Business

AT&T may drop suit vs. small Ipswich company

But owner says giant wants same

The owner of a small business in Ipswich said AT&T Inc. won’t let him off the hook for a $1.15 million phone bill unless he drops his own lawsuit against the telecom giant for trying to force him to pay for international phone calls he didn’t make.

AT&T said in a statement on Monday that it would abandon its lawsuit against Michael Smith, president of Todd Tool & Abrasive Systems Inc. But Smith said AT&T would only halt its legal action if he agreed by Tuesday to drop his countersuit. “What the AT&T media statement said and what they told our attorney is not the same,” Smith said. “They’re willing to drop the claim if we drop ours.”

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“This has been a long, expensive, and frightening process for my client,” Todd Tool attorney Donna Mandriota wrote in an e-mail statement, “and he needs time to consider AT&T’s offer.”

The legal actions arise from a hacking incident three years ago. Todd Tool buys its telephone service from Verizon Communications Inc., which notified the company in September 2009 that it had racked up $260,000 of suspicious international calls. Verizon shut down Todd Tool’s international calling service and canceled the bill, but the criminals were able to use the company’s account to reach AT&T’s international calling service and, over a six-day period, place $892,000 worth of phone calls to the African nation of Somalia. Todd Tool’s typical monthly phone bill is $700, Smith said.

In March 2011, AT&T filed a lawsuit against Todd Tool demanding payment of $1.15 million — the phone charges, plus interest. Todd Tool filed a countersuit arguing that AT&T’s actions amounted to unfair trade practices. “It’s been three years of hell,” Smith said. “The reality is that if I lose this judgment, I’m susceptible. It’s my company.”

But on Monday, after the story was reported by The Salem News and picked up by other news outlets, AT&T said it would drop the case.

“We’re sympathetic to the situation and under these circumstances we’ve decided to not pursue the claims,” the company said in a statement. An AT&T spokesman declined to respond to Smith’s claim that it insisted he drop his countersuit.

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The kind of fraud perpetrated against Todd Tool is quite common. A 2009 report from the Communications Fraud Control Association estimated annual worldwide losses of $15 billion from compromised business phone networks. But Brian McDaniel, founder of McDaniel Telecom Network Security Group LLC in San Francisco, said the size of the Todd Tool case was remarkable. “Normally, it’s more like $50,000 over a weekend,” McDaniel said.

It’s easy to prevent attacks like this, because phone systems can be programmed to block calls to unauthorized phone networks, McDaniel said. But many business phone networks are installed by people who don’t know how to secure them. “There’s a lot of folks who work on these things that aren’t properly trained,” he said. “I see all kinds of holes in these systems.”

Hiawatha Bray can be reached at bray@globe.com.
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