DP Tool Club 19/CD_ASCQ_19_010295.iso/vrac/tc14_393.zip/TC14-393.TXT

Text File | 1994-10-16 | 28KB | 658 lines

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
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----------------------------------------------------------------------

From: Ed Ellers <[e-mail]>
Subject: Re: $50 Million in Quarters?
Date: Sat, 8 Oct 94 13:41:27 -0500
Organization: Delphi ([e-mail] email, 800-695-4005 voice)


TELECOM Digest Editor noted in response to A. Padgett Peterson
<padgett@
tccslr.dnet.mmc.com>:

> [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: [e-mail] (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:

[e-mail] (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 <[e-mail]> 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    [e-mail]

------------------------------

Date: Sat, 8 Oct 94 03:50:39 +0100
From: [e-mail]
Subject: Re: MCI Employee Charged in $50 Million Calling Card Fraud


In Telecom-Digest: Volume 14, Issue 390, [e-mail] (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 <[e-mail]>

------------------------------

Subject: Re: MCI Employee Charged in $50 Million Calling Card Fraud
From: [e-mail] (BARRY PRYDE)
Date: Sat, 08 Oct 94 08:13:00 -0400
Organization: London Telecom BBS - Hamilton, Ontario 905-570-8956
Reply-To: [e-mail] (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: [e-mail]

------------------------------

From: [e-mail] (J.F. Shumway)
Subject: Re: MCI Employee Charged in $50 Million Calling Card Fraud
Reply-To: [e-mail]
Organization: AT&T
Date: Sat, 8 Oct 1994 04:50:33 GMT


In article <[e-mail]>, Aaron Woolfson
<[e-mail]>
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:   [phone]    fax:   [phone]
email:   [e-mail]

------------------------------

Date: Sat, 8 Oct 1994 18:34:22 -0400
From: [e-mail] (Bob Goudreau)
Subject: Re: MCI Employee Charged in $50 Million Calling Card Fraud


Carl Moore <[e-mail]> 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
[e-mail]  62 Alexander Drive
[phone]   Research Triangle Park, NC  27709, USA

------------------------------

From: [e-mail] (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: [e-mail]


Aaron Woolfson ([e-mail]) 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.


 @FROM   :[e-mail]
· (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                         [e-mail]
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: [e-mail] (htc)
Date: 8 Oct 1994 14:50:30 -0700
Organization: Teleport - Portland's Public Access [phone]
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
[phone]
[phone] - fax

E_MAIL REPLY TO:    [e-mail]
-or-                [e-mail]

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.
[phone]           HTC-EWP License Agreement
[phone] - 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.


[e-mail]  Public Access User --- Not affiliated with
Teleport
Public Access UNIX and Internet at [phone] (2400-14400, N81)

------------------------------

From: [e-mail] (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
****************************