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Jun 27, 2003

How to Cage a Prepaid Rat Civil or Criminal Remedies?

Ed Maldonado

Over the past several months we have presented the “How to Smell a Prepaid Rat” Series in an effort to increase our readers’ awareness of industry scams, and how to protect your business against these predators. While we have covered topics such as distributor, direct routes, and provider scams, there are so many variations of these scams it is difficult to cover them all in just a few articles. The unfortunate reality is that the Series has often been read too late — and the “Rat” (or “Rats”) have already struck. In speaking to recent victims, two issues have become crystal clear to me: (1) businesses in the prepaid industry are tired of being victimized by these Rats and want to fight back; and (2) most of these businesses do not understand their legal rights and remedies to effectively go after the Rats once they realize they have been had. Often victims lose precious time in the process of selecting the right remedy because they are educating themselves on the differences. In the end, this gives the Rat more time to walk away or disappear. Indeed, the greatest hurdle in fighting back after any kind of scam is time, and the more you effectively use time, the better your chances of caging your Rat.

Criminal or Civil — What’s the Difference? They Still Scammed Me!

The confusion over whether to first select criminal versus civil remedies is natural because, in the end, someone has duped you and it’s not just a simple matter of business. It hurts both your dignity and your cash flow. However, while the Rats may have absconded with your money or property, the means and intent by which they acquired it will be the tell-all of how, or if, you make any future recovery. The bottom line is whether they actually intended to commit a criminal act or merely ran afoul of reasonable and responsible business practices. It sounds like a simple question, but it isn’t, because to understand both the answer and your legal options you need to understand some basics of criminal and civil law.

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Crime and Punishment: The Art of Convicting a Rat

Let’s begin with some basics about criminal acts and white-collar crime. All criminal offenses are defined in either federal or state statutes. The reason is that the primary purpose of the law is to punish crimes by means of jail, fines or both — and this involves many constitutional rights and due process protections. Any differences between state and federal statutes are founded on issues of jurisdiction. In general, if the criminal activity is interstate, it is generally federal in jurisdiction. State crime statutes deal in crimes committed intrastate, within the state. Most criminal statutes cover a broad range of criminal activity ranging from violent crimes, such as murder, to fraud and white-collar crimes. White-collar crimes are unique in that they are not a specific category of crime, rather, they are a type of crime. It is a crime squarely based upon victimization through business practices or sophisticated commercial relations. This means that business norms and practices are the tools by which the criminal commits the act. It is important in cases where “Prepaid Rats” have struck, because to go after the culprits criminally, their activity must fit under a statute that recognizes — at least in some way- the nature by which they have struck.

Perhaps the most fundamental concept to grasp when evaluating whether an act was criminal in nature is the parity between a criminal act and a culpable mind. For the act to be criminal, it must have been done with the requisite intent. Depending upon statute being applied, this can range from a planned and premeditated intent, to acts that are committed with disregard for the consequences of the act. The majority of crimes committed by Prepaid Rats are usually founded on fraud, theft, or embezzlement. These crimes are generally considered white-collar and are based upon specific intent to commit the act. Therefore, the parity between the culpable mind and the criminal act are essential in order to even charge the offender.

In recent years, we have seen a rise in crimes involving corporations versus individuals as the culprits. Corporate criminal liability is indeed possible, however, it is usually limited to cases where acts are committed by agents of the corporation in concert, purely for the profit of the corporation and with disregard to the victims. In such cases, the individual agents of the corporation may be prosecuted or the larger entity may be prosecuted as a whole. While the occurrences of corporate criminal acts are possible, they are also rare. Generally, prosecutors focus on Rats and not the “Rat’s Nest”.

That said, the next issue in determining whether to pursue criminal remedies is the burden of proof needed to convict the Rat, and the result of that conviction. Criminal convictions require a level of proof that is beyond a reasonable doubt. This does not mean that burden is 100 percent, but it’s fairly close. It requires that a prosecutor show, via evidence and testimony, that parity between the act and requisite intent existed and the Rat acted upon it. Should jurors or a judge decide that there are doubts as to the prosecutor’s evidence or witnesses, then they must rule not guilty and the case is lost entirely. However, should the evidence show guilt, the Rat is convicted and may face jail, fines, or both.

Game’s End: Did I Get Paid?

This brings us to the end result of the conviction — punishment, not compensation. If the goal you sought by pursuing criminal remedies was to get your money or property back, you may be out of luck. Most criminal convictions for fraud, embezzlement and theft require restitution to the victim. The caveat; however, is that restitution rarely is fully paid when the monetary amounts are high. If they are paid, it is over time and usually set at a minimal level, so that the convicted Rat can pay and not immediately violate the court’s order of restitution. In most instances, criminal judges recommend next pursuing the Rat in civil court, as the criminal court record will clearly show liability. This, however, may be a lost cause if the Rat utilized your misappropriated funds or property to finance his legal criminal defense. Likewise, if the conviction is appealed, issues of restitution may be tabled until the case has been re-examined for due process considerations. In the end, criminal prosecution of a Prepaid Rat may only result in a conviction and jail, but no restitution, and another Rat off the street. Should this be an acceptable result in pursuing the Rat criminally, the means have justified the ends. If it is not, Civil Remedies may be a better option.

Civil Remedies: The Art of Skinning a Rat

Distinct from criminal proceedings are civil remedies at law, and equity. Much like criminal offenses, many civil remedies are based upon statutes; however, some are based on common law principles that are legal recourses based on long-time theories of actions and recovery. Of particular interest to those victimized by Rats, are claims at law based upon civil fraud, conversion, civil theft, unjust enrichment, and civil RICO statutes. These laws, and causes of action, can be useful weapons in catching a Rat still in the game. However, these causes of action must be pleaded in full detail in order to survive all the way to trial, or at least past any Motions to Dismiss lobbied by the Rat. This requires that all documentation supporting how you were victimized be available to your lawyer from the beginning of the case. If you already have this information available, then establishing your claim on these grounds can be quite productive in showing exactly how you were scammed.

Once your legal counsel has established the basic claims against the Rat in court then other legal tools may be utilized to ensure that the Rat does not just take the money, or your property, and run. The use of injunctions can be quite useful in freezing the assets held by the Rat. Legal instruments such as prejudgment motions of garnishments, establishment of constructive trusts, compelling the return of property and prohibitions ordered by the court can effectively lock the Rat out of access to funds, or your property, stopping him in his tracks. Unlike criminal proceedings, the use of civil remedies may be a longer process from start to finish, requiring the freezing of assets to ensure an eventual recovery.

Also, unlike criminal proceedings, civil actions bear a different burden of proof at trial, more likely than not, which is a showing of 51% or greater of likelihood. While it is a lower probability burden, it is by no means an easy process. The Rat through his legal counsel can contest the entry of evidence, exclude proprietary information, and counter-sue. This can take both time and financial resources.

Also complicating matters are the practices, terminology and norms related to the prepaid industry. While some lawyers and judges are well-tuned to the nature of the prepaid business, not all are, and this can be a frustrating process. Your lawyer may be educating himself or herself as they continue to work in the case. Here you pay, and lose time in the learning curve. Likewise, many judges, particularly at the state level, are not savvy to the technical issues related to telecommunications and often get confused when deliberating on an injunction or discovery matter. This can lead to mixed results if not vigorously advocated. However, if you are aware of this process from the beginning, the cost in money and time may simply be trade-offs in the pursuit of the Rat. Many states now offer the recovery of attorney fees in cases of civil fraud, theft, conversion, and civil RICO. Although helpful after judgment, you as the Plaintiff, must bear the legal and administrative costs first. Some victims do not have the cash flow or the patience to take on this battle, and choose criminal over civil remedies on this basis alone. Just as the end recovery is an important consideration in initiating a criminal proceeding against a Rat, long-term litigation costs are important considerations in initiating a civil proceeding against a Rat.


In this article, we have tried to touch upon some of the considerations when going after a Rat after he strikes. This is by no means an exhaustive discussion of the issues involved, but it is a start. If you are scammed and wish to fight back, without a doubt, have a consultation with your local attorney. Each state has nuances in its statutes, criminal and civil procedures and injunctions and a local attorney can best instruct you on those nuances and how they can affect your case. Bring up the issues outlined here with your attorney and get a complete understanding of what you may be undertaking before you expend more time and resources.

Second, weigh your options well. If your purpose for fighting back is to get your money back from the “Rat,” then consider civil remedies. If it is to punish the Rat for his crimes against you, consider criminal remedies. However, do not wait too long for evidence may be lost, memories may fade, and the ability to recover money may diminish over time. Finally, should you, or your legal counsel, need some direction in either convicting or skinning a “Prepaid Rat,” do not hesitate to contact an attorney experienced in telecommunications or other seasoned professionals — remember protection comes in numbers.

Good Luck and Success in the Industry.

Edward A. Maldonado, Esq., a principal of the Regnum Group, is a telecommunications attorney based in Miami, FL who represents and advises communication companies both in the US and Latin America. He can be reached


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