__Counterfeiting meets pixel power, and nothing will ever be the same again. __
In April of last year, 17-year-old Dustin Hardy took an advanced business course at the New Mexico Military Institute - an elite private high school in Roswell - and learned how to make money. Lots of money. Easy, multiplicative money. The modern method, he learned, required only a few fixed assets - in his case, an iMac, a Umax Astra 1220U scanner, an Epson 740 printer, and Adobe PhotoDeluxe. And so, one lazy spring afternoon a few days after a class devoted to teaching NMMI's future entrepreneurs about the scourge of counterfeiting, Hardy and his roommate, Brinton Bryan, also 17, locked their dorm-room door, booted up the iMac, and pooled all the paper money they had between them.
Ignoring Andrew Jackson's disapproving glare, they laid Hardy's solitary twenty-dollar bill (the totality of his discretionary spending for the week) on the 1220U's flatbed. They watched as the machine buzzed and the twenty's image appeared on the computer screen.
It was disappointing. The bill, a recent-vintage note loaded with anticounterfeiting features, looked flat, fuzzy, and bluish on the monitor, as if Jackson were suffering from the flu.
But Hardy and Bryan soldiered on. Smoothing a crumpled dollar bill from Bryan's wallet, they set it on the scanner and watched hopefully as it rendered onscreen. Using PhotoDeluxe, Hardy tinkered with the bill's color, tamping down the blue and brightening the green. When he was satisfied, he scanned the other side and adjusted its color the same way. He printed the front, then turned over the paper - heavy stationery from the school's PX - and printed the other side. It took a bit of trial and error to find the right position, but finally he got the front and back to line up exactly and - voilà - the young men made their first dollar. This astonishing act of electronic alchemy, the two would admit later, transformed them from dispassionate observers of currency design into, well, greed-addled kids.
Within a few hours, they had printed more than two dozen ones, followed by a more financially ambitious run of roughly 20 tens. Eager to show off their newfound wealth - and prowess - Hardy and Bryan handed out their handiwork to other cash-strapped cadets, and soon, like an alien destabilization scheme, funny money was popping up all over Roswell.
Beset by angry local merchants, the sherriff made a frantic call to the Albuquerque field Office of the Secret Service, the US agency that has jurisdiction over counterfeiting. Special agent Tim Barraclough took the case.
Barraclough arrived at the NMMI campus on April 2. A clerk at the PX had already identified several cadets who had passed fake ones and tens. (Hardy and Bryan were not among them.) Barraclough quizzed the surprised students at length, and each proclaimed his innocence. The agent instituted a "consensual search of their dorm rooms." Nothing turned up.
By this time, the culprits were feeling both ashamed and surrounded. "It was us," Hardy and Bryan told Barraclough before sheepishly leading him to their room, where another search ensued. This time, the evidence was damning. Their wastebasket contained several scraps of crumpled paper covered with smudged images of copies that hadn't turned out well.
Continuing his search, the agent found a forged Texas driver's license tucked away in an American history textbook. Bryan, who grew up in Austin, admitted he'd used the computer to graft his photograph onto a fellow Texan's license. Barraclough confiscated it. Even more demoralizing, he impounded Hardy's iMac and all its peripherals. Then he arrested the two cadets.
Only 200 miles away and two months later, 18-year-olds Gerrit Mulder and Marvin Paul took a less technology-intensive route to the same dead end. Newly graduated with honors from La Cueva High, Albuquerque's wealthiest public school, the pair augmented their summer earnings by switching on Paul's Epson copier and running off four twenties and three fifties. Afterward they headed for the nearby Century Mall, where they wandered aimlessly, like typical teens - except that, as they walked along, they surreptitiously dropped three phony bills on the floor. Then they stood back, snickering, to see whether anyone would pick them up. Someone did, and at least one of the twenties was passed.
This much comedy was enough for Paul, who went home. But Mulder, flush with the thrill of success, continued on to the Century Rio 24 movie theater, where Arnold Schwarzenegger's End of Days was playing. He paid for a ticket with legitimate money, then used the last of his faux fifties to load up on snacks at the concession stand.
That's when things went sour. Instantly suspicious, the stand's attendant examined the bill. Thick, slick, and grainy, its provenance was obvious. The clerk called his manager, who called the police, who called the Secret Service. A gaggle of federal agents obligingly drove over from their downtown headquarters and collected Mulder from the snack stand. The group then proceeded to Paul's house for a second arrest, followed by a subdued crosstown ride to the park where Paul, fearing this very outcome, had stashed his copier in some bushes.
In February, the pair returned from college to face a four-count indictment for making, possessing, passing, and concealing "forged and counterfeited obligations of the United States" - that is, money - "knowingly and with intent to defraud."
The charges are a clinically precise description of the young men's exploits, certainly. But intent is a murky issue, especially where teenagers are concerned. "I don't know why we did it, OK?" Mulder says from his parents' home during a brief telephone interview. "It seemed like it would be funny. But it was just really, really stupid. End of story, OK?"
Since January 1999, more than three dozen enterprising high school students in the US have booted up their iMacs or Presarios, slapped a greenback on a scanner, and run off a walletful of wampum - and those were just the ones who got caught. For reasons that defy explanation, many were natives of New Mexico, but the perps have also included seniors at City Honors High in Buffalo, New York, and an eighth-grader at Paul Hadley Middle School in rural Mooresville, Indiana. There have been incidents involving students in Weston Township high school in Weston, Massachusetts, and at tiny Catholic Memorial High in Waukesha, Wisconsin. The government doesn't keep a separate tally of counterfeiting committed by juveniles, but there's no doubt that the phenomenon is new and spreading.
"It has become a significant problem for us," says Richard Starmann, who heads up the Secret Service field Office in Chicago, one of the busiest in the nation. "There's not an agent in this office who hasn't made at least one arrest at a high school."
Most of the counterfeits that led to these arrests were fives and tens. A few were ones. Some were printed on lined notebook paper, others on standard bond, still others on only one side. They were used to buy cartons of milk, single-serving pizzas, and fundraiser candy bars. Many were fobbed off on overworked, undertrained convenience-store clerks who, in some instances, happened to be the counterfeiters' own classmates, making apprehension of the culprits a foregone conclusion.
Not that the criminals tried to cover their tracks. Last year, for instance, a gleeful parade of 15-year-olds in Zionsville, Indiana, followed one another to the counter at the local Wendy's, each asking to change a twenty and handing over a bill notable for its odd color, flimsy paper, and identical serial number. The clerk alerted a police officer who, conveniently enough, was eating at the restaurant. While the offenders lingered over lunch, laughing behind their hands, the cop sauntered over Andy Griffith-style and asked, "Kids, just where did this money come from?"
"We're not talking criminal masterminds here," says Patrick Martinez, Dustin Hardy's attorney. "These kids didn't even know enough to get rid of the evidence. It's obvious they weren't setting out to break federal statutes or to form an ongoing counterfeiting enterprise or anything. They were just being stupid - which is a shame, but it shouldn't be treated as a crime."
Copying American money is, of course, a federal offense, and the penalties are draconian enough to raise questions about whether they should apply to juveniles. Under federal statute 18 USC section 471, if you're found guilty of making copies "in the likeness and similitude of US currency ... unless they are much larger or much smaller than US currency" (a minimum of 50 percent larger or 25 percent smaller) or unless they are "rendered in black and white," you face up to 15 years in the slammer. You get a break if you're under 18 and qualify as a juvenile, in which case you might wind up in a federal juvenile facility until you turn 21. However, if you turn 18 after you've committed the crime and before your trial begins - as Hardy and Bryan did - your status changes from juvenile to adult, and the penalties ratchet upward.
In addition to the 15-year sentence for minting your own currency, you can receive another 15 years for putting your bills into circulation. And you can be tried separately for each offense. If you buy a burger with one fake bill and treat yourself to an ice cream cone with another, you've potentially cost yourself 45 years.
Moreover, making and passing bills each carries a $250,000 penalty. Then there's restitution for any item purchased with bad bills and the loss of equipment confiscated by the authorities. If, for example, you used a friend's computer, it can be seized and held indefinitely. If you drive your parents' car to a fast-food outlet to spend your ill-gotten gains, ditto - it's all part of the crime. And if you give phony bills to friends who knowingly pass them and get caught, they risk a full-blown prosecution of their own.
These grave consequences contrast starkly with the spirit in which teenagers tend to commit the crime. "I swear, it was just a silly joke," says Hardy's mother, Doni. (Like many of the defendants mentioned in this story, Hardy declined to comment pending the outcome of his trial, which was unscheduled at press time.) "Dustin never realized it would be so serious. He was just trying to see, I think, what his computer could do."
Many of those charged with enforcing the law find the situation no less disconcerting. "This is just nutty," says Richard Piagentini, a police captain in Waukesha, Wisconsin, who last spring broke up a ring of six juvenile counterfeiters (their specialty, the ten-dollar bill; their downfall, the Whopper). "You expect kids to get into trouble. But this isn't just trouble. It's a felony. It's jail time. I mean, this is just not going to look good on a résumé or a college application."
Not so long ago, counterfeiting was the exclusive province of the skilled, the organized, the closemouthed, and the patient - in other words, not the adolescent. A counterfeiter was an artist, painstakingly engraving exact replicas of bills onto metal plates, carefully seeking out a cotton paper that approximated the look and feel of the government's proprietary linen-based stock, and running off copies on a room-size printing press.
Then came desktop imaging.
About six years ago, the Secret Service began to encounter glossier, stiffer - and sometimes flimsier - bills. They were oddly colored and lacked the telltale embossed feel of offset printing. Within the law-enforcement community, they became known as p-notes, owing to the fact that they were pumped out by a color printer.
Although p-notes aren't as convincing as offset counterfeits, making them requires far less capital outlay, talent, time, space, and risk. Offset printing is necessarily high-volume; you have to run an entire ream of paper and then circulate tens or hundreds of thousands of dollars in cash, which is hard to do without attracting attention. If you make p-notes, on the other hand, you need print only a few bills of any denomination, spend them unobtrusively, and call it a day.
"In the last four years, we've seen reprographic, or computer-based, methods increase from 1 percent of all counterfeiting to about 40 percent," says Jim Mackin, an agent with the Secret Service in Washington, DC. In parts of the country where home-computer ownership is widespread, like on the coasts and in many large interior cities, the percentage tops 60. And it's climbing. In 1996, the Secret Service nabbed 1,737 people nationwide for counterfeiting; only 176 had used a computer. In 1998, p-noters accounted for 2,618 of 3,569 total arrests. The same year, authorities confiscated close to $40 million in computer-generated money. (By most estimates, one-third of all counterfeit money is discovered. The rest skips undetected through the economy.)
Relatively few p-notes are produced by dilettantes like Hardy and Bryan. The overwhelming majority comes from professionals, who crank out digital copies of much higher quality and then launder them through equally illicit activities, like gunrunning. In fact, the most prolific desktop counterfeiters nowadays are members of street gangs, to whom p-noting delivers a peerless revenue stream, more reliable and less difficult than drug sales.
"Gangs actually post their best counterfeit bills on the Internet now and share the technology with one another across the country," Mackin says. "This is part of a broader shift by organized crime groups away from street crime and toward big-league financial crime, much of it electronic. You can make plenty of money that way, and you're much less likely to be shot. But we're not just sitting back and watching. We are on this."
Indeed, since 1998, when the Secret Service made a p-note presentation to the House Subcommittee on Banking - scanning and printing money as the astonished representatives looked on - Congress has sped implementation of a dramatic redesign of America's paper money, virtually every feature of which is intended to thwart digital reproduction. The first of the new bills, fifties and hundreds printed in 1996, display oversize, intricately detailed mugs of Ulysses S. Grant and Ben Franklin, whose delicate lines are too fine for current digital graphics systems to reproduce without blurring. A similar version of the twenty - the favorite denomination of counterfeiters, because retail clerks rarely examine it closely - was introduced in 1998, and in May of this year the Treasury extended the design to fives and tens.
But such hurdles have little effect on teenagers. In fact, the first person caught reproducing the new currency was a 16-year-old. The kid, from Gilbert, West Virginia (unidentified because he's a juvenile), fired up his computer in 1996, scanned a hundred-dollar bill, and with almost touching hubris, placed a photo of his own face over Franklin's. He handed the bill to a cashier at McDonald's and was identified in short order.
"Why do kids do this?" muses Secret Service agent Justin Miller, who has investigated more than a dozen computer-counterfeiting cases in the past year. It's not hard to understand why teenagers might want to whip up a quick batch of cash, but in fact those who do it are the very kids who don't need the money. Overwhelmingly, juvenile counterfeiting is a transgression of affluent, well-adjusted young males who have never been in trouble before. It's a "whassup" crime of good students with better computers. It takes little more than access to digital imaging tools, apparently, to start them down the path to their very own Secret Service file. If evil is banal, teenage counterfeiting is callow.
"We were all 17 once," Miller says. "The difference is, we didn't have this technology, which makes it so easy. I suppose, to some kids, it's so simple that it doesn't seem possible it's a federal offense."
But the criminal aspect can actually enhance the appeal. "It was so cool," says Aaron Doft, a junior at NMMI, as he recalls the moment last year when word spread throughout the school that counterfeiters were in their midst. "Everyone thought it was really cool when the Secret Service showed up. We were all like, 'Dude, look, it's the Men in Black.'"
Of course, throughout history - or since the advent of the $169 Motorola flip-phone and the $395 PlayStation2, at least - money has had a talismanic allure for the young. In sufficient quantities, it represents freedom from parents, dominion over peers, and, in its broadest sense, potency. It gets you stuff. It buys happiness. It might even assuage loneliness.
Kevin Mech, a La Cueva High classmate of Mulder and Paul, apparently thought it would. Last November, Mech suffered a nasty romantic breakup, and, following the contorted reasoning of wounded youth, comforted himself by producing $200 on his father's home computer. "I started making fake money so I wouldn't have pain in my life anymore," he was quoted as saying in the Albuquerque Journal.
With no nefarious plan to profit - or, indeed, any plan at all - he doled out the cash to friends, who used it to buy pizza at the La Cueva snack bar. Now Mech and four of his friends, all of them 18, possess both an arrest record and a terrifying letter from the US Attorney's office that advises the defendants to retain an attorney forthwith and prepare for the consequences of an adult currency forgery conviction.
"I still can't believe it happened. What a ridiculous mess," says Derek Lamppa, co-valedictorian of the La Cueva class of 2000 and Mech's best friend. (He is not implicated in the case.) "Kevin didn't think making the money was so serious. No one did. I mean, who knew it was a federal crime? He just wanted to take his mind off his girlfriend. And the other guys, when they passed the money, I think they all thought it was a hoot."
Mech's mother, Dolores, offers a more sobering perspective. "It is an endless nightmare," she says. "Kevin is depressed. It has affected everyone - the family, Kevin's friends, even the neighborhood. Our own neighbors act like we've raised some kind of criminal." She begins to cry. "Kevin's just a kid. And he made a stupid mistake. He knows it was stupid. Please, we just want all of this to go away."
Juvenile counterfeiting is still so new that nobody knows quite how to deal with it. In some states that lack a large urban center - West Virginia for one - US Attorneys have declined to prosecute simply because the federal government didn't maintain juvenile jails or courts there. Under the circumstances, putting the criminals behind bars hasn't seemed worth the trouble. Although more federal juvenile facilities are being built, the question of what to do with underage counterfeiters will remain perplexing.
For the moment, authorities are torn between upholding the law and making allowances for this new class of offenders. "I can't speak for other federal jurisdictions," says Mary Higgins, the Assistant US Attorney handling counterfeiting cases in New Mexico. "But in deciding whether to proceed with prosecution, we usually consider such things as how many bills were made and passed. I wouldn't want to say, however, what our cutoff point is for the number of bills you can produce."
"It's something of a case-by-case decision," says Secret Service agent Mackin. "I don't think federal prosecutors are looking to make examples of kids who are just stupid. But, you know, it is a serious federal offense. Prosecutors can and do decide to prosecute for making or passing just one bill."
As this article goes to press, it's unlikely that many of the actions pending throughout the country will go to trial. Most defendants, including Mulder, Paul, and Mech, are being told they will be given a preprosecution deferral - a form of probation - for five years. If they stay out of trouble, their court records will be expunged. If, on the other hand, they violate probation in any way, they will be prosecuted for counterfeiting to the fullest extent of the law.
Regardless, their indictment and arrest report will never go away. "That's permanent," says Timothy Padilla, the attorney representing Mulder. "Also, they were arraigned before a federal magistrate in federal court. I don't think they will soon forget that. Which is probably a good thing."
In the long run, the best hope for combating teenage counterfeiting lies in making currency so difficult to copy that young pranksters will find more wholesome diversions. The notion that technology companies should be required to defeat reproduction of legal tender was floated on Capitol Hill in 1998, but the imaging technology of the time couldn't handle the task and the idea fell into legislative limbo.
But technology is catching up. Officials at the US Treasury Department confirm that the agency is working with imaging technology companies, although they refuse to discuss details. One possible approach is digital watermarking. A currency watermark might be imperceptible to the eye yet recognized by a scanner, which consequently would refuse to cooperate. According to a spokesperson for Digimarc, which makes digital watermarking technology, "Within five years, digital security features such as watermarks will be widespread, quite possibly on currency."
In addition, the Secret Service and Treasury Department have enlisted the Applied Physics Lab at Johns Hopkins University to develop more sophisticated technological fixes. "But we're not discussing any results yet," says agent Mackin. "We'd prefer that the counterfeiters be surprised."
The banking industry might also play a role. P-noting was a hot topic at May's meeting in Basel, Switzerland, of the Governors of the G10 central banks, which subsequently issued a press release that announced, "In response to the threat of increasing use of personal computers and digital imaging tools, the Governors authorized work by a group of central banks to develop a system to deter PC-based counterfeiting." The work, however, remains merely authorized. It has not produced any concrete plan of action.
Down at street level, the travails of the La Cueva Seven, and others in the same predicament, seem to be seeping into the vaporous shared consciousness of American teenagers. Desktop counterfeiting is mentioned on a number of youth-oriented Web sites, usually in terms of "don't try this at home, kids" (although a few sites offer tips for better color reproduction). And the Secret Service now makes cautionary visits to middle and high schools, explaining to young, captive audiences just what an arraignment is.
Still, the take-away from such sessions may be more inspirational than palliative. In January, not long after the Secret Service made one of its presentations at the affluent W. T. White High School in Dallas, a freshman was arrested for selling homemade twenties to classmates for $5 each.
"You wonder if these kids are really listening to you when you talk," says Angel Martinez, a Secret Service agent in Dallas. "The only question they ever ask is, 'So, do you get to carry a gun?'"
The only foolproof solution, then, may lie in the natural process of maturation, which brings with it a sobering knowledge of consequences. It's notable that colleges rarely report their computers being hijacked for monetary joyrides. The resources are there, but the desire isn't.
"I think, or hope, that college will get Kevin's life back on track," Mech's mother said in April. At the time, he was waiting to hear not only from the US Attorney about the dispensation of the next 15 years of his life, but from his first choice in institutions of higher learning: the Phoenix Institute of Art, to which he was accepted in July. Mech wants to be an artist.
"He's really talented," his friend Derek Lamppa says. "I hope someday he'll be more famous for making art than for making this stupid money." He pauses. "I hope, really, he can make money with his art. That's the way grown-ups do it, right?"
