Phone-Call Fraud Takes Heavy Toll : Crime: Use of stolen calling-card numbers to make international calls costs phone companies nearly $2 billion annually.

The cars arrived early one morning, slowly forming a line of vehicles that wrapped around the outer edge of a convenience store’s parking lot like a huge multicolored snake.

Then a battered white sedan pulled in and a crowd of people waiting near their parked cars surrounded it, shoving telephone numbers scrawled on bits of paper into the hands of the sedan’s two occupants before dashing back to their cars to follow the sedan out of the parking lot.

The scene was characteristic of a call/sell operation, a telephone fraud in which people can purchase the use of a stolen calling-card number to make international calls for as little as $10 to $15 an hour.

According to officials from several long-distance carriers, call/sell operations can be found in every large city and are often found in areas with large populations of new immigrants.

Peggy Snyder, executive director of the Communications Fraud Control Assn., a nonprofit organization that acts as a clearinghouse for information about telecommunications fraud, is not surprised that call/sell operations are found in communities with large numbers of new immigrants.

“It makes sense,” Snyder said. “Many new immigrants have family in other countries and because they are new arrivals, they possibly can’t afford to have a phone or make long-distance calls. If someone offers them a cheap way to call home, I think most people would pick up on it.”

Recent studies by the U.S. Secret Service, the federal agency that investigates telecommunications fraud, estimated that call/sell operations and other types of long-distance telephone fraud cost telephone companies, and ultimately the consumer, almost $2 billion a year.

Bob Degen, agent in charge of the Secret Service’s electronics crimes branch, cautioned that the $2-billion figure is “probably on the low end” because companies affected by telephone fraud are sometimes reluctant to discuss the extent of their problems, even with law enforcement agencies. Degen said that many companies are unwilling to reveal their exact losses because of confidentiality concerns and a fear that publicly revealing their company’s losses would provide competitors with an advantage over them.

But ever-increasing losses have caused telecommunications companies to take note of the problem, said Degen, and they are finally starting to work together to curb fraud.

“The losses have become substantial enough to affect the bottom line and now (telecommunications companies) are noticing it,” Degen said.

Andrew Myers, a spokesman for AT&T;, one of the largest providers of calling cards, refused to discuss exactly how much fraud cost his company last year, but did say that calling-card fraud made up a large percentage of the several hundred million dollars that AT&T; lost last year as a result of fraud.

Calling-card fraud has become increasingly sophisticated with call/sell operations in different cities exchanging stolen calling-card numbers with one another via computer networks and beepers, Myers said.

Because of the cooperation between thieves, it is not unusual for a number stolen in one area to be in use across the nation within hours of the theft, Myers said.

Security officials for telephone companies said that “bandits” employ a wide variety of methods--from simple eavesdropping to videotaping customers using pay telephones--to obtain calling-card numbers.

One of the most common methods is “shoulder surfing”--standing behind someone at a pay telephone and watching the numbers they punch in. Thieves also have been known to stand outside telephone booths and record customers’ conversations with operators to acquire the numbers.

Fraud experts said that most calling-card numbers are stolen in busy areas such as airports and other transportation centers, but that with a few common-sense precautions, customers can protect themselves.

Even at home, calling-card customers should remain cautious.

GTE spokesman Dan Smith said con artists will often attempt to obtain calling-card numbers by calling a home and identifying themselves as telephone company investigators or police officers, a technique telecommunications security experts refer to as “social engineering.”

A favorite method, Smith said, is to tell customers that fraudulent calls have been made on their calling cards and that before the calls can be removed, they will need to give the company or the police officer their card numbers for verification.

A request for a customer’s calling-card number is a sure sign that the person on the other end is not a legitimate telephone company employee, Smith said.

“No phone company would ever ask a customer for their calling-card number,” Smith said, “We gave you the card, so why would we ask you for the number? We already have it!”

Even if customers inadvertently give their calling-card numbers away, Smith said, GTE and other companies will usually drop fraudulent charges from a customer’s bill as soon as they are reported.

Because so many calling-card numbers are stolen from customers without their knowledge, telephone companies are increasingly relying on preventive measures to decrease calling-card fraud. In recent years, many companies that issue calling cards have begun to use computer programs to detect unusual patterns in a customer’s calls.

If a customer suddenly begins placing a large number of overseas calls, for example, the telephone company will call to confirm that the customer made the calls. If the customer did not, the calling card will be canceled and the customer will immediately be given a new number.

But even with increasing customer awareness and technological advances, calling-card fraud continues to grow, forcing some telephone companies to restrict service in order to curtail fraudulent calls.

Last year in Western Canada, calling-card fraud grew so large that British Columbia Telephone eliminated overseas service for the company’s 500,000 calling cards. According to British Columbia Telephone, losses from fraudulent calls had reached as high as $10,000 a day before the service was ended.

None of the phone companies that operate in Orange County have been forced to put such restrictions on service, but Pacific Bell spokeswoman Linda Bonniksen said several long-distance carriers that serve Orange County have restricted calls to some countries because of the high number of fraudulent calls made to those countries.

Telephone companies and consumers are not the only ones to suffer losses at the hands of call/sell operations. Carla Rivera, the owner of a Santa Ana convenience store, said the large crowds that converge to use the pay telephones next to her store each weekend drive away her customers.

“They take up the whole parking lot with their cars,” Rivera complained. “My customers have nowhere to park.”

Rivera, who has owned the store for six years, said she had often seen entire families gathered around the pay telephones for hours and estimated that there are usually 10 to 20 people waiting to use the telephones.

At one point, Rivera said, she became so angry that she disconnected the telephones from the junction at the back of her store. Unfortunately, she said, the telephone company locked the junction box so she couldn’t get into it.

The owner of the pay telephones, People’s Telephone Co. Inc., turned off the phones for several months after she complained, Rivera said. The company recently reactivated them. The crowds have been quick to return, Rivera said.

“It’s much cheaper to use these phones,” said one 23-year-old man from Santa Ana who said he used call/sell operations near Rivera’s store several times a year to call Central America.

The young man said he was aware he was making calls on stolen card numbers, but explained that he could not afford to talk with his family in El Salvador if he paid the regular rate for an international call.

“If I called to El Salvador from my house, it would cost me $1.50 a minute. Here, I can talk for an hour or two and pay only $15,” said the young man, who refused to give his name.

“I know it’s wrong, but I do it anyway,” he said as his face flushed red with embarrassment.

Then, looking affectionately at his 3-year-old son standing next to him, the young father said: “I have not been home since I came to the U.S. seven years ago, and this is the only way my son can talk with his grandparents. Until I get in trouble, I’m going to keep doing this.”

Phone Security Tips

Telephone companies suggest you do the following to avoid having your calling card number stolen:

Memorize your number.

Never loan your number to anyone.

Shield the phone key pad when entering your number.

Shield your mouth and receiver when quoting your number to an operator.

When placing additional calls after the initial call, use the pound sign so you won’t have to re-key the number.

Always review your telephone bills for fraudulent calls.

Beware of anyone who asks for your calling-card number by representing himself as a telephone company employee.

Businesses that use calling cards should give employees individual calling cards.