Pennsylvania Man Pleads Guilty to $4.4 Million VOIP Fraud Scheme

TRENTON, NJ—A man who pretended to be an Internet telephone service wholesaler today admitted his role in a scheme to steal more than $4.4 million from multiple Voice Over Internet Protocol service providers, U.S. Attorney Paul J. Fishman announced.

Harjeet Bhambhani, 39, of East Stroudsburg, Pa., pleaded guilty this morning to an information charging him with one count of conspiracy to commit wire fraud. Bhambhani entered his guilty plea before U.S. District Judge Peter G. Sheridan in Trenton federal court.

According to documents filed in this case and statements made in court:

Voice Over Internet Protocol (“VOIP”) services transmit telephone calls over high-speed Internet connections rather than over traditional land-based telephone lines. They do not usually travel directly from a caller to a recipient’s computer, but rather through computers belonging to several layers of intermediary VOIP service providers, or wholesalers. VOIP wholesalers charge different rates, typically by the minute, to transmit VOIP calls.

Bhambhani, Vinod Tonangi, 32, of Guttenberg, N.J., previously charged in a separate complaint, and others held themselves out as the owners and operators of Paradise Communications (“Paradise”), Reach Communications (“Reach”), and Airtel Holdings (“Airtel”)—companies that purported to be established VOIP wholesalers. The companies were shell companies with no operations, the sole purpose of which was to induce companies that sold VOIP services—including AT&T, Cordial Communications, Digerati Networks, France Telecom, Iristel, Keywest Communications, Maxcom Telecomunicaciones, Pipeline Telecom, Primus Communications, Surfcreek Communications, and Verizon—into providing those services to Bhambhani and his co-conspirators on credit.

Bhambhani and his co-conspirators ultimately sold the VOIP services that they stole to legitimate VOIP wholesalers and shared the profits.

To make it appear as if the shell companies were legitimate VOIP wholesalers and to induce the victim providers to extend credit to the companies on favorable terms, Bhambhani and his co-conspirators took several fraudulent steps, including establishing fake business addresses for the shell companies at prominent New York locations, including the Empire State Building.

The co-conspirators also used Internet-based answering services that purported to connect callers to the shell companies’ various departments, such as accounts receivable and marketing, but really connected to cell phones controlled by the co-conspirators.

Bhambhani and his co-conspirators created shell company e-mail accounts in the names of non-existent employees for communicating with victim providers; websites that contained false information, such as the names of non-existent employees and the companies’ fabricated qualifications to serve as VOIP wholesalers; and aliases to negotiate the purchase of VOIP services.

They also fabricated year-end financial reports that bore the logo of a national accounting firm in order to give the appearance that the shell companies’ financial reports had been reviewed by that firm.

When the victim providers sold VOIP services to the shell companies on credit, Bhambhani and his coconspirators would “bust out” the account by causing the companies to use substantially more VOIP services than the companies had been approved to buy in such a short period of time. The co-conspirators would do this over weekends and holidays so that the providers would not notice.

When the invoices for the services came due, the co-conspirators would send fake wire transfer confirmations via e-mail or submit small payments to keep the victim providers from cutting off service.

If victim providers sued or threatened to sue the shell companies, Bhambani and his coconspirators would respond in legal pleadings or letters that they prepared in the name of a non-existent attorney, Frank Soss. Bhambhani and Tonangi created and used a fraudulent United States passport in the name Frank Soss by downloading and altering a exemplar passport image and photograph from the Internet.

As a result of their conspiracy, Bhambhani and his coconspirators defrauded the victim providers of more than $4.4 million in VOIP services.

The charge of conspiracy to commit wire fraud carries a maximum penalty of 20 years in prison and a $250,000 fine. Sentencing is currently scheduled for August 24, 2011. The charge against Tonagi remains pending.

U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special Agent in Charge Michael B. Ward in Newark, with the investigation leading to today’s guilty plea.

The government is represented by Assistant U.S. Attorney Seth Kosto of the Economic Crimes Unit in Newark.

As for Tonangi, the charge and allegations contained in the complaint are merely allegations, and the defendant is considered innocent unless and until proven guilty.

Defense counsel: Donald Horowitz, Esq., Hackensack, N.J.