Sunday, May 31, 1998

Internet warnings bringing old telephone scam back to life

By KATIE FAIRBANK / AP Business Writer

DALLAS (AP) -- "Please beware. This sounds like an urban legend -- IT IS NOT!!!" screams an e-mail warning about an old and obscure telephone scam.

The warning, which requests the reader to pass on the information to friends and co-workers, has tripped its way across the country like a chain letter.

The e-mail has made its way into government and business computer systems such as those created for Texas state employees and military workers at the Naval Air Station, Joint Reserve Base in New Orleans. The scam also has been featured in one of Arkansas' Attorney General "Consumer Alert" fact sheets, while the National Consumers League has urged educational material about the swindle.

The trick also has turned up on e-mail and Web site lists of urban myths, even though it isn't one.

Here's how it works: a con artist calls a company and identifies himself as a telephone technician working to repair the line. The swindler will typically ask the customer to hit "9" then "0" followed by the pound sign, supposedly to allow a test to be run. Actually, it connects the con artist with an outside operator, allowing a long distance call to be billed to the business.

Although technology hasn't found a way to seal this loophole, the Internet warnings have both helped prevent the scam as well as spreading word of it to millions of people who have never heard about it.

"This is one of the oldest types of fraud," said Ruth Newell, a spokeswoman for AT&T. "What the scam artist is counting on is breaking into a telephone switch."

The fraud only works on business phones because multiple lines are necessary to make the connection.

"It's not going to work at home because you don't have the dial nine capacity," Ms. Newell said.

It also isn't a particularly successful dupe because it only works on older PBX telephone systems, said GTE spokesman Clovis McCalister.

"But the rumors have been around long enough that it keeps getting circulated," McCalister said.

Often, the e-mail warnings say the calls are originating from jails or prisons. But McCalister said GTE has found that part of the warning to be bogus.

"Prisons require prisoners to place calls collect," he said. "It really couldn't happen."

The Texas Public Utilities Commission has received only one complaint from a business duped with the "9-0-pound" scam, but they too have received e-mail warnings from concerned businesses and other state commissions.

Still, everyone is ready for the swindle.

"Businesses are alerting their staffs to be aware of this," said Texas PUC spokeswoman Katy Bohuslav.

Ms. Newell said there is not a resurgence in people being fleeced, just in people hearing about the scam through the widely circulating warning.

"The thing that stimulated the interest this time is because people are talking about it on the Internet. That's breathed new light onto a very old scam," she said.

Bill Palen, a spokesman for San Antonio-based SWB, said situations such as the Internet warnings are difficult. The warnings themselves are educational and that's good. But the more the scam is made public, the more likely there will be copycats.

Even so, the telephone companies say this swindle is minor compared to many telephone scams.

More prevalent scams include "shoulder surfing," where a thief lurks at a bank of pay phones and steals callers long-distance calling card codes, or "clip-on" fraud, in which a crook patches into a telephone lines and makes calls billed to that line.

The industry estimates that phone fraud totals about $4 billion year. The figures aren't broken down per scheme, so there's no way of knowing how much is bilked through the "9-0-pound" routine.

As for consumer complaints to the Federal Trade Commission and the Federal Communications Commission, most are against telephone companies themselves for "slamming" and "cramming."

Slamming is when a customer has their long distance service switched without permission or as a result of a deceptive sales pitch. Cramming is when charges are added to a customer's phone bill for services never ordered.

The "9-0-pound" scam is nothing compared to those, said Ms. Bohuslav.

"For those," she said, "we get complaint after complaint."

Some of the telephone scams reported to the FCC

Some telephone scams that have been reported to the Federal Communications Commission:

9-0-pound scam: A caller tricks someone at a business to hit "9" then "0" followed by the pound sign, supposedly to allow a test to be run but it actually connects the con artist to an outside operator, allowing a long distance call that gets billed to the business.

Pay phone ripoffs: Some older pay phones can be used to bill long-distance calls to that public phone if the caller knows a particular dialing sequence.

Clip-on fraud: Someone patches into another person's phone line and makes calls billed to that line.

Shoulder surfing: A person watches a customer punch in their long-distance calling card code, then either sells the code or uses it himself.

Slamming: When a customer's long distance service is switched without permission or as a result of a deceptive sales pitch.

Cramming: When a telephone company charges for services never ordered by the customer.