-month course of criminal conduct involving illegal exports to Hungary and attempted exports to Iran during negotiations with undercover agents posing as Iranian purchasers. Among others, Knapp attempted to export a complete F-5 Tiger II fighter jet, as well as F-14 flight ejection seats, anti-gravity flight suits, search and rescue beacons and emergency manuals for U.S. fighter jets. On two occasions, Knapp illegally exported items, including anti-gravity flight suits, to Hungary believing they were destined for Iran. The investigation was conducted jointly by ICE and the Defense Criminal Investigative Service (DCIS).

These cases are troubling and demand continued attention from criminal investigators and regulatory agencies. On June 14, ICE announced the beginning of Operation Chain Reaction, a joint operation between ICE, the Department of Defense, FBI, CBP, GSA and DOJ to target counterfeit parts in the Defense Department and U.S. Government supply chain. Through this operation, we will work together with our partners to protect the members of the Armed Forces, enabling them to conduct their missions without the fear that the equipment they rely on may be counterfeit. At ICE, we are prioritizing our investigative resources to focus on IP theft enforcement that protects health and safety, including the safety of our soldiers serving abroad, and supports U.S. innovation and creativity.

One of the most effective tools ICE agents use to protect the U.S. and its technological and military advantage is an outreach initiative called Project Shield America (PSA). ICE special agents work with manufacturers and/or exporters of strategic commodities that are believed to be targeted for procurement by terrorist organizations and the countries that support them to educate the companies and individuals on U.S. export laws, discuss export licensing issues and requirements, identify "red flag" indicators used in illegal procurement and identify the government agencies responsible for the licensing of export-controlled commodities and technology.

Worksite Enforcement Efforts

The Department of Homeland Security (DHS) has fundamentally reformed immigration enforcement, focusing on identifying and removing criminal aliens who pose a threat to public safety and targeting employers who knowingly break the law. As part of this effort, ICE is focused on criminally investigating and prosecuting employers who exploit or abuse their employees and have a history of knowingly employing an illegal workforce. ICE is pursuing a comprehensive worksite enforcement strategy to deter unlawful employment and drive a culture of compliance with the nation's immigration-related employment laws.

Arresting and removing illegal workers must be part of a strategy to deter unlawful employment, but alone it is insufficient as a comprehensive worksite enforcement strategy. Enforcement efforts focused on employers effectively target the root causes of illegal immigration. In April 2009, ICE released a worksite enforcement strategy designed to: 1) penalize employers who knowingly hire illegal workers; 2) deter employers who are tempted to hire illegal workers; and 3) encourage all employers to take advantage of easy to use and well crafted compliance tools. We carry out this strategy with the robust use of Form I-9 inspections, civil fines and debarment, and by promoting compliance tools like E-Verify through the ICE Mutual Agreement between the Government and Employers (IMAGE) program.

The success of our approach to worksite enforcement is evident in the statistics. In fiscal year (FY) 2010, ICE initiated a record 2,746 worksite enforcement investigations, more than doubling the 1,191 cases initiated in FY 2008. ICE criminally arrested 196 employers for worksite-related violations, surpassing the previous high of 135 in FY 2008. ICE also issued a record 2,196 notices of inspection to employers, surpassing the prior year's record of 1,444 and more than quadrupling the 503 inspections in 2008. ICE issued 237 final orders – documents requiring employers to cease violating the law and directing them to pay fines – totaling $6,956,026, compared to the 18 issued for $675,209 in FY 2008. The total of $6,956,026 last year represents the most final order fines issued since the creation of ICE in 2003. In addition, worksite investigations resulted in a record $36,611,320 in judicial fines, forfeitures, and restitutions. Finally, ICE brought a new level of integrity to the contracting process by debarring a record 97 businesses and 49 individuals—preventing unscrupulous companies from engaging in future business with the government. Through this aggressive approach to worksite enforcement, ICE is bringing employers into compliance with the law.


Thank you for holding today's hearing. ICE welcomes the opportunity to explain its role in protecting American businesses, jobs and national security, and we look forward to continuing to work with you on these important issues in the future.

Last Updated: 03/08/2022
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