By Albert Samaha
By Amanda Dingyuan
By Anna Merlan
By Anna Merlan
By Albert Samaha
By Tessa Stuart
By Anna Merlan
By Roy Edroso
Anyone would be hard-pressed to guess what the late John Gotti might have in common with rural Cass County, Missouri. Located some 1,200 miles and a cultural light-year away from Gotti's old haunts on Mulberry Street, it is farm country hard by the Kansas state line, a place where the county fair in July boasts livestock exhibits, a horseshoe pitching contest, and the Mo-Kan Youth rodeo. There is one local phone company, appropriately called Cass County Telephone, which has about 8,000 subscribers and makes its headquarters in the wonderfully named town of Peculiar, about 25 miles south of Kansas City.
Aside from its location, the other peculiar thing about the company is its ownership: According to federal investigators in New York pursuing mob-orchestrated telecommunications schemes, while the company is headed by an otherwise upright local citizen, it really belongs lock, stock, and switchboards to members and associates of Gotti's Gambino crime family.
The news that a group of New York wiseguys had somehow penetrated their little rural phone company was unsettling to local residents in Cass County. "It was definitely a surprise," said Peculiar city administrator Mike Fisher. "We'll take a wait-and-see attitude."
If the gangsters have indeed invested there, it is a strategy that would make Wall Street proud. Rural telephone companies are small but profitable, industry analysts say. They have become all the more so as a result of the Telecommunications Act of 1996, which mandated that federally regulated feesthe Universal Service Fund charges tacked onto every user's local phone billbe allocated to companies serving districts where maintenance and infrastructure costs are high. Tiny Cass County Telephone reaps some $6.4 million annually from these subsidies, federal records show.
"With the lack of competition in their markets, favorable regulatory conditions and a guaranteed subsidy from the government to help provide services, these companies will be looked upon as safe and steady investments in an otherwise very volatile sector," reported industry journal Communications Today last July.
The biggest barrier for these rural firms, the publication added, is raising the capital needed to buy so-called access lines from larger phone companies. If the feds are correct in their analysis, that's where Gotti's goodfellas came in.
According to search warrant affidavits and other records filed in a pending racketeering case in Brooklyn's federal court (see "The Mob's Phone Sex Fortune," Voice, February 18-24), the plan worked like this:
During the 1990s, companies headed by Richard Martino, a reputed soldier in the Gambino crime family, reaped hundreds of millions of dollars in profits from Internet porn sites and telephone 800-number schemes that allegedly duped unwary consumers into expensive recurring charges on their phone and credit card bills. In the Internet scam, Web surfers were allegedly gulled into providing credit card information in exchange for "free tours" of porn sites. Instead, prosecutors allege, viewers were locked into screens with no exit as charges mounted. In the telephone version, callers were lured by ads on TV and in magazines and newspapers into calling "1-800" and "1-900" numbers to hear sex talk, horoscopes, and sports. In all, between 1996 and 2002, Martino hauled in some $430 million, prosecutors claim.
They also assert that, under standard mob etiquette, Martino sharedor "kicked up"some of the proceeds to his alleged crime family captain, Salvatore "Tore" LoCascio, passing along some $40 million to a firm owned by LoCascio, his relatives, and another Gambino cohort named Zef Mustafa. The feds say LoCascio's company, Creative Program Management, was a shell corporation where no work was done. LoCascio's attorneys say he provided an important product"content" for phone recordings and websites.
Martino and LoCascio were aided, the government says, by a wealthy advertising and marketing expert named Norman Chanes, who pled guilty in 1985 to federal mail fraud charges for bilking customers with phony products. Martino, LoCascio, Chanes, and Mustafa have all pled not guilty to the charges against them, as have six other individuals accused in the schemes. Attorneys for the men have said in court papers that the operations were legal and conducted without a hint of mob rough stuff.
No one disagrees, however, that the businesses were wildly profitable. And while Martino, LoCascio, and Chanes all bought lavish homes and fancy cars with their earnings, records taken from a pair of accountants who handled much of the organization's finances showed that the trio, along with others, used a series of trust accounts to fund a firm called Local Exchange Company, LLC. In 1996as the much anticipated new telecommunications legislation was being enactedthat company hooked up with a politically active local telephone executive in Missouri named Kenneth Matzdorff to purchase phone lines covering a slice of territory south of Kansas City in Missouri and Kansas.
Matzdorff, 47, has been a major contributor to Missouri elected officials and is active in local civic and business affairs. His was the public face of the new company, which was dubbed Cass County Telephone (or simply "CassTel"). It bills itself as an independent local firm providing an array of services including voice mail and high-speed Internet. But a federal postal inspector's affidavit for a search warrant last year for records at Martino's current offices, at 666 Third Avenue in Manhattan, alleged that "practically all" shareholders in the phone company's parent corporation, Local Exchange Company, "are controlled by or closely related to Martino, LoCascio, and Chanes." Moreover, investigators alleged that the funds used to purchase the phone company "were derived from the Internet and credit card fraud scheme."