Digicel Wins $10mn Damages from UPM in Simbox Fraud Trial

A long-running legal battle has seen Digicel Haiti awarded significant damages for frauds committed by UPM Technology, a US-based telco that says they provide communications services to “50+ leading enterprises”. UPM deliberately used technology to give the impression that real people were moving around Haiti with Digicel SIM cards when those SIMs were actually stored at UPM’s Oregon premises and remotely connected to simboxes positioned around Haiti. Digicel originally filed the suit in 2015, which covered fraudulent calls made by UPM between 2011 and 2014; UPM used an array of tactics to delay the trial until this year. After a few days of deliberation, the jury verdict awarded the following damages:

  • USD5.4mn compensation for Digicel’s losses
  • USD3.6mn punitive damages against UPM Technology
  • USD700,000 punitive damages against Duy Bruce Tran, CEO of UPM Technology

The jury decided that UPM was engaged in a classic simbox fraud where termination fees for international calls had been bypassed by using simboxes to make calls that appeared domestic in origin. Oregon Live reports:

Court testimony showed that UPM bought or obtained Digicel Haiti SIM cards, or subscriber identity cards, from third parties in Haiti and then sent the cards to UPM in Oregon. UPM then placed multiple SIM cards in a server, activated the cards with software and used them to initiate two types of calls from the United States to Haiti.

One type of call began in the United States and was sent over the internet to a radio transmitter in Haiti, making the call appear as if it originated as a local call on Digicel Haiti’s network, according to Digicel Haiti’s lawyers. UPM shipped equipment it disguised as DVD players to Haiti that were used to connect the internet-based calls to Digicel Haiti’s network, according to Digicel Haiti’s lawyers.

UPM also abused a tariff plan meant only for use by Haitian customers whilst roaming abroad.

The other type of call also began in the United States with UPM registering Digicel Haiti SIM cards with Digicel Haiti’s discounted calling program called “Roam Like You Are Home.” Using the registered SIM cards, UPM would route an international call as a call from a roaming Digicel Haiti subscriber signed up for the discounted program, concealing the original international caller. As a result, the call was charged at the discount rate.

The damages were far less than Digicel asked for. Digicel claimed that over USD50mn of revenue had been lost because of UPM’s fraud. A lawyer representing UPM, Christopher Savage, countered that Digicel had not provided any CDR records to substantiate their claim, which was instead based on an estimate of traffic received from UPM.

Following the trial, Savage said UPM would consider lodging an appeal. He also said that the US regulator, the Federal Communications Commission (FCC), wanted US telcos to ignore foreign laws by bypassing international termination fees.

“United States law can’t be found to hold illegal something that the FCC itself is encouraging, which is the use of technology to find ways around those high termination rates,” Savage said after the verdict. A termination rate is the price paid when a call out of the country is terminated by having another provider complete it.

The verdict in this trial is a victory for common sense as well as for Digicel. However, it is outrageous that a telco can need to fight so long and so hard to obtain compensation for blatant frauds that began over a decade earlier. Convoluted US laws permitted UPM to deploy a series of obstructive tactics, including a countersuit that will likely fail. The US judge also narrowed the remit of the trial in ways that implied UPM could not be held liable for paying Haitians to purchase SIMs on their behalf, with the result that the trial revolved around the deception involved in using technology to fool Digicel’s controls by mimicking the call patterns of human customers.

US authorities have spent the last few years pointing fingers at foreign jurisdictions and blaming them for telecoms crime. The reality is that the biggest enabler of telecoms crime suffered by Americans is the broken legal system within the USA, which is guaranteed to generate hefty fees for lawyers but takes an age to deliver justice to victims. Another crooked US telco might have evaded responsibility by simply declaring bankruptcy and disappearing before Digicel was able to put their arguments to a jury. If the lawyers running the FCC want to clear up telecoms crime they should start by advocating for the painful but necessary reforms that would speed the execution of justice in cases involving the fraudulent use of communication services. In the meantime, US-based criminals are growing fat by abusing telcos and customers both within and outside the USA.

Eric Priezkalns
Eric Priezkalns
Eric is the Editor of Commsrisk. Look here for more about the history of Commsrisk and the role played by Eric.

Eric is also the Chief Executive of the Risk & Assurance Group (RAG), a global association of professionals working in risk management and business assurance for communications providers.

Previously Eric was Director of Risk Management for Qatar Telecom and he has worked with Cable & Wireless, T‑Mobile, Sky, Worldcom and other telcos. He was lead author of Revenue Assurance: Expert Opinions for Communications Providers, published by CRC Press. He is a qualified chartered accountant, with degrees in information systems, and in mathematics and philosophy.