<nettime> The wonderful life of corporate capitalism, part 3198 ... (WSJ, where else?)

["Patrice Riemens" <patrice@xs4all.nl>]

Original to:
http://online.wsj.com/article/SB10001424052702304636404577297454154404874.html

ExecSum: 95% of phone calls billed under the heavilly govt subsidized
service for hearing impaired scheme were actually made by Nigerian '419'
con-tricksters, 'possibly' with the knowledge of AT&T ...



AT&T Tied to Nigerian Scam

By ANTON TROIANOVSKI and BRENT KENDALL

On April 6, 2010, an AT&T Inc. T -0.60% manager pondered a drop in volume
in the company's government-subsidized service for hearing-impaired
callers.

Reassuring a colleague in an email, the manager said she was "not ready to
throw up flags" because "it was Easter Monday yesterday, which is
celebrated in Nigeria."

The exchange was part of a lawsuit unveiled Thursday by the Department of
Justice, which alleged that AT&T knew the service had become a haven for
Nigerian scam artists, while serving relatively few of America's
hearing-impaired.

A Justice Department lawsuit alleges AT&T improperly sought FCC
reimbursement for hearing-impaired services it provided to scammers from
Nigeria, Anton Troianovski reports on the News Hub.

The telecom giant then billed the Federal Communications Commission $16
million for such services since December 2009, as much as 95% of which
were provided to international callers attempting to defraud U.S.
merchants, the Justice Department said in the suit.

The suit was brought under the federal False Claims Act and was based on
tips from an employee in an AT&T call center.

AT&T did not comment on the suit, but said it followed the FCC's rules for
providing the service and seeking reimbursement.

The program at issue is a little-known text-based communications service
called IP Relay that allows the hearing-impaired to place telephone calls
by typing messages over the Internet. Those messages are then read aloud
to parties on the other end of the line by call-center employees at
companies like AT&T, which are then reimbursed by the FCC.

The government alleges that scammers operating out of Nigeria used the
service to defraud U.S. merchants by ordering goods with stolen credit
cards and counterfeit checks. In essence, the government alleges, AT&T's
operators became mouthpieces for the scam artists.

The complaint used an example of a scammer pretending to be a foreign
buyer, who placed a large order with a stolen credit card. Typing text
read aloud by the operator, the scammer would then ask the merchant to
wire money for transporting the goods.

Enlarge Image
0126attearns
0126attearns
Michael Nagle/Getty Images

A Justice Department lawsuit alleges AT&T improperly sought FCC
reimbursement for hearing-impaired services it provided to scammers from
Nigeria.

The advantage of using the IP Relay system is that it is anonymous, the
Justice Department said in the complaint. The caller can't be visually
identified, and FCC rules say operators can't disclose the contents of the
conversation.

"As the FCC is aware, it is always possible for an individual to misuse IP
Relay services, just as someone can misuse the postal system or an email
account," AT&T spokesman Marty Richter said, "but FCC rules require that
we complete all calls by customers who identify themselves as disabled."

IP Relay services are paid out of fees collected from telecom customers
and are included in the federal budget. Providers like AT&T bill the
government at a rate of about $1.30 a minute, the complaint says.

David Rolka, a telecom consultant who last summer began administering IP
Relay funds for the FCC, said he has grown concerned about fraud.

Earlier this year, he started requiring providers of IP Relay service to
submit detailed records about each call that they handle.

This month Mr. Rolka said he has decided to withhold IP Relay payments
from the fund to all of the service providers?AT&T, Sprint Nextel Corp.,
and several smaller, specialized companies.

The FCC solicited comment in recent weeks on potential misuse of the IP
Relay service. In a filing, Sprint detailed steps it was taking to combat
fraud, such as blocking users making an unusually high volume of calls and
maintaining a database of Internet addresses used to make international
calls.

The Justice Department's complaint was filed in a lawsuit originally
brought by Constance Lyttle, a former worker in one of AT&T's IP Relay
call centers. Filed in a Pennsylvania federal court, it seeks triple
damages, restitution and civil penalties.

AT&T began providing the service in 2003, and learned from its call center
workers the same year that many of the callers were using the service to
defraud U.S. merchants, the complaint says. An internal analysis by AT&T
in 2004 found some of the worst abusers generated over 10,000 minutes per
day of usage, according to the complaint.

The study found that on Jan. 14 and 15, 2004, 10 of the top 12 users of
the service at AT&T were calling from outside the U.S., primarily from
Lagos, Nigeria, according to the complaint.

A single Internet address was the source of 100 hours of calls in those
two days, placing multiple calls at the same time, according to the
complaint.

The FCC, concerned about abuses of the system, began requiring
telecommunications providers in late 2008 to register users of the service
and verify the customers' information.

The Justice Department lawsuit alleges AT&T was concerned about losing
call volume and implemented procedures that it knew wouldn't weed out
fraud.

For example, the Justice Department says, AT&T in 2009 followed up on the
FCC's new requirements by sending a postcard with a verification code to
IP Relay users' purported addresses.

AT&T managers recognized that the new system would drastically reduce the
volume of fraudulent calls, according to exchanges quoted in the
complaint.

"We are expecting a serious decline in [Internet relay] traffic because
fraud will go to zero (at least temporarily) and we haven't registered
nearly enough customers to pick up the slack," one manager of the relay
technical team said, according to the complaint, which doesn't specify how
the manager's message was delivered.

In response to the concerns, the Justice Department says, AT&T switched to
a less demanding registration process that simply involved asking users to
provide their mailing address. If the address matched a real U.S. address,
the users were registered, the complaint says.

The number of registered users soared after the switch, the Justice
Department alleged.

An email from an AT&T employee quoted in the complaint says 2010 was a
"great year" for the IP Relay service, with the total of 10 million
minutes of service in the year "a whopping +42%" over 2009 volumes.

"AT&T has followed the FCC's rules for providing IP Relay services for
disabled customers and for seeking reimbursement for those services," Mr.
Richter, the AT&T spokesman, said.

Write to Anton Troianovski at anton.troianovski@wsj.com and Brent Kendall
at brent.kendall@dowjones.com

A version of this article appeared Mar. 23, 2012, on page B1 in some U.S.
editions of The Wall Street Journal, with the headline: AT&T Tied to
Nigerian Scam.



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