The Great Telecom Billing Swindle

I worked for a publicly traded wireless telecommunications company in the 2000s where I actively participated in a fraudulent billing scheme introduced to me by my manager and coworkers.

To this day I live with the regret of having perpetuated such a scheme, but in fairness to me, the environment was so brutally competitive that my involvement was perhaps the only reason I kept my job for 3.5 years.

Let me explain.

Around the year 2000, I left my job at an internet startup for a sales position with one of the leading wireless companies in the United States at the time. The company had a unique differentiator in the market, and I was hired as part of a national field sales organization to market plans and services to businesses in the Los Angeles area that could benefit from the company’s unique product offerings.

I trained over the course of a few months, working under the tutelage of a veteran saleswoman who had been with the company for a while and consistently ranked as one of the top sales people in the country. She continuously impressed me with her professionalism and sales techniques, which consisted of her arriving for a sales meeting, sitting down with a prospect and listening to them talk themselves into signing her contract. Every time.

When it was my turn to start selling directly to customers, I was given a quota (a sales goal). Activate 40 new lines of service each month, and I’d hit my target. Anything beyond that was up to me, and the more lines of service I could activate, the higher the commission payout would be after the accelerators kicked in.

Back then, the stock performance of a wireless company was tied directly to two primary metrics: new activations, and churn (the net number of customers cancelling their subscriptions). Nowadays I would imagine we see similar metrics in the SaaS (software-as-a-service) world, where companies live and die based on churn. My company didn’t really care where the new activations came from, as long as there were contracts being signed (generally two-year commitments) for new phone numbers. They even went so far as to give away free phones to help incentivize new customers.

Over the course of my first six months or so in the field, I tried to do things the honest (hard) way by hunting for prospective companies using our competitors’ services, hoping I could get them to give me their current bill, which would allow me to assess their spend and create a compelling proposal. I had some modest success there, but getting to the 40 new lines of service was a real struggle when the average business used between 5–10 lines total. And it took a lot of work just to get in front of those prospects (this was back when “cold-calling” was a physical, not virtual event.)

I remember a big account I closed in those early days: somehow I had stumbled into a taxi company in the east part of the city, close to Glendale. The company was owned and operated by an Armenian family and pretty much everyone that worked there was a brother or cousin of someone else working there. They were gruff, but after a few meetings they took a liking to me, and ultimately agreed to sign with us, something like 200 lines of service. A massive opportunity with a huge payout. I remember the day they signed the contract, they broke out a bottle of vodka and asked me to toast with them. I felt like part of the family, and the commission check was huge.

Needless to say, I had to pay it all back a few months later when I found out they had refused to pay their bill, and their service got shut off. Charge-backs, the bane of every sales persons’ existence.

Back then, if you could get your hands on a prospect’s bill from another wireless provider, you were pretty much guaranteed a shot at winning their business. This was before wireless companies moved to “pooled” or “shared” minute rate plans, where each user had a set number of minutes and if they went over, the customer would incur an “overage” charge for each minute over the allotted minutes on the plan. Naturally, this made for a lot of frustrated customers in the market — easy prey for us sales people. You get a prospect to give you their bill, you run a quick analysis and show them how much money they can save by switching to our service. Free phones to boot, and you were pretty much guaranteed a contract.

Around that time (also because they were loosing a lot of customers for the very same reason) my company decided to roll out their own shared minute rate plans. This would allow a customer to assign a set number of minutes (200, 400, 600, 1000 etc.) to each user on the account, and those minutes would “pool” together so that if, say, Johnny spent too much time talking with his girlfriend that month, Steve, who never answered his phone, would pick up the slack. This was great for new customers just getting started, but existing customers either didn’t know about the new plans, or didn’t understand them enough to take advantage of them, and good luck getting customer service to walk you through it all.

“Shared minute” rate plans allowed for pooling across devices

Enter “Greg” (I’ve changed his name to protect his identity.)

Greg was one of the first sales people I met at the company, and he was hard to miss. He had a booming voice that could be heard clear across the massive office we had on Wilshire Boulevard, and everyone knew him. He’d been there for about two years which compared to most of the sales people there was like a lifetime.

Greg was crafty and had a sharp mind — one that bordered on deviant. Unbeknownst to me, he had partnered up with another sales rep in the office to device a scheme that would afford us the opportunity to use the new pooled-minute rate plans to add additional lines of service to existing customers, which we could easily find through our internal billing system. Here’s how it worked:

Browsing the billing system, you would look for customers with at least 10–15 lines of service. Since we, as sales reps, had full access to the system, you could literally open up a customer’s bill and review their activity. If you saw a historical trend of overage charges (which was almost always the case), you knew you had a prospect.

Greg and his partner created a spreadsheet which made it easy to plug in the unsuspecting customers’ billing activity (number of lines, total number of minutes of service being used in a month, total overage charges) to determine ways the customer could save money by switching to the pooled-minute rate plans. An example might be, Acme Corp has 10 employees using on average a combined total 20,000 minutes a month. Because each user is on their own rate plan, and five of the users continuously have overage charges, they are paying $500/month above the cost of their plan in overage charges on average. Naturally they are frustrated and can’t figure out how to fix it.

By plotting the numbers in the spreadsheet, the formula would show how Acme Corp could adjust their plan so that each of their 10 users contributes 2000 minutes to the plan, which pooled together would give them the 20,000 minutes they need, thereby eradicating the monthly overage charges. Easy peasy. To accomplish this, all we had to do was call them up, tell them how we could save them money by switching their plan which would in turn create customer loyalty.

But we weren’t paid on loyalty — we were paid on new activations. So Greg, being the brilliant/deviant economist he was, figured out how we could help Acme Corp save money by switching to the pooled minute rate plan but ALSO get a little something for ourselves (the sales reps) from the exchange. Here’s how he did it:

The spreadsheet gave you the ability to adjust the different rate plan increments for each user on a company account to create a combined total. So maybe you’d have each of the Acme Corp employees contributing 600 minutes (for 6000 minutes total across the company), or 1000 minutes (for 10,000 minutes total). Whatever the case, the formula was (number of users) x (minutes per user) = total minutes pooled. Greg’s idea? Rather then give each user the 2000 minutes needed to reach the 20,000 minute pool of minutes, the spreadsheet would show you how you could ADD extra lines of service to that account to achieve that pool by giving the existing users a SMALLER batch of minutes.

In the case of Acme Corp, that might mean giving each user 1000 minutes, bringing the total to 10,000 minutes, which would be 10,000 minutes shy of the total needed to avoid overage charges. But by adding 10 NEW lines of services to the account, each contributing 1000 minutes to the pool, Acme would get to the 20,000 minutes they needed, and the sales rep would get the 10 new activations. The customer would still save money each month and because the phones were free, they’d get 10 new phones they could stick in a drawer for a rainy day. Never mind that they’d also have 10 new phone numbers to manage, because that was beside the point. It was all about saving them money, making them happy, and getting what we as salespeople needed on the backend, which was the 40 new activations per month we were held accountable to.

They get the savings, we get the sales, the company reports back to Wall Street, the stock performs well. Everyone wins.

I was introduced to Greg’s spreadsheet by my sales manager — we’ll call him Kevin. Kevin walked me through it, explained how to use it, and set me on my way. Once I had the formula figured out, all I had to do was troll the customer billing system to look for accounts (of which there were thousands) that had ongoing issues with monthly overage charges, call them up and tell them about the amazing opportunity for savings. They’d agree to meet with me, I’d walk them through the spreadsheet and they’d sign up for the additional number of lines proposed by the formula.

“What do we do with the extra phones?” they’d ask.

“Save ’em for a rainy day!” I’d tell them.

I was only one of dozens, maybe hundreds of reps that got a hold of this spreadsheet and started putting it to work. That was just in the Los Angeles office, but I’m pretty sure the scheme made its way to the other sales offices in Encino and Long Beach, and likely beyond. It was an incredibly powerful tool, and it is the single thing that allowed me to survive in a cut throat sales position in one of the more competitive industries for three and a half years.

It was so powerful that I got to a point where I no longer had to worry about signing up NEW customers for service — all I had to do was find existing ones to exploit. Keep in mind, the company didn’t measure NEW customer activations differently from EXISTING customer activations: all activations were created equal.

40 new lines of service/month per sales rep. Make your number, you keep your job.

And that’s what I did.

About a year into the scheme, Kevin, who by now had cleverly orchestrated his ascent to Director by interviewing with a competitor and using their offer as leverage to achieve the promotion, asked me what I was doing using the spreadsheet. This happened when I approached him for help on a particularly vexing account where I was having trouble making the numbers work.

“Scott,” he said, “we don’t do that here”, feigning disbelief that I would even consider employing a tool such as this, the tool he had taught be to use only a year prior. “Put that thing away, and don’t use it again,” he said.

In that moment, I completely understood how corporate America works.

I transferred out of the LA market a short time later, and continued selling for the company in the Seattle area, using my old tricks. After all, I wasn’t doing anything “wrong” in the traditional sense — a customer could always say “no”, but why would they? I promised them savings, and a batch of new free phones! Who would say “no” to that?

The problem, though, is that the customers rarely experienced the savings the spreadsheet suggested they would. There always seemed to be some kind of downstream effect, one user’s minutes didn’t pool for some reason, or they still went over their allotted minutes, or they still didn’t have enough minutes. It was never a perfect science, and it became commonplace for me to receive a call from a frustrated customer a month or two after the deal, complaining about a bill with higher overage charges than the ones prior. That, and now they were saddled with a bunch of extra phone numbers they didn’t need.

I did question the ethics of the whole thing, more than a few times. I understood that it would have been just as easy for us to help fix the customers’ billing problems by putting them on a shared plan that made sense without the extra lines of service. But then I wouldn’t have made my sales number, I wouldn’t have my commission checks, and I likely wouldn’t have my job. It was simply too difficult to try and get new customers over to our service when I was competing with multiple other sales channels within my own organization (customers could purchase by phone, web, in-store, through indirect retailers, big box retail, etc.) I simply had to find a way to survive, and I did.

Recently I reconnected with Greg, who was visiting some friends in Seattle. We went for a walk in a park and I asked him about the spreadsheet. I told him it was the most brilliant and deviant thing I’ve seen in business, and he agreed. Then, to my shock and horror, he admitted to me that he’d been the one who’d created the whole thing, something I hadn’t known all these years. We debated the ethics of it and he held tight to the notion that there was nothing wrong with it — we were helping the customers save money and giving ourselves a little something for the effort. I disagreed with him and told him it was a scam in the purest form, and he took some offense, but brushed it off. “Corporate America, man,” is all he could muster, and I couldn’t argue with him.

Looking back, there’s no doubt in my mind that his little spreadsheet generated millions in unnecessary billings for the company, and produced false positives for shareholders in terms of net new activations. How much for sure I’ll never know, but I can say with certainty it was more than just a little.

Ironically, during Greg’s visit he was talking about the sales jobs he is interviewing for now, and knowing that I make my living as a headhunter, asked for any interview or salary negotiation tips. Naturally I shared what I could with him, but a little voice in the back of my head kept wondering what kind of scheme he might come up with for the next company that chooses to hire him.

Knowing Greg, it will be a good one, and the executives will thank him for his contribution to the company’s share price, but later admit they had no knowledge of the scheme, deny any wrong doing, and leave the others to clean up the mess they leave behind them.

And that’s exactly what makes American Capitalism such a beautifully tragic thing.

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Scott A. Weiss

Scott A. Weiss

Author, freelance writer and self-employed recruiter. Bylines in the Daily Beast, Seattle Times, Classic Rock Magazine, LouderSound.