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Apr 04, 2003

"The Three Card Monty - International Direct Route Carrier

Ed Maldonado

First and foremost, thank you for all the emails related to our last article. While it was sad to hear how scams have affected businesses across the country, the resolution of people in the prepaid industry to identify scams and clean up the industry gives us inspiration to continue this series. In the last issue, we addressed the topic of scams on prepaid providers and distributors. This issue we will address international carrier route scams, and in particular - the dreaded "carrier deposit."

Although not always apparent, the heart of the prepaid calling industry are the national and international carriers. They are the means of all calling transport. Many prepaid calling cards are branded and tailored to specific country routes based on underlying carrier termination capacity. Of these direct route carriers, those offering termination into countries that are not entirely open to foreign competition due to either regulation or infrastructure constraints, are the most highly sought after. Classic examples of these routes include Ecuador, Honduras, Cuba, and Vietnam. For the switched-based prepaid calling provider, these routes and their carriers are very tempting because of the provider's ability to charge healthy rates and still be cheaper than most post paid long distance services. Not surprisingly, scam artists have picked up on the temptation and have exploited it.

While there are numerous types of carrier scams, we will focus this issue on the direct route deposit scams because of their pervasiveness in cities such as Miami, New York, and Los Angeles. The basic modus operandi of these scams is to have an initial, and substantial, deposit or funds wired to the carrier; the scam artist then either immediately vanishes, or, will go ahead and connect the services, They may actually operate the services for a few days, but will then disconnect and disappear. Most times the victim is unaware of the scam until it is too late because of the fog of temptation that exists around these rare and desirable routes. The victim thinks, almost haughtily, that they have discovered a one-of-a-kind find, often sloughs off issues or events that seem irregular in comparison to the custom and practice of carrier relations. The reality is that they are playing a game of Three Card Monty for their own deposit or funds. Though the objective is to induce the victim to pay, we have identified several scam themes that seem to re-occur.

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These scams usually are found where a brokered direct route deal is at issue. A broker, or some other type of third party, may approach the victim purporting to have contact with a rare direct route that is in the process of being set up. The deal is usually presented as a ground floor opportunity and one that "may" require some funds in order to get the operations started. The broker may be involved in the scam, or may be an "innocent" third party to the scheme. In some scams, the broker himself may simply regurgitate what the scam artist previously presented. In other cases, the broker may be part of the scam. The process will usually begin with the traditional Non-Disclosure Agreements and a series of discussions where the basic premise of the direct route shortfall is presented.

In a nutshell, the scam premise is as follows: A potential direct route with tremendous capacity has been in works for the past several months between facilities here in the US and some foreign destination. The development of the route has progressed, and some equipment has been already deployed. The problem, according to the scam artist, is that the project has gone over budget and now is in jeopardy. The scam artist presents himself as being desperate and offers to sell substantial capacity at an incredible rate for a period of years, if only he can get an initial deposit in order to bridge the shortfall. Again, the need for an initial deposit is presented and a carrier services contract may be signed. Upon placing the deposit, the victim is usually contacted again about the status of the project and informed that monies are being forwarded to foreign country to complete the project. The truth is that the artist has begun his disappearing act and your deposit has now gone elsewhere.


These scams usually are found where a resale international carrier is involved in a direct route deal. The process often begins with a listing of an incredible rate to a direct route. Upon inquiry it is learned that a small direct route has been in operation for a short by re-filing traffic through a third-party country. Capacity on the route is purported to be limitless and growing. The end victim very rarely has direct contact with the scam artist. Most contact is through the resale carrier who is on the US side and is conducts all business via email, fax and telephone. Again, like the Shortfall scam, it is debatable if the resale carrier is in on the scam or is the first victim.

In either case, the desired target is your deposit(s). A contract may be signed, but invoices may also be used on a take and pay basis because of the re-file method of transport. The reseller does not usually place the deposit themselves. This is allegedly because they are reaping such a low margin of profit in your resale that it is better if you bear the burden. Once the deposit is place, service often begins as if normal - however this is not for the long term. Usually service is provided consistently until a high traffic amount is desired. When this occurs, an increase in the deposit is requested. Once the deposit is paid, it turns out that the route is unable to handle the increased capacity, many calls are lost and overall service quality is poor.

The purported reason for the problems is claimed to be in the re-filling and the fact that either the re-route traffic has been discovered by the country of termination or that the route has been shut-down by third party country for violation of laws or regulations of that country. It will usually prove difficult or impossible to confirm these rationales, but easy to see that your deposit(s) are gone. When you go back to the resale carrier they are either hiding behind a Force Majure clause in your contract, or may be another victim themselves, in the deal. The real winner here is the gray re-file route carrier in the third party country. This is because they either knew the maximum capacity that they could achieve before the route would be discovered or they negotiated the re-file for a limited capacity or period of time with a PTT or other foreign licensed carrier. By offering the best resale rate in town, they baited the hook in order to generate interest in the rare route. If investigated fully, it is likely that this direct route carrier is renting or has temporarily borrowed facilities to complete the deal. The carrier is also usually unlicensed or unregistered in the third party country. All of this is information in hindsight for the victim because their monies are gone and in a foreign jurisdiction.


These scams usually are hybrids of the two previous direct route scams looking to target a deposit. The basic difference in the premise from the above is the alleged involvement of an official or public minister who is "quietly" behind the scenes ensuring that the route will operate freely without interference from their national regulators or the PTT. This official, allegedly on the take, is highly dependable and extremely loyal to the project. Of course, the entire line is a ruse and usually is used when the targeted victim has no real experience in working in an international environment. In the end, the Minister of Everything ploy is made strictly to lower the guard of the intended victim of either the re-file scam or the "from here to there" scam. Particularly in Latin America, the involvement of "corrupt" government ministers or officials in back-door deals has been greatly reduced over the past ten years. Should an actual official or minister be involved in any deal or route in any government capacity, it will be clearly identified.


o A direct route carrier deal presented as a ground floor opportunity requiring deposits or funds to bridge ongoing route development in order to ensure an unbelievable discount rate in future.

o A listing of an incredible rate on a direct route by refilling through a third-party country and purporting to be limitless and growing in capacity.

o No confirmable network maps or network layout within the foreign country prior to a deposit being made.

o Alleged involvement of an official or public minister who is "quietly" behind the scenes ensuring that the route will operate freely without the interference from their national
regulators or the PTT.

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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