Time to Fight Back – How Wireless Providers Should Leverage a Federal Indictment to Stop Cellphone Traffickers

A Texas federal grand jury recently returned an indictment charging 101 individuals in a transnational cellphone trafficking conspiracy responsible for stealing more than 70,000 devices worth nearly $100 million from wireless service providers and their customers. The indictment was part of a coordinated effort among many federal and local agencies over several years, which included the seizure of more than $6 million in assets. This is a significant victory in which dozens of runners and several aggregators in the Dallas area were charged. Consistent with most cellphone trafficking rings, according to the indictment, the stolen phones were ultimately sold in bulk to companies in the United Arab Emirates and Hong Kong.

Unfortunately, there is significant money to be made in the illegal trade of cellphones, at the expense of U.S. carriers, mobile virtual network operators (MVNOs), and other providers, as well as their customers and partners. Law enforcement rarely has the opportunity and resources to pursue traffickers, particularly when the phones are obtained through nonviolent methods.

Telecom providers, however, can maximize the results of their own efforts to stem the flow of illegally obtained phones by piggybacking on the recent indictment.

• While the federal government is prosecuting the indicted individuals, telecom providers can reap the benefits of the government’s investigation and asset seizure. For example, providers may seek restitution and file claims against the $6 million that was purportedly seized. Given how lucrative cellphone trafficking is, additional assets may be located.
• Providers should also consider offering to testify at trial and sentencing, and submit victim impact statements. This can mean the difference between a judge ordering probation or jail time.
• In addition to participating as a victim in the criminal case, telecom providers can take advantage of the information obtained by the government and file civil lawsuits against the named unindicted aggregators, and capitalize on the moment to take action against traffickers nationwide.
• Quick self-help action by telecom providers, immediately after an indictment, is extremely valuable. Shutting down aggregators is crucial to making lasting reductions in handset losses and reducing armed robberies at retail stores.

Carlton Fields is uniquely experienced in this specialized area. In addition to our proactive civil program to attack cellphone and related fraud, we have worked with a wide range of law enforcement agencies and government attorneys to support and encourage their pursuit of traffickers. We assist our telecom clients to protect their rights and to maximize beneficial results, for example:

• We have assisted clients in leveraging federal indictments, including one issued against Jason Floarea. We obtained a $23 million judgment against his company, Ace Wholesale, and more than $600,000 in restitution for our client. We prepared and submitted victim impact statements, and, when combined with compelling testimony from the carrier’s lead fraud investigator, Floarea was sentenced to 12 months in federal prison instead of probation.

• Following a successful civil lawsuit earlier this summer, Carlton Fields obtained a $1.2 million restitution award for another firm client, a leading MVNO, against trafficker Patrick LaMarsh, who was sentenced to 33 months in prison.

Carlton Fields began pursuing handset traffickers who were targeting our clients nearly two decades ago, and over that time we have developed, refined, and updated the original program to combat telecom handset fraud. We have had unique, demonstrable, and lasting success in this arena. Our handset trafficking enforcement lawyers have partnered with our clients to drive traffickers from their phones, filing more than 420 civil lawsuits around the country, obtaining 270 permanent injunctions and final judgments, and more than $860 million in damages awarded to Carlton Fields’ clients.