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Cellular Business

August 1996

Uncovering Unsavory Customers

By Roseanne DeMaria and Albert Gidari

Do we really know our customers? In the fraud arena, how we answer that questions will determine the effectiveness of our fraud management plan. The place to start with this inquiry is to determine who the customer is. In the fraud-related section of our business, we have three customers, each of whom has a different need. First, we have our subscriber, who pays for our service and seeks seamless, quality communications at a reasonable price. Second, we have our law enforcement customer, who seeks timely and complete subpoena and court order compliance, largely for free. Third, we have our criminal customer, who seeks anonymous service at any price.

Although the criminal’s service is free, the criminal purchases a new phone on a monthly basis every 30 days. Prices, depending on location and availability, range from $75 to $150. The anonymity that the cloned phone affords to the criminal customer is apparently worth this monthly access charge. Notably, one of the above three customers is a paying customer.

Each of these customers has unique product needs, which, in many ways, area interdependent. The subscriber’s need is naturally affected by the intrusion of the criminal customer’s quantitative usage. This threatens the capacity of the cellular system and intrudes on seamless roaming by roaming outbreaks, causing carriers to pull their exchanges. The law enforcement customer is the natural intervener to catch this criminal, but he or she, of course, already has a sizeable case load that is generating a host of subpoenas and court orders with which we must comply. The resulting interdependent tensions create confusion. Consequently, it is critical that your fraud management plan conveys a clear message of your fraud mission to each of these customers.

Despite the interdependency of these three customers, the message to each must be distinct. Quite simply:
  • To our law subscribers – We are aggressively and relentlessly battling the cellular fraudster to protect your property and privacy rights. We will continue to do so. We will arm you with the necessary knowledge and tools to protect yourself.
  • To our law enforcement customers – We are aggressively and relentlessly battling the cellular fraudster. We will continue to do so. We will assist you with education, subpoena compliance, technology and legislative initiatives.
  • To our criminal customers – We know what you are doing, who you are doing it with and where you are doing it. We will stop you.
These messages must be genuine. Our execution of these messages will directly influence the growth or reduction of these customer categories in our markets. The criminal customer, of course, presents the greatest challenge.

To meet this challenge, we must understand the criminal customer. What does this customer want from us? Traditionally, we would conduct a direct marketing survey to answer this question. To whom would we mail the survey? What is his or her name? We do not know. Where do we mail the survey? What is the address? We do not know. What does this customer do for a living? We do not know. What is his or her annual income? We do not know.

(The criminal) customer is exceedingly loyal; churn is not an issue. The criminal customer’s resiliency, as demonstrated by fraud migration and its related roaming fraud eruptions, evidences this customer’s status as an industrywide national account.

This customer likes it that way. If we cannot answer the who-what-where trilogy, then neither can anyone else. Most importantly, however, law enforcement cannot answer these questions, and anonymity is completely ensured. The direct marketing survey obviously will not work with this customer. Focus groups are an equally empty tool for the same reason.

Despite our lack of insight into the demographics of this customer, we have been extremely successful with the market penetration of the criminal customer. Our present industrywide marketing campaign is both successful and cost-free. This customer is exceedingly loyal: churn is not an issue. The criminal customer’s resiliency, as demonstrated by fraud migration and its related roaming fraud eruptions, evidences this customer’s status as an industrywide national account. Industry fraud loss growth figures that threaten to rival industry revenue growth figures underscore the fact that we are giving this national account customer exactly what he or she wants without the benefit of our traditional marketing and customer care tools.

The customer attributes described in the above paragraph, if they were true about our subscriber customers, would be sensational news for our business. The criminal customer, however, turns all these values around. As such, this customer requires a re-engineering of our normal business approach to solving customer-related problems. We do not want to provide quality service to the criminal customer. We do not want to provide quality service to the criminal customer. We do not want to provide anonymous service to the criminal customer. We want to encourage churn for this customer. We do not want to ensure privacy for the criminal customer. In short, we must re-engineer our entire customer care value system when we deal with our criminal customer. Are your customer care skills ready for the criminal customer?

There are a number of ways to address the criminal customer. The most direct method is through the law enforcement customer. The carrier’s support of high profile cases that include cloning should be open and notorious – on the stand at the criminal trial, on the record at the sentencing hearing and in the media. When cellular tracking techniques are used pursuant to the requisite court orders in these cases, carriers should emphasize that fact. This unequivocally tells the criminal, “You are not anonymous. We have found you!” These messages will travel through the criminal grapevine with remarkable speed.

It is important to remember that the Federal Victims and Protection Act, 18 U.S.C.§3664 et seq., already has been used to obtain restitution for carriers in the amount that would have been billed for the service obtained through the use of a cloned phone. (See: United States vs. Ahmed, 2F.3d245, 7th Cir. 1993.) Restitution is obtained through a process designed to ensure that victims receive full compensation for their losses without the burden of protracted proceedings or the need to pursue civil remedies separately.

The carrier’s support of high profile cases that include cloning should be open and notorious … This unequivocally tells the criminal, “You are not anonymous. We have found you!”

Fortuitously, in the typical cellular fraud criminal case, the carrier usually gathers the fraud loss information well before trial. Restitution is a mandatory component of any federal sentencing hearing. In order for this law to apply, the federal cellular fraud crime (18 U.S.C. §1029) must be charged, and it must be one of the bases for conviction. (Be sure the prosecutor includes the entire usage period in the indictment because we can obtain only restitution for the period of cloning charged.)

State laws also have restitution provisions. Restitution is a very clear way to address the criminal customer – through the pocketbook. Once restitution is awarded, carriers should pursue collection remedies aggressively to underscore their message. Last year, AT&T Wireless Services was awarded $1 million in restitution in the infamous Azzan Johnson Florida cloner case. It can be done. It must be done if we expect to “market” to the criminal customer. It should be done industrywide to enhance the impact.

Although there have been a number of high-profile cellular fraud cases, they are not voluminous. There is a practical reason for this: Law enforcement has limited resources and unlimited criminal targets. We cannot realistically expect murders, kidnappings and narcotics trafficking to be thrown by the wayside for cellular fraud prosecutions. There are, however, both federal and state laws enabling the appointment of a special prosecutor to assist the elected or appointed official when the public interest so requires. The special prosecutor’s conduct would be subject to executive oversight by the public official. Although this is available, it is admittedly rare. But when the fraud losses rise to the point that service providers and subscribers need assistance, the special prosecutor should be considered and explored with the law enforcement.

When the fraud is caught early and the losses are low, consider pursuing small claims court proceedings. Small claims proceedings are especially effective for the cellular fraud thief who is an otherwise law-abiding citizen.

Of course, a carrier does not need a prosecutor, special or otherwise, to pursue civil remedies. When the fraud is caught early and the losses are low, consider pursuing small claims court proceedings. They are inexpensive, quick and generally do not require a lawyer, so your fraud manager becomes the prosecutor. Small claims proceedings are especially effective for the cellular fraud thief who is an otherwise law-abiding citizen – the casual clone user.

For large losses, state and federal courts are available for standard tort or quasi-contractual restitutionary damages. Bell Atlantic-NYNEX Mobile did precisely that recently in its Maryland suit for $130,965, plus interest, against two cellular thieves. (See: Cellco Partnership d/b/a Bell Atlantic-NYNEX Mobile vs. Edward Harrison and Steven T. Baldwin, Civil Action No. MJG 96-549.) Restitution, when there is a criminal proceeding, probably is the preferred course, but if there is no criminal case pending, or restitution was not complete or available, civil remedies can be effective.

The most available and powerful tool to market to the criminal customer is the so-called “common carrier” exception, which is the federal law codified at 18 U.S.C. §2511 (2)(a)(i). This federal law allows carriers to intercept, disclose, or use wire or electronic communications to protect their rights or property or to ensure system integrity and the continued rendition of services tot heir subscribers. In summary, it is a legal self-defense mechanism. How can we use this statutory tool? Our fraud detection tools are the best place to begin.

Our industry usage profilers enable us to identify entire communities of cloned phones. Our technology allows us to give our customers another line while corralling the cloners. This statute allows us to do a number of things to the corralled criminal customer. Tactics can include the following:
  • Taping incriminating conversations and providing them to law enforcement, or playing them back to the criminal.
  • Identifying the fraudster’s location and providing it to the authorities.
  • Playing a recording to all cloned users indicating that they are illegally using your service and that their location and calls are being recorded for disclosure to the authorities.
  • Providing the criminal customer with purposefully horrible service.
These tactics, once refined, focused and closely supervised by counsel, send a profound message to the criminal customer that resoundingly debunks the anonymity myth.

The criminal customer, like it or not, is in our customer base. We do not want this customer. We do not have to keep him or her as our customer. We can get rid of this customer. We simply have to re-engineer our “criminal” customer care skills.


DeMaria is vice president of business for AT&T Wireless Services, Kirkland, WA. Gidari is a partner with Perkins Coie, Seattle. His practice includes compliance and preventive law, fraud and risk management, and telecommunications and litigation.
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