Kansas City- The FBI now thinks that a group of reputed New York mobsters, using facilities in Kansas City, carried out the nation’s most lucrative swindle ever.
The scheme, which involved illicitly charging consumers for calling phone sex lines and visiting Internet porn sites, generated at least $1 billion, investigators said.
“We believe that the loss exceeds $1 billion,” said James Margolin, an FBI spokesman in New York. “Based on our belief, this is the largest consumer fraud in U.S. history.”
Federal prosecutors allege that a collection of area high-tech companies, controlled by the defendants, played a central role in the scheme.
The scam originally was thought to have bilked consumers out of $430 million when authorities released their indictment Feb. 10. The indictment did not include any Kansas City-based employees of the companies.
Overland Park-based USP&C Co. was named in the indictment, along with reputed members of the Gambino crime family, which John Gotti once ran.
According to that document, the defendants used USP&C Co. to place erroneous charges on phone bills by acting as a “billing aggregator” between phone companies and consumers.
USP&C Co. has office space at the Fox Hill Office Building, 4550 W. 109th St., as does Overland Data Center Inc. and Lexitrans Inc., two other companies authorities said the mob controlled.
Overland Data Center, according to the indictment, was used to run 1-800 phone sex lines. When consumers called, USP&C Co. fabricated charges to pile onto the user’s phone bill, according to the indictment.
Lexitrans allegedly participated in a similar scheme, which involved running Internet sites for adult magazines. Software developed by Lexitrans triggered monthly charges after users gave up credit card information for supposed free tours of the sites.
According to a former Lexitrans employee who spoke on condition of anonymity, the firm moved to Kansas City in 1997 because of inexpensive real estate and readily available fiber-optic lines. The indictment alleges that the defendants siphoned the proceeds into a firm they controlled called Local Exchange Co. LLC, or LEC, which is based in Camdenton, Mo.
Regulatory filings indicate that LEC owns 99 percent of Cass County Telephone Co. (CassTel), a rural phone company based in Peculiar that operates 8,000 lines.
The staff of the Missouri Public Service Commission investigated CassTel’s ties to USP&C Co. but found no wrongdoing. The regulatory body’s three commissioners will question company leaders at a public hearing April 19.
Belton resident Kenneth Matzdorff is listed as the owner of CassTel and LEC and, in an affidavit, is named as a high-ranking officer of USP&C Co.
Matzdorff’s attorney has said he is cooperating with federal authorities on the case. Local phone giant CenturyTel Inc., which employs Matzdorff as its lead executive in Missouri, has conducted an investigation and said it found no wrongdoing.
No one who worked for USP&C Co., Overland Data Center, LEC or Lexitrans in Kansas City has been indicted.
Officials at the Missouri attorney general’s office, Kansas attorney general’s office and Johnson County district attorney’s office said they were not investigating any of the local firms involved.