Suspected Computer Hacker Is Denied Bail

A federal magistrate refused to release suspected computer hacker Kevin Mitnick on bail Friday after prosecutors revealed new evidence that Mitnick penetrated a National Security Agency computer and may have planted a false story on a financial news wire.

Assistant U.S. Atty. Leon Weidman said investigators believe that Mitnick, 25, may have been the instigator of a false report released by a news service in April that Security Pacific National Bank lost $400 million in the first quarter of 1988.

The report, which was released to the New York Stock Exchange and other wire services, was distributed four days after Mitnick had been turned down for a job at Security Pacific, Weidman said. Weidman said the false information could have caused huge losses for the bank had it reached investors, but that the hoax was uncovered before that could happen.

The prosecutor said Mitnick also penetrated a National Security Agency computer and obtained telephone billing data for the agency and several of its employees.

Appeal Rejected

Weidman did not present any evidence that Mitnick had access to classified data files for the top-secret federal agency, and he refused to elaborate on either of the allegations after Friday’s court hearing.

Based on the disclosures and previous evidence that Mitnick has penetrated confidential law enforcement, credit and corporate computer files, U.S. Magistrate Robert M. Stone rejected Mitnick’s appeal from an earlier order denying him bail because of the potential danger he poses if allowed access to a computer.

“I don’t think there’s any conditions the court could set up based upon which the court would be convinced that the defendant would be anything other than a danger to the community,” Stone said.

Mitnick’s attorney, Anthony J. Patti, said prosecutors have no evidence for the new accusations, particularly the inference that Mitnick was behind the report about Security Pacific’s earnings.

“There’s no way, your honor, that this was tied into this defendant,” he said. “There’s no showing that he has even the ability to tie into a wire service. . . . It’s totally unfounded and totally speculative.”

A spokesman for Business Wire, a wire service that distributes financial press releases to newspapers and magazines throughout the country, confirmed Friday that a false report was distributed about Security Pacific’s purported losses.

‘Astronomical Figure’

“It was some astronomical figure that was a loss, something that anybody looking at it and knowing figures would say, ‘I don’t think so,’ ” spokesman Nance Naish said.

A spokeswoman for Security Pacific said she had no information about the incident.

But Weidman said the report was distributed four days after Security Pacific learned Mitnick had lied on a job application about his past criminal record and was turned down for an unspecified job.

The prosecutor said editors of the wire service noted that the report was not coded in the usual manner, then checked the information with Security Pacific and learned it was fraudulent. The report was canceled before it was ever published in newspapers or periodicals, he said.

Security Pacific officials later told police investigators that the bank might have sustained stock losses greater than the $400 million had the report gotten out to investors, Weidman said.

House Arrest Suggested

Patti suggested that Mitnick could be adequately controlled by placing him under house arrest in his home, removing all computers from the house and disconnecting the phone lines.

But the magistrate said that while most criminals might be controlled by remaining in their homes, such was not the case with Mitnick. “This really sounds very different. It sounds like the defendant could commit major crimes no matter where he is,” he said.

Mitnick, a Panorama City resident, faces federal charges of accessing unauthorized long-distance codes via two university computers and unlawfully accessing Digital Equipment Corp. computers, stealing a secret computer security system from the company.

He is scheduled to be arraigned on the charges Tuesday.