Massive Phone Calling Card Fraud Found : Telecommunications: MCI employee allegedly sold more than 100,000 numbers used to make more than $50 million in illegal calls.

In what is believed to be the largest fraud of its kind, an MCI employee has been charged with stealing more than 100,000 telephone calling card numbers that were used to make more than $50 million in long-distance calls, federal authorities said.

MCI employee Ivy James Lay was alleged to be the main supplier of stolen card numbers to an international ring of thieves operating in Los Angeles and at least five other U.S. cities, as well as in Spain and Germany, the U.S. Secret Service said Friday. The Secret Service is the federal agency that investigates interstate telephone fraud.

The Secret Service investigation ended in Southern California Thursday night when agents seized numerous items from the home of a co-conspirator, which included six computers with pirated commercial copyrighted software and thousands of calling card numbers stored on computer disks.

Tens of thousands of customers of MCI, AT&T;, Sprint and several local telephone companies were victimized by the scam, the Secret Service said. But those consumers--many still unaware of the scam--won’t be billed for fraudulent calls on their phone card numbers, spokesmen for MCI, AT&T; and Sprint said Friday. Customers who suspect their calling card numbers were illegally used should contact the customer service department of their long-distance carrier immediately, company officials said.

Secret Service sources familiar with the case said the ring was unprecedented for its sophisticated use of computers and other activities coordinated on a global scale. According to MCI officials, the ring was more sophisticated and better organized than credit card and calling card scams perpetrated in the past by people who obtained a small number of cards by computer hacking or physical means, such as getting carbon copies of receipts or watching customers enter calling card numbers at airport terminals.

Lay, a switch engineer based in Charlotte, N.C., was charged and arrested last week and subsequently released on bail. He faces felony charges of access device fraud and could serve 10 years if convicted, the Secret Service said. Lay was unavailable for comment.

MCI officials characterized the case as the largest of its kind in terms of known losses. The ring ran “the gamut of crimes against telephone and computer software companies,” said Leslie Aun, an MCI spokeswoman, adding that Lay was fired immediately and turned over to law enforcement officials when the investigation in Charlotte was concluded last week.

The latest action ended a 4 1/2-month investigation by the Secret Service into calling card fraud. Search warrants were also served on six alleged co-conspirators in Los Angeles, Seattle, Philadelphia, Minneapolis and Chicago, resulting in the seizure of large quantities of customized computer gear and stolen calling card numbers, the Secret Service said.

Secret Service special agent Steven A. Sepulveda said Lay, who was known in the computer hacking community as “Knightshadow,” allegedly devised special software to trap calling card numbers from a variety of local and long-distance carriers coming across MCI’s telephone switching equipment. The card numbers were sold to other members of the alleged fraud ring, who in turn sold them to computer hackers in the United States and Europe, Sepulveda said.

Members of the ring enjoyed thousands of dollars a week in profits from sales of the stolen card numbers, Secret Service officials said. Purchasers of the stolen numbers were mainly Europeans, who bought many numbers at a time, to be used later in calling back to the United States for free, Sepulveda said.

The investigation was so complex it forced normally competitive telephone carriers to cooperate with each other and with law enforcement officials, MCI’s Aun said.

Secret Service sources said the co-conspirators will shortly face indictments from a federal grand jury in Charlotte, where all the cases are being consolidated.

Also charged in connection with his alleged involvement in the ring is Max Louarn, 22, of Palma de Mallorca, Spain, Sepulveda said. He was charged with conspiracy and arrested. He also could not be reached for comment.