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Updated Apr 7, 2014 - 8:00 pm

Man sentenced to time served in tax fraud scheme

PHOENIX — A California man who admitted receiving $1.9 million in
fraudulent electronic tax returns from a sophisticated scheme that federal
authorities found difficult to crack was soon expected to walk out of jail after
being sentenced Monday in a federal court in Phoenix to the five years he’s
spent in custody.

Daniel David Rigmaiden, 34, of Santa Clara, Calif., who was sporting a long
beard, shaggy hair and an orange prison suit in court, pleaded guilty to one
count of conspiracy, two counts of wire fraud and one count of mail fraud. He
has been in jail since his August 2008 arrest in California.

He initially pleaded not guilty to 74 counts, and prosecutors dismissed the
remaining 70 charges under a plea agreement.

“I want to apologize to everyone I have impacted in a negative way,”
Rigmaiden said.

Authorities say Rigmaiden ran a fraud scheme that used the identities of people
living and dead to file more than 2,400 tax returns seeking $5 million.

Rigmaiden proved elusive to authorities, who dubbed him “the Hacker” before
his true identity emerged. He went to great lengths to conceal his part in the
scheme by sending encrypted emails to conspirators. In one, he gave detailed
instructions on mailing $68,000, saying to dip the money in oil to hide its
smell, put it into a stuffed animal and include a note to a dying child. He was
finally arrested after investigators used emerging surveillance technology that
he called unconstitutional.

Prosecutors say the case was unusual because, unlike most people who commit
white-collar crimes, he lived frugally and invested in gold and silver.
Rigmaiden, who has a high school education, also fired five attorneys and
represented himself in court for more than four years.

He admitted receiving $1.9 million in the scheme. But he only pocketed
$400,000, which he has already repaid. The federal government controlled the
remaining $1.5 million as part of its investigation.

U.S. District Judge David Campbell, who called it an “extraordinary fraud,”
could have sentenced him to 10 to 12 years in prison but gave him time served,
plus three years of supervised release and 100 hours of community service.

“You have tremendous abilities and if you put them to good use, it can benefit
society,” the judge said.

Federal prosecutor Frederick Battista said he believes Rigmaiden has decided to
become a law-abiding citizen.

Years ago, investigators struggling to find the scheme’s leader tried to track
an Internet air card used to make the fraudulent tax filings. They turned to a
suitcase-size device known as a Stingray that pretends it’s a cell tower.
Authorities say the device helped them identify and arrest Rigmaiden at an
apartment complex in Santa Clara.

Rigmaiden had questioned the government’s use of the device and asked that
evidence gathered from it be thrown out, saying he had an expectation of
privacy. The American Civil Liberties Union has argued that the Stringray sweeps
up data of people who happen to be nearby.

The technology didn’t come up in the hearing on Monday.

Campbell previously ruled that Rigmaiden didn’t have an expectation of privacy
because he used fraudulent information to rent an apartment and get the computer
and air card used to carry out the crimes.

The case was handled by a federal court in Arizona because investigators had
originally tied the scheme’s proceeds to a Phoenix bank account set up by
another man who pleaded guilty more than two years ago.

Authorities focused on trying to find the air card enlisted the assistance of a
participant in the scheme who became a confidential informant. The informant had
received emails from an unknown leader in the fraud with instructions on
delivering $68,000, court records said.

The instructions said to wash the cash in lantern oil to mask it from
drug-sniffing dogs, double vacuum-seal the money, put the packaged cash inside a
stuffed animal and send it in a box to a mail store in Palo Alto with a birthday
card addressed to a dying child.

Rigmaiden went to pick up the package but managed to escape federal
surveillance, court records said.

Investigators used records from a phone company to narrow the location of the
air card within the Santa Clara apartment complex. After getting a court order
to use a tracking device, investigators pinpointed the apartment.

Eventually, authorities spotted Rigmaiden at the complex and arrested him after
a foot chase.


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