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Verizon Crime

Verizon Tech Charged In $4.5M Equipment Scam 104

McGruber writes "Michael Baxter, a 62-year-old man from Ball Ground, Georgia, was recently arrested and charged with multiple counts of fraud for allegedly placing false equipment orders. As a network engineer at the southeastern regional headquarters of Verizon Wireless, Baxter allegedly submitted hundreds of fraudulent service requests to Cisco. According to prosecutors: 'The service requests were fraudulent in that no parts needed to be replaced, and instead of placing the replacement parts into service in Verizon Wireless network, Baxter simply took them home and sold them to third-party re-sellers for his own profit.'"
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Verizon Tech Charged In $4.5M Equipment Scam

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  • by Genda ( 560240 ) <> on Monday December 12, 2011 @06:42AM (#38341402) Journal

    Building routers 1 part at a time...

    • by Anonymous Coward

      The Idiot should have just sold the used parts

    • by Anonymous Coward on Monday December 12, 2011 @08:26AM (#38341658)

      "One Piece At A Time"

      Well, I left Georgia back in '96
      An' went to Verizon workin' on a orderin' gig
      The first year they had me dialin' cisco up

      Every day I'd watch them beauties roll by
      And sometimes I'd hang my head and cry
      'Cause I always wanted me an ap that could do it all.

      One day I devised myself a plan
      That should be the envy of most any man
      I'd sneak it out of there in a dhl box in my hand
      Now gettin' caught meant gettin' fired
      But I figured I'd have it all by the time I retired
      I'd have me a router worth at least a hundred grand.

      I'd get it one piece at a time
      And it wouldn't cost me a dime
      You'll know it's me when I come through your boards
      I'm gonna flood around in style
      I'm gonna drive everybody wild
      'Cause I'll have the only one there is a round.

      So the very next day when I punched in
      With my big dhl box and with help from my friends
      I left that day with a dhl box full of asics
      Now, I never considered myself a thief
      VZ wouldn't miss just one little piece
      Especially if I strung it out over several years.

      The first day I got me some ports
      And the next day I got me cpu and cords
      Then I got me a big ass housing and all of the chrome
      The little things I could get in my big lunchbox
      Like the power unit and all of those IOS docs
      But the big stuff we snuck out in my buddy's mobile home.

      Now, up to now my plan went all right
      'Til we tried to put it all together one night
      And that's when we noticed that something was definitely wrong.

      The housing was a '96
      And the dsl modems turned out to be a '04
      And when we tried to put in the ethernet all the holes were gone.

      So we drilled it out so that it would fit
      And with a little bit of help with an A-daptor kit
      We had that pirate os bootin' just like a song
      Now the terminals were truly seminal,
      It could have been straight out of HAL
      But when we pulled out the switch it booted to x.

      The back end looked kinda funny too
      But we put it together and when we got thru
      Well, that's when we noticed that we only had 10GBE
      About that time my wife walked out
      And I could see in her eyes that she had her doubts
      But she opened the door and said "Honey, connect me to Ravencrest."

      So we flooded the boards just for giggles
      And I headed her right on down to wow
      I could hear everybody laughin' for realms around
      But up there at the battleground they didn't laugh
      'Cause to diagnose us up it took the whole staff
      And when they got to see the ping it was minus twelve.

      I'd get it one piece at a time
      And it wouldn't cost me a dime
      You'll know it's me when I come through your boards
      I'm gonna flood around in style
      I'm gonna drive everybody wild
      'Cause I'll have the only one there is a round.

      [Spoken] Ugh! Yow, CMD TACO
      This is the IPSEC 6000 MODULE
      In the SCA 30K Come on

      Huh, This is the CIOSDIOS9999
      And negatory on the cost of this mow-chine there CMD TACO
      You might say I went right up to the client
      And ordered it up, it's cheaper that way

  • 1. First filed a fraudulent service request
    2. Pocket the part
    3. ...
    4. Resell it for a profit!
  • by deniable ( 76198 ) on Monday December 12, 2011 @06:47AM (#38341414)
    He wants to be a defense contractor.
  • by Anonymous Coward on Monday December 12, 2011 @06:50AM (#38341420)

    The real crime here might be the price of Cisco equipment.

    • The real crime here might be the tanking of his retirement funds and IRA which is probably why he went into business for himself
  • greed kills (Score:4, Insightful)

    by Nyder ( 754090 ) on Monday December 12, 2011 @06:56AM (#38341430) Journal

    If he wasn't so greedy, he probably could of gotten away with it.

    A little here, a little there.

    At least he got his woman some cosmetic surgery, she's probably going to need to find a new man.

    • Re:greed kills (Score:5, Insightful)

      by erroneus ( 253617 ) on Monday December 12, 2011 @07:13AM (#38341480) Homepage

      You got that right. It was a pretty good scam! If you keep it low profile enough, no one would have noticed. But with enough "failure reports" concentrated and centered around him, it obviously caused an investigation. Another problem in here is that Cisco didn't want the old equipment back? That's really odd. Not wanting the old equipment back was the hole which made it all possible I think.

      • by Lumpy ( 12016 )

        All companies don't want your old broken gear back. I have a dead TV here, Panasonic wont take it back when I but a new one. This is normal for 100% of all companies on the planet.

        • Re:greed kills (Score:5, Informative)

          by SuricouRaven ( 1897204 ) on Monday December 12, 2011 @07:43AM (#38341560)
          Except in Europe. We have some quite strict recycling laws that give the manufacturer part responsibility for end-of-lifeing old equipment. Not that they'll care at all if you just throw it in the skip.
        • Tell that to Dell!

          They may not "want" the old gear back, but by requesting it back, they better guarantee that this type of fraud doesn't occur.

          • True, I think both Dell and HP asked for their batteries back when we needed replacements.

          • by Lumpy ( 12016 )

            I replaced 2, 5 year old Dell servers last year and Dell did not ask for us to ship them the old servers.
            In fact they did not even ask if we were replacing old servers.

        • With the exception of failure analysis(which certainly wouldn't be done by every outfit for every replacement; but might become a factor if some FRU is getting replaced a lot, knowing which subcontractor to fire can be handy...) or "parts" that are swapped as units but can be trivially refurbed and contain enough good bits to be worth salvaging; the company probably doesn't want the dead part back, just something they have to have shipped and recycled; but everyone I've ever dealt with has(unless specified
        • I have a dead TV here, Panasonic wont take it back when I but a new one.

          If by "but" you mean "bought," that would explain it, since warranty fraud isn't an issue.

          I got a new TV from Sony last year on warranty and I assure you, the technician who brought out the replacement collected the old one. I guess the question who he returned it to, on up the chain.

      • From experience I did the course on handling serious discipline cases for BT and the tutors commented that the most common criminal cases involved this sort of scam and back handers (bribes) from contractors for small civil engineering works.
        I and i wont say what but there was one case where the contractor took short cuts on a job that could have killed people.
    • Re:greed kills (Score:5, Insightful)

      by Technician ( 215283 ) on Monday December 12, 2011 @07:26AM (#38341522)

      Knowing the failure rate of product lines this would have shown up as one supplier with a higher than normal failure rate. The trend continued which is most likely how the high failure rate was investigated. With the theft, the failure rate would start to show up as an outlier on any chart as an unusualy high loss. In a product with high failure rates, this would have been more difficult to detect. For example a few missing light bulbs is hard to detect as they are a high failure rate consumable item. A large amount of high reliability network devices would show up much faster as an unusual event.

      • by Ihmhi ( 1206036 )

        Yes but everything had a margin of error. If the failure rate is estimated to be 7% of the routers per year and it's actually something like 7.5-8%, no one is going to bat an eye on that. He could have made a very steady profit over many decades.

        I think I'm learning the wrong lesson from the stories. Don't steal a lot - steal a little bit over a long time, and you probably won't get caught. =\

      • by Anonymous Coward

        What you said might be true, on the other hand having sound internal control in your purchasing department is the critical factor here. Accounts Receivable and revenue are integrally connected in the accounting function. It is crucial for the company to have high level of segregation of duties, ensure rotations, required vacation time etc. If he got away with it long enough, its likely he knew the independent auditors thresholds for sampling. $40,000 sounds quite high though so that most likely means he

        • Re:greed kills (Score:5, Insightful)

          by petermgreen ( 876956 ) <.plugwash. .at.> on Monday December 12, 2011 @09:34AM (#38341948) Homepage

          I suspect this fell between the cracks of two companies.

          Verizon presumablly wasn't paying for these parts (according to TFA they were replacements for suposedly failed parts under service contracts) so they probablly wouldn't have any purcahse orders or invoices for them.

          Meanwhile cisco probablly didn't have information on what work each tech was doing so they could only check the reasonableness of verizons service requests as a whole, not the reasonableness of any one tech's actions.

      • Re:greed kills (Score:5, Interesting)

        by Migraineman ( 632203 ) on Monday December 12, 2011 @10:00AM (#38342152)
        Lesson to would-be equipment thieves - don't try to dupe the accountants. They have the skills to balance the books, skills acquired over years of training. Skills that will make them a nightmare for people like you. That's ALL they do. They WILL spot the problem, and they WILL find you.

        About a decade ago, a couple was running a similar scam at my job. She worked in sales as an order processor - basically the back-end of the sales process that initiates production orders. He worked in the repair department as a line manager. She would initiate a product order, and set it up with a genuine customer account, but a bogus "ship to" address. The product ($40k+ telecom test gear) would be manufactured and shipped, closing the loop on the production accounting end. UPS would try to deliver the product, but fail. It would be returned to the company as "undeliverable" ... to the repair department where He would intercept it. The undeliverable shipment would be de-booked from the sales accounting system. At this point, they had moved a piece of equipment off the production floor while maintaining the integrity of the production accounting system. Undeliverable equipment was supposed to be returned to the sale-able product queue, but only after inspection by the repair group. He would step in and take the equipment out of the system, preventing the asset from being re-introduced into the production/sales pipeline.

        Manufacturing production was big enough that the float concealed the missing items. You'd have to reconcile the production, sales, shipping, and repair accounts to try to spot the anomalies. This scam persisted for a few years, slipping a couple of units out the door on an occasional basis. They finally got pinched when one of the phantom manufacturing units showed up on a repair order. It was fairly new, and the customer was attempting to get warranty service. Warranty repairs were handled by a different sales entry person, who couldn't resolve the actual sale of the unit to ... anybody. There was a very stealthy internal investigation which was coordinated with the State Police. He and She were arrested in the office when they tried to remove the bogus equipment from the facility.

        They ran their scam too long. Had they moved somewhere else, I doubt any prosecution would have happened. Almost every bit of evidence would have been circumstantial. They got nailed because the Police observed them executing the scam, and grabbed them in the parking lot with the equipment in their possession. Best guess was that they swiped about $500k of equipment.
        • hehe I just watched Taken []. Pretty decent and better than I expected.

    • by twebb72 ( 903169 )
      You've got a point; however most companies claim far more was taken than actually stolen in an attempt to defraud their insurance carrier. Since the paper trail is often limited and tied up in a criminal court that doesn't necessarily care to pursue an exact figure.

      My bet is Verizon doesn't go out of business.
  • by toomanyhandles ( 809578 ) on Monday December 12, 2011 @07:24AM (#38341510)
    on the plus side, there's a chance that some of that "new" Cisco gear bought from that online auction side really is new!
  • Obligatory (Score:4, Funny)

    by drmofe ( 523606 ) on Monday December 12, 2011 @07:25AM (#38341516)
    "I would have gotten away with it if it hadn't been for that darn Cisco Kid"
  • RMA System (Score:5, Informative)

    by sociocapitalist ( 2471722 ) on Monday December 12, 2011 @07:30AM (#38341528)

    When Cisco ships a replacement part under smartnet (service contract) or via a partner it comes looking for the part that was to be replaced. Normally I believe the limit is 30 days and then Cisco will look to charge the customer for the part.

    How this guy could think that no one would come looking for all of this is fairly surprising.

    • You would think they would but he was doing it for around 5 years.
      They had to of had a replacement contract where they were not required to return the broken part or Cisco was doing a very poor job of tracking.
      • Or they charged Verizon for the parts and accounting just didn't notice.
      • Re: (Score:2, Insightful)

        by Anonymous Coward

        "had to HAVE had", shit for brains. "of", jesus....

    • Re:RMA System (Score:5, Insightful)

      by gl4ss ( 559668 ) on Monday December 12, 2011 @07:44AM (#38341568) Homepage Journal

      When Cisco ships a replacement part under smartnet (service contract) or via a partner it comes looking for the part that was to be replaced. Normally I believe the limit is 30 days and then Cisco will look to charge the customer for the part.

      How this guy could think that no one would come looking for all of this is fairly surprising.

      *Beginning at least as early as December 2006 and continuing until he was terminated by Verizon in May 2010, Baxter submitted hundreds of fraudulent service requests, prosecutors said.*

      maybe their service contract was just better than usual. maybe he started doing it once he discovered that nobody really came looking for the parts. how much does that shit cost anyways? the bail was for 50k.

      it doesn't mention how he was caught, could be as simple as cisco buying from these 3rd party resellers and following serial numbers to see how they got the parts, because I don't really think cisco likes 2nd hand market at all, they'd probably be much happier about keeping price discrimination in effect(or only lease/sell them on support contracts..).

      anyhow he probably would have done better mileage if he had sold the good used equipment instead - but the installers might have had a procedure to send them straight to somewhere where he wouldn't have controlled access to them.

      • Re:RMA System (Score:4, Interesting)

        by klubar ( 591384 ) on Monday December 12, 2011 @10:56AM (#38342766) Homepage

        I suspect the RMA agreements are different for very large customers. At least with Dell if you are a preferred buyer you can issues your own RMA (and I suspect the really large customers have even better deals of on-site spares and more). It's not uncommon for vendors to trust their best customers and to make it easy to get repair parts. Even ordinary retailers are able to get credit for customer returned items without physically shipping the defective part back to the vendor. In many cases the vendor just trashes the return part so there is a cost associated with handling an RMA. The total value of the defective parts in this case was probably a small percentage of Verizon's purchases. And if you're Cisco you don't want to piss off a good customer by accusing them of cheating on RMAs.

        But eventually you'll get caught.

      • by swb ( 14022 )

        Cisco probably goes along with lenient RMA terms for major clients because they have such profit in the contract that it's not really costing them any money to provide that leniency, plus getting a large volume of broken equipment back has its own costs. The marginal value of the equipment may not be high enough to warrant repairing it, at least for low end equipment.

        It also wouldn't surprise me that Cisco would have some kind of competitive intelligence team that buys equipment from resellers and traces i

      • by isfry ( 101853 )

        I think the issue with selling the old item is getting the clearance to replace a "good part" where it has not triggered an alarm for being bad. I am sure they would have to jump through a lot of hoops to replace parts on a working network if there is not alarm even if there is redundancy in place to not notice you taking something down to replace it. Again you still end up where those S/N get traced back to Verizon when someone calls support on them. My guess is it was easier not to have to fight the red t

    • Re:RMA System (Score:4, Interesting)

      by alen ( 225700 ) on Monday December 12, 2011 @08:46AM (#38341714)

      Almost everyone offers a super precious metal support contract where you keep the bad parts

    • Re:RMA System (Score:5, Interesting)

      by TheCarp ( 96830 ) <sjc@carpanet.PERIODnet minus punct> on Monday December 12, 2011 @09:02AM (#38341762) Homepage

      Well, when you work for a large company, and know how disorganized they are, I can see how a person would get to thinking "they will never know" and 99.9% of the time... be right.

      I distinctly remember a few incidents...very very minor stuff I am thiniing of. One machine, can't find it in the asset DB. So I look up an old work order, there it is... with asset tag info. I look up the tag, different machine. What gives?

      So we track it down (because we needed to submit work order for the original machine).... turns out, somebody never updated the asset DB, so whoever submitted this old work order must have just put the name in, and selected a different asset tag, just because he had no way to look up the real one (we only found it because we asked the right person who had it on a spreadsheet). No fraud, just "this place is so big, and tracks things so poorly, that I can enter anything" even more "I have to to get my job done".

      Translate that to an order system, you probably have several systems, all ordering through some central department. Between all the engineers and departments, they probably get some number of these non-return fees as a matter of course. He probably found that out, and realized that they didn't have the right info to really track them down easily. My guess would be he got a bit greedy and they noticed the numbers steadily climbing and wanted to know why.

      Then, well, it takes time to build a case. I bet they let him do it a couple of times before they finally fired him.

    • Whenever I replace a part, I have to record the serial number of the old part, the serial number of the new part, and the name of the customer. I return the old part to the warehouse, and don't get paid for the service call until it arrives. Clearly, Verizon Wireless wasn't this careful; perhaps now they are.
    • Maybe he bought broken parts of the same type on the Internet and returned them to Cisco? Assuming all the parts aren't checked for serial numbers, that'd be hard to track.
  • by clonehappy ( 655530 ) on Monday December 12, 2011 @09:44AM (#38342014)
    So, he stole 1 router?
  • It is simple theft, indistinguishable from so many other thefts. Just because the stealee is Verizon and the stolen is techie parts, it does not make it is any more interesting than other forms of embezzlement.
  • I'm working for Verizon (Business, not Wireless), but I would like to know which process did he used to order the devices. When I have to order legitimate devices or training, it's always a highly complex process that must be validated by up to ten people including one vice-president, checked by auditors in different countries and must be exactly filled otherwise will be rejected (in one of the last steps of course)... a nightmare and really time consuming ! So I'm really impressed by what he did !

All laws are simulations of reality. -- John C. Lilly