MR. ROEPKE: We were expecting a moderator, but I guess that fell through, so it gives me a chance to, I guess, really cut myself up here. I guess there’s some administrative things that are supposed to be covered here, so I’ll give it my best shot. [INSTRUCTIONAL COMMENTS]
I’m Tom Roepke, I’m the speaker for the class. A little bit about myself. I am with Western Digital; I’m the Manager of Corporate Investigations. I’ve been a member of ASIS for 4 years now, a CPP for 2 of those years. I have a bachelor’s degree from Waylon Baptist University in criminal justice, and prior to Western Digital I was in the pharmaceutical industry, and prior to that spent several years with the US Air Force.
I guess we’ll jump right into the meat of the presentation here then. OK, thank you all for coming. There are a lot of people here. I just want to make sure that you’re in the right class. How to win at blackjack is next door, so if you’re in the wrong one.
Let me start by saying I’m not a technical wizard, so if you have any highly technical questions during the presentation, fire away, I’ll give it my best shot, but you may just get a blank stare. That may be because I lost all my money at the craps table, too. OK, it’s a tough crowd here.
I want everybody to put their bad guy hat on for a minute. That may not be too hard for some of you. Now, I want you to select a crime to commit that is going to yield you the highest profit and is going to be the easiest to get away with. I’m going to give you three choices up here, an armored car robbery, a bank robbery, or hijack a truck that’s carrying about $10 million in computer equipment. Let me give you a few things to think about while you’re deciding.
Take the armored car. Well, number one, it’s armored. Number two, you’re looking at, at least, two armed guards that are going to be with that truck. They’re going to have two-way communication back to wherever their central dispatch is. They’re probably going to have some type of panic alarms or security systems on that truck. Pretty risky, to say the least. So, let’s consider the bank. Well, your real money is going to be in the vault.
That’s kind of a problem, to get to the vault. They’re probably going to have guards in the bank, you’re going to have alarm systems, intrusion, burglary, panic alarms, and you’ve got to deal with witnesses, unless you’re going in there after hours. If you get the money, then you’ve got to deal with your dye markers and things like that. So, good luck on the bank robbery.
That leaves us with hitting the truck that has $10 million in computer equipment. Like I say up here, it really doesn’t take a genius when you consider that the truck probably has no security measures.
It’s questionable whether the driver even has two-way communication with his dispatch center, or anybody else, for that matter. When you consider that the current fencing rate for high tech product is fifty cents on the dollar, you’re looking at a $5 million profit for hitting that truck. I think I’d go with the truck.
That’s one of the problems that we’ve been facing in the high tech industry for a number of years now. For awhile, the bad guys were hitting the actual plants and were moving the product out that way, so the facilities started to harden security and make it a much tougher target. That left the weakest link as the product being in transit, and that’s where our problems are now.
Some statistics that you’re probably already familiar with. The FBI conservatively estimates that about 3.5 billion is lost annually in the US to cargo theft. The National Cargo Security Council, the NCSC, they’re a little more realistic about it and they say approximately 10 billion is in direct losses to cargo theft. Indirect losses, that’s where it really hurts you. You’re looking at about $30 to $60 billion a year lost because of cargo theft.
Indirect losses, I’m talking about lost time, investigative costs, insurance, etc. etc. etc. Keep in mind, this is the United States only. We have a lot of international people here, and I’m sure that the statistics in your particular areas of the world are staggering, as well. Before I go on any further, if anyone has any questions during the presentation, feel free to raise your hand at any time.
Unfortunately, it’s estimated that approximately 85% of cargo thefts can be attributed to some form of internal involvement or collusion. We’re also combating extremely well organized worldwide cargo gangs, and they seek out these 85% to get critical information. Your typical scenari
o may be a truck driver is approached by the bad guys and offered $20,000 to essentially do exactly what he’s supposed to do. We’re going to force your truck over to the side of the road at location X, we’re going to tie you up, we’re going to throw you in the back of the trailer, whatever, and we’re going to take your product.
After we’re gone, you’re going to go and you’re going to call the cops. Shoot, that’s what I’d do anyway, and I got $20,000 in my pocket. Well, another big problem we’re facing. If you’re the truck driver, just don’t deposit the money. You don’t want any type of paper trail.
A little bit about high tech cargo. In 1997, Economist magazine stated that 10% of the US gross domestic product was high tech. And I said $10 billion in annual cargo theft. Well, 3.5 billion of that is just high tech cargo. Why is it so attractive? A couple of reasons. A lot of these bad guys, criminal enterprises, will use high tech components as currency. It’s not necessarily illegal to be stopped with a trunk full of expensive computer hardware. It’s awfully suspicious, mind you.
We in the high tech corporate security industry are working real hard with different law enforcement agencies to get them to recognize what is a suspicious sign if, even on a routine traffic stop, this guy happens to have 100 hard drives in his trunk. Your federal sentencing guidelines on cargo crime are very light when you compare them to, say, drug crimes. They’re making a large profit off of hitting this product, and they’re not really looking at too much punitive-wise.
A little bit about Western Digital. We’re one of the leading hard drive manufacturers in the world. I see some of my competitors in the audience, and I’m sure they’d have a difference of opinion about that, and especially if you looked at our current stock quote. We move about $87.5 million worth of hard drives every quarter. In ’98, we had 65,000 shipments worldwide. Needless to say, we move an awful lot of high.
Prior to 1996, our problems were pretty much your standard security problems in any large corporate environment, employee issues, your access control systems, background checks, yada-yada-yada. Well, we had a real wake-up call in June, and we had our first armed takeover of a truck. We lost over a million dollars just in product on that hit alone. Over the next 6 months, we lost another eight million dollars just in product, mind you. That’s not counting all the indirect losses.
So, we had to do something, and we had to do something pretty fast. We sat down and we came up with three different options that we could look at. One, take the posture of strictly reactive investigations. Two, contract private security to escort our trucks that are moving the hard drives. Or, three, find some kind of proactive use of technology that’s out there. Well, our first option, strictly reactive investigations, had a few drawbacks. Number one, the drives already have a black market buyer, typically, before they’re ever even hit. So, they’re gone, as soon as they’re hit, they’re usually out of the state, out of the country, within hours, yes. So, unfortunately, recovery is minimal.
Sometimes we get lucky, though. We had a recent case where a customer of ours was moving our hard drives, so they held title on it, but working with them for a hit on their truck on a Friday, and through the use of some informants, we found those hard tech equipment drives for sale out of the back of a shoe store in San Diego, California the very next day.
So, it just goes to show you, this product is moved and, you name it, you’re going to find it. We did get the 8,000 hard drives back too, on that one. Option number two, contract out private security to escort the trucks. Some drawbacks to this, as well. Number one, if your escort vehicles are marked in any waywith that particular security company, it’s kind of like advertising, I’ve got something very valuable in this truck that I’m following. Number two, it’s very costly, especially on long haul movements. You’re looking at about an average of $25 an hour for these escorts. You’re going to expose your company to increased liability if, heaven forbid, that there is an actual incident and that escort is harmed.
You’re looking at potential lawsuits from the company, his family, and so on. Unfortunately, it’s just as easy for the criminal elements to bribe the escorts. I know they’re supposed to be security professionals, and not subject to that kind of thing, but there’s a high tech company that experienced that very same thing in Malaysia recently. Lastly, find a proactive use of technology. Well, enter GPS, Global Positioning System, which is why you’re all here. What is GPS? It’s a global positioning system that was developed by the US Department of Defense in the ’70s, the most recent satellites being launched between 1989 and 1994. The total cost to create this system was just about $12 billion. It consists of 24 satellites. They’re in a constellation 11,000 nautical miles above the earth. They orbit every 24 hours. The system itself is called the NaviStar system, and these satellites are constantly being calibrated by the five base stations that you see listed here. They’re being calibrated for their positioning, what their atomic clocks are reading.
There are private companies out there that have launched their own satellite systems and are offering GPS services. Motorola’s Iridium (?), for example. You have some other companies with some low earth orbiting satellites. Some things that you may want to consider, though, on the private industry is, you’re going to pay for the use of the signals on
that satellite, where, your Navistar satellites, the cost is nothing. It’s zero to use the signals from that.
On these private systems that go out, typically, the hardware is going to be proprietary. If you buy this hardware and you enter into a contract with this company, and you don’t like the service 6 months, 12 months down the road, well, you’re stuck with the hardware and nobody else can read it. Lastly, it’s going to be pretty hard to beat the incription on the Department of Defense Navistar system.
How it works. These satellites, they communicate with GPS receivers down here on earth, providing real time location. The particular receivers that we use are accurate to within 30 feet. Now, this depends on the quality of the receiver that you have. You take your Hiker or your Fisherman out there; they’re not going to have a receiver that’s as high tech as our receivers. And when these fixed positions, your backpacking GPS receiver is only going to communicate with maybe a maximum of 3 satellites, whereas, ours is going to communicate with a minimum of 5 to 8 satellites at once to triangulate that position.
The receivers then transmit that information over any number of wireless means to your monitoring agent, whether that’s internal to your company or if you third-party that out to a monitoring agent, which we do. Then, that information is viewed on a wide array of software, and that can be anything from a text-based software to a graphical user interface of maps for cover anywhere you can think of in the world. Now, that’s great for GPS, gives you a little bit of knowledge about GPS, but that wasn’t what was going to solve our problem. We needed a marriage of GPS and security systems. So, we sat down with our electronic security vendor and started brainstorming and coming up with some ideas, and decided the way to go was to come measures on the trucks, along with this existing GPS technology. So, we set out on this adventure and what we ended up with was, our trucks with panic alarms would either be floorboard keyfobs (?), depending on if we’re looking at a bobtail or straight truck, or a tractor-trailer combination.
On the tractor-trailer combinations, we have tractor-trailer separation alarms. You have the rollup, the rear door alarms, route deviation alarms, and I’ll talk about that a little more in the next few slides. Tamper alarms, somebody tampering with the way the GPS unit is set up in the truck. I talked earlier about the high percentage of internal involvement. Well, we tried to address that and come up with a way to alert us if there’s some internal collusion going on with attempting to defeat the GPS system. I won’t go into exactly how we do that, but we came up with a pretty neat concept in that area.
Operationally, you’re going to set how you want that particular receiver to report to you. Do you want to do time/distance reporting? Do you want it to report to you every 10 miles, every 10 minutes, what the location of that truck is? And it’s not just going to tell you the location of the truck, it’s going to tell you the speed of the truck, it’s going to tell you the direction it’s going. Or, you can have autonomous reporting zones. You can have particular zones set up along whatever routes you use. When it passes through this particular zone, boom, it shoots you a signal of where this truck is. Now, if up with an integrated series of panic alarms, alarm contact zones, and some other an alarm happens, it’s automatic, continuous reporting. You know right where that truck is every step of the way.
Some minor details that we put in place procedurally to ensure the integrity of this program. We have our monitoring agent conduct a systems check of each GPS security unit before that truck moves any freight. The routes that those trucks are going to take, and who’s driving it, and the locations that they’re going to be stopping at, are all transmitted to the monitoring agent before that truck ever leaves to start its cargo run. it’s important to have these routes, because you need to program these into whatever software system you’re using for your route deviation.
There’s a couple different ways that you can do the route deviation alerts. One is, set up virtual fences along that particular route. That truck breaks that virtual fence; you get an automatic alert system. You can program in, OK, this truck is not supposed to go more than 2 miles off the route. Obviously, there’s traffic and things on the freeways. Well, if it goes more than 2 miles off this particular route, it’s going to send you an alarm signal.
What if you get an alarm? Does it really work? It does. Like I said, you get an alarm signal that transmits instantaneously to the monitoring agent, and this alarm is not audible to the driver or to the bad guy that’s taking over his truck. It’s only audible to the monitoring agent. Our monitoring agent has two-way communication with each of the rivers in these trucks that we have GPS security systems installed. We set up an authentication code protocol question that’s changed every couple months, but that each of the drivers is familiar with.
If an alarm comes through, the monitoring agent asks the driver this particular question and, depending upon his response, they either verify the incident or it was, you know, I hit the panic alarm by mistake, blah blah blah, OK, we’ll reset the system. But, if they answer in such a way that they know that this is a verified incident, then our monitoring agent immediately dispatches law enforcement to wherever that truck is, or is going. It’s important to note here that we spent a lot of time establishing positive and proactive relationships with different law enforcement communication centers in the various jurisdictions that we’re going to be dealing in.
We didn’t want to run into the problem of, a lot of these law enforcement communication centers get these false alarm calls from different alarm companies, and it gets very frustrating for them, and it ties up a lot of their time. But we needed to assure them that, if you get a call from this monitoring agent, it is a verified incident, something is happening. Certain law enforcement jurisdictions that we move in have centralized communication centers that can transmit emergency messaging over a broad band. Southern California, for example, out of the one central communication center, they can transmit to the California Highway Patrol, to Orange County Sheriff’s, LA Sheriff’s, LAPD, and so on and so on.
This alarm comes through. Our monitoring agent is on the phone, on the radio, with this particular dispatch center. Oh, I’m sorry. Yes?
: You basically rely on the police to get to the truck, or [inaudible]…?
MR. ROEPKE: Right. The question was, we basically rely on the police to get to the truck.
: [Inaudible] … truck get hijacked, the alarm works, but how you get there?
MR. ROEPKE: Right, OK. That’s what I’m going to talk about right now. That alarm comes through, our monitoring agent is on the horn with the particular law enforcement dispatch center. They’re giving them real-time information as to where that truck is, where it’s heading, if the tractor and the trailer were separated; and a lot of times that happens.
These bad guys hit a particular truck, the trailer’s got some kind of advertising on it that would be readily identifiable, well, they’re going to switch that out and onto their own trailer. But we also have the capability to covertly view inside the cab of the track, on the rear of the truck, and covertly listen in to what’s going on on that truck, without the driver, the bad guy, anybody at that truck knowing that the monitoring agent is doing that.
Which, to answer your question, they give that information to the responding law enforcement units. If they have in-car computers, it’s like that. This information is transmitted from the monitoring agent to law enforcement over the Internet in bit-map, J-peg formats. We already have on file digital images of each of our trucks and the drivers that are assigned to those trucks, all the identifying marks on those trucks, so that’s all given right away to the responding law enforcement center.
A good thing about the ability to view inside the cab is, it combats the tactic of the bad guys switching out their drivers every couple of miles, so that there’s different witness accounts. Where, if they get caught, by the time it gets to court, you’ve gotpeople saying, well, I saw a guy with long red hair, I saw a guy with short blond hair, driving it. If you have different witness accounts, it just makes for difficult prosecution.
How has it helped us? Since inception, we’ve only had one unsuccessful attempt at a hijack of a GPS security-equipped truck. It’s resulted in lower insurance premiums and deductibles. Basically, we’re just extremely pleased with it. I am here today to try and get the understanding out there as to GPS, not as a fleet management tool, which you’ll see a lot with your various trucking companies or shuttle services, things like that, but as a security tool married up with the different alarm systems and what not that I spoke of.
This went a lot faster than I anticipated, so I hope you have a lot of questions. I’m going to leave this up here. It should all be in your handouts anyway.
: One thing I’m curious about. A lot of the cargo traveling coast to coast are using cellular technology for the transmission of that information, and I’m just wondering about dead zones throughout those cargo routes. What are your thoughts in that category?
MR. ROEPKE: The question was, if you’re using cellular communication to report the signals, what about dead zones, and how do you address that. We do usecellular to transmit from our receivers, and we have noticed that there’s so much cellular coverage that the problem of dead zones is really minimal for us. But you also have other options to communicate back to your particular monitoring agent, whether it’s Autoref (?), all the other different wireless systems out there. We just went with cellular because cellular pretty much covers the globe. If we wanted to rely on strict satellite communication, that footprint of that satellite may have only covered North and South America, but it may not have serviced us in Asia or Europe.
RICHARD ALT: [Inaudible] Mutual Group, Madison, Wisconsin. Do you see these units being used for executive protection? We deal primarily with credit units around the world, transporting funds, and those kinds of things. Do you see global positioning units used to track
executives, and those kinds of things?
MR. ROEPKE: Yes, I do. In fact, it is. The question was, do I see global positioning in this capacity being used for executive protection. There is a product that is, if not already out, is just about to come out, which is the size of a pager. In fact, it is a pager, alphanumeric pager, with a GPS receiver inside, basically a mini-386 computer in there, along with a panic alarm. So, if the individual that you’re protecting has a problem, he hits this panic alarm, it sends a signal back to your command center, andyou know exactly where he is. And he’s still able to use this device as a pager, to receive his e-mails, his pages, and what not.
: You talked a little bit about you use a third-party transporter, and what kind of contractual obligations, and how did you get to where you are now [inaudible] …?
MR. ROEPKE: Good question. The question was, if we use a third-party carrier, how did we get to the point of having them utilize this protective measure on the trucks. It all goes back to your initial negotiations with that particular freight forwarder or cargo carrier. We really teamed up with our Logistics Department and came up with a mutually agreeable plan on where we wanted to proceed security-wise.
When these particular carriers were bidding on our contracts, we let them know at the forefront what our requirements were security-wise, both in transit and where they’re warehousing our product, and this was one of them. They knew going into it that they were going to have to put this on their trucks.
They agreed to it and I basically went in and set up the system for them, and it’s worked out beautifully for us. They love it and, actually, it’s a great marketing tool for them for other contracts. I’m talking about high tech product, but you look at thepharmaceutical industry. I used to work in the pharmaceutical industry, and there is a lot of high dollar drugs being moved in these drugs. Perfect application for this.
: Can you list several large companies that have this, trucking companies? Who’s out there that has it?
MR. ROEPKE: I’m not sure if I’m allowed to name vendors. Get with me after.
: There are so many [inaudible] products, I would assume, plus there are so many vendors. Could you say something about how to select the right vendor, or select the right product?
MR. ROEPKE: The question was, can I say some things about what to look for when you want to take GPS in this application. One thing that concerned us, and I talked about it earlier, was getting a system that was not proprietary to that particular vendor. That was because we did not want to be dissatisfied with the service but be stuck with this particular hardware. So, I would recommend that you kind of weigh where you’re at and, if proprietary is the way you want to go, then go proprietary. But I would recommend non-proprietary. You also want to ensure that, obviously, it’s Y2KYou want to look at what’s the accuracy of that particular GPS receiver. Is it going to tell you where that unit is within 30 feet, or is it going to tell you where it is within 3 miles? That may not really help you out. You want to take a look at how it communicates with the particular monitoring software. You want to take a look at that monitoring software. Is that going to meet your needs?
I’ve been to some trucking companies where they use strictly text-based monitoring. It just tells them, basically, a longitudinal and latitudinal position of the truck. That wasn’t really going to help us out. So, we went with a software system where you’re looking at a map with landmark icons and everything on there, and it’s showing you your truck, where it’s moving. Does that kind of answer your question? OK.
: [INAUDIBLE QUESTION]
: Do you have it for Latin America?
MR. ROEPKE: The question is, do we have it for Latin America. It is worldwide. You’re talking about satellites in space. Now, is this particular application compliant, and this time of the year I’m pretty sure that they all are. worldwide? No. That can be attributed to just a lack of understanding of how this can actually be used. We’re working very hard with Europe right now to get this up and running over in Europe. There’s a progressive company in Norway, actually, that is getting ready to expand more into mainland Europe with this type of service. But, to answer your question about Latin America, it’s no problem getting this service up and running anywhere in the world.
: Are you attributing your reduction in hijackings to the system?
MR. ROEPKE: The question is, are we attributing the reduction in the hijackings to this system. I can say, when we put this system in, in late ’96, yes, I, in fact, attribute it to this particular system. The communication system within the criminal network is phenomenal. When bad guys find out that you’ve got this particular protective measure on your truck, well, the word’s going to get around pretty quick. Now, today, our product isn’t being hit very much, just because hard drives, unfortunately, aren’t worth very much in the market. My friend from Seagate here will attest that, hopefully, that’s going to change real soon.
: You said there was no cost for the Navistar itself, I understand that. But, what is the cost to the third-party logistics mover per vehicle to install the kind of equipment that you’ve got? And then what’s your cost for Western Digital security to set.
MR. ROEPKE: You’re looking at, to equip a truck with the GPS receiver, your alarm systems, and excluding the — I’ll exclude the CCTB, because that gets into a more pricey range. But you’re looking anywhere from — there’s systems from about $750 up to about $2,000 to equip this truck.
Now, if you want to bring the monitoring in-house, that’s going to be an expense that you have to evaluate and weigh against what type of contract you can negotiate with a monitoring agent to do that particular monitoring, and how intensive you want that monitoring to be. Where we have our monitoring agent, verifies the routes, verifies the integrity of the system, some companies may not want to do that, so it’s going to bring your monitoring cost down. It just all goes into whatever type of negotiations that you handle.
: Is there any technology available today where the transmitter is small enough to — a product, like a watch, or something like that?
MR. ROEPKE: I’m sure that there is. I’m not going to stand up here and tell you that I know what it is. I don’t. I’m familiar with the product that we use. We haven’t found a need for small devices like that yet. The smallest that I’m aware of is the pager size. I think what you’re probably referring to is, can we get it down to whereit’s actually in the product itself. We never considered that an option because we move so much product. It would have just been cost prohibitive for us to try and get that many units out there.
: Given the lack of police resources, and poor communication systems in some foreign countries, how effective is this system in international particularly in Latin America?
MR. ROEPKE: That’s a good question. The question is, given the lack of ;
: Are these units permanently attached to the tractor, they’re not portable?
MR. ROEPKE: We have a couple of different formats that we use. For our straight tractor-trailer bobtails, we’ll have those in the cab somewhere protected within the cab. On the tractor-trailer combinations, it’s imperative that you have it in the trailer. You don’t want to track the cab, you want to track the trailer, and where your goods are.
But we have that in a protected, encased area within the trailer, where it’s darn near impossible to get into that particular receiver. But also, to answer your question, no, they’re not portable. We don’t have them set up as portable.
: So, they need a power source from the tractor back to the trailer to keep it powered up?
MR. ROEPKE: Right. As the tractor and the trailer are connected, it’s feeding off of the main battery system off of the cab, and then we also have a backup system in the trailer that acts as a trickle type system from that backup system. The system that we’re currently using, if that tractor and trailer are separated, we’ve got good power, and can communicate signals, for 3 hours. Well, if we can’t find that truck within 3 hours, that’s a whole ‘nother set of problems that we’ve got to address.
: Does that mean that you have an outside antenna then on your trailer?
MR. ROEPKE: You need an antenna to communicate with the satellites, but it does not necessarily have to be an outside, visible antenna. There are antennas that can, believe it or not, sit right underneath the skin of the truck.;
: So, I reckon that you need 3 to 4 satellites to have suitable parameters, right?
MR. ROEPKE: Right.
: So, let’s assume in, say, Los Angeles downtown, you have the signal?
MR. ROEPKE: Yes. You’re going to have the signal –
: [INAUDIBLE ADDITIONAL STATEMENT]
MR. ROEPKE: That’s a good point. It brings me to why we didn’t go with a ground-based communication system. I’m sorry. The question was, if you’re in a metropolitan area, is your signal going to be blocked by the high rises. No. Obviously, if you go underground, you’re not going to communicate. But the second you go underground, you k