Feds Sue AT&T for Aiding and Abetting Nigerian Scammers

| Fri Mar. 23, 2012 1:30 PM EDT

From the National Law Journal:

AT&T Corp. is accused of wrongly collecting millions of dollars from a government fund intended to bankroll telephone service for hearing and speech-impaired people, but was instead overwhelmingly used by Nigerian scammers, the Department of Justice alleged in a False Claims Act suit announced March 22.

Say what? Did AT&T get scammed itself? If DOJ — and the whistleblower who exposed AT&T's involvement — are to be believed, no. They were making lots of money from a program that was designed to help the hearing-impaired make phone calls by typing text that was then relayed as voice communication by an AT&T operator. But it turns out that because the service is anonymous, it became a favorite for Nigerian scammers too. What's more, AT&T knew it:

On April 6, 2010, an AT&T Inc. manager pondered a drop in volume in the company's government-subsidized service for hearing-impaired callers. Reassuring a colleague in an email, the manager said she was "not ready to throw up flags" because "it was Easter Monday yesterday, which is celebrated in Nigeria."

....The government alleges that scammers operating out of Nigeria used the service to defraud U.S. merchants by ordering goods with stolen credit cards and counterfeit checks. In essence, the government alleges, AT&T's operators became mouthpieces for the scam artists.

AT&T got reimbursed $1.30 per minute for these calls, and the government says as many as 95% of them originated with scammers outside the U.S. A new registration program was put in place in 2008, but DOJ says AT&T did its best to undermine it. Bloomberg summarizes:

“We are expecting a serious decline in [internet relay] traffic because fraud will go to zero (at least temporarily) and we haven’t registered nearly enough customers to pick up the slack,” Burt Bossi, a manager of AT&T’s technical team, said to other managers on Sept. 22, 2009, according to the complaint.

The following month, AT&T changed its registration system from a postcard one to an Internet one where users’ addresses are compared to those on a database called DASH to determine whether the address provided exists. Registrations immediately increased to 40 to 100 a day, the government alleges.

By the end of October 2009, AT&T managers were aware that credit card scams were being conducted by new users, the lawsuit alleges. “This is a consequence of easing registration restrictions,” Dave Claus, a technical manager, said in an e- mail to colleagues cited in the complaint.

Needless to say, AT&T says it did nothing wrong. I expect a settlement soon.