Phone Resellers Avoid Trumped-Up Terrorism Charges, Now Face Trumped-Up Fraud Charges Instead

from the saving-face dept

Thu, Aug 17th 2006 11:23am — Carlo Longino

Some good news came for the three Palestinian-American men arrested in Michigan, basically for having 1,000 prepaid cell phones: they won't be charged with any terrorism-related offenses. The bad news: they've been hit with federal fraud charges instead. The guys' business plan was pretty straightforward: buy subsidized prepaid phones, then get them unlocked so they could work with any compatible provider, then sell them for a higher price. Prosecutors allege the men's actions represent an attempt to defraud prepaid provider Tracfone, phone manufacturer Nokia and the public by trafficking in counterfeit goods. While unlocking phones, particularly for resale, annoys mobile operators, it's not abundantly clear how doing so represents fraud, nor how unlocking the phones makes them counterfeit, and it's not clear at all why doing so is illegal, though Tracfone and other providers apparently make the bizarre claim that it's copyright infringement. In any case, it seems like any potential legal problems here would be of a civil nature, and not worthy of federal fraud and money-laundering charges. Somehow, you get the feeling somebody doesn't want to admit the arrest and subsequent treatment of these guys was nothing other than a big mistake.

Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.

Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.

While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.

–The Techdirt Team

30 Comments

If you liked this post, you may also be interested in...

Reader Comments

Subscribe: RSS

View by: Time | Thread

Anonymous Coward, 17 Aug 2006 @ 11:37am

Intent
There is no good reason to have 1000's of cash and 1000 prepaid phones in your car while taking pictures of the Mackinac Bridge. In addition, if they were subsidized phones, who was paying the subsidy? The profit these men are taking is the subsidy that someone else is paying for a specific reason.
It's like Chris Rock said, if you need $300 from an ATM at 3am, you're up to no good.
If you don't check out the people in bad circumstances with good intent you'd miss the people in bad circumstances with bad intent.
[ link to this | view in thread ]
Neal, 17 Aug 2006 @ 11:54am

Who are...
...Palestians?

Palestinians, maybe?
[ link to this | view in thread ]
Carlo, 17 Aug 2006 @ 11:55am

Re: Who are...
Ah, those would be people from Palestia. These guys, however, were of Palestinian descent. Thanks for pointing it out.
[ link to this | view in thread ]
Quar, 17 Aug 2006 @ 11:57am

Re: Intent
300 at 3a? sounds like me trying to get my car back from tow lot. Was a great way to end a first date, I promise you.

As for subsizidy I bet its the phone company to the store where they were purchased. Fairly common practice inorder to get a product out there, and make more money spent on the service, which has a higher profit margin.
[ link to this | view in thread ]
Joe Smith, 17 Aug 2006 @ 1:17pm

Re: Intent
"if you need $300 from an ATM at 3am, you're up to no good. "

That may be but it is not necessarily any of your or the government's or my wife's business. Well, maybe my wife - but she is the last one I would want to know.

Seems to me that the only basis for a fraud charge would be an argument that the buyers represented in some way to the seller that the buyer would use the telephones in one way (which representation was important to the seller) having in mind all along an intention to use the telephones in a different way (knowing the seller would object if they were told the truth)
[ link to this | view in thread ]
Anonymous Coward, 17 Aug 2006 @ 1:29pm

Re: Intent
Lovely. This is what our country has come to. Guilty until proven innocent. Idiot.
[ link to this | view in thread ]
Kendro, 17 Aug 2006 @ 1:34pm

Bogus
Sorry, you pay for the phone as in a pre-pay plan, it's yours to do with as you please. Just because they list some terns of sale somewhere doesn't mean that you are legally bound to accept it or even read it.

Even if they remove the "provider lock" they still have to pay some carrier to have the phone's SSID talk to the cellular system. You can't just turn it on and magically get on a carrier's network for free.
[ link to this | view in thread ]
Anonymous Coward, 17 Aug 2006 @ 1:41pm

"There is no good reason to have 1000's of cash and 1000 prepaid phones in your car while taking pictures of the Mackinac Bridge."

If they were in an 18 wheel truck delivering phones to another address and stopped to take a picture, no one would make such a stupid comment. Furthermore, a $1000 in cash is a suspicious thing? That's not even ten nights worth of lodging or about enough to pay for gas coast to coast.
[ link to this | view in thread ]
Anonymous Coward, 17 Aug 2006 @ 1:42pm

Re: Intent
It's like razors and razor blades. Sell the razors way below cost (i.e. cell phones) in order to sell lots of razor blades (i.e. cell phone minutes) at very high margin and volume later. In this case, our enterprising, free-trading, capitalist Palestinians found a way to modify the razor (that they legally owned) to fit someone else's blades. The only one suffering here is the cell phone telco that got hoisted on its own petard (business model). Walmart got paid, Nokia got paid, and even the telco got paid (what they asked for the phones).
[ link to this | view in thread ]
Anonymous Coward, 17 Aug 2006 @ 2:09pm

Re:
Charging them with fraud is just a way to investigate them further. Who buys a cell phone promising x minutes for y dollars from some guy in a van? People that don't want to be traced. I'd prefer my law enforcement check that out and maybe embarass a few people if it could lead to other things. I'd rather check out suspicious people, (simple statistics, who is blowing up buildings?) than just shrug it off.
[ link to this | view in thread ]
Gomorrah, 17 Aug 2006 @ 2:16pm

Re: Re: Intent
Looking at the behavior of somebody acting suspicously is not saying they are guilty. These gentelmen were acting suspicously, and as such the police were correct to question that.

And as to the comment that if they were in an 18 wheeler doing that same activity, your correct. That would not be quite so suspicous considering the fact that 18 wheelers run 24 hours a day 7 days a week. And carrying around $1000 dollars cash is unusual in this day and age, delivery men do not like to carry large amounts of cash on them due to the increased chance of being robbed. They carry cards, either personal or their companies depending on the situation.
[ link to this | view in thread ]
Jim, 17 Aug 2006 @ 2:42pm

Government
The Amerikwan government no longer even vaguely resembles the fine republic bequeathed us by our forefathers. If those were Israelis with 1000 cell phones driving away from a smoking terrorist attack, our government would have sped them on their way. We need to rethink where our loyalties should lie. Maybe then we can rekindle the spirit of '76. And when we do, it will be hard to find an empty tree branch in Washington.
[ link to this | view in thread ]
BillDivX, 17 Aug 2006 @ 2:50pm

still full of holes
'Looking at the behavior of somebody acting suspicously is not saying they are guilty. These gentelmen were acting suspicously, and as such the police were correct to question that.'

Sure, investigate. But if there's no proof of wrong doing, stop at investigating.

'And as to the comment that if they were in an 18 wheeler doing that same activity, your correct. That would not be quite so suspicous considering the fact that 18 wheelers run 24 hours a day 7 days a week.'

oh sure, cause last time I checked, cars were only allowed on the road between 9-5 m-f. I suppose nobody drives their car across country non-stop, driving in shifts?

'And carrying around $1000 dollars cash is unusual in this day and age, delivery men do not like to carry large amounts of cash on them due to the increased chance of being robbed. They carry cards, either personal or their companies depending on the situation.'

Again, fallacious logic. It implies a decent business already going, or at least men with incomes and good credit. Maybe this was the brain child of two guys down on their luck, with too much poor credit to get a business loan or line of credit? So it's a bad way to run a business. Big deal, being a poor entrepeneur doesn't make you a criminal. Well...unless you run Enron, and already HAVE millions to screw your shareholders out of...

Finally, two professional business men (the kind that carry credit cards and act intelligently) wouldn't be stopping on their delivery route to take a picture of a bridge. But two buddies trying to drum up cash to get something going, who've never driven a large shipment of anything across country before, might. They MIGHT make ALL these mistakes. But again, being a clueless amateur at running a business isn't illegal. Most small businesses start out by doing things this way: i.e. any way they can get done.

I still fail to see any proof that anything illegal was done, nor anything harmful, or even anything resembling theft.
[ link to this | view in thread ]
paul, 17 Aug 2006 @ 3:47pm

its not legal because the phone COs says so...
what, you mean someone is finally saying that the king has no cloths? There is hope yet.
[ link to this | view in thread ]
RANDOLF SCOT, 17 Aug 2006 @ 4:01pm

Quote
"This and no other is the root from which a tyrant springs; when he first appears he is a protector." - Plato
[ link to this | view in thread ]
CubFx, 17 Aug 2006 @ 4:06pm

Large amounts of cash
'And carrying around $1000 dollars cash is unusual in this day and age, delivery men do not like to carry large amounts of cash on them due to the increased chance of being robbed. They carry cards, either personal or their companies depending on the situation.'

Not true. I routinely carry tens of thousands of dollars when travelling to or from a job. This is in addition to a company AMEX. Their are still many places where you cannot pay via Credit Card, and many more where you cannot pay via AMEX. In other situations, paying via credit cards carries a credit card surcharge. I carry the cash to cover these expenses. If the job is overseas, I have to carry even more cash to cover crew expenses.

We are still a world away from an "e-cash" society.
[ link to this | view in thread ]
Sean, 17 Aug 2006 @ 4:07pm

Re: Re: Re: Intent
"And as to the comment that if they were in an 18 wheeler doing that same activity ... 18 wheelers run 24 hours a day 7 days a week ... either personal or their companies depending on the situation."

I'm guessing it's people like you who are trying to charge these two guys with a crime. Instead of just saying, "Well darn, they weren't doing anything wrong." You consistently try to pull sh#t out your a#s to make them seem guilty of *something*.

Everything you've said makes absolutely no sense to anyone with half a mind. But you just can't drop it. Now you're just making stuff up to make them seem guilty.

Oh, and I have carried around $1,000+ in my wallet. Boy those were some wild nights. :)
[ link to this | view in thread ]
cp, 17 Aug 2006 @ 5:17pm

uh
okay well everyone is saying that they were plannign to use these to detonate bombs. okay why do you need 1000 cellphones to do that? you can do it with just 1? kay. kay.
[ link to this | view in thread ]
jeff, 17 Aug 2006 @ 5:58pm

wartime. palestinians. go get 'em.

being an average white male still does have its advantages.
[ link to this | view in thread ]
tl, 17 Aug 2006 @ 6:36pm

Um, they were caught with $11,000 in cash if my ears heard the newscast correctly. Correct me if I'm wrong.

Maybe some of you carry around $1000, but I don't know many driving around with $11G's in their car.

very suspicious.
[ link to this | view in thread ]
Search Engines WEB, 17 Aug 2006 @ 9:15pm

Mental Health & Career Consequences
They cooperated with the arresting officers for several hours before charges were filed.

It is important that they be protected from National publicity - there are deranged people who could have retaliated against their familes - without knowing or caring about the facts!

Also, no one knows the long-term psychological effects this could have on people who are barely out of their teens. If they are convicted of felonies, their entire future may be ruined, regardless of whether they do prison time or not.
[ link to this | view in thread ]
Donald Duck, 18 Aug 2006 @ 2:43am

No one has said any thing about IED's
They make IED's with cell phone parts. There is people over seas setting off bombs by hitting the quick-dial buttons on there trac fones. Wait a minute how many terrorist is arrested with a tracfone :)
If I was a terrorist in iraq I wouldn't use a f$%ing tracfone. Maybe these be poor terrorist wanting to use it on israel. So they might have wanted the parts to make bombs. Also since the gov listens to all phone calls they send part of a text message with one phone and send the rest with another.

Pictures of Big Mac?

Here's one they probably thought it was awesome???

http://www.wikimapia.org/#y=45813247&x=-84725533&z=15&l=0&m=a

how many bridges look like that in the middle east? Besides what nut job made that bridge? I wouldn't be caught on that bridge for a million bucks. Fluke Earth Quake hits that area, your meat on a sheet.

Even though these people might be in some sort of legal cell phone business, little cell phone companies are every where now, I guess some people call this profiling.

There is a lot of companies like wal-mart that might have a sale on phones and they limit you from buying more then 3 at a time, what ever nation your from.

So you would probably have to go to several different stores to purchase a 1000 or so phones. What is $1000 bucks. That is nothing, that would buy you just enough kegs for a OK party. If you ever filled out a credit card app. They email a copy of that to Home Land Security that you applied. So there is some serious doubt about how innocent these people really are? If the IRA was running around and we caught two irish men buying a 1000 phones. You know they probably might be up to no good. The problem here is would you trust them.

I would like to point out also that if you took 1000 cell phones and sold them in London or Europe just for making phone calls. You could be rolling in the dough.

The Pound is worth more then our dollar so is the Rope. 1000 cell phones for sale in LONDON, England for about $30 dollars american, there would be about 15 pounds. That totals up to $30,000 dollars. So if they bought 10,000 phones sold for $45 american that is $450,000 dollars. Now sale phones for a profit in a rich arab nation with their Dinar worth almost what 8 times the dollar and you could be making a lot of money. We are at war and IED's are in use so I say error on the side of caution. One minute though all of these phones can be tracked they are GSM phones they can be tracked. Let me add that part.
[ link to this | view in thread ]
Anonymous Coward, 18 Aug 2006 @ 7:40am

Re: Intent
> There is no good reason to have 1000's of cash and 1000 prepaid phones in your car while taking pictures of the Mackinac Bridge.

There's no good reason to be holding closed door meetings with Enron executives in the oval office. Let's go after the real terrorist, GW Bush.
[ link to this | view in thread ]
Anonymous Coward, 18 Aug 2006 @ 7:42am

Or...
Or not letting UN inspectors into Guantanamo Bay.

Or using secret Soviet prisions.

Or suppressing the photo and video evidence of attrocities.

Or rigging the 2000 election.

Or breaking federal wiretap laws.

etc., etc., etc.
[ link to this | view in thread ]
satan, 18 Aug 2006 @ 11:06am

Re: Intent
who in the hell quotes chris rock the comedian. everything he says is a joke.
[ link to this | view in thread ]
Wizard Prang, 6 Sep 2006 @ 9:34am

Pot. Kettle. Black.
"Who buys a cell phone promising x minutes for y dollars from some guy in a van? People that don't want to be traced. I'd prefer my law enforcement check that out and maybe embarass a few people if it could lead to other things."

And you call yourself "Anonymous Coward" :)

So... hiding behind anonymity is ok for you, but not for other people?

Getting back on-topic, if these guys actually did something wrong, then they should be investigated and if found guilty, punished. But on its face, all it looks like they did was upset some Telco's business model... which I, for one, applaud.

Last time I looked, "Thoughtcrime" was not yet on the law books.
[ link to this | view in thread ]
Wizard Prang, 6 Sep 2006 @ 9:38am

Suspicious?
What kind of a nation has this become where carrying a wad of cash has become a crime?
[ link to this | view in thread ]
Wizard Prang, 6 Sep 2006 @ 9:42am

Enough with the 2000 election already!
The other points I do not dispute, but... whatever the outcome of the 2000 election, 2004 left no room for doubt.
[ link to this | view in thread ]
Anonymous Coward, 15 Jun 2007 @ 6:12am

Re:
exactly!!!!
[ link to this | view in thread ]
Eric, 8 Nov 2008 @ 2:48pm

wow
sorry, pal, but your argument just isn't very convincing.

according to their lawyer, the digital camera had 50 pictures on it. 20 of them were of the bridge.

now, i've traveled all over the world (US, England, France, Germany, Holland, Switzerland, Afghanistan, Kuwait, Qatar, etc.), but i haven't seen ANY structure that so captivated me that i would take 20 pictures of it, so yes, i'm suspicious of these men.

the authorities had plenty of PROBABLE cause to arrest them, PROBABLE meaning "they're PROBABLY up to no good."

these suspected terrorists will get their day in court to prove their innocence (if, in fact, they are innocent).

that's the great thing about this country.

and to the idiot who wrote this:

"If those were Israelis with 1000 cell phones driving away from a smoking terrorist attack, our government would have sped them on their way."

i say:

if the Palestinians ever caught three Israeli men with a van full of cash, 1000 cell phones, and numerous pictures of a single Palestinian landmark, they would've shot all 3 men on the spot and thrown their bodies in a ditch somewhere. so rather than bemoan the fate of these Palestinian-American terror suspects, let's be grateful we live in a country where there's due process.
[ link to this | view in thread ]