TELECOM Digest Sun, 9 Oct 94 11:45:00 CDT Volume 14 : Issue 393 Inside This Issue: Editor: Patrick A. Townson Re: $50 Million in Quarters? (Ed Ellers) Did MCI Really Lose $50M? (Mike King) Re: MCI Employee Charged in $50 Million Calling Card Fraud (Haakon Styri) Re: MCI Employee Charged in $50 Million Calling Card Fraud (Barry Pryde) Re: MCI Employee Charged in $50 Million Calling Card Fraud (J.F. Shumway) Re: MCI Employee Charged in $50 Million Calling Card Fraud (Bob Goudreau) Re: MCI Employee Charged in $50 Million Calling Card Fraud (Dave O'Shea) Electronic White-Pages (EWP/DA) Directory Assistance Software (htcink) New Abyss Bankruptcy Plan (For Those With a Morbid Interest) (James Haynes) TELECOM Digest is an electronic journal devoted mostly but not exclusively to telecommunications topics. It is circulated anywhere there is email, in addition to various telecom forums on a variety of public service systems and networks including Compuserve and America On Line. It is also gatewayed to Usenet where it appears as the moderated newsgroup 'comp.dcom.telecom'. Subscriptions are available at no charge to qualified organizations and individual readers. Write and tell us how you qualify: * telecom-request@eecs.nwu.edu * The Digest is edited, published and compilation-copyrighted by Patrick Townson of Skokie, Illinois USA. You can reach us by postal mail, fax or phone at: 9457-D Niles Center Road Skokie, IL USA 60076 Phone: 708-329-0571 Fax: 708-329-0572 ** Article submission address only: telecom@eecs.nwu.edu ** Our archives are located at lcs.mit.edu and are available by using anonymous ftp. The archives can also be accessed using our email information service. 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Any organizations listed are for identification purposes only and messages should not be considered any official expression by the organization. ---------------------------------------------------------------------- From: Ed Ellers Subject: Re: $50 Million in Quarters? Date: Sat, 8 Oct 94 13:41:27 -0500 Organization: Delphi (info@delphi.com email, 800-695-4005 voice) TELECOM Digest Editor noted in response to A. Padgett Peterson : > [TELECOM Digest Editor's Note: Padgett, what I do not understand and > believe to be wrong about the court rulings you cite is the apparent > conflict with federal regulations pertaining to fraud and misuse of > credit cards generally. To the extent that telephone calling cards are > credit cards -- and they are intended to allow you to pay 'later' -- > how can the user be held responsible for more than some minimal > amount -- usually fifty dollars -- in damages? Federal regulations > pertaining to credit cards are quite clear that the card holder will > not suffer as a result of fraud when the cardholder had nothing to > do with it. PAT] My understanding is that the FTC has already ruled that these calling cards are "credit cards" under Federal law, meaning (among other things) that carriers can't just send out cards to customers without an actual request for them. ------------------------------ From: mk@TFS.COM (Mike King) Subject: Did MCI Really Lose $50M? Date: Sat, 8 Oct 1994 22:43:28 PDT In TELECOM Digest V14 #390, there was discussion as to how much money MCI might have lost as a result of the Calling Card Fraud perpetuated by one of its employees. Discussions about this amount included: awoolfso@uop.edu (Aaron Woolfson) wrote: > Does anyone know that the telephone network is ALWAYS transmitting to > it's maximum capacity, regardless of the information placed over it? [...] > 3) Perhaps if the calls were being terminated to locations where > MCI is using WilTel's or AT&T's facilities, there may be some > nominal termination charges. > Although I am not suggesting that it is not a big deal what happened, > I just don't see how MCI can be running around and crying that they > are losing all this money, when THEY REALLY AREN'T! They are just > not collecting nearly as much revenue as before. Will Martin wrote: > I venture to say that the actual amount stolen for a call billed at $10 > is actually only a few mills' worth of electricity that MCI paid on > its various utility bills at the sites through which the call traveled. There IS one factor that hasn't been mentioned yet: transport fees to the LECs. For each minute of connection, there's a meter running at both ends of the connection. This is real money that MCI must pay to the LECs, whether the calls were phraudulent or not. I'm not up-to-date on the costs for interconnection, but I remember seeing figures of 3-4 cents a minute. Double that, and multiply by the total number of minutes of connection, and there's a real cost to MCI. Mike King mk@tfs.com ------------------------------ Date: Sat, 8 Oct 94 03:50:39 +0100 From: styri@balder.nta.no Subject: Re: MCI Employee Charged in $50 Million Calling Card Fraud In Telecom-Digest: Volume 14, Issue 390, awoolfso@uop.edu (Aaron Woolfson) writes: > 2) If a circuit logs 10 or 10,000 minutes of billable time, > MCI is paying the same amount anyway. > 3) Perhaps if the calls were being terminated to locations where > MCI is using WilTel's or AT&T's facilities, there may be some > nominal termination charges. If the amount of "free" calls increase to the extent that the operator must add a new circuit I'm afraid your statement is wrong. The news reports say that card numbers have been distributed in Europe, naming at least Germany and Spain. At present it's very likely that any US operator will have to pay for this kind of calls that originates in Europe. For calls terminating outside the US the same situation will occur. (Or, to make my comment really short: There are a few other operators out there.) I'm afraid that the "we're just using surplus capacity anyway" argument isn't any good. Correct me if I'm wrong, but I believe I read something about one or two US operators increasing the price of calling card calls due to an increased level of fraud earlier this year. (I think it was in Telecom Digest, but I may be wrong about that.) To me that sounds like somebody's losing real money. It may of course be the world-wide telco conspiracy. Haakon Styri ------------------------------ Subject: Re: MCI Employee Charged in $50 Million Calling Card Fraud From: barry.pryde@ltn.com (BARRY PRYDE) Date: Sat, 08 Oct 94 08:13:00 -0400 Organization: London Telecom BBS - Hamilton, Ontario 905-570-8956 Reply-To: barry.pryde@ltn.com (BARRY PRYDE) > MCI has FIXED costs for leasing the T1's between the POPs. If a > circuit logs 10 or 10,000 minutes of billable time, MCI is paying the > same amount anyway. You are right it is a fixed cost but the problem is when T1's become full then you're customers get mad. This forces you to install more facilities. If you could get rid of all the fraud from the existing facilities then you would have more connections available for your paying customers. So i guess we can call INDIRECT cost of fraud. I would think they are thinking FACILITIES and not MINUTES. Barry Pryde MIS: London Telecom Network SYSOP: London Telecom BBS E-Mail: barry.pryde@ltn.com ------------------------------ From: phread@trojan.nw.att.com (J.F. Shumway) Subject: Re: MCI Employee Charged in $50 Million Calling Card Fraud Reply-To: j.f.shumway@att.com Organization: AT&T Date: Sat, 8 Oct 1994 04:50:33 GMT In article , Aaron Woolfson wrote: > WAS that really $50,000,000 lost or was it just $50,000,000. not > collected? It somehow just doesn't seem the same as someone getting > on to some scheme to actually steal money. >1) MCI has FIXED costs for leasing the T1's between the POPs. >2) If a circuit logs 10 or 10,000 minutes of billable time, > MCI is paying the same amount anyway. >3) Perhaps if the calls were being terminated to locations where > MCI is using WilTel's or AT&T's facilities, there may be some > nominal termination charges. > Although I am not suggesting that it is not a big deal what happened, > I just don't see how MCI can be running around and crying that they > are losing all this money, when THEY REALLY AREN'T! They are just > not collecting nearly as much revenue as before. The IECs like MCI pay very significant sums as access charges to LECs like Southern Bell for terminating calls through their local network. Presumably some portion of the calls fraudulently billed to these cards did terminate in a LECs network. I seem to recall from AT&T's annual report that something like 1/3 of the revenue collected from long distance consumer billings was returned to the LECs as access charges. This is big bucks that leaves the books of the defrauded carrier and not just an operating inefficiency due to underutilizing fixed cost timeslots. But don't get me wrong I wouldn't be the least bit suprised if MCI and the SS estimated these revenue loses very liberally to fan the flames of public outrage and encourage the notion that nothing short of public executions (and increased funding for law enforcement) will temper the wicked designs of the wily hacker. It would be interesting to know just how this loss figure was estimated. It certainly wasn't from contested billings as the IECs are only now contacting effected customers. Jesse Fred Shumway post: AT&T, 2600 Warrenville Rd., Lisle, IL, 60532 voice: (708) 224-7880 fax: (708) 224-6764 email: j.f.shumway@att.com ------------------------------ Date: Sat, 8 Oct 1994 18:34:22 -0400 From: goudreau@dg-rtp.dg.com (Bob Goudreau) Subject: Re: MCI Employee Charged in $50 Million Calling Card Fraud Carl Moore asks: > Cary, NC? That's in the Raleigh-Durham area, quite far from > Charlotte. Earlier article from you said he was employed in the > Charlotte switching center. Our Moderator responds: > [TELECOM Digest Editor's Note: The version I got referred to Charlotte. > My source was the {Los Angeles Times} and a couple other places where > raids took place last week. Now I believe the {Chicago Tribune} account > which was used in the Computer Underground Digest placed it in Cary, > as did the report in the papers in New York. PAT] As a Cary resident, I'll add my two cents as well: From the reports I've read, the employee is alleged to have started his fraud scheme while working in Charlotte (which is indeed a good couple of hundred miles west of Cary). Later, he transferred to MCI's new operations center in Cary, which was built and opened only recently. The accused himself is currently a resident of Haw River, an unincorporated community near Burlington (east of Greensboro). Bob Goudreau Data General Corporation goudreau@dg-rtp.dg.com 62 Alexander Drive +1 919 248 6231 Research Triangle Park, NC 27709, USA ------------------------------ From: dos@spam.wdns.wiltel.com (Dave O'Shea) Subject: Re: MCI Employee Charged in $50 Million Calling Card Fraud Date: 8 Oct 1994 22:37:55 GMT Organization: WilTel Reply-To: dave_oshea@wiltel.com Aaron Woolfson (awoolfso@uop.edu) wrote: > Well ... I sit here looking over an inter-exchange carrier switching > system at our carrier and am thinking to myself: > WAS that really $50,000,000 lost or was it just $50,000,000. not > collected? It somehow just doesn't seem the same as someone getting > on to some scheme to actually steal money. Depends how you count it. But you can be pretty certain it added to the company's costs without increasing their revenues. > Does anyone know that the telephone network is ALWAYS transmitting to > it's maximum capacity, regardless of the information placed over it? No, I didn't know that. And while I don't work for WilTel's long distance unit, I suspect they don't know that, either. > T1's are hooked up between locations and all the data is placed over > those facilities in the form of 0's or 1's. If there are 1's and the > A&B bits over the T1 show that there is traffic there, then a circuit > gets billed. That's how simple it really is. You're leaving out a number of things here: 1. IXC's (Long distance carriers) have to pay for the usage of local loops -- by the minute. These charges make up a significant part of what they bill back for long distance usage. The fact that a call was made fraudulently doesn't mean that NYNEX or whoever isn't still going to be looking for usage charges. 2. All those T1s and such cost money. T1 channels occupied by non-revenue calls mean that they aren't available for paying customers. Ditto for expensive switch ports and monitoring equipment. 3. The equipment used by thieves still has to be maintained and upgraded. The costs are absorbed by stockholders, employees, and paying customers in the form of lower profits, more work, and higher LD costs. > I know that I will probably get a lot of heat from people within the > telephone industry and especially the companies who we build fraud > detection devices for just for saying this. But I just do not see how > it can possibly really be hurting MCI. If you have long distance service, it's hurting *you*. YOU are paying for all that local loop time. YOU are paying for extra capacity. YOU are paying for the call-fraud systems. > 1) MCI has FIXED costs for leasing the T1's between the POPs. Even if this is true, it does not take into account switched facilities and the cost, again, of adding T1s just for use by thieves. If 5% of a transmission network is used fraudulently, that capacity is not available to the legitimate users. Busy signals or higher costs are your options. > 2) If a circuit logs 10 or 10,000 minutes of billable time, > MCI is paying the same amount anyway. Again, you're thinking just of feeding data into a DS0 on a channel bank and pulling it out at the other end. You're not taking into account any of the other costs. You probably only use your car for, say, an hour a day. Would you have any objection to other people borrowing it -- without your permission - - for the other 23 hours? "But," you say, "Who's going to pay for the gas? And what if they crash and my insurance rates go up? And suppose I need the car while they're using it!" Well, you'll just have to buy a spare car. How about your house? Just mail me a copy of the keys, and I'll even promise to clean up after myself in the kitchen. I like steaks, so make sure there are plenty in the freezer, eh? And if I'm watching "Cops" when you want to watch "L.A. Law", you'll just have to wait. And while you're at it, could you create a "guest" account on your computer and give it an unlimited disk and CPU quota? > 3) Perhaps if the calls were being terminated to locations where > MCI is using WilTel's or AT&T's facilities, there may be some > nominal termination charges. Unless you're willing to cough up those "nominal" charges out of the goodness of your heart, you really don't have any say in how MCI spends it's money. > Although I am not suggesting that it is not a big deal what happened, > I just don't see how MCI can be running around and crying that they > are losing all this money, when THEY REALLY AREN'T! They are just > not collecting nearly as much revenue as before. ÿ@FROM :telecom@delta.eecs.nwu.edu úÿ(Continued from last message) Well, great! I'm going to be taking 5% of your paychecks in the future, okay? It won't be like I'm really stealing money from you, you simply won't get as much as you did before. Dave O'Shea dave_oshea@wiltel.com Sr. Network Engineer 201.236.3730 WilTel Data Network Services Did I say I'm a WilTel spokesman? [TELECOM Digest Editor's Note: Yours is probably the best rebuttal I have received to date to the original commentary by Aaron. A lot of folks who accept the sort of fraud that the accused is said to have pulled on MCI do so in a very casual, uncaring, or disinterested third- person sort of way. It is hard for many people to feel much sympathy when the victim of a crime is a huge monolithic entity like AT&T or MCI. There has to be some actual person they can point to before they are willing to accept the seriousness of the crime. Now, when you put it to them as you did, i.e. 'suppose I borrow your car without your permission for 23 hours per day since you are not using it anyway', or 'suppose I open an account on your personal computer without your knowledge or approval' ... then listen to them squeal like a bunch of pigs on their way to market. Does anyone remember the cartoon which appeared in {Playboy Magazine} a few years ago showing the little kid sitting in front of his computer -- screen totally blank -- with a very mystified and angry look on his face? His mother and father are standing there and one says to the other, "during the night a huge corporation broke in and erased all his files and reformatted his disk." Turn-about, you see, is not fair play where hackerphreaks are concerned. Their supporters and bosum-buddies at the EFF and similar organizations will give you the bull jive about how we are simply dealing with 'excess capacity not being used'; but they neglect to point out whose excess capacity they are stealing, and what gives them the right to be there in the first place. In summary Dave, very good response. Thanks for writing. PAT] ------------------------------ From: htcink@teleport.com (htc) Date: 8 Oct 1994 14:50:30 -0700 Organization: Teleport - Portland's Public Access (503) 220-1016 Subject: Electronic White-Pages (EWP/DA) Directory Assistance Software Dear Internet user, My company has developed an Electronic White-Pages software product for use under DOS named "HTC-EWP." HTC-EWP interfaces with the LEC (Local Exchange Carrier/RBOC) EWP system via pull- down menus. By utilizing EWP, companies can reduce their EWP/DA cost-per-lookup significantly while they increase their productivity. HTC-EWP has been tested successfully with USA LEC/RBOC EWP systems including PacBell, USWest, BellSouth ... HTC-EWP will execute under Windows. The RBOCs charge a one-time account set-up fee and a fee of up to about $.15 per search screen. I am pleased to offer HTC-EWP software run-time and source code (including libraries and all header files) for a flat fee of $5000.00 (five thousand dollars USA.) This source code can be compiled and linked using Microsoft 'C' or Quick 'C'. The end- user must agree not to resell or distribute any of HTC-EWP source code -- Executable files may be distributed organization-wide. THIS OFFER IS MADE TO USA COMPANIES AND ORGANIZATIONS THROUGH THE END OF OCTOBER, 1994, AND MAY BE WITHDRAWN AT ANY TIME WITHOUT NOTICE. Companies that wish to test a sample copy of the run-time HTC- EWP before the purchase the source code, can order one run-time copy (with manual) for $250.00 USA from the address listed below. This fee will be refunded upon the purchase of the HTC-EWP source code package. Payments shall be accepted through October 31, 1994. HTC, Inc. 19625 NW Melrose Dr. Portland, OR 97229 (503)690-8391 (503)645-3566 - fax E_MAIL REPLY TO: 6994868@mcimail.com -or- htcink@teleport.com Please fill-in the blanks of the following contract, and fax back to HTC to expedite your order. ------------------------------------- HTC, Inc. 19625 NW Melrose Portland, OR 97229 HTC, Inc. (503)690-8391 HTC-EWP License Agreement (503)645-3566 - Fax This agreement is made and entered into as of this __ day of October, 1994 by and between HTC, Inc. (hereinafter called "HTC"), and __________________ (hereinafter called "Customer") HTC agrees to provide "HTC-EWP" source code, Header files, and libraries (hereinafter called "Software") required to allow the customer to re-compile or re-link an executable copy of the HTC- EWP software system. Customer agrees to pay HTC, Inc. the amount of $5000.00 (five thousand dollars) for the Software. Customer agrees not to distribute or allow the distribution of the Software or parts of the Software outside of Customer's business or organization, without first obtaining HTC's express written permission. This agreement shall be interpreted, construed, and enforced in all respects in accordance with the laws of the State of Oregon without reference to its principles of conflicts of law. In the event that any provision of this contract conflicts with the law under which this agreement is to be construed or if any such provision is held invalid by a court with jurisdiction over the parties of this agreement, such provisions shall be deemed to be restated to reflect as nearly as possible the original intentions of the parties in accordance with applicable law, and the remained of this Agreement shall remain in full force in effect. In witness whereof, the parties have executed this Agreement as of the date first written above. _______________________ ____________________________ (company) HTC, Inc. _______________________ ____________________________ (Sign - Company Officer) C. Walworth, Pres HTC, Inc. _______________________ ____________________________ Date Date ----------------------------------------------------------------- Company officer must sign, and return via fax to HTC, Inc. htcink@teleport.COM Public Access User --- Not affiliated with Teleport Public Access UNIX and Internet at (503) 220-1016 (2400-14400, N81) ------------------------------ From: haynes@cats.ucsc.edu (James H. Haynes) Subject: New Abyss Bankruptcy Plan (For Those With a Morbid Interest) Date: 8 Oct 1994 07:30:12 GMT Organization: University of California, Santa Cruz I received a thick packet in the mail today from New Valley Corp. concerning the proposed bankruptcy settlement and sale of Western Union Financial Services to First Financial. There's a two-page letter from New Valley Corp. announcing and supporting the plan. There's a two-page letter from the "statutory committee of unsecured creditors" also supporting the plan. This committee consists of seven members representing the creditors. There's a one-page letter from the "statutory committee of senior secured noteholders" also supporting the plan. And there's a 5-page letter from the "official committee of equity holders" recommending rejection of the plan. Their points are: (1) the company is worth more than has been offered, by at least $150 million. (2) The plan unfairly favors creditors, paying some disputed claims, paying interest on interest, and leaving the part not sold to First Financial under the control of Bennett LeBow. (3) The plan leaves New Valley without enough income to pay its expenses. (4) The plan penalizes holders of certain shares who vote against it. (5) Approval of the joint plan may result in the termination of pension plans. (6) The joint plan eliminates a lawsuit against LeBow and other insiders. (7) The committee thinks it has a better plan. "The holders of common stock and certain other securities will receive no distribution ... and are therefore deemed to have rejected the Joint Plan wihtout the need for a solicitation of their votes." Some other things: "New Valley was organized under the laws of the State of New York in 1851" [Of course that wasn't its name then.] ..."conducts its operations through its wholly owned subsidiary, FSI, which provides a variety of financial and messaging services." ...has approx. 18,000 agents in the U.S. and another 6,000 in the rest of the world. Agents operate under exclusive contracts with FSI to provide Western Union services... Approx. 1800 full-time employees of FSI receive 44 million incoming telephone calls process 40 million money transfers, move $7.8 billion in 1993. A new division Western Union Information Services formed in December 1993 to manage the service centers (in Bridgeton, MO, Reno, NV, and Dallas, TX) and computer facilities. Following asset acquisition [if the deal goes through] the business of the reorganized company will consists of the messaging services business, including Mailgram, Telgram, Priority Letter, Hotline, Automated Voice Telegram, Commercial Telegram, Custom Letter, Cablegram and Opiniongram. It will license the Western Union name from First Financial. goes on to describe all the money transfer services and then all the messaging services. an excerpt: "Automated Voice Telegram (AVT) is a service through which telephone operators verify recipient names, addresses and telephone numbers and deliver high- impact messages for credit-and-collection and direct-marketing applications." So the next telemarketing call you get might be under the Western Union banner. Then there's a lot of history of the bankruptcy case. Then a bunch of details of the plan and its financial and tax consequences. Then a description of New Valley after the deal goes through. As noted above New Valley keeps the message part of the business, licenses the Western Union name, and there are other details between the two companies so that business keeps going. First Financial may contract to take over the marketing of services for the Message Company. The reorganized New Valley will have about 130 full time employees, which will be reduced to 90 if First Financial takes over marketing. Threatens that if the plan is not approved the company may be liquidated under Chapter 7. In any case the revenues from messaging services are expected to continue declining. Then a bunch of financialese and legalese, and finally ballots for the owners of preferred stock to vote to accept or reject the plan. The hearing on confirmation of the plan will take place Nov. 1. ------------------------------ End of TELECOM Digest V14 #393 ****************************