ELIMINATING PAY PHONE TOLL FRAUD AT THE PORT

ELIMINATING PAY PHONE TOLL

FRAUD AT THE PORT AUTHORITY

BUS TERMINAL IN MANHATTAN

Gisela Bichler

and

Ronald V. Clarke

Rutgers, The State University of New Jersey

Abstract: During the late 1980s and early 1990s, international toll fraud

at the pay phones of the Port Authority Bus Terminal in Manhattan was an

entrenched criminal enterprise involving millions of dollars per year. People

wanting to call outside the U.S. could make contact with a "hustler" at the

terminal who knew how to obtain illegal access to toll lines, and who would

connect the callfor themfor a fraction of the usual cost. This business helped

to attract many criminals to the building, and toll fraud materially con-

tributed to the terminal's unsavory atmosphere. It proved highly resistant

to police action and was only eliminated during a comprehensive effort by

the management to rid the building of crime. Various measures recom-

mended by two separate groups of consultants were implemented, including

a reduction in the number of pay phones, restricting access to high-risk pay

phones outside rush hours, removing the phones' international dialing

capacity and disabling the telephone keypads to prevent the routing of

fraudulent calls through the exchange systems of private businesses.

INTRODUCTION

The telephone system has an important dual role in the production of

crime, both as crime target and crime facilitator. Its pay phones are the

target of theft and vandalism and its long-distance calling facilities are

subject to wide-scale "toll fraud." The telephone system facilitates a variety

Address correspondence to: Gisela Bichler. School of Criminal Justice, Rutgers

University, 15 Washington Street, Newark, NJ 07102.

Gisela Bichler and Ronald V. Clarke

of serious offenses, such as kidnapping and criminal conspiracy, and also

makes possible a vast number of the more everyday offenses of prostitu-

tion ("call girls"), drug dealing and obscene phone calling.

Apart from the usual array of criminal justice responses (police crack-

downs, task forces, stiffer penalties and the like), some specific counter-

measures have been developed, frequently by the phone companies

themselves, to deal with these various crimes. Illegitimate access to toll

lines has been made more difficult, and pay phones have been target-har-

dened to prevent theft and vandalism. To prevent their use in drug dealing,

they have also been removed from some neighborhoods, or their capacity

to receive incoming calls has been blocked. In addition, "traps" to identify

the source of obscene phone calls and wire-tapping equipment to listen

into the phone conversations of known racketeers have been developed

(Natarajan et al., 1995).

Little of this activity, whether crime or countermeasure, has attracted

the interest of criminologists, though some early research was under-

taken on specific crimes. This included small-scale studies of obscene

phone callers or their victims (e.g., Savitz, 1986; Dalby, 1988) and

exploratory work on the environmental correlates (neighborhood charac-

teristics, natural surveillance, usage levels, etc.) of vandalized pay phones

(Mawby, 1977; Mayhew et al., 1979).

Stimulated by the development of situational prevention, there have

recently been signs of an awakening interest in the effectiveness of some

specific countermeasures. Analyses undertaken in Australia (Wilson,

1990; Challinger, 1991) and England (Markus, 1984; Bridgeman, in press)

have documented successful measures involving redesign, re-siting and

target hardening to reduce theft and vandalism associated with pay

phones. In New Jersey, the introduction of Caller-ID (a device that displays

the telephone number of an incoming call) was found to have reduced the

incidence of obscene phone calls (Clarke, 1990), while an analysis of

obscene phone-calling patterns led to the conclusion that such devices

would probably also be effective in Britain (Buck et al., 1995). Finally, the

introduction of a new computerized phone system on Rikers Island (a New

York City jail) was shown to have reduced jail phone costs by half as a

result of eliminating fraudulent access by inmates to toll lines (La Vigne,

1994).

The new phone system at Rikers Island also led to fewer fights between

inmates because removing the scope for fraud eliminated much of the

competition for access to the phone. In addition, as all inmates were issued

Eliminating Pay Phone Toll Fraud at the Port Authority

personal identification numbers (PINs) linked with their commissary

accounts, it was possible to identify any excessive phone use by particular

inmates (La Vigne, 1994). The reduction of violence was an unexpected

benefit and shows how the previously insecure phone system "created"

additional crime beyond the fraudulent use it permitted.

The present study also documents successful efforts made to deal with

toll fraud, and the additional problems created, but this time at the pay

phones of the Port Authority Bus Terminal at 42nd Street in Manhattan.

International toll fraud at the bus terminal was a highly organized

business involving millions of dollars and inconveniencing commuters,

who often found it difficult to find a phone not in use. More seriously, the

fraudsters attracted to the bus terminal — and possibly also some of those

using their services — constituted a pool of criminals who preyed upon

commuters and other terminal users. In short, the opportunities for toll

fraud helped to produce the more general crime problems at the terminal,

documented by Felson et al. (this volume) that made it notorious

throughout the northeast U.S. (Baehr, 1992; Meier, 1992; Myers, 1992).

The precise nature of the problem involving the telephones was not

immediately apparent to management and emerged only in the course of

the successful effort to tackle the more general crime problems at the

terminal (Felson et al., this volume; Lambert, 1995). This paper describes

the efforts made to understand and deal with the pay phone problem, and

evaluates the effects of the measures adopted. First, however, the bus

terminal is briefly described.

THE PORT AUTHORITY BUS TERMINAL

The Port Authority Bus Terminal (PABT) is the primary ground

transportation facility for the New York metropolitan region. Commuter

buses arrive at the terminal in midtown Manhattan from New Jersey and

the nearby counties of New York State, and travelers can obtain direct bus

service between the terminal and the three international airports serving

the region. Bus service can also be obtained to the Atlantic City casinos,

the Meadowlands sports complex, Monmouth Park and Aqueduct

racetracks and the New Jersey shore. In addition, the terminal provides

direct and connecting bus travel throughout the U.S., Canada and Mexico.

The terminal currently handles about 55 million passengers annually, and

on a typical weekday approximately 7,000 buses use the terminal.

96 Gisela Bichler and Ronald V. Clarke

The PABT is a large and complex structure consisting of two wings. The

south wing of the building occupies an entire city block between West 40th

and 41st Streets, from Eighth to Ninth Avenues. The north wing occupies

about half the block between Eighth and Ninth Avenues, from West 41st

to 42nd Streets. Above and below street level, the north and south wings

are connected by corridors, walkthroughs and bus roadways, and direct

underground passageways connect the terminal with the Eighth Avenue

and 42nd Street subway station. The terminal has three separate loading

levels capable of handling about 220 buses simultaneously. A three-story

structure above the terminal roof has more than 1,100 auto parking

spaces. Ticket plazas, waiting areas, restrooms, restaurants and other

services are located throughout the building.

CRIME AT THE BUS TERMINAL PAY PHONES

While it had been apparent for some years that the PABT pay phones

were the locus of criminal activity, the precise nature of the problem was

unclear. Despite there being nearly 350 of these phones, they were always

busy with people lined up to use them, even on weekends and outside

rush hours when few commuters were using the terminal. Police

suspected that the people loitering around the phones were drug dealers

and prostitutes who used the phones to make contact with their cus-

tomers. Some phones were clearly "controlled" by particular individuals

who were occasionally involved in violent territorial disputes with inter-

lopers.

In addition, from at least 1987, the PABT was widely known to be a

place where toll fraud was rife. People who wanted to make calls to

anywhere in the world could do so at a fraction of the usual cost by making

contact with a "hustler" at the terminal, who would place the call for them.

Certain banks of phones were reportedly "reserved" for calls to particular

countries, for example, China at one carousel and India at another.

According to newspaper reports of the day (e.g., McFadden, 1987), the

hustlers were obtaining illegal access to the international lines through

two methods. The first was by "shoulder surfing," which involves

"hustlers" positioning themselves to hear the number spoken by a

legitimate user or to see it entered on the telephone keypad. Many hustlers

became very adept at this method of obtaining numbers, which they could

then use to gain illegal access to the long-distance lines. A second method

Eliminating Pay Phone Toll Fraud at the Port Authority

of obtaining these access numbers was by purchasing them from "middle

men" who were in contact with hackers who had penetrated the computers

of telephone companies to "steal" the calling-card billing numbers issued

to customers.

The loitering and criminal activity surrounding the phones contributed

to the terminal's threatening and unsavory atmosphere. The Port

Authority Police had made various efforts to deal with the problem, but it

proved difficult to gather sufficient evidence for an arrest

and, when this

was possible, the offender was often back in the terminal the next day

having been released on bail. Consequently, the police became frustrated

and assigned low priority to dealing with the activity which continued

unabated, sometimes in the full view of police officers (Holloway, 1992).

Only in 1990, when a task force was created to improve the environ-

ment and atmosphere of the bus terminal, did the nature and the scale of

the toll fraud really become clear. The activity related to pay phones was

specifically targeted by the task force. Resolution of the problem took three

years and involved the implementation of recommendations made by two

different groups of consultants. The task force received little help from the

telephone companies providing service to the pay phones.

Moreover, the

Port Authority absorbed major losses in pay phone revenue in order to

prevent their customers from being victimized from toll fraud. The follow-

ing sections describe the two-stage process by which toll fraud was

eliminated.

STAGE ONE — THE PROJECT FOR PUBLIC SPACES,

INC.

The task force first contracted with the Project for Public Spaces, Inc.

(PPS) to undertake an analysis of the misuse of pay phones, and to

recommend solutions. PPS is a non-profit corporation specializing in the

planning, design and management of public spaces. Founded in 1975, the

organization grew out of the work of William H. Whyte's Street Life Project,

with the objective of improving problematic public spaces so as to make

them more attractive, enjoyable and, ultimately, more active. In developing

their recommendations, PPS projects employ a variety of observational and

survey techniques in analyzing how people use the public spaces con-

cerned.

Gisela Bichler and Ronald V. Clarke

Analysis

As a first step in their analysis of the problem, PPS located every pay

phone in the building. It was found that the PABT had many more of these

telephones (347) than the two large railway stations in Manhattan, each

of which has considerably more commuter traffic than the PABT. The

Pennsylvania Station, with 96 pay phones, serves New Jersey and Long

Island rail commuters as well as AMTRAK long-distance travelers, and

Grand Central Terminal, with 210 pay phones, serves commuters from

Westchester County and Connecticut. PPS also found that the PABT pay

phones generated more than twice as much income ($210,954 in April

1990) than the combined revenue ($87,880 for April 1990) from the pay

phones at two of the region's major airports, LaGuardia and JFK Interna-

tional.

These findings prompted the following observations:

"... the current situation at the PABT is such that it functions as a

comfortable communications/transportation hub for illegitimate as

well as legitimate uses and that a part of the problem is an excess of

pay phones... This excess of telephones allows ample telephones for

other uses, many of which are not ones the Port Authority wishes to

support. This is a clear repetition of an issue found with other aspects

of the Bus Terminal; where there is a vacuum of desirable activity,

other activities, potentially undesirable, will fill the space" (PPS,

1990:2).

In order to target pay phones for removal, as well as to identify the

precise nature of the misuse, PPS undertook more detailed studies, one

of which involved systematic observation of particularly active phones to

identify "illegitimate" users. This study proved abortive because there was

no reliable way of distinguishing illegitimate from legitimate callers,

though the "hustlers" were more readily identifiable. Another study in-

volved a survey of more than 300 commuters waiting in line for buses

during the evening rush hours. This research revealed that pay phone use

by commuters was largely confined to calling their homes or offices to

report on delays and estimated times of arrival. These were usually collect

calls or made by coin and were approximately four to five minutes in

duration.

Eliminating Pay Phone Toll Fraud at the Port Authority

This information about commuter calling patterns enabled PPS to

identify phones plagued by misuse through examination of revenue pat-

terns for each pay phone for a period of three months. "Hot spots" of

misuse were identified by disproportionately large revenues from credit

card calls and were found to be "... most heavily concentrated on the floors

nearest the ground level, where the heaviest circulation occurs" (PPS,

1990:2). Also, "...clusters of phones appear to facilitate illicit use, allowing

for multiple sales without having to move around" (PPS, 1990:2).

Recommendations

Since they believed that no single strategy could resolve the illicit phone

use, PPS advocated a multi-dimensional approach (PPS, 1990:5). PPS

argued that a comprehensive approach must be adopted and that

"...failure to do so may lead to a decrease in one pattern of criminal

behavior, and a concomitant increase in another, as criminals try to make

up for lost income by re-channeling their efforts" (PABT Internal Memoran-

dum, 1991:2).

Recommended courses of action included (PPS, 1990:5):

(1) Reducing pay phones to the number needed to accommodate

legitimate patrons.

(2) Relocating the phones to serve legitimate patrons more ade-

quately.

(3) Centralizing the location of phones in a supervised location.

(4) Limiting phone calls to those reflecting the bulk of legitimate

uses to be achieved by (a) allowing only brief, coin calls to specific

area codes, and (b) blocking international calls.

(5) Developing a detailed database in order to monitor pay phone

activity.

Implementation

By December 31, 1990, the "01" and "Oil" international dialing

capabilities of all public pay telephones at the bus terminal had been

100 Gisela Bichler and Ronald V. Clarke

blocked. The hustlers left the building but soon returned, apparently

having discovered that they could still gain access to international lines

by first calling the access codes of individual companies such as MCI and

AT&T. Federal regulations prohibited blocks on these codes in the inter-

ests of fair competition.

Reducing the absolute number of pay phones and relocating some to

serve legitimate users more adequately and to increase supervision was

the next course of action. An internal report indicates that between

December 1990 and September 1991, 90 telephones were removed from

the bus terminal, reducing the total to approximately 250. A memorandum

circulated on September 23, 1991 detailed plans to relocate another 77

pay phones, and reducing the total number to 148 — though as of March

1995, 198 pay phones remain at the bus terminal.

Despite these efforts, illicit activity involving the phones continued,

and the management resorted to gating-off 110 problematic phones

outside rush hour times (PABT Internal Memorandum, Nov. 6, 1991).

will be shown below, this somewhat crude method of restricting access to

the phones was highly effective in reducing fraudulent use.

STAGE TWO — TELECOMMUNICATIONS EXPERTISE

Despite its effectiveness, physically blocking access to the pay phones

was not satisfactory in the long term, since the gates were unsightly and

the labor costs involved in removing and re-erecting them on a daily basis

were not insubstantial. Moreover, blocking access to phones violates the

pay-phone contracts between the PABT and service providers.

Serendipity played a part in the final solution, which involved more

sophisticated changes to the dialing capabilities of the pay phones. Bob

Williams, the leader of the task force created to improve the terminal,

became aware that a contract was being negotiated with Teleport Com-

munications Group Inc. (TCG) for 48 Elcotel "smart" phones to be installed

on a trial basis in the World Trade Center, another large Port Authority

facility in Manhattan.

Williams realized that if these smart phones were

placed instead at strategic locations in the PABT, they could be used to

gather better information about ways in which the hustlers were subvert-

ing the blocks on international dialing. He succeeded in getting the new

phones installed at the PABT.

In December 1991, Williams also engaged

John Gammino, a telecommunications expert with John Richard As-

Eliminating Pay Phone Toll Fraud at the Port Authority

101

sociates, Inc., (a management consulting firm specializing in the com-

munications industry), to analyze the data produced by the "smart"

phones, define the precise methods used in committing toll fraud, and

develop plausible solutions (Guhl, 1993).

Problem Re-identification

Gammino began by examining calls placed through AT&T, the main

long distance carrier connected to PABT pay phones during 1990 (i.e.,

pre-blocking). He found that calls from these phones were much longer,

with an average time of 15-20 minutes, than the four to five minutes that

is usual for calls from such pay phones. His examination of call destina-

tions showed an enormous volume of international traffic, with calls to

virtually every country from Algeria to Zimbabwe (see Table 1), whereas

the commuters serviced by the terminal should have been making very

little use of the pay phones for international calls.

In addition to these findings from the AT&T records, 1991 and 1992

data from the smart phones revealed temporal patterns of calling that did

not correspond to the travel patterns of PABT's primary users. Of the

185,000 travelers who use the terminal each day, about 65,000 areround-

trip commuters who travel during the morning (7 a.m. to 10 a.m.) and

evening (4 p.m. to 6 p.m.) rush hours. It might therefore be expected that

most pay phone calls would be made during these times. In fact, Gammino

found that a substantial proportion of calls were made during evenings

and weekends, and, moreover, that many of these calls were being made

to individual businesses at times when they were not open. After speaking

with the businesses concerned, Gammino confirmed that many un-

authorized international calls were being placed during non-business

hours through the company's telephone system or "Private Branch Ex-

change" (PBX). Fraudulent operators were accessing the PBXs through

voice mail and other automated systems in order to place long-distance

calls. The numbers to access these systems had been purchased from

hackers, who had broken into the PBX systems to acquire the dialing codes

that permit employees to make long-distance calls through the company's

phone system when they are away from the office.

102

Gisela Bichlerand Ronald V. Clarke

Table 1: Destinations of AT&T International

Directly Dialed Calls Placed from PABT Pay

Phones, 1990

Eliminating Pay Phone Toll Fraud at the Port Authority

103

Gammino's examination of telephone call reports generated by the 24

"smart" phones confirmed that there were three other ways in which toll

fraud was being perpetrated. First, instead of dialing directly, many

long-distance calls were being made via the 5-digit access codes of major

carriers such as AT&T (10288), MCI (10222) and Sprint (10333). The

second method of gaining access to the toll lines was through 1-800 carrier

numbers (similar in function to the 5-digit access codes) such as 1-800-

877-8000 (Sprint) and 1-800 corporate or business numbers.

The third

method involved gaining access through the 950 (MCI) codes. Once the

fraudulent operators gained access to the telecommunications network by

any of these routes, they would connect calls using stolen calling card

numbers. Many of these numbers were known to be obtained at the bus

terminal itself by "shoulder surfing" (Baehr, 1992; Guhl, 1993; Hoey,

1992a, 1992b; Telecom & Network Security Review, 1994).

Recommendations

Gammino's proposed solution involved developing an algorithm to

re-program the pay phones in order to: (1) block all international calling

capabilities (but not interstate calls, which were prohibited from being

blocked by federal regulations and which were not subject to fraud at the

PABT), and (2) prevent subsequent redialing by disabling the keypad for

calls placed to corporate PBX systems.

In order to block access to PBX systems without blocking access to

long-distance carriers using 1-800 or 950 calling programs, Gammino

developed a data bank of frequently called 1-800 business numbers, for

which subsequent redialing capabilities were blocked. This modification

would mean that voice mail systems and beepers at these numbers could

be accessed through the pay phones only by using coins. The PABT

management was concerned about the loss of these customer services,

but the PPS analysis had shown that most legitimate callers used coins

or called collect and, after balancing the needs for service and security,

the management consented to a trial of the software solution.

Testing the Software

Testing of the disabling software algorithm began in March 1992 on

the 24 smart phones selected on the basis of high levels of suspected fraud.

104

Gisela Bichler and Ronald V. Clarke

A comparison of calls made from these phones one month prior to

implementation (February) with those made one month post-implementa-

tion (April) showed a dramatic change in calling profiles (see Table 2). The

number and duration of calls were significantly reduced. Calling patterns

became normal for pay phones, with primarily interstate and local calls

(four to five minutes in length) made more frequently during rush hours.

Additional analyses showed that the numbers of calls lasting more than

ten minutes and those lasting more than one hundred minutes had been

nearly halved. Police confirmed that the hustlers and their customers

had abandoned the re-programmed test phones within a short period of

time.

Table 2: Software Trial Results on 24 "Smart"

Phones

(Two 12-day periods, pre- and post-implementation)

Pull Implementation

Following this successful trial, the software solution needed to be

implemented on the remaining pay phones in the terminal. Officials from

the telephone company providing the pay phone services initially resisted

this action on grounds that it would cost them$350,000 to alter the

Eliminating Pay Phone Toll Fraud at the Port Authority

105

phones. They also argued that the only result of changing the terminal's

pay phones would be to displace the crime to other locations. However,

the officials were persuaded to take action following higher-level interven-

tion, and by June 1992 all the PABT phones had been changed.

Once the solution was implemented throughout the terminal, the

fraudulent activity disappeared and there was a dramatic improvement in

the atmosphere of the building. Due to the nature of the fraud, any breach

of pay phone security would be immediately noticed as the fraudulent

operators would undoubtedly return in force, just as they did after

discovering ways of subverting the blocks on "01" and "Oil" dialing.

Customer surveys conducted after the changes uncovered few complaints

regarding inability to access voice mail or pagers (Port Authority of New

York and New Jersey, 1994).

EVALUATIVE DATA

The effectiveness of action taken against toll fraud is reflected in

monthly gross revenue data aggregated for all pay phones, from October

1989 to December 1994 (see Figure I).

Figure 1 shows a sharp increase in gross revenues during the latter

part of 1990, peaking in November. The decline in December 1990

coincides with the blocking of "01" and "Oil" calls, while the severe drop

between January and February of 1991 coincides with the use of gates to

restrict access to 110 problematic phones outside rush hours. Between

February 1991 and June 1992 when gating was in force, there was a

further slight decline in revenue (with some apparent seasonal fluctua-

tion) , which may have been due to reductions in the number of pay phones.

Following full implementation of the algorithm in June 1992 (and the

removal of all gates), there is evidence of a further slight decline in gross

revenues. It is quite evident from these patterns that both the gating-off

solution and the software solution were effective in dealing with toll fraud.

However, the software solution seems to have been somewhat more

effective than the gates, as well as having aesthetic and other advantages.

That this reduction in revenues is largely the result of the blocks on

international calling is supported by data provided by Teleport Com-

munications Group, Inc. (TCG). Results indicate that not a single inter-

national call was made from any of the 24 original smart test phones

during July 1994 to March 1995.

108

Gisela Bichlerand Ronald V. Clarke

Displacement of toll fraud to other Port Authority facilities was not a

particular concern to management. This was because the World Trade

Center had also been equipped with "smart" phones, while the three

airports were not thought to be conveniently enough located for fraudulent

operators to develop a profitable trade there, even though the international

clientele prevented blocks on international access codes for the pay

phones. Analysis of gross revenue by facility confirms these assumptions;

Figure 2 shows there has been no increase in revenue at the other

facilities.

It also seems unlikely that there was significant displacement of pay

phone toll fraud to the nearby Times Square area (where pay phones have

been altered to prevent fraud), or to the other large commuter terminals

in Manhattan. A search of Lexis/Nexis for 1992 through 1995 found a

dramatic decline in coverage of toll fraud at the PABT, Grand Central

Station and Pennsylvania Station. Furthermore, the focus of the coverage

was on the efforts that had been made to rid each terminal of the problem.

In 1994, only one story was uncovered by the search relating to toll fraud

at Pennsylvania Station. In addition, a number of news reports indicated

that several New York businesses had adjusted their PBX systems so as

not to accept calls from the PABT and the other terminals.

CONCLUDING REMARKS

Brantingham and Brantingham (1993) distinguish between hot spots

of crime that are "crime generators" and ones that are "crime attractors."

The former are places such as shopping malls or parking lots that become

hot spots simply because so many people pass through them, of whom a

proportion will be offenders. The latter, which may include red-light

districts or drug markets, become hot spots because the many oppor-

tunities for crime they provide attract the presence of predatory offenders.

It is clear from the analysis of calling patterns that the PABT pay phones

were crime attractors. The hustlers preying upon them and the customers

availing themselves of cheap calls were mostly not the commuters who

comprised the bulk of the bus terminal's legitimate users, but instead

those who came specifically to the terminal because of the opportunities

for toll fraud. Moreover, the criminals attracted to the phones seem to have

engaged in a number of other crimes, such as purse-snatchings and

muggings, that further contributed to the lawless and unsavory atmos-

phere in the terminal.

Eliminating Pay Phone Toll Fraud at the Port Authority

109

Why the PABT became a principal venue for toll fraud in New York City

is unclear, but the large concentration of pay phones and the fact that

these went unused for much of the day must have played a part. The

terminal is also well known in the region, close to centers of poor

immigrant populations and easy to reach via the subway and bus lines.

In addition, it provides a comfortable environment for the hustlers who

must hang around for long periods of the day because it gives them shelter

from the weather, and access to restrooms and fast-food outlets. It also

provides them with many entertainment opportunities, both on-site

(where there was a bowling alley and an off-track betting office) and nearby

(with a concentration on 42nd Street and Times Square of liquor outlets,

drug markets and porno movie theaters).

Whatever the terminal's "attractive" properties, it is clear that the

hustlers were not much deterred by the regular presence of large numbers

of police. While the police were understandably frustrated by their inability

to deal with the problem through conventional means of surveillance and

arrest, they missed the opportunity to take the lead in finding more

creative solutions to the problem by applying the principles of problem-

oriented policing (Goldstein, 1979, 1990). It was only when the building

managers decided that the problem must be solved were solutions iden-

tified and a spectacular crime prevention success achieved. This is

reminiscent of another notable crime prevention project in New York —

the successful effort to rid the subway of graffiti (Sloan-Howitt and Kelling,

1990). Here again, management stepped in to develop solutions to a

problem that the police had failed to control by conventional patrolling

and investigative methods. This is further evidence of just how much the

police must change if they are to take advantage of the potential afforded

by problem-oriented policing.

Despite this potential, the difficulties of this kind of problem-solving

work should not be underestimated. These have less to do with developing

solutions (two very different solutions were found to the toll fraud problem,

though with different costs and benefits) than with implementing them.

The PABT management received little cooperation from the major

telephone service providers who, in general, were not bearing the costs of

the fraud since they passed these onto customers, either directly or in the

form of increased charges. Indeed, solving the problem of toll fraud

resulted in a substantial loss of revenue from the pay phones for the Port

Authority. What appears to have motivated management to improve the

situation is not profit, but pride. Recognizing that travelers deserved a

110 Gisela Bichler and Ronald V. Clarke

better facility, management was humiliated to be responsible for so

notorious a crime location as the bus terminal.

This suggests, finally, that there might be other occasions when

corporate pride could be tapped in the interests of preventing crime,

especially when the responsible institution is large and important enough

to be susceptible to public "shaming." There are many corporations and

businesses, such as the automobile manufacturers and insurance com-

panies, that fit this definition and that could do more to prevent crime by

eliminating the opportunities provided by their products and services.

"Shaming" these institutions into action may provide large dividends for

criminal justice policy.

Acknowledgements: While we as its authors are responsible for the

content of and the opinions contained in this report, it could not have been

produced without the cooperation and assistance of Daren Krebs, Account

Manager of Public Communications, Teleport Communications Group Inc.,

and of Janice Sazallai, Senior Researcher in the Accounting Division of the

Port Authority of New Jersey and New York. We are also most grateful for

the assistance given by the consultants whose recommendations provided

the basis for the successful action taken against toll fraud — John

Gammlno, President of John Richard Associates, Inc., and Fred Kent and

Steve Davies of the Project for Public Spaces, Inc. Ken Philmus, the Manager

of the Port Authority Bus Terminal and the leader from the end of 1991 of

the task force to improve the terminal, provided us with invaluable assis-

tance and much useful advice. Professor Marcus Felson also gave us many

useful suggestions.

NOTES

1. The work of the police in arresting offenders was hampered by cumber-

some and inadequate technology. Pen registers (that record all calls made

on a particular phone line) were available, but could only be effectively used

when it was possible to match pen register records with the results of direct

surveillance of the phone concerned.

2. Dated tariff legislation regulating the industry limits the common

carriers' liability for fraud, thereby distorting normal market incentives to

Eliminating Pay Phone Toll Fraud at the Port Authority

111

resolve the problem. In particular, the current legislation absolves from

liability those with the ability to prevent fraud — equipment manufacturers,

vendors, carriers and customers. For example, AT&T has a clause in its

contract stipulating that any breach of security and the associated costs

are the responsibility of the company on whose property the PBX switch is

located. Major components of the industry are currently trying to sort out

liability concerns in the courts (Federal Communications Commission

Hearing, Oct. 9, 1992).

3. Each phone company offering long distance calling in the U.S. has a

5-digit access code or carrier identification code. These codes were not

disabled by the block on "01" and "Oil" calling. This meant that fraudsters

at the PABT could simply dial the access code, then 0 + area code + number

sequence. By blocking the "01" and "Oil" calls, only directly dialed calls

were being prohibited (01+country+city+number).

4. All phones in the ticket-hall area and six units next to the parcel check

were gated-off all day on Sunday, and from Monday to Saturday between

10 a.m. and 6 p.m. and between 8 p.m. and 6 a.m. In addition, all phones

adjacent to the bowling alley were gated-off from 8 p.m. Friday to 6 a.m.

Monday.

5. "The 'Smart Phones' (Elcotel units) are programmable units capable of

logging and manipulating a variety of data such as: area codes accessed,

telephone numbers accessed, duration of calls and time of calls. The units

can identify calling patterns, block calls by individual phones and alert the

responsible party if the unit has been damaged. The information the unit

captures can either be downloaded to Teleport, Big Apple (the Teleport

service provider) or to the client (PA)." (PABT Internal Memorandum, Sept.

1991:3).

6. Elcotel smart phones were installed during September 1991 at the

following sites, determined largely on the basis of the PPS analysis (PABT

Internal Memorandum, Sept. 23, 1991:1-2):

North Wing:

Subway Level

a) on tenant storage wall across from M.P. Cozzoi Co. 7

b) on wall next to doors leading to south wing 2

Main Concourse

a) next to 42nd St. exi 6

112 Gisela Bichler and Ronald V. Clarke

b) on M.E.R. Wall 5

Second Floor — by escalator and newsstand 6

Total North Wing 26

South Wing:

Main Concourse — next to escalator 12

Second Floor

a) fronting poppers 5

b) opposite escalator near bowling center 2

Fourth Floor

a) opposite gates 403, 41 land 420 3

Total South Wing 22

Grand Total of Smart Phones 48

7. PBXs are "private" switches that are purchased by businesses and

located on their property. A recent service offered by the telecommunica-

tions industry to market these switches allows traveling employees to

access messages, and to punch in an access code to get a second dial tone

upon which they can place another call. While this system saves money by

consolidating all long-distance traffic, it provides hackers with an avenue

into the PBX system. Hackers use "auto-dialers" or "war-dialers" to uncover

corporate telephone access codes. Auto-dialers randomly call various

numbers, and when answered by a PBX system the hacker's computer

generates different combinations of digits until it gets a second dial tone,

whereupon it prints out the circuit number.

8. 1-800 calling had provided many options for calling international and

interstate available to the business community. Businesses bought into

these two options en masse without realizing how insecure the systems

were.

9. Apart from the new algorithm, Gammino suggested some other possible

countermeasures, including: the installation of credit card phones that

allow international calling with a card only; the installation of debit cards

or cash cards where individuals prepay for calls and use the card as credit

cards at the phone; and the construction of a centralized long distance

phone facility equipped with attendants and security so that legitimate

users could access the phones.

Eliminating Pay Phone Toll Fraud at the Port Authority

113

10. In a period of 12 days pre-implementation, there were respectively 713

calls over ten minutes in duration and 92 over 100 minutes, compared with

388 and 48 in a comparable post-implementation period.

11. During 1992, the Port Authority changed the telephone carrier serving

the pay phones, though this change seems to have had little effect on gross

revenues because the difference between gross revenue and net revenue

remained constant throughout the period. Another factor complicating

interpretation of Figure 1 is that the Elcotel "smart" phones choose the

most profitable route for each call. This may have resulted in some small

increases in revenue for the pay phones that were masked by drops

resulting from the interventions.

12. Some uncertainty exists regarding the full implementation of the

algorithm. By June 1992, all the pay phones had the algorithm in place,

but not all had been replaced by "smart" phones until the end of 1992.

(Internal reports also indicate that the contract with Teleport Communica-

tions Group Inc., was not finalized until January 1993). In addition, tests

of the blocking capabilities in August 1992 found inconsistencies; some

international calls were still being connected. Given this extended period

of implementation, it is possible that the full effects of the algorithm were

not obtained early in 1993.

13. It should be noted that the gross revenue data in Figure 1 include only

revenue from AT&T and not that from TCG because monthly data for the

latter were unavailable. However, estimates of the monthly values for 1993

and 1994 on the basis of annual TCG totals did not significantly alter the

curve in Figure 1.

14. The drop in overall pay phone revenue at the PABT between 1990 and

1994 was significantly greater than the decline in revenue from AT&T

international calling alone (see Figure 1). This apparent discrepancy may

result from a combination of other circumstances, including a decline in

fraudulent international calls made through long-distance carriers other

than AT&T, fraudulent interstate calls, local calls to PBX and voice mail

systems, local calls made in furtherance of drug-dealing and prostitution,

and in the number of pay phones: and a very large reduction in the

homeless population (see Felson et al., this volume).

114 Gisela Bichler and Ronald V. Clarke

15. Net profits accruing to the PABT from its pay phones in 1990 were

$2,556,458; in 1994, the net profits were $748,183 (figures not adjusted

for inflation).

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