Verizon Tech Charged In $4.5M Equipment Scam

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.'"

Comments

I thought maybe he was...

[Genda]

Building routers 1 part at a time...

Re:I thought maybe he was...

[Anonymous Coward]

"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.

[CHORUS]
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.

[CHORUS]
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

When he grows up.

[deniable]

He wants to be a defense contractor.

Re:When he grows up.

[Galestar]

+5 Funny, should be +5 Insightful if you ask me

Big deal, a couple of routers.

[Anonymous Coward]

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

greed kills

[Nyder]

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

[erroneus]

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.

Re:greed kills

[Technician]

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.

Re:greed kills

[SuricouRaven]

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.

Re:greed kills

[Ihmhi]

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. =\

Re:greed kills

[erroneus]

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.

Re:greed kills

[petermgreen]

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

[weszz]

This happened in Milwaukee Wisconsin for downtown sporting events... people in full gear sold parking spots on the road and in city owned lots, then when it was full they took off with their money and the police followed ticketing every car for illegal parking in city lots...

turns out they were just guys with cones and lights...

Re:greed kills

[Migraineman]

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.

on the plus side....

[toomanyhandles]

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

[drmofe]

"I would have gotten away with it if it hadn't been for that darn Cisco Kid"

RMA System

[sociocapitalist]

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.

Re:RMA System

[gl4ss]

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

[alen]

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

Re:RMA System

[TheCarp]

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.

Re:RMA System

[varmittang]

Or they charged Verizon for the parts and accounting just didn't notice.

Re:RMA System

[klubar]

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.

Re:RMA System

[Anonymous Coward]

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

Re:RMA System

[isfry]

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 tape to pull the "bad" part and the replacement part had factory seals on it still and was more valuable. However having the bad S/N's still is service will get you when they do go bad and you have to replace something that has been already replaced at that point people started to look deeper.

Re:Capitalism at its best

[fsckmnky]

You do realize, *everyone* is a trader, right ? Even the kid slinging burgers at the local fast food joint is a trade. He trades time for money.

Re:Capitalism works

[fuzzyfuzzyfungus]

I, for one, certainly can't imagine why anyone would dislike market traders, aside from envy. As we all know, financial markets have been widely regarded as practically a paragon of model free markets, remarkably free of corruption, fraud, regulatory capture, and other such socially disruptive distortions.

Also, trading floors are frictionless ideally planar surfaces, inhabited by perfectly spherical traders who obey the ideal gas laws...

$4.5M of Cisco Gear?

[clonehappy]

So, he stole 1 router?

Re:Verizon

[Tolvor]

Wrong

There have been numerous studies done which show there is little relationship between wage paid and work done. Wages only influences the retention of your trained workforce (less wages, more training budget) when they switch to a more profitable job (in a bad economy, wage goes down and productivity up).

Put it another way. Take your average production line employee and double his pay. Does production increase any? No. Production is limited by outside factors (order received, assembly time, work flow from other members, waiting for results to be generated...) However that person may feel better, but as a company I really don't care how that employee feels (yes I know this isn't PC but it is real). Why should I then increase a person's wage?

Take another example. A company in the U.S. competes against a company outside of the U.S. Suppose that there is a extreme difference in labor costs between these two countries/companies. As a result the price for the finished product is much lower when produced in the company outside of the U.S. Which one will the consumer buy? (Hint, take a look at where your car/computer/clothing etc was assembled/built). High (or increasing) wages are counter-productive.

Re:Capitalism at its best

[rwhamann]

No, what I believe he means is that the "inflate and deflate" that the trader can do is worthless to society. It adds no real property or value to society, it only transfers value from one person to another. That's the leach part, the part that derivative traders maximized to harm the housing market (I won't say crash because that implies that mortgoage brokers and customers were free of fault, which they certainly were not.)