RIO DE JANEIRO, March 28 (Reuters) – As residents of Rio de Janeiro sheltered their homes during the deadliest phase of Brazil’s COVID-19 outbreak last year, police detective Gabriel Ferrando said he received a tip that something suspicious was local internet service turned upside down.
Access was gone over wide swaths of Morro da Formiga, or Ant Hill, a tough neighborhood on the north side of town. When Ferrando questioned a technician from broadband provider TIM SA charged with fixing the outage, the worker, whom he declined to name, said gunmen had chased him away with a warning not to return.
Turns out a new Internet service provider had claimed this ground: a company whose investors were once an accused drug and arms trafficker with alleged ties to Brazil’s notorious Red Command crime syndicate, according to Ferrando, court documents filed by authorities and company registration records viewed by Reuters. Using stolen equipment, some of which was stolen from TIM, the newcomers soon had their own Internet service, Ferrando said. Residents could sign up with the new company, he said — or do without.
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TIM, a part of Telecom Italia SpA (TLIT.MI), declined to comment and referred all questions to the Brazilian telecom industry association Conexis. In a statement, the group called on the country’s law enforcement to act to protect legitimate operators.
Ferrando, a veteran of Rio’s largest organized crime unit, tries to do just that. In a sealed report documenting months of investigation, he asked Rio prosecutors in February to press charges against the alleged pirates. The prosecutor’s office did not respond to a request for comment. No charges have been filed.
Morro da Formiga is not the only community reporting problems. Reuters interviewed nearly two dozen telecom executives, law enforcement officers, technicians, academics and Internet clients in Brazil, and reviewed thousands of pages of police files filed by the police.
The people and documents described a daring takeover of internet services in dozens of neighborhoods in Brazil’s major cities by companies associated with alleged criminals who were unafraid to use violence and intimidation to drive out rivals. The upshot, these sources say, is that tens of thousands of Brazilians now depend on unreliable, second-rate broadband networks estimated by industry and law enforcement to generate millions of dollars annually for alleged crooks.
Bootleg providers are unresponsive when the service crashes and impatient when an account is missed, some customers told Reuters. In Rio’s working-class neighborhood of Campo Grande, a resident described someone knocking on their door every month to collect 35 reais ($6.80) in cash.
There is “pressure to pay on the day they choose without delay,” said the customer, who requested anonymity for fear of retaliation.
It’s a reliable source of income made all the more lucrative by the COVID-19 pandemic, which forced families to go to school, work, and shop online. In 2020 alone, the proportion of Brazilian households with an internet connection grew by more than 12 percentage points to 83%, according to the most recent data available from Cetic.br, an information technology organization.
Pirates also loot equipment and infrastructure, much of which is repurposed for their makeshift networks, authorities and telecom managers said. Telecommunications equipment theft and destruction is up 34% in 2020 from 2019, representing about 1 billion reais ($194 million) in direct annual losses, according to Feninfra, an industry group whose members include installers and repairers. It said that figure rose an additional 16% in the first half of 2021.
THE LISTED SCHEDULE
The Brazilian telecom sector is not alone in its struggle. Crime groups have for years controlled the distribution of cooking gas, pitchers of drinking water and other basic necessities in many low-income urban neighborhoods. read more
But by building their own broadband networks, Brazil’s criminals are increasing their sophistication, according to more than 20 technicians, industry representatives and law enforcement officers interviewed by Reuters. They said the scheme usually works like this:
First, thieves steal or destroy equipment from traditional broadband operators. When repair teams arrive, they are threatened by gunmen who warn them not to return. Last year in Rio alone, no-go zones rose to 105 locations for Oi SA (OIBR4.SA), one of Brazil’s largest internet providers. That figure has quadrupled since 2019, data from the company shows.
Shortly after the service is cut, telecom companies associated with organized crime groups set up their own networks, piggybacking on existing infrastructure. In some cases, these outfits are run directly by members of drug gangs, including the Red Command or the Pure Third Command, one of the main rivals. Others are run by militias – a type of criminal outfit made up of retired and off-duty cops. In other cases, they are run by businessmen who pay bribes to mobsters to eliminate the competition.
According to Rio prosecutor Antonio Pessanha, the intruders often get help from rogue employees of major suppliers who sell them expertise and stolen equipment. He told Reuters that he is investigating criminal activity in the telecom sector in and around the city of Rio, the state capital.
In a recent case, an employee of Claro, the local unit of America Movil SAB de CV (AMXL.MX) in Mexico, offered to sell company equipment to organized crime employees, according to a recorded phone call that Pessanha said his office obtained. was through a court-approved wiretapping. He did not specify which criminal organization the people in the call would be affiliated with, nor did he identify the Claro employee or the other participants. The investigation is still ongoing and Reuters was denied access to the recording.
Claro declined to comment on the alleged incident.
NEW PLAYER IN ANT HILL
In Morro da Formiga, Detective Ferrando said he began receiving anonymous tips in the first half of 2021 from some of the roughly 5,000 residents who said major operators’ broadband services were down.
One company now dominates there, said Ferrando, a company called JPConnect Servicos de Telecomunicacoes. It was founded in 2019, according to company registration documents filed with the government of Rio and seen by Reuters.
That data shows that until late last year, JPConnect was partially owned by an individual named Paulo Cesar Souza dos Santos Jr., who authorities claim is a member of Comando Vermelho, or Red Command, Rio’s largest organized crime group. In 2011, Rio dos Santos’ prosecutors charged with drug and arms trafficking, according to court files reviewed by Reuters. He was later acquitted.
Dos Santos transferred its 50% stake in JPConnect to another investor, Alexandre Rodrigues de Almeida, in September 2021, according to the registration documents.
According to Ferrando, police officers searched JPConnect’s headquarters in Morro da Formiga in January. He said police found equipment belonging to TIM, Oi, Claro and Telefonica Brasil SA (VIVT3.SA), the local unit of Spain’s Telefonica SA (TEF.MC). All those companies declined to comment on Ferrando’s allegations.
The JPConnect investigation has not been previously reported. Authorities have not filed charges in the case. Reuters was unable to reach JPConnect officials. The company’s registered phone number is not working.
Dos Santos and Almeida declined to comment through their lawyers. Their attorney, Eberthe Vieira de Souza Gomes, said JPConnect operates legally and has gained market share by offering a quality product. He said dos Santos has no affiliation with any criminal organization and points out that his client has been acquitted of all charges related to his 2011 indictment. Reuters confirmed dos Santos’ acquittal via court documents from the state of Rio. Those documents did not mention the year of his acquittal.
TIM, Oi, Claro and Telefonica Brasil referred questions to Conexis, the telecom industry association. In an interview, Marcos Ferrari, the group’s president, described a litany of woes facing Brazilian industry in general, including vandalism, theft, threats to employees and the hijacking of service areas by players with suspected ties to the underworld.
Authorities must “slow down these kinds of criminal actions,” Ferrari said.
In Greater Rio, several other broadband providers are being investigated for allegedly abusive tactics and links to suspected criminals, authorities said.
Among them is Net&Com, which made headlines in March 2021 when Rio police raided their downtown headquarters as part of a wider investigation into an alleged drug gang. Police have publicly stated that they are investigating the company for paying criminals linked to the Red Command to help them take over the telecom market in poor neighborhoods in the metropolitan city of Rio.
More than three dozen people, including alleged members of the Red Command, were charged with drug and arms trafficking and conspiracy last year, according to court documents filed by Rio prosecutors and viewed by Reuters. They are currently on trial, maintaining their innocence.
In documents detailing the government’s case, authorities claimed the ring also benefited by accepting bribes from Net&Com to drive telecom competitors away from the neighborhoods where the company now operates. Net&Com and its executives have not been charged.
Pedro Santiago, a lawyer for Net&Com, said the company was a genuine operator who was “a victim of a witch hunt.” Santiago said he had watched many hours of police wiretaps and they showed no connection between the company and criminal elements.
Police dispute that characterization in court documents seen by Reuters, citing alleged stolen equipment and conversations between conspirators citing Net&Com’s alleged role as evidence.
Pessanha, Rio’s public prosecutor, said the investigation is continuing.
“The new gold for the criminal underworld,” he said, “is the Internet.”
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Reporting by Gram Slattery; additional reporting by Rodrigo Viga Gaier; Edited by Marla Dickerson
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