Peeping Feds

Nicodemo "Nicky" Scarfo Jr. was the kind of mobster who sent snickers instead of shivers up a debtor's spine. More at home with a laptop than a gun, Nicky was a far cry from the thuggish brute so often depicted in the movies and was reportedly the inspiration for the young hothead mobster Christopher Moltasanti on The Sopranos. Nicky Jr. was the son of one of the most notorious mob bosses in history, Nicodemo "Nicky" Scarfo Sr. The elder Scarfo took the Philadelphia mob from its heyday in the 1970s and dragged it into an intra-family war that left more than half the made guys in the family dead by the end of the 1980s. That's when Scarfo Sr. was sentenced to life in prison for racketeering and murder and Nicky Jr., after being wounded in an assassination attempt, set his sights on the greener pastures of Newark, N.J.

In June 2000, Nicky Scarfo Jr. was arrested by the FBI on charges of loan sharking and gambling. The feds gathered the evidence by using a key logger installed on Scarfo's computer that recorded every keystroke he made, giving them access to his encrypted files where he allegedly kept gambling records. The defense was ready to put the technology and methods employed by the FBI on trial until the Sept. 11 attacks and subsequent anti-terrorism legislation changed everything.

While the new U.S. law doesn't specifically mention the key logger system, the government will be getting even greater power in using other high-tech snooping devices and expanding their reach into the electronic world. Some say it's a necessary evil to combat the threat of terrorism, while others are dismayed at the civil rights and privacy implications.

Nicky Scarfo Jr. began his New Jersey operations after a masked gunman wielding a 9mm machine pistol on the evening of Oct. 31, 1989, shot Nicky Jr., sending bullets through his chest face and arms. The reign of Scarfo Sr. was over and the unidentified gunman was sending a message to the younger Scarfo to get out of town. Upon his release from the hospital Nicky Jr. relocated to Newark, where he lived under the protection of the Jersey branch of the Philadelphia Bruno-Scarfo family.

Steve Lenehan, a former mobster who has since left his life of crime after sending away more than 30 New Jersey and New York gangsters, remembers Nicky Jr. "I got to know him fairly well when he first came to North Jersey. He was pretty banged up, emotionally as well as physically, but he was treated like the royal crown prince." He adds: " I thought he was a pretty nice and polite guy. It was obvious he was trying to put some things together."

Scarfo had always been into computers. When he was ambushed in 1989, he was carrying his trusted laptop instead of a gun. When he relocated to Newark, he found himself caught up in a massive crackdown on the mob in Jersey and spent a good deal of the 1990s in prison for conspiracy, public violation and gun possession. He was released in July of 1998 and walked away from the Bruno-Scarfo family and aligned himself with the Gambino crime family, based out of New York.

Nicky Jr. began a large-scale bookmaking and loan-sharking operation under the auspices of Nicholas Mitarotonda, the Gambino family's capo in New Jersey. By February 1999, a series of convictions put away Mitarotonda and Nicky's immediate boss, Andrew Knapick Jr. Scarfo then took over the small crew and their bookmaking and loan-sharking operations.

Using an encryption program, PGP (Pretty Good Privacy), Scarfo kept all the records of the business on his office computer. For a mobster, keeping permanent computer records is not the usual mode.

Steve Lenehan has his own take on Scarfo's methods. "High tech record-keeping? Leaves too many trails; smart guys get rid of what they can after everyone's paid. All records should be coded, but that isn't foolproof either. Keep as much as you can in your head."

With all Scarfo's precautions, however, the FBI was watching. They had previously seized Scarfo's computer that January, when Knapik was still on the streets, but were unable to crack any of Scarfo's encrypted files. Instead of destroying them and moving on to another venture, Scarfo kept the business going and the FBI decided they needed a new tactic to get at the files.

They submitted an affidavit to a judge, arguing that the only way to get into the files was to find out what Scarfo's password was. The best way to access the password would be to install a key logger on his computer. The logger would record every keystroke Scarfo made on his computer and enable the FBI to figure out the password and enter the encrypted files.

Keystroke loggers take on two forms. One is a device that is physically implanted in the keyboard itself. The other method is a software program that's installed on the target computer. It is unclear which of the two methods was employed by law enforcement in their monitoring of Scarfo.

The judge who gave the green light to the FBI ruled that "normal investigative procedures to decrypt the codes and keys necessary to decipher the "factors' encrypted computer file have been tried and have failed."

On the evening of May 10, 1999, federal agents broke into Merchant Services, Scarfo's business in Belleville, N.J., and installed the key logger. Within a few months they had the password needed to access the hidden files. Scarfo used his father's prison number, nds09813-050, as his password. This time it seemed like the feds had Scarfo for good. On July 15, 1999, the FBI raided Merchant Services and carted away Scarfo's computer and were able to get into all the hidden files. They arrested Scarfo, charging him with bookmaking and loan-sharking.

This past summer as the case was coming around to trial, the defense filed a motion to have the FBI reveal the exact nature of the key logger system they used on Scarfo's computer. Scarfo's attorneys wanted to see if their client was subject to an unlawful search and seizure.

The U.S. Attorney on the case, Robert J. Cleary, asserted that the techniques used by the FBI were sensitive and that revealing them would pose a threat to national security. He requested that the techniques remain secret. The prosecution invoked a little-known 1980 law, the Classified Information Procedures Act (CIPA), which permits authorities to go beyond usual methods to protect classified information. Among the methods is to disclose the key logger to the judge but not to the defense.

Some contend that the key logger is merely an extended wiretap and violates the wiretap warrants, which generally allow for only targeted conversations to be monitored. The FBI counters that they did not monitor Internet activity, so it is technically not a wiretap. This argument is the crux of the defense's motions: to have the key logger system revealed so they can determine whether the technology violates the warrant.

George Anastasia, a Philadelphia Inquirer reporter who has followed the Philly mob for two decades, echoes some of the criticism of the FBI's methods in the case. "I think this an example of the FBI overreaching and using sophisticated, anti-terrorism technology to track a bookmaker, which on the face of it seems like overkill. Pre-Sept. 11, I think most people would have agreed."

Within days of the Sept. 11 attacks, a new set of laws strengthening law enforcement's powers to aid in the war against terrorism were being drawn up. On Oct. 26, 2001, President Bush signed HR 3162, Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (US PATRIOT Act); ushering in a new era in the fight against terrorism, and critics say, an even greater erosion of civil rights.

Commenting on the Scarfo case and the effect of the anti-terrorism bill, David Sobel of the Electronic Privacy Information Center says, "The government was not inclined to disclose the (key logger) methods before Sept. 11. On the other hand the need for public information concerning these techniques is stronger than ever because this type of technique will be used more frequently."

"It's very clear what happened to US PATRIOT. Whatever bright idea law enforcement had, that they wanted to pass before Sept. 11 was rolled into one bill. And it was passed rapidly without Congress to make a significant effort to really evaluate what they were doing," said Mike Phenegar secretary of the ACLU in Florida. Phenegar is a retired U.S. Army colonel intelligence officer and the former Deputy Director of Intelligence at Central Command at MacDill Air Force Base. He was also the Director of Intelligence for Special Operation Command and one of the ACLU's few conservative Republican activists.

While the US PATRIOT Act does not mention the key logger system specifically, it is clear that new methods of electronic surveillance are on the horizon and the government will be giving more leeway to agencies using similar methods to gather intelligence from both criminal and suspected terrorist enterprises.

Section 101 of the new law deals with many of the electronic issues. The section opens the door for monitoring of electronic correspondence via pen registers, which traditionally were limited to telephone numbers. The PATRIOT Act redefines a pen register to encompass Internet Service Provider (ISP) addresses, but unlike the old trap and trace devices that looked only at the numbers being dialed, the information gleaned from electronic monitoring would contain far more information. Additionally, one judge's orders for a pen register as well as subpoena for electronic records would transcend all jurisdictions and be, in essence, a blanket warrant. This is one area that particularly concerns some privacy rights groups.

Another computer-based focal point is the newly expanded scope of subpoenas for electronic communications. A service provider must now give the government duration of log-on, addresses visited and methods of payment for any commercial transactions. This again raises some privacy issues.

The PATRIOT Act also brings back the FBI's notorious Carnivore program, renamed the DCS-1000. In the new law, the FBI is given greater power in applying the program to search through people's Web surfing with little approval from a judge. Some think that the government will now be able to look at e-mail headers without a court order, capture content while looking for ISP addresses, and even in some cases infiltrating Web sites, which, under the new law, is a crime if the suspect does it.

Not everyone feels that these new powers threaten the privacy of the average citizen. Larry Sams, the special agent supervisor of technological services for the Florida Department of Law Enforcement (FDLE) says, "No one's tramping on rights, I can assure you. The Constitution is still there. The standards that law enforcement goes by, that's all still there."

The FDLE's computer division spends most of its time tracking online fraud and pedophiles. Hardly glamorous work, but there's more than enough to go around. Sams sees a difference between criminal investigations and the current war on terrorism. "Crime and terrorism are two different animals. A matter of national security is not the same as a pedophile. Crime didn't stop when terrorism came to the forefront. We still have to deal with it and our abilities to use surveillance, whether traditional or electronic, are still covered under warrants."

In fact, the new law really doesn't specify provisions for criminal investigations, like the Scarfo case, but as the lines between terrorist organizations and criminal ones blur, it may become necessary to use the PATRIOT Act against groups that are linked to both terrorist cells and international criminal groups. Recent intelligence from the Middle East reported that members of Al-Qaida were buying arms and nuclear materials from Russian organized crime figures. Other terrorist groups like the KLA (Kosovo Liberation Army) have been implicated in traditional criminal activities like extortion, human smuggling and drug trafficking.

One set of checks and balances that was added to the final draft of the US PATRIOT Act was a sunset provision. The provision opens a clause in which the current form of the bill will expire in four years. This gives Congress the power to oversee the FBI's use of the law and make changes before reauthorization. Ironically, while the Bush White House fought to remove the provision, it was the House Republicans who kept it in the final draft.

David Sobel contends that the sunset provision, "really doesn't go far enough. For instance, the provision that uses Carnivore is not affected by sunset provision. In fact, only a limited number of provisions will sunset. While it is better than nothing, it really won't have a major effect."

A number of critics question whether new anti-terrorism laws were even needed, asserting that existing laws on the book were more than adequate to address the security concerns. Mike Phenegar outlined three criteria that the ACLU is using to assess the new laws. The first is to decide whether the law would have been effective if it were in place. Would all the new surveillance powers have stopped the Sept. 11 hijackers? The second would be to mitigate the collateral damage. If a suspected terrorist were the subject of a roving wiretap, then anyone else who uses the phones that the terrorist might happen to use would also be tapped. Finally the ACLU wants the laws implemented in a non-discriminatory manner, which could prove difficult in these politically and culturally charged times.

In light of the recent redirection of FBI manpower to the war on terrorism, will the FBI let up in their pursuit of organized crime figures like Scarfo? "The feds are maxed out now with the terrorist stuff, but they like O.C. (organized crime) cases. The mob means press coverage. The FBI and the Justice Department will be back focusing on mob stuff as usual, if they aren't already," says Lenehan.

Anastasia had his own take on the new anti-terrorism law. "One of the interesting things to watch is whether the new, less restrictive wiretap and surveillance laws that have been put in place to counter terrorism end up being employed in traditional mob cases."

Meanwhile back in New Jersey, on Dec. 26, Judge Politan ruled that the government did not break the law, nor did it overstep its bounds in the use of the key logger. Furthermore, he stated that the FBI did not have to reveal the exact nature of the key logger used on Scarfo's computer. The judge wrote in his decision of the need for law enforcement to keep up technologically with criminals, especially in light of the Sept. 11 attacks. The trial is set to begin sometime this year.

It's too early to tell what effect the new anti-terrorism measures will have on the war on terrorism and the war on crime. With the watchful eye of privacy-rights groups, let's hope that the government doesn't overstep its bounds, and with the ever-vigilant law enforcement and anti-terrorism agencies bringing electronic surveillance to the forefront, maybe tragedies like Sept. 11 will be ended before they begin.

Scott M. Deitche is a freelance writer in St. Petersburg. He has written three articles for the Planet on organized crime. He is currently working on a book on the Tampa mob and one on the life of New Jersey mobster Steve Lenehan. He can be reached at sdeitche@

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