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Verizon Tech Charged In $4.5M Equipment Scam

samzenpus posted more than 2 years ago | from the show-me-the-money dept.

Verizon 104

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.'"

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I thought maybe he was... (5, Funny)

Genda (560240) | more than 2 years ago | (#38341402)

Building routers 1 part at a time...

Re:I thought maybe he was... (-1, Offtopic)

ArsenneLupin (766289) | more than 2 years ago | (#38341410)

Damn, you were quicker. Congrats for your 1!

Re:I thought maybe he was... (-1, Flamebait)

shoehornjob (1632387) | more than 2 years ago | (#38341424)

No wonder why their network sucks. You can't get any new parts. Seriously though this guy must have been really stupid to think he could get away with it. A word of advice for ya dude, If you drop the soap in the shower don't bend over to pick it up.

Re:I thought maybe he was... (1)

Anonymous Coward | more than 2 years ago | (#38342000)

Verizon network sucks? You either work for ATT, or live in a cave(which incidentally I am sure you could get a Verizon signal in).

Re:I thought maybe he was... (0)

chudnall (514856) | more than 2 years ago | (#38342142)

A word of advice for ya dude, If you drop the soap in the shower don't bend over to pick it up.

He's 62. ewww....

Re:I thought maybe he was... (1)

Anonymous Coward | more than 2 years ago | (#38341432)

The Idiot should have just sold the used parts

Re:I thought maybe he was... (0)

Anonymous Coward | more than 2 years ago | (#38345388)

Except, the shipments are made on an exchange basis. They expect, and are looking for, the old parts to be shipped back to them.

Re:I thought maybe he was... (1)

Cramer (69040) | more than 2 years ago | (#38347372)

Exactly! Maybe Verizon has a different relationship with Cisco, but every time I've ever had Cisco replace defective parts, they've always required the bad parts be sent back. In a few cases, the courier takes the defective stuff with him.

Re:I thought maybe he was... (5, Funny)

Anonymous Coward | more than 2 years ago | (#38341658)

"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

Re:I thought maybe he was... (1)

mjeffers (61490) | more than 2 years ago | (#38342048)

I'm glad I'm not the only one who immediately thought of that song.

Nice! (0)

ArsenneLupin (766289) | more than 2 years ago | (#38341404)

1. First filed a fraudulent service request
2. Pocket the part
3. ...
4. Resell it for a profit!

When he grows up. (5, Funny)

deniable (76198) | more than 2 years ago | (#38341414)

He wants to be a defense contractor.

Re:When he grows up. (2)

Galestar (1473827) | more than 2 years ago | (#38347904)

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

Big deal, a couple of routers. (5, Funny)

Anonymous Coward | more than 2 years ago | (#38341420)

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

greed kills (3, Insightful)

Nyder (754090) | more than 2 years ago | (#38341430)

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 (5, Insightful)

erroneus (253617) | more than 2 years ago | (#38341480)

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 (1)

Lumpy (12016) | more than 2 years ago | (#38341542)

All companies don't want your old broken gear back. I have a dead TV here, Panasonic wont take it back when I but a new one. This is normal for 100% of all companies on the planet.

Re:greed kills (4, Informative)

SuricouRaven (1897204) | more than 2 years ago | (#38341560)

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 (2)

erroneus (253617) | more than 2 years ago | (#38341696)

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 (1)

somersault (912633) | more than 2 years ago | (#38341984)

True, I think both Dell and HP asked for their batteries back when we needed replacements.

Re:greed kills (0)

Anonymous Coward | more than 2 years ago | (#38342280)

Dell "wants the part back", but at least on an enterprise level, they really don't care. I know a number of guys who have the "dell certified, advance parts replacement" deal where they order a part for a desktop/laptop, dell ships the part next-day and they swap it themselves. Dell includes a return shipping label, and the parts are supposed to go back, but a lot of these guys have handed the part off to the mail room to be returned only to get a phone call 4 months later from Dell asking "we noticed these parts haven't come back..."

In every single case, a response of "well we handed it to the mail room for shipping, I'll check into it and see if it got mislaid" was good enough for Dell. True, in most cases it turned out that FedEx fucked up and didn't pick the package up on time or lost it in transit (let's face it, FedEx is CRAP compared to what DHL service used to be), and in a few it honestly just got put in a corner waiting for the Fedex guy and then forgotten about under other stuff, but the point remains: Dell really doesn't care too much about getting the parts back. A returned bad motherboard or hard drive isn't going to be refurbished, it costs too much even at indian/malaysian slave wages to do that versus just landfilling the bad one and pulling another new one out to ship to the next customer.

Re:greed kills (0)

Anonymous Coward | more than 2 years ago | (#38342466)

(let's face it, FedEx is CRAP compared to what DHL service used to be)

Are you serious? DHL is quite possibly the worst shipping company in recent history. I was honestly shocked that Dell used DHL exclusively; I could only guess some hot DHL sales rep was "servicing" some Dell decision-makers pretty well.

Little wonder they pulled out of the domestic shipping market (an event I marked by dancing a jig on the roof), forcing Dell to switch to another carrier (I'd prefer UPS, but FedEx or even the post office are lightyears better that DHL).

Re:greed kills (0)

Anonymous Coward | more than 2 years ago | (#38342568)

Uh, no.

DHL was always on time, always reliable. We called them up, there was a guy out by noon the next day, knew what package needed picking up, would pick up and scan any others that needed to go out.

FedEx? Half the time their fucking drivers don't even show up. When they do, they're never prepared, and they won't take even a prepaid box ready for shipping if someone didn't specifically call FedEx and say "we need package X with tracking number Y picked up", even if it is RIGHT THERE WITH THE FUCKING LABEL ON IT.

DHL had their act together, they got screwed by the US government because UPS and FedEx lobbied hard to get regulations changed in order to make it harder for DHL (who, unlike UPS and FedEx, are a "foreign" entity) to do business. FedEx are fucking jokes.

Re:greed kills (0)

Anonymous Coward | more than 2 years ago | (#38343050)

You can call up DHL and they will have a driver out by noon the next day? That's so cute!

It is 10:30 and I can punch up UPS or FedEx online and get someone out here by noon too! Noon today, that is.

DHL had their act together, they got screwed by the US government because UPS and FedEx lobbied hard to get regulations changed in order to make it harder for DHL (who, unlike UPS and FedEx, are a "foreign" entity) to do business.

DHL could barely avoid pissing themselves. I'm pretty sure they were simply laughed out of the domestic market, but if the government had anything to do with it, it would be the FIRST SMART THING government has done in 10 years.

Re:greed kills (1)

Moryath (553296) | more than 2 years ago | (#38343182)

It is 10:30 and I can punch up UPS or FedEx online and get someone out here by noon too! Noon today, that is.

I wonder where you work. Where I work, if I call up UPS or FedEx or go into their system online (makes no difference) today, I'll be lucky to get someone out here by thursday to pick the damn thing up even if we paid for overnight - the only way to get true "overnight" is to take it direct to the central depot downtown as an "overnight" from one other suburb branches sits around in the suburb depot all night before they truck it to the central depot in the morning.

I have to second those who've defended DHL on this thread, I really miss having them around, the service I got from them was top-notch while the UPS and FedEx are horribly incompetent and incredibly rude.

Re:greed kills (0)

Anonymous Coward | more than 2 years ago | (#38343252)

I'm in metro Boston.

I have to second those who've defended DHL on this thread, I really miss having them around, the service I got from them was top-notch while the UPS and FedEx are horribly incompetent and incredibly rude.

I am starting to wonder if I fell into some alternate reality where DHL was good. Anyway, at least in my reality, UPS > FedEx > USPS > * > DHL.

Re:greed kills (1)

Moryath (553296) | more than 2 years ago | (#38345426)

For my reality: DHL > UPS = FedEx > USPS. UPS and FedEx are interchangeable, I've had the same issues (drivers not leaving attempted delivery tags, even missing packages because they were too fucking lazy to leave a contact tag for a package that required signature) with both.

UPS and FedEx are also MASTERS of lying out their asses, either pushing the doorbell once and running straight for the goddamn truck, or not knocking/ringing at all and just claiming they "attempted delivery" even if they never came near your door, relying on home delivery recipients to have the tracking number and be checking the tracking website every fucking day even if it's something that was pre-ordered a while ago or if it's something that they might not have known was coming (like a surprise birthday or christmas gift!).

Re:greed kills (1)

Cramer (69040) | more than 2 years ago | (#38347942)

Actually, they're all pretty bad about that. My favorite is the delivery note with nothing at all marked on it. At least that driver was smart enough to stick them in the door frame instead of hanging on the doorknob or relying on that sticky to hold it to a dirty door in the wind.

At the apartment, many times, but UPS and Fedex would just go straight to the office and unload everything. If you're lucky, you got a note as per above. But most of the time, if you weren't looking at the tracking info, you'd get a call from the office staff to "get your crap out of the closet." (they were much less irate about it when educated about the UPS/Fedex way of delivery.)

Of course, they were also just as likely to leave stuff stacked outside your door... where neighborhood child could walk off with it, dogs could pee on it, etc. They do that today at my townhouse... boxes sitting out in my driveway in the rain. (now that I think about it, they do that at the office too... crap stacked in the hallway when you get back from lunch.) I've had the landscapers bring me jiffy mailers they found blown in the ditch. And Fedex has left legal documents propped against my front door -- things that require my verified signature (i.e. SHOW ID and sign PAPER, not that damned electronic pad that has the resolution of a fat crayon.)

Re:greed kills (1)

Qzukk (229616) | more than 2 years ago | (#38351218)

My favorite is the trick of leaving stuff under the doormat. Like the time I came home to the box my computer case shipped in under my front doormat.

Re:greed kills (1)

Lumpy (12016) | more than 2 years ago | (#38342608)

I replaced 2, 5 year old Dell servers last year and Dell did not ask for us to ship them the old servers.
In fact they did not even ask if we were replacing old servers.

Re:greed kills (1)

hierophanta (1345511) | more than 2 years ago | (#38349052)

i lol'd

Re:greed kills (1)

fuzzyfuzzyfungus (1223518) | more than 2 years ago | (#38341900)

With the exception of failure analysis(which certainly wouldn't be done by every outfit for every replacement; but might become a factor if some FRU is getting replaced a lot, knowing which subcontractor to fire can be handy...) or "parts" that are swapped as units but can be trivially refurbed and contain enough good bits to be worth salvaging; the company probably doesn't want the dead part back, just something they have to have shipped and recycled; but everyone I've ever dealt with has(unless specified to the contrary for some specific reason, as with hard drives that can't leave the premises anything close to intact) has at least reserved the right to ask for the dead part back if you request a warranty replacement.

Actually exercising that right is considerably rarer, because most of the time they don't have anything to gain; but there is usually a spot somewhere in the documentation that either says "Here's the new one, don't bother about the old one." or "Here's a mailing label, old part is back to us in 30 days, or you are getting invoiced as though you'd ordered a spare."

Re:greed kills (1)

timeOday (582209) | more than 2 years ago | (#38343080)

I have a dead TV here, Panasonic wont take it back when I but a new one.

If by "but" you mean "bought," that would explain it, since warranty fraud isn't an issue.

I got a new TV from Sony last year on warranty and I assure you, the technician who brought out the replacement collected the old one. I guess the question who he returned it to, on up the chain.

Re:greed kills (0)

Anonymous Coward | more than 2 years ago | (#38349648)

Which is why in my Canadian Province we have a recycling tax on new televisions and computers that funds a program that allows you drop off old electronics to major retailers who are obligated to ensure they're recycled and not dumped on African shores. Amazing what a little legistlation can accomplish....

Re:greed kills (1)

mjwalshe (1680392) | more than 2 years ago | (#38348280)

From experience I did the course on handling serious discipline cases for BT and the tutors commented that the most common criminal cases involved this sort of scam and back handers (bribes) from contractors for small civil engineering works.
I and i wont say what but there was one case where the contractor took short cuts on a job that could have killed people.

Re:greed kills (4, Insightful)

Technician (215283) | more than 2 years ago | (#38341522)

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 (2)

Ihmhi (1206036) | more than 2 years ago | (#38341688)

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 (0)

Anonymous Coward | more than 2 years ago | (#38341736)

It reminds me of that guy who sold parking outside the zoo for 25 years. He wasn't employed by either the zoo or the city.

Re:greed kills (4, Funny)

weszz (710261) | more than 2 years ago | (#38342110)

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 (0)

Anonymous Coward | more than 2 years ago | (#38342782)

Best part was that each thought the other had employed him. The only time that anyone knew any better was the day he died (he never missed "work"), and someone at one called the other wondering when he was going to be in.

Re:greed kills (1)

Anonymous Coward | more than 2 years ago | (#38341840)

What you said might be true, on the other hand having sound internal control in your purchasing department is the critical factor here. Accounts Receivable and revenue are integrally connected in the accounting function. It is crucial for the company to have high level of segregation of duties, ensure rotations, required vacation time etc. If he got away with it long enough, its likely he knew the independent auditors thresholds for sampling. $40,000 sounds quite high though so that most likely means he was in such a position that he was able to ensure he could provide enough fraudulent purchase orders, credit memorandums etc.

Fraud in this area is the hardest to prevent, but in a company the size of Verizon that has been around a while and should be in-tune with the failure rates should have been able to catch this a little quicker it would seem.

Re:greed kills (4, Insightful)

petermgreen (876956) | more than 2 years ago | (#38341948)

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 (4, Interesting)

Migraineman (632203) | more than 2 years ago | (#38342152)

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.

Re:greed kills (0)

Anonymous Coward | more than 2 years ago | (#38342364)

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.

No, less on to would-be equipment thieves - do the work. They "found" the guy because he ordered replacement parts, but never actually replaced the old part. All he would have had to do was replace the old part and then sell the old part out as "refurbished / no warranty" on eBay, and nobody would ever have caught up to it. If he was asked what he did with the old part, he could have plausibly said "well I threw it out, it was bad, someone must have pulled it from the dumpster" and that would have been that. Nobody would have blinked, because the new part would have been the one on the network.

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.

What you're really telling us here is: doing it over and over and over again made them get lazy about what they were doing.

Re:greed kills (0)

Anonymous Coward | more than 2 years ago | (#38343006)

When I worked shipping at Dell I found a rather large security hole. I told management about it a couple times (my immediate supervisor actually wanted to take advantage of the security hole) and eventually discussed it with my co-workers.

A month or two after I got fired I found out that a number of my co-workers were taking advantage of the security hole. They ended up getting caught because someone who purchased a computer from them wanted a repair.

Re:greed kills (0)

Anonymous Coward | more than 2 years ago | (#38347068)

I'm an Internal Controls Auditor. Especially considering the nature of the products you're talking about, there were three obvious rules violated in the scam. 1: The people who can initiate transactions were not separated from the maintenance of the customer accounts. 2: Immediate and/or periodic follow-up with the customer to confirm shipping addresses, such as by phone calls or yearly account confirmations. 3: Monitoring and matching of shipments received (particularly returns handling). The saving grace is that there was collusion - it's a heck of a lot harder to develop specific controls that will be 100% effective when there is collusion.

This isn't to say anything about the computer system that didn't freak when a non-confirmed sale was deleted - it should have been SCREAMING that there was an inventory accounting error.

Re:greed kills (1)

Migraineman (632203) | more than 2 years ago | (#38352028)

I believe the biggest issue, and the reason this scam was possible in the first place, was that the production and repair departments had separate accounting systems. Or at least they were segregated enough that they were effectively separate. Probably had to do with the way WIP (work in-progress) is accounted for as required by the IRS. New production goes into the accrual system, where repairs are not inventory items.

I can't say that I was briefed on the specifics. I wasn't. However, I was told that He was in a position to break the chain of continuity for the accounting system when the equipment was returned. His specific responsibility was to receive the equipment, and initiate the task of returning it to the production queue. If he only did the first half, and he "forgot" to do the second half, no one would be the wiser unless they did a cross-system audit of the books. I don't know why the de-booked sale didn't leave an orphaned production unit in the system. Perhaps He and She occupied two positions that were supposed to be check-and-balance counterpoints. If you compromise both of those, you can defeat the oversight system.

I'm sure the audits were coming. Even a $100M company will notice a $500k unresolved discrepancy on the books. They'll write-off $50, not $500k.

Re:greed kills (0)

Anonymous Coward | more than 2 years ago | (#38352112)

Going by what you say, I would bet a lot more had to do with the lack of controls surrounding the process of using separate systems (and within the same system, if she was able to initiate sales and input unverified customer addresses) than WIP accounting. Particularly since, with $40k pieces of equipment, you can bet that stuff is serialized (which usually means it is tracked to the customer records for the purposes of repairs and returns). Validation of the on-hand inventory to the serial number file should have turned this up annually at a minimum.

And you're also right about the numbers - for example, my division of the company has around $200M in annual revenue, our write-off for obsolete RMA'ed goods is $30k without Controller approval (and the accrual account gets reviewed quarterly).

Re:greed kills (1)

GodfatherofSoul (174979) | more than 2 years ago | (#38347338)

hehe I just watched Taken [imdb.com] . Pretty decent and better than I expected.

Re:greed kills (0)

Anonymous Coward | more than 2 years ago | (#38351062)

AC for obvious reasons.

This scan was done in Aus by Telstra (Telecom back then) in a very similar fashion. Here's how it goes:

Someone figured out that repair crews don't really care where the spare parts come from. The repair crews turn up to work, the parts are dropped off, and they get to work, then go home with the job done.

Some bright spark inside the company figured out two things:
1) How to place orders in the maintenance system
and
2) That the orders were put together and shipped by a contracted company

So, what he did is place orders for equipment, designate a manhole or location in a suburb where no maintenance was scheduled, waited until the parts/equipment was dropped, picked up the shipment and stored it in a warehouse.

This went on for some time. The scam was perfect. The two companies didn't really talk to each other except for the purchasing and accounting systems, and the amount of equipment was not considered exceptional.

Now, the fun part. The guy was selling the equipment back to the company that sold the equipment to Telecom.

He was caught because some of the equipment had unique codes with which are used to register the equipment in the system, and some of the equipment was marked as it was processed by the contracting company.

The contracting company started to look into the abnormalities.. then discovered that one of its suppliers was selling their own gear back to them.. which led to the police being involved.. which resulted in this guy's well stocked warehouse with equipment stolen from Telecom being discovered.

He was busted, the stolen equipment returned, and the lives of many accounts and maintenance people made absolute hell for the next 5 years. Eventually the managers left or forgot about the incident and life got back to normal. For those few years though, well, it sucked. Badly.

A woman's scorn? Forget it. Nothing compared to management being embarrassed.

Re:greed kills (0, Flamebait)

Anonymous Coward | more than 2 years ago | (#38342828)

"could HAVE", dumbfuck.

AzzHole (-1)

Anonymous Coward | more than 2 years ago | (#38341478)

No wonder Equipment was always late ..

on the plus side.... (4, Funny)

toomanyhandles (809578) | more than 2 years ago | (#38341510)

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 (3, Funny)

drmofe (523606) | more than 2 years ago | (#38341516)

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

Re:Obligatory (0)

Anonymous Coward | more than 2 years ago | (#38341892)

Oh, Pancho!

RMA System (5, Informative)

sociocapitalist (2471722) | more than 2 years ago | (#38341528)

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 (1)

will_die (586523) | more than 2 years ago | (#38341552)

You would think they would but he was doing it for around 5 years.
They had to of had a replacement contract where they were not required to return the broken part or Cisco was doing a very poor job of tracking.

Re:RMA System (2)

varmittang (849469) | more than 2 years ago | (#38341784)

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

Re:RMA System (2, Insightful)

Anonymous Coward | more than 2 years ago | (#38342948)

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

Re:RMA System (4, Insightful)

gl4ss (559668) | more than 2 years ago | (#38341568)

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 (3, Interesting)

klubar (591384) | more than 2 years ago | (#38342766)

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 (1)

swb (14022) | more than 2 years ago | (#38344974)

Cisco probably goes along with lenient RMA terms for major clients because they have such profit in the contract that it's not really costing them any money to provide that leniency, plus getting a large volume of broken equipment back has its own costs. The marginal value of the equipment may not be high enough to warrant repairing it, at least for low end equipment.

It also wouldn't surprise me that Cisco would have some kind of competitive intelligence team that buys equipment from resellers and traces its provenance so that Cisco can alter its sales policies to keep that used equipment out of the secondary market. Ie, a trade-up discount of $250 that involves actually giving up the old hardware may actually be worth a new product sale of $5000 if it keeps the old hardware out of the secondary market.

My guess is that this guy just did it too long and eventually the contract came up and somebody in finance decided to do an audit or start digging into the data and came up with a funny pattern.

Re:RMA System (2)

isfry (101853) | more than 2 years ago | (#38346722)

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:RMA System (3, Interesting)

alen (225700) | more than 2 years ago | (#38341714)

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

Re:RMA System (4, Interesting)

TheCarp (96830) | more than 2 years ago | (#38341762)

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 (1)

John_Sauter (595980) | more than 2 years ago | (#38342102)

Whenever I replace a part, I have to record the serial number of the old part, the serial number of the new part, and the name of the customer. I return the old part to the warehouse, and don't get paid for the service call until it arrives. Clearly, Verizon Wireless wasn't this careful; perhaps now they are.

Re:RMA System (1)

Culture20 (968837) | more than 2 years ago | (#38342232)

Maybe he bought broken parts of the same type on the Internet and returned them to Cisco? Assuming all the parts aren't checked for serial numbers, that'd be hard to track.

Re:RMA System (0)

Anonymous Coward | more than 2 years ago | (#38346164)

eyebrows must be raised when the technician enters "F00BAR" as the serial # of the equipment being replaced.

Re:RMA System (0)

Anonymous Coward | more than 2 years ago | (#38350600)

I work for a large global network operator who naturally buys a lot of Cisco kit. As one of my first tasks when I joined I was asked to handle an RMA.

I organised the RMA and the replacement unit was shipped to a warehouse. The warehouse guys somehow lost track of the faulty unit. I spent 6 months chasing it up and found it in the end. In that time, Cisco contacted me twice asking me to return the faulty part as soon as possible. For the rest of the time, notably the last 4 months, silence. Not a peep, even after I had contacted *them* asking if they had seen anything (as the warehouse guys believed they had returned the faulty unit), they still didnt ask me any follow up questions.

So its easy to assume that you could somehow "stall" Cisco into believing youre doing something about it. If youre a big enough customer and the people handling RMAs know it, maybe they might not care too much ("we dont want to upset a big customer"), perhaps with a little "encouragement" from their account manager(s) to simply get the replacements out...

Tbilisi (-1)

Anonymous Coward | more than 2 years ago | (#38341530)

Was he from Georgia, former USSR?

Capitalism at its best (-1)

Anonymous Coward | more than 2 years ago | (#38341634)

Goldman Sachs should hire him. Hes has all the qualifications needed to work as a trader.

Re:Capitalism at its best (1)

fsckmnky (2505008) | more than 2 years ago | (#38341754)

Hey now. Traders do just that, they trade. They don't steal and fence. ;)

Re:Capitalism at its best (0)

Anonymous Coward | more than 2 years ago | (#38341764)

I'm sorry for insulting fences and thieves by comparing them with traders.

Re:Capitalism at its best (3, Insightful)

fsckmnky (2505008) | more than 2 years ago | (#38341782)

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 at its best (1)

fuzzyfuzzyfungus (1223518) | more than 2 years ago | (#38341968)

The teenage fry-cook is a 'trader' in roughly the same sense that a Private E-1 is a 'military contractor'...

Not strictly false; but not terribly usefully true.

Re:Capitalism at its best (0)

Anonymous Coward | more than 2 years ago | (#38341976)

The kid slinging burgers is performing a job and actually doing something. The trader is just a leach.

Re:Capitalism at its best (1)

fsckmnky (2505008) | more than 2 years ago | (#38341998)

Well, if I didn't comprehend that the customers of the fast food joint, weren't purchasing the food and eating it voluntarily, I could accuse the kid working behind the counter of being a mass murderer by way of providing poison that kills people.

But I happen to understand the benefits traders provide to society with their activity, as well as the benefits the kid at the burger joint provides to society by his activity, which is exactly why both securities trading and burger slinging are legal occupations.

Re:Capitalism at its best (0)

Anonymous Coward | more than 2 years ago | (#38342262)

Trader is a leach? Do you know at least 400 people you can sell a stock to? Traders inflate and deflate the price of a security just by that very fact. Creating a buyers market for something increases the value of said thing.

But I take it you dont like the fees and they should do their job for free. How about this I have a house I want painted could you swing by and do it for me oh and pick up some paint while your at it. My wife has a few colors picked out so check with her first.

Re:Capitalism at its best (2)

rwhamann (598229) | more than 2 years ago | (#38343592)

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.)

Re:Capitalism at its best (1)

Dr_Barnowl (709838) | more than 2 years ago | (#38342078)

He trades HIS time for money. The value of his time is dictated to him by his employer, because he has no bargaining power, and his employers fight dirty to prevent any collective bargaining power accumulating in the form of a union, but at least it's his time, an honest trade of a real commodity.

Traders trade other peoples money. They dictate the value of stocks, and currencies. The very definition of the stock market is an instrument that defines the value of companies, and the traders play it for all they can get. By playing their games, they can make the cash value of something plummet, even though it's intrinsic value never changed, buy it for cents on the dollar, and reap the difference as profits. By inserting themselves as a kind of proxy in the loop via high frequency trading, they can squeeze even more out. They hire math PhDs specifically for their ability to invent financial instruments that are too complex to understand, so they can't be taxed or monitored.

Traders will freely admit they don't give a shit about any of the claimed positive effects that the market has. It is not some noble calling, providing liquidity and a fair valuation of your business. It's a racket. The first thing Wall Street thought after the planes hit the Twin Towers, after "Whoa!", was "Whoa, the price of gold must be skyrocketing." The first thing they think when war breaks out is "How can I get me some of that action?"

I've no problem with honest trade, until something better comes along. But Wall Street and the LSX have very little to do with honest trade.

Re:Capitalism at its best (1)

Anonymous Coward | more than 2 years ago | (#38342414)

Traders trade other peoples money.

They only trade their own money OR the money of other people who have given it to them voluntarily to trade. This is no different than you giving your daughter money to help buy a house.
 

They dictate the value of stocks, and currencies.

Absolutely false. The market as a whole determines the value of stocks and currencies, via standard accepted accounting practices. A used car dealer doesn't dictate the value of his cars, the market determines that.
 

The very definition of the stock market is an instrument that defines the value of companies, and the traders play it for all they can get.

No. The definition of the stock market, is the environment in which stocks are traded. It doesn't "define" the value of companies by itself. The markets perception of the value of a company AS WELL AS the companies actual performance determines value. As for traders being competitive, yes they are, as is any other business person, as is any other sports team member, as is any other politician, etc etc etc. Lifeforms compete for resources and this is not unique to securities traders.
 

By playing their games, they can make the cash value of something plummet, even though it's intrinsic value never changed, buy it for cents on the dollar, and reap the difference as profits.

If by playing games, you mean, using mathematics and timing, that is no different than any other company does, in order to insure efficient operations. As for market manipulation by any single participant, please go do some research. You will find there are multiple mechanisms in place that prevent market manipulation, and with the exception of fraud or other illegal activities, traders do not cause prices to plummet. They do profit, if they enter a position, with the expectation that the price of something will rise or fall. But it is the overall market, ie, the environment in which one chooses to own a thing or not, that causes prices to rise and fall.
 

By inserting themselves as a kind of proxy in the loop via high frequency trading, they can squeeze even more out.

This is absolutely not true. As much as we've all read fantastical articles on wired.com about high frequency trading using supercomputers to siphon off profits, trading does not work that way. Every trade is a transaction between a buyer, and a seller. It is a mutual agreement between 2 parties. If you detest mutual agreements between two parties, I suggest you try to make it through life without participating in such transactions yourself. You would surely starve. HF is a near zero sum game between HF traders, and has little effect on long term investors of the health of a company. In the short term, it increases liquidity, which is a good thing, and everyone benefits from it. The only major risk factor in HF trading is the size of the positions that are allowed to be traded via algorithmic platforms, which can easily be limited via simple legislation.
 

They hire math PhDs specifically for their ability to invent financial instruments that are too complex to understand, so they can't be taxed or monitored.

This is pure newspaper fodder. Certainly the average person, like yourself, who doesn't study complex financial instruments has little chance of understanding them, at the same time, you aren't in the business of trading them. Car manufacturers hire PhDs to help manufacture cars, because the public just wants to drive them. The public doesn't understand how they are manufactured, but receives benefit from the activity anyway.

FYI. Financial instruments are taxed, and monitored. The current state of the tax code is such that there are millions of loopholes, which can be legally used to reduce ones tax burden. If you think the loopholes should be closed, then by all means, call your congressmen and demand they be closed. I think we would all benefit from a simplified tax code, but in the meantime, there is no reason to vilify that which you don't understand simply because you don't understand it.
 

Traders will freely admit they don't give a shit about any of the claimed positive effects that the market has.

Car dealers don't care whether you are driving your car to work, or to school, or to grandmas house. It is not their job to care. Traders are concerned with purchasing risk when there is no risk, and selling risk before there is risk. This does not automatically mean the counter party is screwed. The counter parties risk environment may in fact be such that he needs to sell to reduce risk, where the buyers situation is the exact opposite.
 

I've no problem with honest trade, until something better comes along. But Wall Street and the LSX have very little to do with honest trade.

If you have no problem with honest trade, then you in fact have no problem with securities trading. The contracts are standardized and agreed upon ahead of time, the rules are spelled out very clearly. If only used car dealers were so open and honest.

People should study economics before they attempt to fix the economy. But then again, fixing the economy isn't nearly as exciting and fulfilling an activity as burning witches.

Capitalism works (1)

Anonymous Coward | more than 2 years ago | (#38341790)

You seem to hate market traders for some reason. Could it be that you lack the basic knowledge and intelligence needed to invest wisely?

Go back to watching "Dancing with the Stars" on that nice TV you bought in that installment plan. That's as close you should get to the financial system, it takes more brains than you have to play this game...

Re:Capitalism works (1)

Cragen (697038) | more than 2 years ago | (#38341922)

He probably feelss that most market traders would trade their mothers, wifes, and children, for starters, for more money. I have no idea where he got that notion. Your compassion reply surely has helped rid him of that idea. happy holidays.

Re:Capitalism works (4, Funny)

fuzzyfuzzyfungus (1223518) | more than 2 years ago | (#38341942)

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...

Re:Capitalism works (0)

Anonymous Coward | more than 2 years ago | (#38341996)

Only a moron like yourself would buy something on an installement plan. Please don't take your case for a generality.

Re:Capitalism works (1)

VGPowerlord (621254) | more than 2 years ago | (#38344056)

Go back to watching "Dancing with the Stars" on that nice TV you bought in that installment plan.

Installment plan? Ugh, you mean like one of those Rent to Own places?

The ones who charge like $600 for a Nintendo Wii (retail price $150)?

Mark Faris got busted for this in 2002 (0)

Anonymous Coward | more than 2 years ago | (#38341890)

Mark Faris got busted for almost the exact same fraud in 2002. He's now teaching ethics courses (http://www.mpvethics.com/), so it's official: karma has completely given up on the universe and packed it in.

$4.5M of Cisco Gear? (5, Funny)

clonehappy (655530) | more than 2 years ago | (#38342014)

So, he stole 1 router?

Verizon (-1)

Anonymous Coward | more than 2 years ago | (#38342028)

I am 100 percent sure sh it wages had something to do with this.

Re:Verizon (4, Insightful)

Tolvor (579446) | more than 2 years ago | (#38342322)

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:Verizon (0)

Anonymous Coward | more than 2 years ago | (#38342386)

But this magically becomes untrue when it comes to set the salary of managers.

Re:Verizon (1)

Shatrat (855151) | more than 2 years ago | (#38344794)

Manager turnover can have a much higher cost if it disrupts all the employees working for that manager. The GPs logic still holds true. A higher paid manager won't work any harder, long term, but he will be less likely to look for another job.

Re:Verizon (0)

Anonymous Coward | more than 2 years ago | (#38344552)

Except on a macro scale is does matter. Jobs and production aren't created by corporations. They're created by demand: corporations are merely a facilitator, and assuming a healthy economy/society and non-monopolized market segment, new startups will pop up as necessary. Demand is created by the people doing the demanding. If money isn't in the hands of potential buyers, but is instead stashed away in bank accounts that high finance leverages into a global game of russian roulette, then demand drops and jobs and production drop right after.

Re:Verizon (-1)

Anonymous Coward | more than 2 years ago | (#38344920)

You can rationalize paying people shit when you decide the metrics upon which you judge their productivity.
Moreover, paying people shit translates in to treating them, as people, like shit.

Worker moral is the intangible asset which management steals to line their own pockets, ultimately setting up their organizations for failure.
In an ideal system managers would bed judged not on numbers which managers pick, but the psychological health and socioeconomic health of their workers.

Governments attempt to do this very thing via law and regulation, but our management culture has zero incentive and it shows. Worker/company loyalty is non existent. Both parties engage in a relationship expecting to screw eachother as hard as possible.

Re:Verizon (0)

Anonymous Coward | more than 2 years ago | (#38345222)

Cut his wage in half and see what that does for your productivity and workforce retention.

Awesome. (0)

Anonymous Coward | more than 2 years ago | (#38342084)

Now thats some fine company thinking. Screw em all. Get what you can while you can.

CEO's everywhere must be proud. Except of course at verizion.

Is this guy my gas man? (0)

Anonymous Coward | more than 2 years ago | (#38343458)

Seems like a regular scam undertaken by dodgy engineers of all types. Given it's such a common scam, why can't we stop this occuring so often across so many different practices?

Re:Is this guy my gas man? (1)

ISoldat53 (977164) | more than 2 years ago | (#38344484)

That's why you always require the parts to come back to the factory.

Re:Is this guy my gas man? (0)

Anonymous Coward | more than 2 years ago | (#38344866)

I have a bunch of replacement parts for EMC sans. On example of how I got some of them. Our SAN was dialing home every few days with a random P/S fault. Everytime that happened, I was sent a replacement part and called by a tech to schedule a repair visit. By the time they finally got here to replace the part, I had 4 them here waiting. Oddly, the tech brought one with him as well. A year later, I still have them sitting on the shelf, I've never hared from them on sending them back. They have return labels on them, when I get unlazy, I'll eventually send them back. That's what if funny about large data centers. There is ALWAYS a bunch of parts and stuff laying around and with employee turnover, no one knows exactly what it is for, how it got there, or if they can get rid of it or not. We still have a bunch of alalog telcomm stuff plugged in and powered on and we've been using unified communications here for at three years. Shortly after moving to UC, our telcomm guys were let go and replaced. No one knows what is still in use and what isn't so it just sits there and runs.

Simple theft != technologically interesting. (1)

140Mandak262Jamuna (970587) | more than 2 years ago | (#38345696)

It is simple theft, indistinguishable from so many other thefts. Just because the stealee is Verizon and the stolen is techie parts, it does not make it is any more interesting than other forms of embezzlement.
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