Geoff@CSL.SRI.COM.UUCP (03/27/87)
By LEONARD BUDER, New York Times:
NEW YORK - In a federal attack on a crime made possible by the latest
technology, 18 New Yorkers were arrested Thursday on charges of using
illegally altered memory chips in their mobile telephones so they could
make calls without being charged for them.
Also arrested were seven others who, the authorities said, illegally
reprogrammed the chips and placed them in the mobile telephones. Such
telephones can be installed in vehicles or carried by individuals.
It was the first time anyone in the country had been arrested for this
kind of crime involving cellular telephones, said Thomas L. Sheer, the
assistant director of the Federal Bureau of Investigation who is in
charge of the New York office.
He said the problem of fraud in the cellular telephone industry had
grown significantly in the last six months and that Thursday's arrests
were the result of ''the first of a series of initiatives'' being
undertaken by the bureau and the Secret Service to counter fraud in
emerging technologies.
''Every new technology carries with it an opportunity to invent a new
crime,'' said Laurence A. Urgenson, the chief assistant U.S. attorney
for the Eastern District of New York.
The first commercial cellular mobile telephone service began late in
1983. According to the Cellular Telecommunications Industry
Association, there were nearly 682,000 customers of such phone services
at the end of last year.
Sheer said the government was making ''aggressive use'' of a federal
statute dealing with ''Fraud in Connection with Access Devices,'' that
was originally intended to combat credit card fraud but is now being
interpreted to cover frauds involving all computer-based or
computer-assisted systems.
Thursday's arrests, which started at 6 a.m. and took place at homes
and places of employment, mostly in Brooklyn, was carried out by 70 FBI
and Secret Service agents.
The 18 people who had the illegally altered chips installed ''awoke
this morning to find that their cellular telephones had been
disconnected'' electronically, Sheer said at a news conference held at
the bureau office at 26 Federal Plaza in lower Manhattan.
''They're going to get one phone call today,'' the FBI official added
- referring to the call a person is permitted to make after being
arrested - ''but it's not going through from a cellular telephone.''
The officials said the arrests followed a six-month investigation that
involved the use of a confidential informer who installed the chip and
federal agents working under cover. The authorities acknowledged the
cooperation of the Nynex Mobile Communications Co. in the
investigation. Sheer said the investigation was assisted by ''recent
technological advances in computerized telephone-switching equipment
and billing systems.''
Sheer said that the fraud, which was not the product of an organized
conspiracy, cost local mobile telephone companies about $40,000 a month
and that nationwide, carriers of cellular services were losing about $3
million a year because of frauds.
The authorities gave no details about the alteration of the chips.
Among the cellular telephone users who were arrested were a plumber, a
hair stylist, a gasoline station owner, a physician, a student and a
diamond merchant, as well as several business executives. Most lived or
worked in Brooklyn, but they did not know each other, the authorities
said.
Andrew J. Maloney, the U.S. attorney for the Eastern District, said in
a statement that the cases against those arrested would be presented to
a federal grand jury in Brooklyn. The most serious charge that could be
brought against each carries a maximum term of 10 years in prison and a
possible fine of $250,000.
Sheer said the installers usually charged $500 to reprogram and
install two memory chips in a cellular phone. The chips, in their
unaltered state, are sold in computer equipment stores at a price of
two for 89 cents, an FBI agent said.
According to the federal authorities, each cellular mobile telephone
has a memory chip containing a mobile identification number, or M.I.N.,
and another containing an electronic serial number, or E.S.N. When a
mobile telephone call is made, the two numbers are automatically
transmitted to the mobile carrier.
The mobile carriers make a computer check of the E.S.N. to see if it
is valid. If it is, the call goes through and the cost is billed to the
billing number provided by the M.I.N. chip.
By using illegally reprogrammed chips, the federal complaint said,
other people were billed for calls made by those participating in the
fraud.
Those arrested were arraigned in U.S. District Court in Brooklyn and
released in their own recognizance.