DALLAS -- The Federal Bureau of Investigation raided a Dallas data center last week, investigating a fraud case in which the alleged criminals reportedly scammed millions from AT&T and Verizon Communications.
According to PCWorld, an affidavit dated March 11 states Texans Michael Faulkner, Brian Haney, Nathan Shafer and Michael Bowden all "had numerous criminal charges associated with them, including various frauds, interfering with law enforcement officials, violent crimes and illegal possession of weapons charges."
The FBI alleges the quartet's two companies Premier Voice and Lone Star Power submitted "false/fraudulent credit information and other false representations" to access the telephone services, which they allegedly resold to their own customers for 1 cent per minute over a nearly four-month period."
Last Thursday, the FBI raided servers at the Telx collocation facility in Dallas. The raid reportedly disrupted business for some 50 companies as the FBI searched for equipment related to the fraud case, according to DSLReports.
The affidavit also states that "On or about January 26, 2009, Verizon officials contacted the FBI and reported they were the victims of a fraud for in excess of $1 million. Verizon officials advised they believed AT&T had also been victimized by the same fraud for similar losses."
During a teleconference between Verizon/AT&T fraud investigators and the Bureau, the investigators explained that they believed a group of individuals working together had defrauded both firms of more than 120 million connectivity minutes valued at $6 million in a three-to-four-month period for a profit of $1.2 million.
Data center operators have said the problem should have been addressed in court and did not require FBI intervention to the point of raids, reports Wired.
But Mark White of the Bureau's Dallas office said a federal judge would not sign off a search warrant for a civil case."
"We wouldn't be looking at it if it was a civil matter," White said. "And a judge wouldn't sign a federal search warrant if there wasn't probable cause to believe that a fraud took place and that the equipment we asked to seize had evidence pertaining to the criminal violation."
The FBI investigation launched March 12 when equipment owned by Faulkner's Crydon Technology was seized, according to Web Host Industry Review. Agents reportedly confiscated about 220 servers belonging to Faulkner along with networking equipment, racks and even power strips, while $200,000 was taken from his business bank account. His home was also raided and agents even seized iPods and video games belonging to his children, which some have seen as the agency stepping way over the line.
Faulkner also claims money was removed from his teenage daughter's bank account, and the account of his mother, who once served as his comptroller.
But he does admit owing both telecoms money.
"There's a big difference between stealing money and owing money," he said. "Usually you settle the debt. But AT&T never contacted me about owing money. Verizon never contacted me."
Faulkner is claiming innocence regarding fraud and charges that the telecoms are being corporate bullies, and also blames a disgruntled former employee.
However, the FBI counters that Faulkner is at the center of the scam, and has a long history of software piracy and deceptive business practices along with the other three suspects.
The Bureau also alleges Faulkner ran similar scams against XO Communications in 2005 and 2006.
The FBI report said his home Verizon connection had outbound traffic five times higher than inbound. Going under the name "CygonX" online, he's said to be well-known in the scam world.