DHS Developed ERAD Device Used by Law Enforcement to Seize Your Money

DHS Developed ERAD Device Used by Law Enforcement to Seize Your Money

Follow Michael on Twitter. Jerod MacDonald-Evoy & Jason Hernandez contributed to this report.OKLAHOMA – The Oklahoma Department of Public Safety recently were forced to stop using 16 devices used to scan and seize money from debit cards without victims being convicted or even charged with a crime. The public outcry forced the this department to cease use pending further review and training. ERADs remain in use by law enforcement across the United States.

The technology, “Electronic Recovery and Access to Data” or ERAD, was originally developed by the Department of Homeland Security through the Science and Technology Directorate’s First Responder Group. According to a video advertisement posted by DHS, the portable ERAD devices enable law enforcement officials to “seize cash on the side of the road” or “to freeze that value literally in under ten seconds.”

Law enforcement can utilize the technology from a wireless or wired terminal, laptop, smart phone or even a tablet, according to the ERAD patent information. The technology cloaks the requests to appear as if they are coming from the merchant in order to “prevent alerting account holders,” according to the patent document.

This type of property seizure without a warrant or conviction is made possible by civil asset forfeiture laws. These laws enable the government to confiscate property based on the mere suspicion of criminal involvement. The burden of proof then lies with the victims to establish that the property was owned legally.

Listen to our interview with Freddy Martinez, independent journalist and records researcher. Martinez uncovered Chicago Police use of seized assets to pay for surveillance technology.

In many states (including Oklahoma),100 percent of the proceeds from asset forfeiture are kept by the very law enforcement agencies responsible for seizing it to begin with. Oklahoma earned a D-rating for asset forfeiture policies based on both state laws and their enforcement by police from the nonprofit Institute for Justice.

According to the DHS Science and Technology Directorate, the First Responder Group began developing ERAD card readers in March of 2012 for an unnamed agency partner. After being used to seize over $1 million during field testing, “FRG transitioned the card reader to the commercial market, and it is now available for law enforcement use.” The devices are now sold to agencies such as Oklahoma DPS by the privately-held ERAD Group Inc., based in Fort Worth, Texas.

The ERAD devices themselves can be used for multiple functions. The most basic is simply scanning the magnetic strip of a prepaid debit card to determine the account balance. From there, law enforcement officers can choose to freeze the funds for up to 30 days or have them transferred to a government account.

An ERAD Group presentation to law enforcement from May of this year explains the legal basis for these policies as follows:

“1. Interrogating the magnetic stripe of a confiscated credit, debit, or prepaid card does not violate an individual’s fourth amendment rights.
2. Individuals do not have privacy rights with magnetic stripe cards.
3. Prepaid cash cards are treated like currency.”

The ERAD presentation states the Supreme Court decision Riley v. California deeming warrantless searches of cell phones by law enforcement officials unconstitutional does not extend to magnetic stripe cards.

The prepaid cards covered by these policies consist of both “Open Loop” debit cards (usually bearing a Visa, MasterCard, or other issuer’s logo and able to be used at multiple retailers and locations) and “Closed Loop” gift cards (featuring a store brand such as Wal Mart, Target, or Best Buy). According to DHS and ERAD Group, identity thieves, criminal couriers and drug traffickers have lately taken to using such prepaid cards instead of cash – reportedly going so far as to use “library cards, hotel card keys, even magnetic-striped Metrorail cards” for smuggling illegal funds.

But prepaid debit cards are also an increasingly popular method of payment for low-income workers, those with poor credit scores, and others without access to a traditional bank account.

In the case of regular credit cards and debit cards linked to a bank account, the ERAD devices can provide associated information such as the card number, account holder’s name, expiration date and card issuer, but cannot freeze or seize these funds. This account information can then be kept in a law enforcement database for later analysis and used as potential evidence for future cases.

The state contract with Oklahoma reported on by the nonprofit news organization Oklahoma Watch shows that, in addition to the usual charges for service and support of the devices, ERAD Group also receives up to 7.7 percent of any funds seized by the law enforcement using their devices. Before the adoption of ERAD devices, 72 percent of recent seizures in Oklahoma had been cash forfeitures.

Company president T. Jack Williams told Oklahoma Watch that the number of nationwide law enforcement agencies using ERAD technology is “in the hundreds.” The proposal submitted to Oklahoma DPS states that ERAD Group operates in nine states, including “Florida and Texas, with partner support in Georgia and California.” The document also provides implementation references in Oklahoma County and Kane County, Illinois, as well as the city of Tempe and Maricopa County, Arizona.

The full contract and bidding proposal from ERAD Group is available here.

Jerod MacDonald-Evoy & Jason Hernandez contributed to this report. Follow Michael Eberhart on Twitter.