Owner Of Telecommunications Companies Admits Role In International Phone Hacking Conspiracy

Revenue share fraud cost companies millions in losses

NEWARK, N.J. – A German citizen today admitted his role in an international conspiracy that hacked into the telephone systems of large corporations and entities in the United States and around the world to make telephone calls, causing tens of millions of dollars in losses, U.S. Attorney Paul J. Fishman announced.

Wolfgang Uelpenich, 44, of Zug, Switzerland, pleaded guilty before U.S. District Judge Katharine Hayden in Newark federal court to an information charging him with conspiracy to commit wire fraud. Uelpenich was arrested by FBI agents at a Key West, Fla., on Jan. 9, 2012.

According to documents filed in this case and statements made in court:

Uelpenich, who owned telecommunications companies in Germany, conspired with others to profit by causing unauthorized telephone calls to be placed to Revenue Share Numbers (RSNs).

Also known as international premium numbers, RSNs offer such services as adult entertainment, chat lines, and psychic hotlines on a cost-per-minute basis. Telephone companies that carry calls to overseas RSNs (known as Revenue Share Providers [RSPs]) are typically paid an internationally-regulated fee for connecting such calls.

To increase profits by increasing call traffic, some RSPs and others illegally use stolen telephones to make unauthorized calls, generating additional revenue, which the RSPs shared with the people or entities (known as “dialers” or “callers”) making the unauthorized calls. A recent telecommunications industry association report estimated $3.84 billion annually in revenue share fraud.

The scheme involved the theft of long distance telephone service, either through the theft of cell phone service or through a process known as “PBX hacking.” Hackers targeted PBX (Private Branch Exchange) telephone systems of corporations and placed calls to those systems in an attempt to identify telephone extensions that are not in use. Once an unused extension was identified, hackers illegally reprogrammed the telephone system. The hacked telephone system could then be used by the hackers and others to make long distance telephone calls that are charged back to the victim corporation, creating virtually free telephone lines through which they could make calls. These “free” telephone lines were then used to call RSNs controlled by defendant Uelpenich and others.

Noor Aziz, 50, a fugitive last known to have resided in Pakistan, and others obtained access to hacked PBX systems or cell phones that had been activated with fraudulent information and used those phone lines to originate telephone calls to RSNs controlled by a conspirator and Uelpenich in Slovenia, Liechtenstein, Austria and elsewhere.

The RSNs that Uelpenich controlled and provided to Aziz frequently contained no actual content – they did not have adult entertainment or chat rooms – and could never generate legitimate fees for the RSPs.  Telephone company representatives who suspected fraudulent activity on these phony RSNs found they frequently had recordings of fake rings, fake password prompts, fake voicemail messages, music, or dead air on continuous loops, all to make it appear they were legitimate sites.  

As a result of the conspiracy, telephone companies and the hacked entities lost tens of millions of dollars due to more than 13 million minutes of telephone calls over 4,800 hacked PBX systems. Uelpenich’s conduct between 2010 and 2012 was responsible for approximately $1 million in losses. The case was charged in New Jersey, where AT&T has a major operating center in Somerset County and a fraud detection center in Middlesex County.

The count to which Uelpenich pleaded guilty is punishable by a maximum potential penalty of five years in prison and a fine of up to $250,000 or twice the gain or loss. Sentencing is scheduled for July 15, 2013.

U.S. Attorney Fishman credited the special agents of the FBI Newark Division, under the direction of Special Agent in Charge Aaron T. Ford, and special agents of the FBI Miami Division, under the direction of Special Agent in Charge Michael B. Steinbach, for the investigation leading to today’s guilty plea. The investigation, which relates to conduct ranging from November 2008 through January 2012, is ongoing.

The government is represented by Assistant U.S. Attorney Erez Liebermann, Deputy Chief of the office’s Criminal Division.

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Defense Counsel: Alan Kaufman Esq., New York

Uelpenich, Wolfgang Information