Dial M for the Mob

Kenneth Matzdorff, the president of Cass County Telephone, mingles easily among the locals at Pat's Family Restaurant in Peculiar, where CassTel is based. "He comes down and eats breakfast with us and is just as common as an old shoe," says George Lewis, the mayor of Peculiar.

Despite ordinary appearances, Matzdorff lives in a gated community outside Belton. County appraisers say his house is worth $467,000.

And federal authorities believe that he was a "high-ranking officer" in a company controlled in secret by gangsters.

A twenty-count indictment unsealed in federal court in New York in February said that members and associates of the Gambino crime family -- a gang made famous by its murderous former boss, John Gotti -- stole $200 million by falsifying telephone charges, a practice known as "cramming." The indictment named ten people and a billing company based in Overland Park that provided the cover of Midwestern propriety.

Matzdorff helped organize the billing company, USP&C. He has not been charged, though he was mentioned as a company officer in an affidavit used to obtain a search warrant. He denies playing a part in a fraud or being aware of anyone's ties to organized crime. In April, he told the Missouri Public Service Commission, which regulates local phone service, that he merely "put together the paperwork" when USP&C was formed in 1996. "We had no employees at the time, so I placed myself as the president, but I've never held an active function with that company nor as an officer of that company," he said.

CassTel was not directly involved in the alleged cramming scheme. The Public Service Commission summoned Matzdorff to Jefferson City in April to discuss a matter unrelated to the federal indictment: an agreement that called for CassTel to reduce its customer billing by $320,000. But the regulators also wanted to ask Matzdorff about USP&C and the mob.

USP&C was what's called a "billing aggregator." Through agreements with various local phone companies, USP&C charged customers for services (such as voice mail) provided by third parties. Its name may have suggested a trusted utility, but USP&C cheated consumers, according to suits brought by regulators in other states. California's Public Utilities Commission found that of the $51.5 million USP&C billed through Pacific Bell in 1998 and 1999, $27 million was refunded at customers' requests.

Matzdorff told the Missouri commissioners that he sold his interest in USP&C in 1998. Yet his name is signed to a court settlement that the company and the state of Wisconsin reached in 1999, after the Wisconsin attorney general had accused USP&C of cramming. USP&C settled the claim by agreeing to pay a $50,000 fine and to stop billing customers for unauthorized services.

The document is signed in deliberate cursive by "Kenneth Matzdorff, company president." William England III, Matzdorff's attorney, suggests that the signature was forged. Matzdorff, England tells the Pitch, is not aware of the settlement. "He did not sign it," England says.

It is not absurd to think that Mafia types would forge a signature. But if Matzdorff doesn't know his name is on the paperwork, he is one oblivious phone company executive. He is also associated with two other companies -- one owns CassTel -- that the feds say were organized-crime properties.

Authorities say a Gambino family soldier, Richard Martino of Harrison, New York, and an associate named Norman Chanes initiated a scheme by advertising free psychic readings and sex chats in adult magazines and other media. The phone lines Martino and Chanes operated, advertised as toll-free, were a trap, authorities say. Callers who dialed the numbers were later charged for unapproved services on their regular phone bills.

USP&C allegedly served as the agent between those lines and the local phone companies that billed customers. The generic name "USP&C" shaded the charges' true origin; vague and misleading terms ("Call Mgr Plus," "Dial Plan") provided an additional layer of camouflage.

The scheme generated staggering amounts of money -- as much as $600,000 a day, according to the indictment. Martino, Chanes and their associates guarded the enterprise, authorities say, using a host of disposable companies to distract attention, even creating a call center to handle complaints. Only insistent customers received full refunds, according to the indictment.

Local phone companies and regulators presented a challenge for the mobsters, though. A high refund rate prompted Pacific Bell (now SBC) to stop carrying USP&C's charges. Undaunted, USP&C started contacting customers directly, authorities allege, mailing bills made to look like SBC's -- all the way down to the blue stripes along the margin of the page. Customers were threatened with canceled service if they failed to pay the bill from "Southwest Region Bell," a fiction controlled by Martino and Chanes, according to the indictment.

Authorities believe the scheme grossed $200 million from 1997 to 2001. Roslynn R. Mauskopf, the U.S. attorney in Brooklyn, called the enterprise one of the largest consumer frauds in American history. Last year, several of the same men were charged with running an Internet pornography scam similar in design and scale.

Brooklyn is a long way from Belton, where Kenneth Matzdorff is considered an upstanding citizen. "He's a super guy. He's a real asset to our community," Mayor Lewis says. Matzdorff is a successful businessman -- not one who has to cheat, Lewis says.