AT&T Wins Battle Against Prepaid Mobile Traffickers Awarded $51 Million

By Contributor Wireless and Mobile News on July 14, 2009 12:08 PM

AT&T obtained final judgments and permanent injunctions against defendants in four federal lawsuits stopping the unauthorized bulk buying and resale of prepaid mobile

AT&T has filed 14 lawsuits against companies and individuals in Texas, Florida, California, and New York in an effort to stop the illegal activity. The lawsuits have resulted in a total of 15 permanent injunctions and final judgments totaling $51 million in damages.

AT&T says it will file additional lawsuits to aggressively investigate and combat the issue.

Prepaid wireless handset diversion is an industry-wide issue. Middlemen typically buy prepaid mobile phones in bulk, remove them from their original packaging, discard warranties and manuals, hack into the phones' software and then resell the phones and accessories to unsuspecting customers at a substantial profit.

Among judgments AT&T has recently obtained:

On May 27, the U.S. District Court for the Eastern District of New York entered a consent judgment and permanent injunction against IA Communications, Inc. of Westbury, N.Y.; and DK Wireless Inc., d/b/a Wireless Touch and Talk 2 Me, of Baldwin, N.Y.
On June 15, the U.S. District Court for the Central District of California entered a stipulated final judgment and permanent injunction against Mohamad Farhat of Coachella, Calif. and his company, Delta Games, Inc. of Montebello, Calif.
Also on June 15, the U.S. District Court for the Southern District of Florida in Miami entered a stipulated final judgment and permanent injunction against defendants Ibrahim El-Zaatari and Tropical Export, Inc., both of Miami.
On June 25, the U.S. District Court for the Central District of California entered a stipulated final judgment and permanent injunction against California Products International, Inc. of Downey, Calif.

In all of the above final judgments, the Court found the defendants' conduct violated numerous state and federal laws, and awarded a judgment in the amounts of $3 or $5 million in damages.

The injunctions permanently prohibit the defendants in each case from engaging in any activities in any way related to the bulk purchase and resale of AT&T prepaid phones, and from using the AT&T or GoPhone trademarks in connection with such activities without AT&T's authorization.

As a result of this trafficking, consumers may be misled about the source and origin of their mobile phones, and they are sold phones without their manufacturer's warranties, accessories or user manuals. Because the phones may still carry AT&T branding, consumers may mistakenly believe they are purchasing handsets still covered by original warranties.

"We believe this is wrong, it's illegal, and it's bad for consumers," said Judy Cavalieri, vice president of marketing and head of AT&T's prepaid phone products. "We continue to investigate and will take aggressive action against those we find are involved."

In order to make prepaid phone service affordable for customers, AT&T subsidizes the cost of certain GoPhone® prepaid handset models, and recoups the subsidy through the sale of airtime.

"Prepaid handsets provide a viable, affordable option for customers who choose not to purchase a postpaid plan," Cavalieri said. "We're able to offer these GoPhone handsets at such great discounts only if they're used as intended on our network."