A businessman pleaded guilty Tuesday to rigging pay phones he owned to robotically call toll-free numbers repeatedly so he could collect the 50-cent fee owed for each call, illegally racking up $4 million.
Nicolaos Kantartzis acknowledged using more than 100 pay phones he controlled in the Washington area to make phantom calls to toll-free numbers belonging to companies and the government. Because the calls are free to legitimate users, the entity on the receiving end must pay costs that include a cut for the company that operates the pay phone. As a result, Kantartzis was paid each time his phones rang the numbers, even though most calls lasted only a few seconds and no one was on the other end of the line. Authorities say the scheme spanned six years and 8 million bogus calls.
Kantartzis, 62, pleaded guilty Tuesday in federal court in Maryland to wire fraud, which could carry a prison term of up to 20 years and a $250,000 fine. His attorney, David Irwin, said after the hearing that Kantartzis has repaid the money he earned from the scheme and agreed to forfeit his phones, which have been disconnected. He said federal sentencing guidelines would recommend a sentence of five or six years, though he plans to ask for less when Kantartzis is sentenced Jan. 4.
Irwin said he believed his client's business declined as cell phones became more popular, one factor that may have led him to make the fraudulent calls. He said his client regrets taking a shortcut to make a profit.
"He's an electrical engineer who came up with a program," he said of his client.
Prosecutors wrote in court documents that Kantartzis has owned a pay-phone company since 1995 and controlled at least 165 phones in Washington and nearby Maryland. Starting in January 2005, he used a computer at his home in Bethesda to program the phones to place calls to toll-free numbers for government agencies, companies including Dell and multiple airlines, the documents say.
Pay phone operators are allowed to collect approximately 50 cents for each toll-free call placed from their equipment. But in Kantartzis' case, prosecutors say the calls were not being made by real people.
Kantartzis was caught after an employee at the government's General Services Administration noticed an irregular pattern of incoming calls on the agency's toll free line and an investigation was launched, said GSA spokeswoman Sarah Breen.
"By auto-dialing, this fraudster exploited a public service and essentially, `dialed for taxpayer dollars,'" GSA Inspector General Brian Miller said in an emailed statement.
His scheme isn't unique, however. Two Wisconsin men were charged in April with a similar operation. Prosecutors say they fraudulently obtained more than $1 million over three years.