Sun | Mar 18, 2018

Digicel files suit against US firm for mail, wire fraud

Published:Friday | March 18, 2016 | 12:00 AM
Digicel headquarters overlooking the Kingston waterfront.

A United States court has found that sufficient facts have been pleaded against UPM, an Oregon-based firm, to proceed with the case in which it is alleged to have used Digicel Haiti’s subscriber identity cards – SIMs – to divert international telecommunications traffic and, consequently, revenue from the telecoms provider.

US District Judge Michael H. Simon denied UPM’s application to dismiss a claim alleging mail and wire fraud brought by Unigestion Holding SA, which trades as Digicel Haiti.

Head of group public relations for the Digicel Group, Antonia Graham, said the case will now proceed to a full hearing. Unigestion Holding’s lawsuit names UPM Technology, UPM Telecom, and UPM Marketing – all aliases of the same business – as well as Oregon residents Benjamin Sanchez Murillo, Baltazar Ruiz and Tyler Allen as defendants.

It alleges common law fraud, violations of the Racketeer Influenced and Corrupt Organizations Act, conversion, and unjust enrichment. As outlined in court documents, Digicel operates telephone switching systems in Miami and New York City that route international calls from third-party providers such as AT&T and Verizon to its customers in Haiti.

The switching systems use an international gateway that allows Digicel to manage call routing and account for any billing and associated regulatory charges. Under Haitian law, international telephone carriers must charge at least 23 US cents per minute for international calls terminating in Haiti.

Accordingly, Digicel charges thirdparty providers at least 23 US cents per minute to route such calls. SIM cards shipped to Oregon According to the complaint, UPM is an Oregon corporation that offers to route international calls to Haiti at lower rates than Digicel.

UPM does so by purchasing large quantities of prepaid Digicel SIM cards in Haiti, shipping the cards to UPM’s operations in Oregon, and incorporating the cards into a system connected to the Internet. Digicel alleges that UPM sends money by international wire to its agents in Haiti for the purchase of its SIM cards.

The telecoms said shipping documents show that agents shipped Digicel SIM cards from Haiti to Oregon, addressed to Sanchez, owner of UPM Marketing and president of UPM Telecom, as well as Allen, who is also affiliated with UPM.

Customer forms also show that Ruiz, project manager of UPM Telecom, shipped computer equipment to Haiti.

Digicel asserts that Ruiz provided laptops, Internet routers and generators to co-conspirators in Haiti to facilitate UPM's operations.

UPM's system includes SIM boxes or SIM servers in Oregon into which SIM cards are loaded. UPM uses the information on the SIM cards to assist in transmitting calls to Haiti in ways that indicate that the calls have originated from Haitian telephone numbers associated with Digicel SIM cards.

Accordingly, the Digicel telecommunications system charges local, or non-international, rates for the calls.

Digicel refers to UPM's activities as "bypass fraud". It alleges that UPM engages in two categories of fraudulent activities: non-technological and technological.

The Oregon firm has denied wrongdoing.

According to Digicel, the non-technological fraud occurs at the point of sale of Digicel's SIM cards. Digicel alleges that UPM sends agents to Digicel's authorised retailers in Haiti, including grocery and convenience stores, to purchase SIM cards under the false premise that those SIM cards are for the agents' own personal use in cellular handsets.

Restrictions on SIM bulk purchase

It claims that UPM obtains the SIMs in this manner because Digicel itself does not allow for the unauthorised bulk purchase of the cards. Digicel cautions its authorised retailers not to sell SIM cards to anyone who the retailers suspect will resell them and they must document all SIM card purchases.

In order to purchase a Digicel SIM card in Haiti, an individual must complete and file a customer registration form using their government-issued identification card.

Digicel alleges that UPM's agents sometimes purchase SIM cards "using false or altered identification documents procured by local co-conspirators".

Digicel further claims that UPM perpetuates technological fraud when it sells minutes either wholesale to third parties or directly to consumers through phone cards or retail sales of cellular plans and devices.

Then, asserts Digicel, the technological fraud occurs in one of two ways.

First, UPM purchases Digicel SIM cards and register the cards for Digicel's Roam-Like-You're-Home (RLYH) plan, which allows prepaid and postpaid customers to purchase a roaming plan which charges at a rate similar to rates in their home country.

For an access fee of approximately US$25, the RLYH plan allows registered Digicel customers to make international calls to Haiti at rates similar to the local rate.

When a UPM customer places a call, the call is routed to UPM's SIM servers in Oregon. The SIM servers, containing SIM cards purchased from Digicel's dealers and registered for Digicel's RLYH plan, direct the call to a third-party carrier's cellular tower in the US, which then directs the call to Digicel's network as a call coming from a RLYH subscriber eligible for the lower calling rate.

Digicel alleges that UPM uses the RLYH plan to cause international calls to be manipulated in the SIM servers, retransmitted, terminated, and accounted for as regular local calls.

Second, when a call is made by a UPM customer outside of Haiti, the call is routed to UPM's SIM servers in Oregon. The SIM servers then clone Digicel's SIM cards, meaning that the servers manipulate the SIM cards to retrieve and then transmit the unique identifying information contained in a SIM card.

The identifying information from the SIM card is packaged with the call into Haiti, and then the package is routed via the Internet to a local receiver in Haiti.

The local receiver, allegedly operated by agents of UPM in Haiti, uses the cloned SIM card data to complete the call to the ultimate recipient in Haiti through Digicel's telecommunications network in that country.

This process allows UPM to pretend to initiate a local call in Haiti when the call was in fact initiated outside of Haiti, thus bypassing Digicel's international switches and international charges.

In this way, UPM "intentionally manipulates the SIM card data to misrepresent the international call to Digicel's Haitian network as a domestic call made in Haiti, and only the domestic calling fees are charged," the telecoms asserts in the court documents.

Use of multiple receivers

Additionally, Digicel alleges that to avoid easy detection, UPM uses multiple, portable receivers in various locations. The software on the SIM servers manipulates calling patterns by directing calls to be spread among various receivers.

Digicel claims that spreading the calls among multiple receivers is intended to mimic the calling patterns of real people. If all calls went to - and then from - a single receiver in a static location, the abnormal call volumes to the particular tower in the area of the receiver could be flagged as a sign of bypass fraud, the telecoms said.

However, as the court opinion noted, UPM refers to the second routing method as Voice over Internet Protocol. UPM argues that the method has never involved cloning or copying SIM cards because it lawfully purchases the SIMs and simply uses the prepaid minutes on them to enable customers to make local calls in Haiti using Digicel's local network as any local caller would.

UPM further argues that because it pays for both the RLYH plans and the minutes purchased on the SIM cards, UPM and its customers legitimately acquire access to Digicel's local network.

Judge Simon said that if non-technological fraud constituted Digicel's only theory of how UPM defrauded it, the court would dismiss the claim. However, he said the allegations that UPM diverted millions of minutes of calling time away from Digicel's international switches, for which UPM has not compensated the company, satisfy the elements of common law fraud in Oregon.

The judge also ruled that Digicel had not adequately stated claims for non-technological fraud or technological fraud based on affirmative misrepresentations, but said this was not fatal to its complaint.

The court, having ruled that some, although not all, of Digicel's theories were sufficiently plausible to back its claims, denied UPM's motion to dismiss the complaint.