Subject: Cell Phone Fraud Losses Triple in a Year
From: TELECOM Moderator <[email-masked]>
Date: Tue, 29 Jun 1993 23:38:16 -0500

In a one year period from 1991 through 1992, losses from cellular
phone fraud tripled from $100 million to $300 million nationwide
according to the Washington DC based Cellular Telecommunications
Industry Association.

Industry sources say Los Angeles cellular providers account for about
ten percent of the losses, which are passed on to consumers in higher
service costs.

Todd Young, an investigator for the Guidry Group, a Texas-based
organization which investigates cellular fraud for carriers all over
the United States said that Los Angeles is both the leader in cellular
fraud dollar volume and in the technology itself which makes the fraud
possible.  He said fraud techniques seem to begin in Los Angeles then
start showing up all over the country. 

Young oversees investigations for the western half of the US for the
Guidry Group. He said in 1992 there were only twelve arrests in the
entire USA for cellular fraud, but that due to 'improved techniques in
detecting fraud' arrests have increased to about four a month during
1993, and these are mostly in the Los Angeles area.

The two main cellular providers in Los Angeles, LA Cellular and PacTel
Cellular both refused to say what their losses were last year, claiming
this is proprietary information ... must be pretty high, huh?  :)
Someone at the Cellular Telecommunications Industry Association who 
would not be quoted on the record said the two firms lose about two
million dollars between them *each month* from calls made on stolen
numbers. There are methods for calculating approximate losses due to
fraud where LA Cellular and PacTel Cellular are concerned; it involves
looking at chargebacks between the companies and other cellular carriers
where alleged 'roamers' came from when in the LA service area. Other
cellular companies are willing to talk -- when they think it in their
best interest to do so -- even though PacTel and LA Cellular want to
keep quiet.

To make matters worse, an infamous court decision in November, 1992 by
US District Court Judge Wallace Tashima has caused a complete halt to
cellular phone fraud prosecutions by the Secret Service. the one
federal agency which had been charged with investigating that crime. 

According to Judge Tashima, ESNs are not the same as PINS or private 
access codes, which is what the Secret Service regulates ... therefore
he ruled the Secret service out of order in investigating cellular
fraud involving the changing of ESNs ...  how do you like that?  :)

The end result in Los Angeles?  According to Stan Belitz, the Secret
Service special agent-in-charge of financial crimes in southern Cal-
ifornia, the Secret Service is no longer investigating cellular phone
fraud. The United States Attorney's office in Los Angeles no longer
prosecutes cellular phone fraud cases either. 

"Why bother," said Mr. Belitz. "The judge in this district said
cellular fraud is not a violation of the law ..."  At present, the
Secret Service and the US Attorney in Los Angeles are considering
whether or not to appeal the ruling by Judge Tashima. 

Todd Young said this is not a helpful turn of events. His firm and the
cellular clients he serves are trying to get the federal government
involved in more prosecutions ... but they may not succeed unless Judge
Tashima is overruled on appeal. 

The majority of cellular fraud is made possible by the use of ESN
readers; devices which can pick up the serial number of a cellular
phone from almost two miles away. They are expensive devices, and
often cost about $5000, but apparently are well worth it to cellular
phone phreaks. Once an ESN has been obtained, the data is cloned on
blank computer chips. Stolen phones are then retrofitted with the
newsly-cloned chips, and in many cases, pirate manafacturers of cell
phones simply install the clone chips directly into new phones they
build in their factory.  About a year ago, a pirate factory where
illicit cellular phones were built was raided by the Secret Service.
As the phones were built, they were sold 'on the street' as 'ready
to use cellular phones; no carrier turn on required ...'

Of course this leads to the true -- and until this point unwitting --
customer of the cellular company getting a BIG bill a month or so
later, and typically roaming bills take a couple months to get back
to the home carrier, meaning pirated ESNs from Los Angeles get sold
in New York and vice-versa. Two or three months later, the owner of
the phone gets a shock when he sees the bill, and this is the first
notice the carrier had that something was wrong in many instances.

So phreaks, have phun!  Judge Tashima in Los Angeles Federal District
Court is on your side. 

Patrick Townson