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Mob accused of phone-card scam

NEW YORK, Jan. 11 -- It's dial 'M' for Mafia in New York. A federal grand jury is investigating allegations that the mob ran a phone-card scam that has left thousands of consumers with deactivated cards.

According to The Daily News, the scheme has also left the country's fourth biggest long-distance carrier still waiting for $94 million it is owed. Phone-card firms, like Communication's Network Corp. (Conetco), which is thought to be a mob front, buy access to telephone systems, such as WorldCom and MCI. They sell the pre-paid cards in denominations from $5 and up, reasonable rates that attract students and immigrants who generally call specific counties. Scammers fail to pay the phone system owners, so the telecommunications giants pull the plug. When customers try to use their cards, they find that the plastic is useless. The News says Conetco, owned by new Gambino family crime boss John Gotti, Jr., set up shop in 1995 and by the following year, was selling $20 million in cards monthly. But when the company went belly up at the end of 1996, it owed WorldCom tens of millions of dollars. The News also points to bankruptcy papers that show $45 million are missing from the company's coffers. The company included Joseph 'Joe the German' Watts, convicted of getting rid of a Gambino slay victim, on its payroll. Watts's lawyer says, 'If there were any thefts, they were after he left.' In an unrelated federal probe, Gotti's own phone-card company is under investigation for similar charges. The News says Nic O Dan Communications allegedly folded before paying its $50 million tab, owed to MCI and two other long-distance companies. ---

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Copyright 1998 by United Press International. All rights reserved. ---

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