sarettah
07-28-2004, 10:22 AM
http://www.kansascity.com/mld/kansascity/9258128.htm?1c
Posted on Wed, Jul. 28, 2004
FBI charges area exec with aiding mob schemes
By DAN MARGOLIES The Kansas City Star
FBI agents arrested a Cass County telephone executive Kenneth Matzdorff on Tuesday and charged him with aiding New York mob figures in massive phone “cramming” and Internet pornography schemes.
Federal authorities have been scrutinizing Matzdorff's activities as part of a long-running inquiry into the schemes, which they allege were perpetrated by members of the Gambino organized crime family and involved area companies.
An indictment returned by a federal grand jury in Brooklyn, N.Y., earlier this year said the schemes generated more than $400 million, which collectively would make them one of the largest consumer frauds in U.S. history. Matzdorff was not named in the indictment.
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A 21-page complaint filed last Thursday in New York and unsealed Tuesday said that Matzdorff was instrumental in establishing USP&C Inc., an Overland Park company that “was the primary vehicle that the Gambino family used to submit false billing charges” to local telephone exchanges.
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As alleged in the earlier indictment, the cramming scheme defrauded consumers by placing unauthorized charges on their local telephone bills. As part of the scheme, Gambino mobsters set up shell companies that advertised phone sex, psychic hot lines and dating services using 1-800 telephone numbers.
The ads encouraged consumers to call the numbers for free samples. The indictment alleged that consumers who called unwittingly triggered recurring monthly charges on their phone bills for voice mail service.
The mobsters allegedly concealed the scheme by preparing dual sets of materials: one that was used to solicit and defraud customers and another that was presented to local telephone carriers to hide the existence of the fraudulent marketing materials.
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The Internet pornography scheme, as described in the indictment, offered “free tours” of adult Web sites and asked visitors to provide credit or debit card information as proof of their ages. Visitors who tried to leave the sites, however, were bounced to another free tour or were unable to click on an “exit” or “home” button in the free portion of the tour.
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The arrest complaint said that another company associated with Matzdorff, LEC L.L.C., owned CassTel and was paid $6.6 million between 1998 and 2002 by Overland Data Center. Matzdorff, in documents he filed in 2000 to acquire Garden City Bank in Garden City, Mo., said he was LEC's president and a 7.4 percent owner.
The complaint said that subpoenaed documents showed that CassTel paid five to 10 times the true value of computer services provided by Overland Data Center between 1997 and 2003.
Citing a confidential source identified as a once high-ranking official of Overland Data Center, the arrest complaint said the funds were initially transferred to a consulting company owned by one of the mobsters and then back to Overland Data Center.
“This arrangement had the effect of defrauding the Universal Service Fund (“USF”), a federal government program established to assist high-cost and/or rural telephone service providers,” the complaint said, alleging that CassTel received millions of dollars from USF as a result of claims it submitted for the services from Overland Data Center.
The complaint also alleged that Matzdorff acted as a “front man” for mobster Richard Martino when Matzdorff and his wife, Rebecca Matzdorff, acquired 83 percent of Garden City Bank in 2001 for $526,000 in cash and a $2.5 million loan.
The complaint said that during an October 2003 search of Mical/Telcom Online in New York, a company owned by Martino, authorities recovered bank documents and correspondence “discussing the possibility of using Garden City Bank as a merchant bank for purposes of credit card processing. As set forth in the Indictment, an integral part of the Internet pornography scheme was the use of merchant banks to bill victims' credit cards.”
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Posted on Wed, Jul. 28, 2004
FBI charges area exec with aiding mob schemes
By DAN MARGOLIES The Kansas City Star
FBI agents arrested a Cass County telephone executive Kenneth Matzdorff on Tuesday and charged him with aiding New York mob figures in massive phone “cramming” and Internet pornography schemes.
Federal authorities have been scrutinizing Matzdorff's activities as part of a long-running inquiry into the schemes, which they allege were perpetrated by members of the Gambino organized crime family and involved area companies.
An indictment returned by a federal grand jury in Brooklyn, N.Y., earlier this year said the schemes generated more than $400 million, which collectively would make them one of the largest consumer frauds in U.S. history. Matzdorff was not named in the indictment.
************************************************** *****
A 21-page complaint filed last Thursday in New York and unsealed Tuesday said that Matzdorff was instrumental in establishing USP&C Inc., an Overland Park company that “was the primary vehicle that the Gambino family used to submit false billing charges” to local telephone exchanges.
************************************************** *****
As alleged in the earlier indictment, the cramming scheme defrauded consumers by placing unauthorized charges on their local telephone bills. As part of the scheme, Gambino mobsters set up shell companies that advertised phone sex, psychic hot lines and dating services using 1-800 telephone numbers.
The ads encouraged consumers to call the numbers for free samples. The indictment alleged that consumers who called unwittingly triggered recurring monthly charges on their phone bills for voice mail service.
The mobsters allegedly concealed the scheme by preparing dual sets of materials: one that was used to solicit and defraud customers and another that was presented to local telephone carriers to hide the existence of the fraudulent marketing materials.
************************************************** *********
The Internet pornography scheme, as described in the indictment, offered “free tours” of adult Web sites and asked visitors to provide credit or debit card information as proof of their ages. Visitors who tried to leave the sites, however, were bounced to another free tour or were unable to click on an “exit” or “home” button in the free portion of the tour.
************************************************** **************
The arrest complaint said that another company associated with Matzdorff, LEC L.L.C., owned CassTel and was paid $6.6 million between 1998 and 2002 by Overland Data Center. Matzdorff, in documents he filed in 2000 to acquire Garden City Bank in Garden City, Mo., said he was LEC's president and a 7.4 percent owner.
The complaint said that subpoenaed documents showed that CassTel paid five to 10 times the true value of computer services provided by Overland Data Center between 1997 and 2003.
Citing a confidential source identified as a once high-ranking official of Overland Data Center, the arrest complaint said the funds were initially transferred to a consulting company owned by one of the mobsters and then back to Overland Data Center.
“This arrangement had the effect of defrauding the Universal Service Fund (“USF”), a federal government program established to assist high-cost and/or rural telephone service providers,” the complaint said, alleging that CassTel received millions of dollars from USF as a result of claims it submitted for the services from Overland Data Center.
The complaint also alleged that Matzdorff acted as a “front man” for mobster Richard Martino when Matzdorff and his wife, Rebecca Matzdorff, acquired 83 percent of Garden City Bank in 2001 for $526,000 in cash and a $2.5 million loan.
The complaint said that during an October 2003 search of Mical/Telcom Online in New York, a company owned by Martino, authorities recovered bank documents and correspondence “discussing the possibility of using Garden City Bank as a merchant bank for purposes of credit card processing. As set forth in the Indictment, an integral part of the Internet pornography scheme was the use of merchant banks to bill victims' credit cards.”
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