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Two Charged in Payphone Compensation Fraud Scheme

Madison, Wis. - John W. Vaudreuil, United States Attorney for the Western District of Wisconsin, announced that a federal grand jury sitting in Madison returned an indictment today charging Jeff Frost, 53, Brookfield, Wis., and Colin Nordstrom, 48, Coon Valley, Wis., with conspiracy to commit wire fraud, wire fraud, conspiracy to commit money laundering, and criminal asset forfeiture. Nordstrom is also charged with making a false statement to federal agents and false declarations under oath to a federal grand jury.

If convicted, both defendants face maximum penalties of 20 years in federal prison, a $250,000 fine, and five years of supervised release for the wire fraud, conspiracy to commit wire fraud, and conspiracy to commit money laundering counts.  Nordstrom faces additional maximum penalties of five years in prison, a $250,000 fine, and three years of supervised release for the false statement, and false declaration charges.

According to the indictment, Frost and Nordstrom devised and participated in a scheme to fraudulently obtain dial around compensation fees by programming payphones to autodial toll-free telephone numbers. Per FCC regulations, payphone owners were paid $.494 per every toll-free call placed from their payphone. This fee is typically called "dial around compensation," and is paid by the toll-free subscriber.

Read more here.