Adonis Diaries

Posts Tagged ‘Freedom of Information Act

U.S. Nuclear Agency: Safety Record How close are you from an earthquake prone region? How close is the nearest nuclear power plant? Do we all need to say a prayer?

A magnitude-6.9 earthquake struck off the coast of Northern California on Sunday night, March 9, 2014, the U.S. Geological Service reported.

The epicenter was 48 miles west-northwest of Ferndale and 50 miles west of Eureka at a depth of 4.3 miles, the USGS said.

The quake, which occurred at 10:18 p.m. PT (1:18 a.m ET), was initially reported as magnitude 6.1, but seismologists revised it upward to 6.9. It was followed by about a half-dozen aftershocks, including one of magnitude 4.6.

In the tense days after a powerful earthquake and tsunami crippled the Fukushima Daiichi power plant in Japan on March 11, 2011, staff at the U.S. Nuclear Regulatory Commission made a concerted effort to play down the risk of earthquakes and tsunamis to America’s aging nuclear plants, according to thousands of internal emails reviewed by NBC News. BILL DEDMAN posted this March 11, 2014

U.S. Nuclear Agency Hid Concerns, Hailed Safety Record as Fukushima Melted

The emails, obtained via the Freedom of Information Act, show that the campaign to reassure the public about America’s nuclear industry came as the agency’s own experts were questioning U.S. safety standards and scrambling to determine whether new rules were needed to ensure that the meltdown occurring at the Japanese plant could not occur here.

At the end of that long first weekend of the crisis 3 years ago, NRC Public Affairs Director Eliot Brenner thanked his staff for sticking to the talking points that the team had been distributing to senior officials and the public.

“While we know more than these say,” Brenner wrote, “we’re sticking to this story for now.”

There are numerous examples in the emails of apparent misdirection or concealment in the initial weeks after the Japanese plant was devastated by a 9.0 earthquake and 50-foot tsunami that knocked out power and cooling systems at the six-reactor plant, eventually causing releases of radioactive material:

  • Trying to distance the U.S. agency from the Japanese crisis, an NRC manager told staff to hide from reporters the presence of Japanese engineers in the NRC’s operations center in Maryland.
  • If asked whether the Diablo Canyon Power Plant on the California coast could withstand the same size tsunami that had hit Japan, spokespeople were told not to reveal that NRC scientists were still studying that question. As for whether Diablo could survive an earthquake of the same magnitude, “We’re not so sure about, but again we are not talking about that,” said one email.
  • When skeptical news articles appeared, the NRC dissuaded news organizations from using the NRC’s own data on earthquake risks at U.S. nuclear plants, including the Indian Point Energy Center near New York City.
  • And when asked to help reporters explain what would happen during the worst-case scenario — a nuclear meltdown — the agency declined to address the questions.

As the third anniversary of Fukushima on Tuesday approaches, the emails pull back the curtain on the agency’s efforts to protect the industry it is supposed to regulate.

The NRC officials didn’t lie, but they didn’t always tell the whole truth either. When someone asked about a topic that might reflect negatively on the industry, they changed the subject.

NBC News requested in late March 2011 all of the emails sent and received by certain NRC staffers during the first week of the crisis.

Other news organizations and watchdogs filed similar requests. The NRC has now been posting thousands of emails in its public reading room over the past two years.

See details of the 62 U.S. nuclear power plants, along with their age and safety records.NBC NEWS

See details of the 62 U.S. nuclear power plants, along with their age and safety records.

The NRC declined to discuss specific emails or communications.

But Brenner provided an emailed statement: “The NRC Office of Public Affairs strives to be as open and transparent as possible, providing the public accurate information in the proper context. We take our communication mission seriously. We did then and we do now. The frustration displayed in the chosen e-mails reflects more on the extreme stress our team was under at the time to assure accuracy in a context in which information from Japan was scarce to nonexistent. These e-mails fall well short of an accurate picture of our communications with the American public immediately after the event and during the past three years.”

Dating back to the Three Mile Island nuclear crisis in 1979, many nuclear watchdogs and critics have said that the NRC acts first to protect the industry, and its own reputation. One critic said these emails solidify that perception.

“The NRC knew a lot more about what was going on than it wanted to tell the American people,” said Edwin Lyman, senior scientist at the nuclear watchdog group Union of Concerned Scientists and co-author of the new book “Fukushima: The Story of a Nuclear Disaster,” which relied on some of the same emails.

“They immediately put out information that implied that U.S. reactors were in a better position to withstand Fukushima type events than Fukushima reactors were, but it was clear that the what the NRC knew internally was not nearly as positive.”

‘We all need to say a prayer’

From the earliest hours of the crisis, the emails among NRC staff show deep concern about the developing crisis in Japan, particularly among the technical experts.

The first word that the powerful earthquake and tsunami waves had devastated the Fukushima plant came early morning (Eastern time) on March 11, 2011.

Throughout the day, staff at NRC headquarters in Rockville, Md., struggled to learn what was going on in Japan. The chief of the NRC Component Integrity Branch, senior engineer David Rudland, was asked by a colleague if he had any new information. [The emails excerpted in this article are shown in full in a PDF file.]

From: Brenner, Eliot Date: Friday, March 11, 2011, 1:54:57 PM While one reporter knows or has guessed that there are Japanese here in our Ops center in communication with their home authorities, we will NOT make the[m] available and we will NOT volunteer their presence. If anyone knows they (Japanese scientists) are here and wants to talk with them, they will have to make the request through the embassy to have it relayed to these folks.

The memo also instructed staff to evade any questions about efforts by the NRC’s Office of Nuclear Reactor Regulation (NRR) to model the effects of similar earthquakes and tsunamis on California plants:

“NRR is getting tasked with making an overlay of the Japanese conditions … to see how west coast plants stack up against it,” it said. “We think preliminary Diablo would have had no trouble with a wave that size. [For an earthquake of about] 8.9 we’re not so sure about, but again we are not talking about that.”

Find the distance from any location in the United States to the nearest nuclear power plants using this map from Esri.NBC NEWS

Find the distance from any U.S. location to the nearest nuclear power plants with this map from Esri.

In congressional testimony and interviews in that first week, NRC Chairman Gregory Jaczko was quick to say that the NRC could learn lessons from Fukushima.

“We’re going to take a good solid look at everything that comes out of Japan, and if we need to make modifications to our facilities in this country, then we’ll do that,” he told NBC News on March 16.

Gregory did not disclose that the NRC technical staff had already been reassessing, before Fukushima, increased risks from earthquakes, tsunamis, dam failures and power blackouts.

Jaczko did push for release of a report on Fukushima and its lessons just 90 days after Fukushima. Some of those recommendations have been implemented. Jaczko, who resigned in 2012, declined a request last week to be interviewed.

‘Non-public information’

The talking points written during the emergency for NRC commissioners and other officials were divided into two sections: “public answer” and “additional technical, non-public information.” Often the two parts didn’t quite match.

One topic the NRC avoided in the talking points, even when responding to a direct question: meltdown.

“Q. What happens when/if a plant ‘melts down’?

“Public Answer: In short, nuclear power plants in the United States are designed to be safe. To prevent the release of radioactive material, there are multiple barriers between the radioactive material and the environment, including the fuel cladding, the heavy steel reactor vessel itself and the containment building, usually a heavily reinforced structure of concrete and steel several feet thick.

“Additional, non-technical, non-public information: The melted core may melt through the bottom of the vessel and flow onto the concrete containment floor. The core may melt through the containment liner and release radioactive material to the environment.”

The Japanese public television network, NHK, asked if the NRC could provide a graphic depicting what happens during a meltdown of a nuclear reactor.

From: McIntyre, David Date: Friday, March 18, 2011, 9:02 AM NRC would not have such a graphic. I suspect any number of anti-nuclear power organizations might.

When reporters asked if the Japanese emergency could affect licensing of new reactors in the U.S., the public answer was “It is not appropriate to hypothesize on such a future scenario at this point.”

The non-public information was more direct: This event could potentially call into question the NRC’s seismic requirements, which could require the staff to re-evaluate the staff’s approval of the AP1000 and ESBWR (the newest reactor designs from Westinghouse and General Electric) design and certifications.”

On the subject of tsunamis, the public assurances omitted the “non-public ” nuances that might have given the public reasons to doubt nuclear power safety:

  • Design standards varied significantly from plant to plant in the U.S.
  • The experience in Japan had taught the NRC that it needed to study the dangerous effects of “drawdown,” the powerful receding of ocean water near the shore that can precede a tsunami’s arrival.
  • And although the U.S. was developing new tsunami standards, those wouldn’t be in draft form for another year.

‘It was a hydrogen explosion’

The NRC spokespeople sometimes had trouble following the public debate, because for days their computers were blocked by security rules from accessing Twitter and YouTube. And they often had incomplete information about events in Japan.

From: McIntyre, David Date: Saturday, March 12, 2011, 10:02 PM Just saw an incoherent discussion on cnn by Bill Nye the science guy who apparently knows zilcho about reactors and an idiot weatherman who said Hydrogen explosion? Pfft. I’m not buying it.

His boss sent back the following reply, correcting the staffer and explaining plans to ask the Obama administration to help blunt critical news coverage.

From: Brenner, Eliot Date: Saturday, March 12, 2011, 10:07 PM 1: There is a good chance it was a hydrogen explosion that took the roof off that building, though we are not saying that publicly. 2: I have just reached out to CNN and asked them to call (former NRC Chairman Nils) Diaz, and reached out to push the white house yet again to start talking on background or getting out in front of some of this crap.

On March 20, when Energy Secretary Steven Chu hesitated on CNN when asked if U.S. plants could withstand a 9.0 earthquake?

McIntyre, one of the agency’s spokesmen, suggested to his bosses what Chu should have said:

From: McIntyre, David Date: Sunday, March 20, 2011, 10:01:00 AM He should just say “Yes, it can.” Worry about being wrong when it doesn’t. Sorry if I sound cynical.

The public affairs staff showed disdain in the emails for nuclear watchdog groups, including the Union of Concerned Scientists.

After the UCS raised concerns about diesel backup power and batteries being inadequate, as at Fukushima, spokesman McIntyre dismissed it as “bleating” from nuclear power foes.

When Steven Dolley, former research director of the NCI and a reporter for McGraw Hill Financial’s newsletter Inside NRC, asked McIntyre for a nuclear containment expert to speak to a reporter, the spokesman asked if the reporter had contacted the industry’s lobbying group, the Nuclear Energy Institute.

Dolley asked, “So, should I say NRC is deferring inquiries to NEI?” suggesting that the NRC was deferring to the industry it is supposed to regulate.

McIntyre shared this exchange with his bosses, adding the comment, “F—ing a-hole.”


The NRC’s Public Affairs staff attempted to discredit news reports that raised questions about nuclear plants, even when they were based on NRC data.

A story by this reporter for (now reported that the NRC had published a study 6 months earlier with new estimates of the risk that an earthquake could cause damage to the core of U.S. nuclear power plants. The plants were listed in alphabetical order, along with the NRC’s risk estimates.

The story, published on March 16, ranked the U.S. nuclear plants by those NRC estimates.

Surprisingly, the highest risk was not on the Pacific Coast, where plants are designed and built with severe earthquakes in mind, but in the Central and Eastern states, where scientists have raised their estimate of the earthquake risk since the plants were designed and built. The story said that the NRC still described the plants as safe, but also said the margin of error had shrunk.

We had checked our understanding of the report with NRC earthquake experts, but NRC spokesman Scott Burnell responded to the story by asking the same staff to find fault with it.

From: Burnell, Scott Date: Wednesday, March 16, 2011, 6:22 AM I know you’re going to have a cow over this – somewhat inevitable when a reporter new to the subject tries to summarize things. Apart from “you’re totally off-base,” what specific technical corrections can we ask for?? OPA (Office of Public Affairs) – this is likely to spark a lot of follow-up. The immediate response would be “that’s a very incomplete look at the overall research and we continue to believe U.S. reactors are capable of withstanding the strongest earthquake their sites could experience.” I’ll share whatever we get from the experts.

Senior officials at the industry’s lobbying arm, the Nuclear Energy Institute, sent emails asking the NRC for help rebutting the story. Burnell urgently asked again for errors in the article.

From: Burnell, Scott Date: Wednesday, March 16, 2011, 11:11 AM Folks, the expected calls are coming in — We need a better response ASAP!

But the NRC experts found nothing to correct.

From: Beasley, Benjamin Date: Wednesday, March 16, 2011, 12:31 PM I have received no concerns or corrections regarding the MSNBC article.

Nevertheless, the Public Affairs staff waved other news organizations off the story, particularly after New York Gov. Andrew M. Cuomo reacted to his state’s Indian Point nuclear power plant having the worst risk in the NRC data.

From: McIntyre, David Date: Thursday, March 17, 2011, 2:20 PM I just filed this request for correction with The Huffington Post, which has a report of Cuomo wanting to shut IP based on the MSNBC report: There is NO SUCH NRC REPORT! The NRC does not rank nuclear power plants according to their vulnerability to earthquakes. This “ranking” was developed by an MSNBC reporter using partial information and an even more partial understanding of how we evaluate plants for seismic risk. Each plant is evaluated individually according to the geology of its site, not by a “one-size-fits-all” model – therefore such rankings or comparisons are highly misleading. Please correct this report.

His colleague in Atlanta, spokesman Joey Ledford, replied, “Great talking point, Dave. I wish I had it during my 10 or so calls today trying to debunk this thing.”

The New York Times, which was reporting a story about Indian Point, was dissuaded from using the NRC’s risk estimates. We asked the New York Times reporter, Peter Applebome, why he ignored the NRC data. He replied in an email, “Burnell said it wasn’t accurate and included rankings the NRC never made. I have no idea if that’s correct, but I was writing a column on deadline and figured I did not have the ability to figure out who was right in the time I had.”

In his piece, Applebome quoted the NRC downplaying the risk: “Officials with the Nuclear Regulatory Commission say the site is safe and that its earthquake threat is on the lower end nationally and in the Northeast.” The NRC’s recent study with a different picture was ignored.

The NRC followed up with a blog post from Brenner, the public affairs chief, cautioning the public, “Don’t Believe Everything You Read.” Brenner called the report “highly misleading.”

He didn’t mention that its figures came from the NRC.

Emails excerpted in this report can be read in full here in a PDF file.

A cache of many emails is included in larger PDF files No. 1234, and 5. More are available in the NRC’s online public reading room.


Age and safety record of U.S. nuclear power plants

How close are you to a nuclear power plant?


How did you get your Smartphone? Trading in underground stolen smartphones?

Before a federal SWAT team descended last summer, one storefront in a Detroit suburb attracted so many people bearing shopping bags stuffed with iPhones and iPads that managers installed a port-a-potty on the sidewalk.

Once inside, people deposited their electronic wares into a rotating drawer below a bulletproof glass window and waited for the cashier to deliver stacks of cash.

So much money changed hands in this fashion at the Ace Wholesale storefront in Taylor, Mich., that an armored truck arrived each morning to deliver fresh bundles of cash, according to an undercover investigator for the wireless company Sprint and an employee at the Mattress World outlet next door.

This article is part of a Huffington Post series exploring the global underground trade in stolen smartphones. Previous stories in the series can be found here.

“It was like Fort Knox over there,” said the Mattress World employee, who asked not to be named for fear of making enemies inside what police say was a locus of criminal activity.

Many of the mobile devices swapped for cash at Ace Wholesale had been stolen at gunpoint in an escalating wave of gadget-related robberies, police say. Ace Wholesale had become a key broker in the underground trade of stolen phones, a global enterprise that often connects violent street thieves in American cities with buyers as far away as Hong Kong, according to law enforcement and the wireless industry.

“These companies fence the stolen phones for them, no questions asked,” said Jerry Deaven, an agent with the Department of Homeland Security, which is tasked with preventing the trafficking of stolen goods. “You can walk right into one of these storefronts and sell all the phones at once and walk out with $20,000.”

Deaven told The Huffington Post that such traffickers are responsible for “a tremendous amount of phones being shipped out of the country,” adding that “some organizations are shipping a couple million dollars worth of phones per month.”

ace wholesale

Ace Wholesale’s storefront in Taylor, Mich.

Deaven declined to comment specifically about Ace Wholesale, which he said is now under federal investigation. Last August, federal agents armed with search warrants raided the company’s locations in suburban Detroit, Atlanta and Chicago, and the owner’s home in Taylor, Mich., according to a DHS spokesman.

Ace Wholesale’s owner, Jason Floarea, has not been charged with a crime. He did not respond to requests for comment. His attorney, Jim Thomas, who has represented high-profile clients including former Detroit Mayor Kwame Kilpatrick, declined to comment.

The case against Ace Wholesale sheds light on what law enforcement and wireless providers portray as a shadowy world of smartphone trafficking. At the center of this trade is a crucial layer of middlemen: bulk purchasers who buy devices from thieves and con artists before exporting them to customers around the world.

In 2009, federal agents charged Hezbollah operatives in Philadelphia with attempting to buy thousands of stolen cell phones and ship them to Hong Kong and the United Arab Emirates to finance the Shiite militant organization, which the United States considers a terrorist group.

Earlier this year, a woman’s iPhone stolen at a bar in San Francisco turned up a few days later in Lima, Peru, according to San Francisco police.

Last fall, American and Mexican wireless carriers began collaborating to address the cross-border trade in stolen phones after learning that Mexican drug cartels were using them to communicate with kidnapping victims’ relatives without being traced. But American wireless companies lack similar arrangements with other countries, allowing international phone trafficking to flourish.

Phones stolen in the United States have been located “on all continents except Antarctica,” said Marci Carris, vice president of customer finance services at Sprint.

The global nature of the trade stems in part from measures that law enforcement and wireless carriers have imposed to make it harder to resell stolen phones in the United States, prompting criminals to forge new markets abroad.

“Once it gets overseas, it’s virtually impossible to track a phone back here to the person who committed the crime,” Deaven said.

Phone trafficking is driven largely by the massive profits made by exploiting the price difference between smartphones sold in the U.S. and overseas. Americans who agree to two-year service contracts with their cell phone company can buy the latest iPhones for about $200a price subsidized by the carrier. In Hong Kong, an iPhone can be sold for as much as $2,000.

This equation helps explain why more than 1.6 million Americans were victims of smartphone theft last year and why thefts of mobile devices now make up 40 percent of all robberies in major American cities. The rising street crime is exacting a heavy toll on consumers who spend an estimated $30 billion each year replacing lost and stolen devices, according to Lookout, a San Francisco-based mobile security firm.

Smartphone-related crime has also turned increasingly violent.

Last month, a 24-year-old man was shot in Philadelphia after police say he would not give up his cell phone to a thief.

Last year, 26-year-old Hwangbum Yang of New York City and 23-year-old Megan Boken of suburban Chicago were shot and killed during separate iPhone robberies, police say.

In response to the crime wave, state and city law enforcement officials are investigating smartphone makers for their failure to adopt measures that would render their devices inoperable when stolen. New York Attorney General Eric Schneiderman pressed smartphone manufacturers in May to create “kill switch” technology to undercut the black market, noting that “foreign trafficking of stolen devices has proliferated.”

Phone trafficking also costs the wireless industry “hundreds of millions of dollars a year,” said James Baldinger, an attorney for Sprint. One alleged phone trafficker, Hassan Essayli, admitted in 2008 that his company, Platform Enterprises, shipped 30,000 phones from California to other countries in just two months, according to a deposition in a lawsuit filed by TracFone Wireless.

“I’m seeing thousands and thousands of phones being resold overseas,” Baldinger said. “The numbers are so big, but a lot of time it flies under the radar.”

Over the last 8 years, wireless companies have filed more than 200 lawsuits against alleged phone traffickers, but no case has bigger stakes than the federal lawsuit Sprint filed last summer against Ace Wholesale, Baldinger said. Sprint has accused Ace of buying thousands of Sprint phones and reselling them overseas, thereby depriving the wireless company of revenue from monthly phone bills.

“As far as we know,” Baldinger said, “Ace is the biggest phone trafficker in the country.”

Founded 4 years ago, Ace Wholesale was the brainchild of Jason Floarea, a Detroit area entrepreneur who opened his first wireless retail outlet when he was only 16, according to the company’s website. He says on the site that he started the company to help consumers purchase top quality smartphones at discount prices.

Now 27, Floarea is a married father of three and an ordained minister. He aims to open his own church focused on outreach to convicts, alcoholics and the homeless, the site says.

Local law enforcement, however, accuse him of less savory activities: acting as a well-known buyer of smartphones and tablets stolen in burglaries and armed robberies.

In January 2010, Dearborn, Mich., police pulled over Floarea in his wife’s silver Lexus and found two handguns, more than 30 cell phones, marijuana, a bottle of prescription drugs and more than $40,000 in cash, according to a local police report obtained by The Huffington Post through the Freedom of Information Act. He was arrested on charges of possession of marijuana, possession with intent to distribute narcotics and possession of a firearm in commission of a crime, the report says. Police later returned the phones and all but $4,200 in cash to Floarea per a court judgment.

A search of court records found no evidence of the case and both prosecutors and Floarea’s attorney declined to comment on it. In Michigan, some defendants have been sentenced under statutes that prevent their cases from being disclosed publicly, according to a Michigan Department of Corrections spokesman.

While it remains unclear how profitable Floarea’s business has become, he appears to be making a comfortable living. Early last year, he purchased a five-bedroom house in West Bloomfield, Mich., for $1.4 million, according to the town assessor’s office. Even Ace Wholesale’s low-level associates say they are well-compensated. One person who buys and sells phones for the company told Sprint’s investigator that he makes $3,000 per week, court documents show.

Deaven said he recently interviewed a man who claimed to supply phones to traffickers and boasted about how his work supported his lavish lifestyle.

“He said, ‘I drink nothing but top-shelf liquor and get all the girls,'” Deaven recalled. “‘I make more money than the dope man, but have none of the risk.'”


The underground market transporting iPhones and other gadgets around the world began with a different form of theft.

For years, traffickers have hired teams of so-called “runners” or “credit mules” to buy discounted phones in bulk from retailers by agreeing to long-term service contracts. These runners simply stop paying the bills and sell the devices to traffickers who export them overseas.

In March, the California Attorney General charged two people — Shoulin Wen, 38, and Yuting Tan, 27 — with recruiting runners from homeless shelters to buy iPhones and Samsung Galaxy phones. The pair shipped the phones to Hong Kong — a scheme that the attorney general says netted them nearly $4 million in less than a year.

But recently, thefts have become bolder and more violent: Traffickers have been acquiring phones through a growing number of cell phone store robberies, according to local and federal law enforcement officials.

“A guy can go into a cell phone store and steal 30 or 40 phones and get a lot more than if he hit a bank,” said Deaven, the Homeland Security agent. “It’s just a very lucrative crime.”

In Houston’s Harris County last year, thieves robbed at least a dozen cell phone stores — sometimes at gunpoint — during a two-month period, prompting the police department to establish a special task force to investigate the burglaries.

At one store in Houston, three men crashed a truck through the front window and stole dozens of cell phones before speeding away. At another store last year, a thief lowered himself through the ceiling, grabbed as many handsets as he could, then climbed back through the ceiling to escape.

Last July, Anthony Riopelle, 22, was working at a Meijer department store in Taylor, Mich., when two men approached and started asking about iPads. Suddenly, one man punched Riopelle in the face, knocking him to the ground, while the other grabbed more than a dozen tablets and fled the store, according to police.

“They said, ‘If you move, we’re going to kill you,'” Riopelle told HuffPost.

Police said they later found the stolen iPads behind the bulletproof glass window at Ace Wholesale. The two thieves were never caught.

It was not the only time police tracked stolen mobile devices to Ace Wholesale. In August, Taylor police arrested a man in the company’s parking lot shortly after he had stolen iPhones from several victims at gunpoint in Detroit.

“Ace Wholesale made it very easy for people who were obtaining phones through robberies and retail fraud to go there and sell them,” Taylor police Chief Mary Sclabassi told HuffPost. “It brought a large crime element to the city.”

Dozens of other companies around the country have played a similar role, Sprint says.

Sprint’s investigators discovered hundreds of stolen iPhones stored in a suburban Baltimore warehouse owned by a company called Wireless Buybacks, according to a lawsuit Sprint filed against the company in February. Wireless Buybacks says it buys used phones and resells them to large retailers, which in turn issue them to customers who have insurance policies and need a replacement phone.

In its lawsuit, Sprint claims that a company associated with Wireless Buybacks tried to sell 800 iPhones to its undercover investigator for more than $400,000. A sample of serial numbers revealed that “the vast majority” of phones were stolen or obtained through fraud, the suit says.

In February, agents from the FBI, the Secret Service and the Bureau of Alcohol, Tobacco and Firearms raided Wireless Buybacks’ warehouse in Elkridge, Md., and found the facility was being used to store stolen phones, according to Sprint. Law enforcement declined to comment about the raid, citing an ongoing investigation.

In court documents, Wireless Buybacks said it “does not knowingly transact business with anyone involved in burglaries or armed robberies” and conducts “a rigorous screening process” to ensure it doesn’t buy stolen phones.

Kevin Lowe, co-founder of Wireless Buybacks, has said that his company supplies phones to “some of the largest retailers in the country.” The company generates most of its revenue from a contract to supply cell phones to Best Buy worth about $45 million each year, the company said in court documents.

Best Buy has no plans to cut ties with Wireless Buybacks. “At this point, these are accusations that haven’t been substantiated,” a company spokesman said.

But Baldinger, Sprint’s attorney, said the lawsuit reveals how many U.S. consumers are unwittingly buying stolen phones.

“There are lots of consumers walking around with phones they think they got legitimately from a national retailer,” he said, “when in fact the phones were stolen during armed robberies.”


The middlemen at the center of the global trade in stolen smartphones organize themselves into distinct roles.

Many hire hackers who use special software to “unlock” the devices, enabling them to connect with wireless networks around the world, according to Lt. Ed Santos of the San Francisco Police Department, which has created a special task force focused on combating smartphone thefts. Then, they erase the data on the handsets, often within an hour after the device is stolen.

“They completely erase them so the phones can’t be identified by who they belong to,” Santos told HuffPost. “They want to sell a clean phone that can’t be traced.”

Traffickers later repackage phones in boxes with the manufacturer’s logo, power chargers and instruction manuals in the native language of their destinations, according to Sprint.

Finally, they ship them overseas, mostly to Hong Kong, where they are distributed across Southeast Asia, said Baldinger, Sprint’s attorney. Many phones are also shipped to Dubai, Israel and Latin America.

In 2011, Ace Wholesale shipped dozens of iPhones and Samsung Nexus phones to Go Telecom HK and Mobile Planet HK, according to invoices obtained by Sprint. These two companies listed addresses in Kowloon, a district of Hong Kong that is thick with electronics merchants.

Most traffickers ship phones in large cardboard boxes via FedEx and UPS, according to Deaven, the Homeland Security agent. The destination of stolen phones often depends on the provenance of the traffickers.

“Here in San Francisco, a lot of people have ties to Mexico,” San Francisco police Sgt. Josh Kumli said. “A lot of phones are going to Mexico because that is where they have contacts.”

Until December of last year, two brothers, Henry and Victor Gamboa, drove thousands of stolen phones and other electronics by truck from the Bay Area to Mexico every two weeks, Santos said. The two brothers are now in jail after being convicted of running a massive stolen electronics fencing ring.

Thuc Ngo told Sprint’s lawyers that he smuggled iPhones from California to his native Vietnam, where his siblings helped him find buyers, according to a deposition from a Sprint lawsuit against him.

Ngo said he obtained phones through his business, which he called “Tony Buy iPhone.” He drove a white Dodge Ram 3500 van emblazoned with an advertisement — “We Buy Used Iphone” — listing his phone number and website, the lawsuit claims. He met customers at Starbucks coffee shops around the Bay Area and paid between $220 and $330 for each iPhone. Some of the iPhones had been reported stolen, he confessed, according to his deposition.

He regularly flew to Vietnam to sell his inventory, stuffing the phones in his pockets and strapping them to his waist beneath his clothing with plastic wrap — a technique he used to bypass Vietnamese customs at the airport and avoid paying taxes, the deposition says. In this way, he carried 11 iPhones at a time.

“That’s the most I can hide on my body,” he said, the deposition notes.

And yet it was never enough.

“Every time I was there, people would tell me, ‘Oh, next time, I want such and such phone and if you come back, you know, sell it to me,'” he said.

Earlier this year, a judge in San Francisco barred Ngo from buying and selling phones manufactured for use on Sprint’s network. Ngo could not be reached for comment.


Thuc Ngo drove this van to meet people and buy iPhones that he smuggled to Vietnam, according to Sprint.


Ace Wholesale acquired phones by advertising on Craigslist and websites like and One ad read: “Buying Apple iPhone 4S!! Must Be Brand New!!..Will Buy any Quantity!!” Another read: “Ace Will Buy Your Smartphone For Top Dollar!!!!!!!”

The company listed the price it paid for each model on the walls of its stores. The latest iPhones still sealed in their original packaging commanded the highest prices. One employee told Sprint’s undercover investigator that he was buying the iPhone 4S for $430.

At the Ace storefront in Taylor, Mich., the Mattress World employee next door said he saw “the same people every day” arriving with bags full of iPhones and other high-end phones and tablets. Mirrored windows prevented passersby from seeing inside. The company hired a security guard to sit in a car in the parking lot. Sometimes, people bought phones from others in the parking lot, then resold them inside Ace.

At another Ace Wholesale location in Troy, Mich., the company replaced the glass front door with a metal door featuring a peephole and buzzer, according to Scott Zochowski, an attorney who works in the building.

“They were very secretive and kept very strange hours,” Zochowski told HuffPost. “I’ve always been very suspicious about what the heck was going on in there.”

With so much valuable inventory moving through its operation, Ace Wholesale itself became a target for robberies, police say. In February 2011, Floarea, the store’s owner, told police that four masked men broke into his store and stole 258 cell phones worth about $140,000. One month later, police say six men wearing masks broke into Ace Wholesale again and stole smartphones and tablets worth $173,000.

Last July, a man reported to police that he was robbed at gunpoint in the parking lot of Ace Wholesale after he sold 25 iPads for $15,000. The gunman grabbed the cash, which was in a black duffel bag, and ran away, according to a police report.

Some Ace Wholesale associates have criminal records. At the Atlanta location, the company paid $800 to Barney Gunn for two iPhones, Sprint says. Gunn, 46, who goes by the streetname “Spook,” has served multiple prison sentences since the early 1990s for drug and weapons charges, Georgia court records show.

One morning last August, a SWAT team and agents from the Department of Homeland Security busted through the front window at Ace Wholesale’s location in Taylor, leaving behind piles of shattered glass. The storefront is now occupied by a company that sells outdoor pools and jacuzzis. Federal agents spent six hours removing boxes and surveillance cameras from inside Ace Wholesale’s location in Troy, Zochowski said.

In court documents, Ace Wholesale said the raids forced the company to shut down its business. Its website says its inventory is now “entirely online” and being carried by its sister company, Electronics Direct, which is also owned by Floarea.

Baldinger, of Sprint, said the raid against Ace Wholesale caused “a short-lived drop” in the number of phones being shipped overseas.

But in the increasingly competitive underground smartphone trade, shutting down one operation — even a major one — left plenty of others waiting in the wings, Baldinger added.

“There are so many other players out there,” he said. “The raid provided an opportunity for a lot of other traffickers to step up and fill the void.”

Watch the video below to see federal agents raiding Ace Wholesale in Taylor, Mich.




February 2023

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