WASHINGTON—U.S. law enforcement officials are expected to continue scrutinizing large purchases of prepaid cell phones and possible links to terrorist activity on American soil, despite failing to make such a connection to a wireless buying behavior that may be far more widespread than initially thought.
Indeed, U.S. officials in Michigan said a probe of irregular prepaid cell phone purchases will not end as a result of a federal magistrate’s decision to throw out conspiracy and money laundering charges against three Texas men. The three men originally faced terrorism charges, which were subsequently dropped because of insufficient evidence.
James Baldinger, a Florida lawyer who has represented Miami-based TracFone Wireless Inc.—the largest independent prepaid mobile phone company in the United States—in prepaid hacking litigation, cautioned against reading too much into last week’s court ruling and predicted more law enforcement action.
“I think this is nothing more than a bump in the road…No one should interpret this decision by the Michigan court to mean it’s OK to engage in this type of activity,” said Baldinger.
Baldinger said his discussions with U.S. attorneys around the country has led him to believe the practice of accumulating large numbers of pre-paid cell phones and reconfiguring them to work on other wireless carriers’ networks is pervasive and may be the work of a handful of ringleaders. TracFone stands to take a significant financial hit, he said, if the unlocking and resale of TracFone handsets continues unabated.
Whether it is secondary black market at work or a stealth mechanism for terrorists to collect communications tools, or both, remain unclear. But law enforcement and homeland security authorities are not apt to let such peculiar buying behavior escape scrutiny.
After a preliminary examination on the government’s case against the three men in Bay City, Mich., last Tuesday, U.S. Magistrate Judge Charles E. Binder dismissed conspiracy and money laundering charges against brothers Louai Othman, 23, and Adham Othman, 21, and cousin Maruan Muhareb, 18, for lack of probable cause.
The three men—all of Middle Eastern descent—were first arrested in mid-August after attempting to buy about 80 handsets early in the morning at a 24-hour Wal-Mart store. Police found approximately 1,000 handsets in the men’s van and pictures of the five-mile long Mackinac Bridge that spans the states upper and lower peninsulas. That worried law enforcement.
“The cell phones can be used as detonators. Batteries can be disassembled and used to make methamphetamine. Obviously there’s something wrong here,” Caro Police Chief Ben Page told the Associated Press at the time. The three men were subsequently held on bonds of $750,000 each.
The men’s families claimed they were simply in Michigan to buy phones they planned to resell to a wholesaler in Texas, at a profit of about $5 per device.
A similar scenario recently played out in Ohio where law enforcement investigated the purchase of a large quantity of prepaid phones, but were unable to find a terrorism link.
After terrorism charges were dropped against the three men in Michigan, the government decided to accuse them of defrauding customers and money laundering related to handsets manufactured by Nokia Corp. and marketed by TracFone.
TracFone has been aggressively litigating against individuals and small firms accused of disabling TracFone’s proprietary software—enabling customers to access TracFone’s prepaid wireless service—and then reselling the phones as new for operation on other wireless carriers’ networks.
Indeed, TracFone filed a new prepaid phone hacking lawsuit in late August against several individuals in a Florida federal court.
