Dallas- http://cbs11tv.com- CBS 11 News has uncovered new information about FBI raids against Dallas companies that provide web servers for dozens of businesses in North Texas and across the country.

Court documents show it’s all part of an alleged massive fraud scheme against AT&T and Verizon.

Court records show Verizon first went to the FBI this past January, alleging some North Texas web server providers were cheating them and AT&T out of millions of dollars.

Documents show this is the second time in less than a month FBI agents raided offices inside a Downtown Dallas office tower.

The companies being investigated provide web servers for dozens of companies, including Catholic Media Group of Cincinnati, Ohio, which represents motivational speakers.

During the raid, CMG’s owner, Joe Condit, says his website and business went down. “It’s crippled us completely. Now that we don’t have a website, we have no business, and a lot of speakers are without representation.”

In Thursday’s raid, the FBI seized equipment in the offices of Core IP Networks, owned by Matthew Simpson.

Court documents show agents raided Crydon Technology’s offices March 12 in the same downtown building as Simpson’s and at the Infomart.

Agents also raided a $600,000 house in Southlake. Crydon and the house are owned by Mike Faulkner.

AT&T and Verizon operate physical equipment and facilities for the transmission of phone calls and other communications.

Court records show federal law requires the telecom giants to provide for a fee those services to smaller telecom companies, who in turn provide services to their own customers.

Documents say AT&T and Verizon told investigators they believe they were being defrauded out of $6 million in a three to four month period by a group of investors working together, including Faulkner, Simpson, and three others.

The documents say those individuals profited more than $1 million.

In a phone conversation, Faulkner said, “The allegations that I defrauded AT&T and Verizon are ridiculous… The companies that owe money to AT&T and Verizon are clients and not owned by me.”

Simpson said, “I’m not involved in alleged fraud against AT&T and Verizon, and I’m doing everything I can to cooperate with the investigation and to help my clients get back up and running.”

No charges have been filed.

As for Joe Condit, he’s hoping his company can survive. “We’re all for catching the bad guys and the criminals. It also has to be recognized that young, small businesses can’t take a hit like this, especially in this time.”

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From www.thewhir.com- After refusing to comment to local news sources during a raid on the Texas data centers of colocation company Core IP last week, the FBI defended its raids this week in a lengthy and detailed article on the seizures posted within Wired’s Threat Level blog.

According to the Wired News article – which focuses mostly on an earlier seizure of equipment hosted by Crydon Technology that took place on March 12, but also deals with the Core IP raid on April 3 – the raids were part of an investigation into complaints filed by AT&T and Verizon of unpaid bills the companies claimed were owed them by smaller VoIP providers operating in the data centers.

Data center operators have complained that the telcos are using the FBI to address a situation that should have been settled in civil court. But on Tuesday, spokesman for the FBI’s Dallas office Mark White told Wired News the agency was working on a fraud case, and said a federal judge wouldn’t have signed a search warrant for a civil case.

According to Threat Level, companies whose equipment was seized – a list that includes local VoIP providers, a credit card company, a video game software developer and many others, according to Wired – say they have lost millions of dollars in equipment, and an incalculable amount of business, as a result of the raids.

The bulk of the story deals with the seizure of equipment from the colocation facility operated by Crydon Technology on March 12. FBI agents reportedly took about 220 servers belonging to the company’s owner Mike Faulkner, he says, as well as networking equipment, racks and even power strips. Faulkner says about $200,000 was seized from his business bank account, and claims authorities raided his home, seizing iPods and video game systems belonging to his children. He also says money was seized from his teenage daughter’s bank account, and the account of the elderly mother of his former comptroller.

Faulkner says he has lost millions in revenue as a result of the raids, and many of his affected customers have gone, or are at risk of going, out of business. Last week’s raid on Core IP is related to the Crydon seizures, though Core IP owner Matthew Simpson has been quiet on the matter, with the exception of a letter he posted online following the raid last week.

The Wired article includes a 39-page PDF of the affidavit in the case, which claims that a number of conspirators who may have connections to Faulkner conspired to acquire connectivity services from AT&T and Verizon in order to operate their VoIP services – providing forged documents in the process – and have since racked up more than 120 million “physical connectivity minutes,” but have not paid for the services, and now owe the telecommunications companies about $6 million in fees.

Faulkner was previously part owner of one of the companies mentioned in the affidavit, Premier Voice, but he sold his stake in the company about a year ago. He tells Wired that Premier did owe money to AT&T at one time, but the debt was taken on by the company’s new owner when he sold it. He adds that the money owing should be classified as “debt” and not “fraud.”

The implication of the statements by Faulkner seems to be that the treatment of the case as a fraud by the FBI, and by the telcos involved, is an example of a kind of big-business bullying that is nearly impossible to fight back against. He says he was never contacted by either company asking for debts to be repaid.

More significantly, he claims the FBI’s mishandling of the case – seizing everything in the facility rather than targeting the specific VoIP companies accused of fraud – has done irreparable damage to some innocent customers of his who have nothing to do with the case and just happened to be collocated at Crydon, in some cases literally putting them out of business.

A quote given by FBI spokesman White in the Wired story certainly suggests a problematic, if not outright callous, misunderstanding of some of the fundamental issues underlying the operation of a hosting business.

“My understanding is that the way these things are hooked up is that they’re interconnected to each other,” says White, quoted in the article. “Company A may be involved in some criminal activity and because of the interconnectivity of all these things, the information of what company A is doing may be sitting on company B or C or D’s equipment.”

Crydon customers say they weren’t able to convince FBI investigators that their equipment was separate from the case.

White goes on to say that the FBI is working with companies affected by the raids to provide copies of the data seized with their equipment so they can get their businesses operating again. He says the FBI has “repeatedly asked companies” to call and provide the information they need to return the data.

Faulkner says the accusations leveled against him in the affidavit by a confidential informant come from a disgruntled former employee who was fired after he failed to perform his duties.