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Companies Using Computers, Other Tactics To Help Recoup Losses

April 21, 1987

WASHINGTON (AP) _ Telephone companies are using computers, amnesty programs and the law to recoup their losses from a half billion dollars in unpaid calls a year.

College students, computer-literate professionals, even enterprising prisoners are among the offenders who get into the phone network illegally with stolen authorization codes, electronic devices or other means.

″Everytime you find an answer for one area, another problem crops up. It’s a continual battle,″ said Neal Norman, district security manager for American Telephone & Telegraph Co.

Companies are changing the software as well as the hardware in their networks to try to block the calls, and they are offering amnesty programs on college campuses for students to fess up and pay up.

They also are working with federal authorities to prosecute call-sell operators who are using stolen authorization codes and electronic ″blue boxes″ to break into the network and sell calls to all parts of the world at drastically discounted prices.

″The whole telecommunications industry is very aggressively pursuing the people who are committing fraud. They’re going for restitution and jail sentences,″ said Rami Abuhamdeh, executive director of the industry-sponsored Communications Fraud Control Association.

Abuhamdeh estimates the industry loses about 1 percent, or about $500 million, to fraud annually, but he says ″it’s tough to assess losses because it’s a touchy topic with companies.″

College students are among the biggest offenders. Many know how to use computers to search phone company systems for active authorization codes and their campuses are hotbeds for large-scale theft because the codes are so easily passed around.

MCI Communications Corp. officials say they recently persuaded 1,000 students at North Texas State University in Denton, Texas, to turn themselves in and pay about $100,000 for the illegal calls they made.

At American University in Washington, D.C., 400 students turned themselves in and are being billed for about $25,000 so far, MCI spokesman John Houser said.

Other computer hackers include doctors, lawyers and housewives, but Abuhamdeh says the heaviest damage is in selling of the codes or posting of them on electronic billboards. The hackers themselves usually don’t make as many calls as other groups, including prisoners, he said.

″Prisoners have a lot of time on their hands and they’re very innovative. And unfortunately in a lot of places, they have access to phones continually,″ AT&T’s Norman said.

In one case, Norman said, a prisoner called a hospital, identified himself as a doctor and asked to be connected to another number in the hospital. When that number answered, he asked to be switched to the hospital operator, whom he asked to connect him to an outside line for a long-distance call.

Companies are using sophisticated computer technology to identify patterns of illegal calling, which are often traced to operations run by ″call sellers.″

″They make $2,000 a week selling calls, and that’s tax-free,″ said Martin Preede, a special agent for corporate security at New York Telephone Co. But he warned that phone companies and federal authorities are actively tracking down such operations and prosecuting.

Preede helped authorities gather evidence against Raphael Rodriguez, who was convicted by a U.S. District Court jury in Manhattan earlier this month for using unauthorized devices to break into the phone network.

His was the first such case to go to trial in Manhattan - all the others have plea-bargained down to suspended sentences - where he was sentenced to 20 months in jail and five years probation and was ordered to pay restitution of $20,000, said Assistant U.S. Attorney Carl Loewenson Jr.

″His operation was more sophisticated than most,″ Loewenson said. ″Most of the buyers usually have to go to the apartment of the seller to make the call, but he had three-way calling″ so buyers could talk from home.

Most of the calls he made were to the Dominican Republic, where for an hour-long call worth $85 he was charging $15, the prosecutor said.

Call sellers get their authorization codes from a variety of sources, including computer hackers, but also from people who simply watch callers punch their codes into telephones at airports and bus stations.

″They even use binoculars to read the numbers,″ Abuhamdeh said. ″They’re very skilled at reading numbers.″

US Sprint Communications Co., the third-largest long-distance company, has doubled the size of its fraud-detection staff to more than 100 since January and has improved its computer programs to watch for sudden increases in telephone use and trace the original caller.

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