By JOHN SCHWARTZ icodemo S. Scarfo Jr. might seem an unlikely champion of civil liberties in the high-tech age. Mr. Scarfo, the son of the jailed mob boss "Little Nicky" Scarfo, has been awaiting trial on charges of running gambling and loan sharking operations for the Gambino crime family. But like so many businessmen today, Mr. Scarfo kept his data on his personal computer; and like many other businessmen, he encrypted the sensitive stuff to protect it from prying eyes. Today, a federal judge in Newark will hear defense motions to throw out evidence gathered by a controversial new law enforcement technology: a system that recorded every keystroke typed on Mr. Scarfo's computer, including the password that investigators used to unscramble Mr. Scarfo's files. That wrinkle in the case makes the United States v. Scarfo the latest battleground in a growing struggle to determine the proper balance between the government's ability to conduct surveillance and a citizen's right to privacy. "It raises a whole issue of invasive law enforcement technology that really hasn't been considered by the courts yet," said David L. Sobel, who has followed the case closely as the general counsel for the Electronic Privacy Information Center in Washington. The Scarfo case comes at a time of rising concern about the government's power to snoop. In other cases, the Federal Bureau of Investigation's use of an Internet wiretap system initially known as Carnivore ignited opposition from privacy advocates and a number of Republican lawmakers, who said the technology sampled the communications of many customers of an Internet provider, not just the suspects. Similarly, public uproar accompanied the announcement that Tampa had installed surveillance cameras with facial recognition technology to spot criminal suspects in the city's Ybor entertainment district. The courts are paying attention. The Supreme Court, in a case known as Kyllo v. the United States, which was decided in June, restricted the ability of police to use thermal imaging cameras to look inside houses without a search warrant. In the majority opinion, Justice Antonin Scalia wrote that the court was confronting a fundamental question about the Fourth Amendment: "what limits there are upon this power of technology to shrink the realm of guaranteed privacy." When the police raided Mr. Scarfo's business, Merchant Services of Essex County in Belleville, N.J., in January 1999, they found a computer and copied the contents of its hard drive. But investigators could not read one file on the machine, because it had been encrypted using a common program, PGP, which stands for Pretty Good Privacy. Encryption has become an essential part of doing business on the Internet for companies and consumers alike. And the rising use of encryption technology has long been a concern of the F.B.I., which has said the technology could be devastating to criminal investigations. The Scarfo case shows one way the F.B.I. has tried to address the problem. Agents went back into Mr. Scarfo's business under court order and surreptitiously installed what court papers identify only as a "key logger system" on the target PC. The F.B.I. would not say whether the system was a hardware device or purely software, or give any details about how it worked, except to say that it recorded every keystroke entered into the machine. Agents returned to Mr. Scarfo's business over the following months to retrieve data recorded by the system. Ultimately, the logger captured a password, nds09813-050. Mr. Scarfo had apparently changed his password, however, because it did not decrypt the original file. But investigators found new versions of the file on floppy disks in Mr. Scarfo's home, and the password worked to unscramble the file, which prosecutors say contained accounts of gambling and loan activities. (The annual interest rate on the loans, as calculated by the F.B.I., was 152 percent.) In briefs presented to Judge Nicholas H. Politan of United States District Court, who will preside over today's hearing, Mr. Scarfo and his lawyers assert that any evidence collected with the help of the keyboard logger should be thrown out because the technology was not used in ways that passed Constitutional muster. They say that because the keyboard logger collected everything Mr. Scarfo typed, the court order permitting its use violated longstanding constitutional rules that search warrants and evidence collection should be as narrow as possible. They also assert that the technology is like a wiretap, and that therefore the relatively difficult process of obtaining an electronic communications wiretap order, known in law enforcement as a "Title III" order, should have been followed, instead of the more basic search warrant procedure. Mr. Scarfo's lawyers have demanded full technical details of the key logger system. The assistant United States attorney on the case, Ronald D. Wigler, said in his court response to Mr. Scarfo that the technology was used in full compliance with the law. In the brief, he refused to discuss technical details of the "sensitive law enforcement technique," saying that to do so would tip the hand of law enforcement in future cases. Mr. Wigler also said that the system did not record any e-mail communications and so the requirements for a wiretap warrant did not apply: "Letters do not become `electronic communications' subject to Title III merely because they happen to have been typed on a computer." All lawyers involved with the case are under court order not to speak about the case. Mr. Sobel said the use of keyboard loggers was a new area of surveillance that posed a threat to personal privacy. "If what this case means is we are about to see an explosion in the number of surreptitious police entries," he said, "that's a troubling development." Mr. Sobel, who has advised Mr. Scarfo's lawyers in the case and has followed it closely, said, "It's a very serious precedent." As people's computers become their mailboxes, home shopping malls, entertainment centers and more, he said, technologies like the key logger system give law enforcement "a secret means of monitoring all of that activity." Mark Rasch, an expert in government surveillance, said he was concerned about the use of the key logger before its constitutional implications have been thoroughly considered by policy makers. "What I want to know is the extent to which government believes it is entitled to invade privacy within the bounds of the law," said Mr. Rasch, a vice president of Predictive Systems (news/quote), a network consulting firm. He is also a former Justice Department lawyer who has consulted with a civil liberties group following the case. Philip R. Zimmermann, the creator of the program used by Mr. Scarfo and millions of other people worldwide, said, "I knew PGP would be used by criminals; I felt bad about that." He also said, however, that "the good uses to which PGP is put are so compelling that we have to factor that into the whole equation." He recalled inventing the program 10 years ago with goals like promoting privacy and protecting political dissidents around the world. But most powerful technologies, like automobiles, "have mixed effects on society," he said. "The fact that criminals use cars doesn't mean that the rest of us shouldn't have cars." Copyright 2001 The New York Times Company