When the economy goes south, crime -- in particular theft of goods, theft of services, credit card scams and cyber-crime -- tends to go up.

What’s more, with Internet technology now in the mix, law enforcement is hard-pressed to keep up with rapid proliferation of increasingly sophisticated Web-based scams. These days, law enforcement agencies must work closely with technology companies, including Internet service providers, to solve these often-complex cases.

One of the more difficult scams to pull off is the theft of phone minutes from a service provider’s network. According to a report yesterday on DSLReports.com, four men from Texas who allegedly succeeded in doing that now face charges from the FBI.

According to the report, Michael Faulkner, Brian Haney, Nathan Shafer and Michael Bowden, all of Texas, were arrested by the FBI in March for stealing more than 120 million minutes of telephone service from AT&T and Verizon (News - Alert) and reselling those minutes to consumers.

Or that is to say, at least not paying for those services.

The FBI’s investigation focused on two Texas-based phone companies which the men ran: Premier Voice and Lone Star Power. According to the report, the men provided fraudulent credit information and “other false representations” to AT&T (News - Alert) and Verizon, enabling them to access telephone services from both companies, which they allegedly re-sold for a penny a minute over a nearly four-month period.

 

FBI investigators reportedly followed a twisted trail of dummy corporations, post office box addresses and bogus phone numbers in order to unravel the fraud. Last Thursday they raided two collocation facilities in Dallas, one of which was run by Core IP Networks, in order to access and retrieve call data. The building where the raid took place also houses data centers operated by Digital Realty Trust, Telx and Capstar Commercial Real Estate.

The raid reportedly disrupted business for around fifty companies, some of which were “offline” for days.

The FBI investigation reportedly began in January when fraud investigators from Verizon informed the FBI that they believed they had been the victims of a fraud in excess of $1 million. Verizon officials told FBI investigators that they believed AT&T had also been victimized by the same fraud for similar losses.

 

During a teleconference with FBI investigators, internal investigators with Verizon and AT&T explained that they believed a group of individuals working together had defrauded them of more than 120 million physical connectivity minutes valued at $6 million during a three to four month period, and that these individuals had charged their customers $.01 per minute, for a profit of $1.2 million

"All four of these individuals had numerous criminal charges associated with them, including [charges of] various frauds, interfering with law enforcement officials, violent crimes, and illegal possession of weapons," an FBI investigator wrote in a March 11 affidavit, as cited in another report on Computerworld. The official added that Premier Voice (aka Premiere VoIP) has been the subject of numerous complaints in online forums.

According to the DSLReports article, the FBI affidavit states that Faulkner was mostly responsible for orchestrating the scam. It states that he has been involved in the past in software piracy and also tried to pull off a similar scam against XO Communications (News - Alert) back in 2005 and 2006.

“Faulkner, who goes by the handle of ‘CygonX’ online, is well-known in VoIP scambuster circles,” the article states. “Google (News - Alert) quickly brings up example correspondence between an abrasive Faulkner and annoyed, unpaid companies from last June …”

Typically the theft of VoIP services is carried out by hacking into a service provider’s network and routing calls across its network backbone – not by falsifying information to gain access to a provider’s’ network. Such hacking scams are not entirely uncommon -- back in 2006 TMCnet reported on the arrest of Edwin Andres Pena, who allegedly stole more than 10 million minutes of VoIP service from 15 different VoIP providers.

 

According to a recent report published on Evangelyze Communications, Pena was finally arrested in Mexico in February after being on the run for nearly three years.

 

According to the report, Pena and his partner, Robert Moore, scanned VoIP providers’ networks to find open or poorly secured ports. Moore would deliver the information to Pena and Pena in turn used the information to sell the minutes.

 

“Pena's lucrative criminal enterprise netted him more than $1 million, enabling him to live a lavish lifestyle,” the report states. He “purchased real estate in Miami, a 40-foot Sea Ray Mercruiser boat, and a BMW M3 among other things with his ill-gotten gains.”

Pena reportedly faces up to 25 years in prison. The U.S. is currently trying to extradite him.

Such cases, although rare, underscore the importance of securing VoIP networks through continuous monitoring and by tracking the threats that are currently out there.