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317 IN THE SPRING OF 2012, the head of the FBI’s counterterrorism office in Detroit told an audience at the local Jewish community center that while he knew of no specific Hezbollah threat to Jewish communities in metropolitan Detroit, he remained concerned about potential and “general” threats in the area, from Hezbollah and other violent extremists. “The Iranian issue . . . that is a huge deal,” he said. “Their use of the proxy group Hezbollah—these are things we’re very concerned about.”1 But while Detroit has seen its share of trained Hezbollah gunslingers pass through town, the vast majority of Hezbollah cases in Detroit and around the country revolve around financial and logistical support for Hezbollah through criminal enterprise. “Hezbollah acts like a basic crime organization here in the United States,” explained a former head of the FBI’s Iran-Hezbollah unit.2 Employing an “Al Capone” disruption model—getting the bad guys on whatever legitimate charges will most easily stick—can be an extremely effective means of disrupting terrorist activity. In fact, the vast majority of cases targeting Hezbollah supporters in the United States have been prosecuted in just such a fashion, without any mention of the group. ThiswasthestrategybehindseveralDearborn-basedinvestigationsthatmorphed into Operation Bathwater, a major case aimed at disrupting Hezbollah activities by focusing on the group’s broad array of criminal schemes. While some bit players involved in the Hezbollah support network were caught up in the investigation, the FBI focused on the higher-level figures. “Some Hezbollah supporters [in the United States] are not actual members, they are just useful idiots who want to be associated with a glorious cause but don’t need or want to know more,” explained the former FBI unit chief.3 Operation Bathwater was predicated on information developed in January 1999 by US Secret Service agents assigned to the Detroit Joint Terrorism Task Force (JTTF).4 Investigating a series of financial crimes, the agents stumbled onto what proved to be not only the largest credit card fraud scheme in the country at the time but also a Hezbollah fundraising enterprise. The scheme dated back to 1994, though authorities would become aware of it only in November 1998, when an off-duty 11 Party of Fraud Hezbollah’s Criminal Enterprise in America 318 Chapter 11 Toledo police officer moonlighting as a department store security guard arrested Nancy Paulino, a single mother from New York, for trying to purchase $1,600 in clothes with a counterfeit Visa credit card. A couple of days later, another New Yorker named Jose Diaz Jr. traveled to Toledo to post bond for Ms. Paulino’s release and was himself arrested on outstanding theft warrants from Wisconsin. The two suspects quickly conceded their roles as shoppers in an elaborate credit card scam run out of Toledo by Dearborn resident Ali Nasrallah.5 What police officers and federal agents learned from their investigation amazed them. In 1994, Ali Nasrallah, then living in New York, approached Diaz with a business proposition: Nasrallah would provide Diaz with fraudulent credit cards and counterfeit identification to match, and Diaz would recruit shoppers—like Ms. Paulino—who would use the cards to buy electronic equipment for Nasrallah. In return, the shoppers would be paid 5 percent of the purchase price for the items they bought. Nasrallah’s organization later expanded beyond New York, first to Florida and then to Michigan.6 Diaz walked federal agents through Nasrallah’s scheme. In an effort to “keep the heat away from where he lived,” Nasrallah used Toledo as his base of operations, away from his Dearborn home but close enough to make regular trips down Interstate 75.7 Diaz would meet Nasrallah at a Knights Inn or an Olive Garden restaurant to pick up counterfeit credit cards and plan shopping trips. The shoppers, often single mothers from New York, drove across the country buying laptops in places like Oklahoma City; Fort Wayne, Indiana; and Jackson, Mississippi. The laptops were then shipped to one of several addresses in Michigan or Virginia. “The idea,” the prosecutor explained, “was to move around, not get caught, and not stay anywhere too long.”8 Nasrallah and his business partners obtained active credit card numbers from computer hackers who breached the security systems of some 138 financial institutions from New Zealand to Switzerland. They acquired more than 10,000 blank credit cards that were stolen from a security company in Nebraska, which they then embossed with legitimate but stolen credit card numbers, and produced...

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