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Cellular Phone Firms Fight High-Tech War With Pirates

October 19, 1994|CHIP JOHNSON and ADAM S. BAUMAN | TIMES STAFF WRITERS

Neither police investigators nor cellular phone officials know exactly how long Abner Pajounia and Davoud Yashoron operated the alleged dark side of their electronics shop on La Cienega Boulevard.

But Glendale police detectives--who arrested the owners of Master Mobile Sound on Friday and then, posing as salesmen, conducted a sting operation over the weekend--say the store was all too typical of those that have made cellular telephone fraud a high-tech crime of epic proportions.

Police and telephone company officials on Tuesday proudly displayed more than 100 illegal "clone" phones and the computer equipment needed to make them, and said that when the costs of the illegal calls are tabulated, it could turn out to be one of the biggest cellular phone fraud busts ever in Southern California.

But authorities face a daunting task in trying to eliminate a fraud problem that accounts for an estimated $300 million a year in illegal calls nationwide--and Los Angeles, the cellular phone capital of the country, is also the fraud capital.

Now law enforcement officials and cellular phone company technicians--desperate to protect a dynamic industry that has created tens of thousands of jobs and altered the lifestyles of millions of Americans--are redoubling their efforts.

AirTouch Cellular, one of the two big cellular carriers in Los Angeles, has dispatched more than 250 private detectives to scour Southland streets to identify cellular phone fraud. The industry is unleashing an array of powerful new electronic countermeasures that could take a big bite out of the problem--but also might alienate some customers and saddle companies with both financial and operational burdens.

LA Cellular, which is subject to far more fraud than rival AirTouch Cellular, has quietly introduced a code system that could eventually require all customers to electronically "unlock" their cellular phones with an eight-digit code before making calls, according to an internal memorandum obtained by The Times.

The company is also testing an electronic anti-fraud system called Operation Blackbird. Meanwhile, around the country, elaborate fraud detection schemes with names such as "Fraudbuster" and "Clone Detector" are being deployed.

"We have launched our own high-tech war back at criminals," said Mike Houghton, a spokesman for the Cellular Telephone Industry Assn. "When this first started, we didn't know how to fight back."

Most cellular phone fraud involves "cloning," a process in which a thief steals the electronic serial number of a customer's cellular phone and programs it into a computer chip, thus making a perfect duplicate, or "clone" of that customer's phone. While cloning has been going on for some time, it has grown rapidly and become much more sophisticated as the cellular phone industry has exploded.

With 1.2 million customers, LA Cellular and AirTouch operate in the nation's largest cellular phone market, and while they won't discuss losses from fraud, market analysts and industry insiders say they have been among the hardest hit companies in the nation.

According to David Gamson, a legislative aide to state Sen. Herschel Rosenthal (D-Los Angeles), author of a bill that raised the theft of cellular phone service to a felony crime beginning this year, about one out of every four cellular phone calls made from Los Angeles is made from a counterfeit phone.

In some poorer Los Angeles neighborhoods, phone counterfeiters offer unlimited long-distance phone calls to customers for about $75 a month, said Detective Richard Garcia, who is assigned to the sheriff's Lomita station in southern Los Angeles County.

In another variation, phone bandits set up call-selling schemes in which they use two cloned phones patched together and link callers with anyone anywhere in the world for between $10 and $20 per call, said Chuck Ortmann, the resident agent in charge of the Riverside County office of the U.S. Secret Service, which recently busted an Ontario call-sell operation.

While these types of calls do not exactly represent lost business for the cellular carriers--customers in the fraud schemes generally would not be subscribers--the illegal calls soak up valuable capacity on cellular systems. In addition, they can be a major inconvenience for subscribers whose phones are cloned: While they don't have to pay for clone calls, their numbers have to be changed, and straightening out the billing can be a major hassle.

"I first found out about being cloned when I received a bill for $7,000," said Kenneth Hirsch, a West Hills dentist. "It looked like a United Nations: There were calls to Chicago, Ireland, South Africa, Russia, Lebanon and all over the U.S.

"When I first called LA Cellular, they told me the fraud department will contact me soon. The next month, an additional $2,000 showed up. . . . This was about four, five months ago. Since then they never got back to me, but they keep sending me the bills. I have called them four, five times."

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