Postal Inspectors : The Unsung Heroes of U.S. Sleuths

A sharp-eyed postal inspector boarding a Presidential Airlines flight between Washington and Orlando, Fla., was astonished to see Peter E. Voss, vice chairman of the Postal Service’s Board of Governors, sitting in coach class.

Voss belonged in first class, the inspector thought. He turned out to be right. In fact, Voss’ travel arrangements were already being investigated by postal inspectors.

Undone by his own sleuths, Voss, who served as co-chairman of President Reagan’s 1980 Ohio campaign, ultimately was convicted of defrauding the government out of at least $43,000 in travel expenses.

According to court records, Voss had repeatedly billed the agency for first-class airline tickets but traveled coach class under a variety of false names, pocketing the difference. Voss also pleaded guilty late last year to accepting about $25,000 in kickbacks relating to $250 million in contracts for automated postal equipment.

Postmaster General Fired

Government prosecutors said Voss’ indiscretions led to the firing of Postmaster General Paul N. Carlin after one year of service. Carlin was fired in January, 1986, for being too slow in implementing automated mail handling. In his defense, Carlin later claimed that he was right in not having awarded equipment contracts to a Texas company that hired a friend of Voss to represent it. The friend, Michigan public relations executive John R. Gnau Jr., also pleaded guilty to a federal conspiracy charge for making illegal payments to Voss.

The trio’s demise focused rare attention on a little-known corps of Postal Service investigators whose work in recent years has helped convict targets ranging from child pornographers to major stockbrokers.

Live Up to Nickname

“They are the unsung heroes of the federal investigatory agencies,” said Al Murray, an assistant U.S. attorney who prosecuted the massive 1985 check-kiting case against the E.F. Hutton brokerage house from his Harrisburg, Pa., office. Murray and other prosecutors said postal inspectors truly live up to their agency’s nickname--”The Silent Service.”

Although the Postal Inspection Service is the nation’s oldest law enforcement agency, most people have no idea what a postal inspector does, perhaps because the 1,900 inspectors are outnumbered by nearly 9,000 FBI agents.

This year, said Inspector C.W. Lawrence, manager of the service’s planning branch in Washington, inspectors will celebrate the 250th anniversary of the appointment of the colonies’ first postmaster, Benjamin Franklin. Franklin was postmaster of Philadelphia, but he was assigned to regulate several New England post offices and bring “the postmasters to account.”

Since then, postal inspectors have protected mail carried by steamboat, railroad and the Pony Express. Congress passed the first mail fraud statutes in 1872 to combat a plethora of swindles after the Civil War.

Unscrupulous salesmen used the mails to sell worthless swamp land across the South and fake gold nuggets from non-existent mines. Chain letters were also popular more than a century ago, according to Lawrence. The same basic laws are used to prosecute a variety of frauds today.

“Postal inspectors have the ability to do the complex, intellectual part of an investigation, plus the cops and robbers part of it,” said Assistant U.S. Atty. David A. Katz, who works in Los Angeles. In the last two years, Katz has prosecuted about 60 people investigated by postal inspectors.

While some inspectors specialize in complex investment fraud cases, other inspectors investigate medical and insurance frauds. Inspectors pursue people who send mail bombs. They audit all Postal Service operations and provide security for postal facilities and trucks. And they investigate crimes committed by or against postal employees, including the murdering of mail carriers.

Their territory includes 30,000 Postal Service outlets, and “even McDonald’s doesn’t have as many,” Lawrence quipped.

Daily Activities

Depending on one’s assignment, a postal inspector’s day-to-day activities range from serving subpoenas and arresting suspects to plowing through mountains of canceled checks to reconstruct a paper trail of missing funds.

And while other agencies periodically audit their own operations, rarely do those audits lead to the imprisonment of their leaders, according to prosecutors.

Shunning bureaucracy, postal inspectors operate in small teams assigned to 36 divisions across the country. Postal inspectors also differ from FBI agents in their approach to cases. The most striking difference is an inspector’s ability to stay with a case from the first complaint until the jury returns a verdict. Inspectors can travel anywhere to interview suspects or collect records. FBI agents, on the other hand, are generally limited to a geographical area and often must ask a fellow agent in another city for help.

Postal inspectors enforce about 85 laws associated with mail fraud while FBI agents deal with 250 different federal statutes, according to an FBI spokeswoman in Washington.

Several federal prosecutors said postal inspectors are the creme de la creme of complex fraud investigators.

“If I say, ‘Fly to the moon,’ they say, ‘We were there last night, what can we do today?’ ” said Joseph B. Valder, the assistant U.S. attorney who prosecuted the Voss case in Washington. “It is truly phenomenal.”

Other prosecutors offered similar praise but declined to be quoted by name, saying they do not want to offend other agencies.

Before the 1970s, postal inspectors worked their way up from other Postal Service jobs, including delivering the mail. Beginning in the 1970s, inspectors were required to have a college degree.

Professional Backgrounds

Today many inspectors join the Postal Service as attorneys, accountants or computer scientists. Others include former military men, law enforcement officials or prison guards.

Every inspector must pass rigorous written and physical examinations. After surviving an intense 11-week training course in Potomac, Md., new inspectors spend their first three years in a non-major metropolitan area before they are assigned to one of 14 major metropolitan areas.

Local postal officials say burgeoning caseloads--particularly in Orange County--are testing the skills and resources of the 125 inspectors assigned to seven offices in Southern California.

“We have more work than we can handle,” said Michael Ahern, assistant inspector in charge of the Los Angeles division.

In recent months, Ahern has been spending more time in Orange County, where he describes fraud activity as “worse than ever,” because more investors are losing ever-increasing amounts of money.

Assistant U.S. Atty. Teree Bowers, head of the U.S. attorney’s office major fraud unit in Los Angeles, agreed.

“There has been an incredible proliferation of white-collar crime,” Bowers said, particularly in Orange County.

A five-man fraud team based in Santa Ana is working on 50 cases with an average dollar loss in excess of $1 million, according to team leader Kacy McClelland. All of the cases together represent a loss to the public of $125 million--including one limited partnership case worth $33 million.

“I like the feeling of trying to right a wrong,” McClelland said. “The job is challenging and somewhat overwhelming at times, but it offers a lot of freedom and a chance to use my brain.”

$1-Million Fraud

In recent months, McClelland’s team arrested a Long Beach precious metals dealer who was convicted of defrauding hundreds of Orange County and Los Angeles investors out of about $1 million before fleeing to Las Vegas.

And last December, the Santa Ana team raided the Placentia home of George F. Milledge, a salesman and youth football coach, seizing a collection of child pornography from the trunk of a car parked in his garage. The postal inspectors had been tipped off by customs officials who seized a package of child pornography en route to Milledge from Sweden. He pleaded guilty to one count of possessing illegal child pornography and is awaiting sentencing.

Experienced inspectors, who earn between $35,000 and $50,000 a year, are not paid for overtime. But, Bill Maisch, inspector-in-charge of the Los Angeles division, said the long hours pay off with a 98% conviction rate, one of the highest of any law enforcement agency.

Still, not every postal case leads to a prosecution and conviction. After inspectors spent months investigating a Southern California computer products company that wasn’t delivering equipment to paying customers, the U.S. attorney’s office declined to prosecute, saying it was too difficult to prove an intent to defraud, according to Ahern.

The range of postal inspector cases is astonishing. Last year, Los Angeles division inspectors helped investigate the murder of Dale Hooker, a mail carrier killed by a Los Angeles man. A federal court jury convicted Kerry Lynn Brown of first-degree murder and he was sentenced to life in prison.

In early April, armed with search warrants, inspectors seized books and records from a Burbank financial adviser who hosted his own radio and television shows. A judge issued the warrants at the request of the Securities and Exchange Commission.

“When our jurisdictions coincide, they are a pleasure to work with,” said Irving Einhorn, chief of the SEC’s Los Angeles office. He said his agency was having difficulty getting certain records, but that the postal inspectors were able to locate them and that “they went in and scooped them up.”

Postal inspectors were behind several Wall Street cases that made headlines across the country, although they received no credit for their work.

“When we finally resolved the Hutton case, everyone thought the FBI did it,” prosecutor Murray said.

Nearly two dozen postal inspectors worked in a drafty, moldy post office basement nicknamed The Dungeon reviewing 9 million documents and 400,000 banking transactions related to the Hutton case.

Based on their work, a federal grand jury accused Hutton of making withdrawals that exceeded the amount of customer funds it had deposited. Hutton also transferred funds from account to account across the country, taking advantage of the delays in check-clearing times. Hutton allegedly obtained as much as $250 million in interest-free funds each day from 400 banks.

In May, 1985, based on the evidence collected by postal inspectors, Hutton pleaded guilty to 2,000 felony wire and mail fraud counts. Hutton’s $2-million fine went directly to the Postal Service. Hutton also set aside $8 million to repay the banks cheated by the scheme.

A six-member team of postal inspectors sequestered in a nondescript second-floor office at Postal Service headquarters nicknamed the Black Hole pieced together the case against Vice Chairman Voss. The same team also produced evidence that led to a 10-year sentence for contract fraud for Ronald J. Perholtz, the former director of accounting for the Postal Service.

Postal inspectors also provided the SEC, which has virtually no criminal investigators, with the investigative clout that led to guilty pleas being entered by Wall Street traders Ivan F. Boesky and Dennis B. Levine. Boesky, a major stock trader, was charged with profiting from inside corporate information. He pleaded guilty and paid a record $100-million penalty to the Securities and Exchange Commission. Levine was fined $11.6 million for leaking valuable stock information to Boesky.

And postal inspectors executed the search warrants served on the offices of Los Angeles securities dealer Boyd Jefferies as part of a widening probe into insider trading. In mid-April, Jefferies pleaded guilty to two federal felony counts, including one charging that he helped Boesky break securities laws.