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Officers at a Waukesha pay phone company face charges of fraud after allegedly rigging their phones to automatically dial toll-free numbers, thereby collecting fees from phone carriers.

Earlier this week, a federal grand jury indicted Jeff Frost, 53, Brookfield and Colin Nordstrom, 48, Coon Valley, Wis., on charges of wire fraud, conspiracy to commit wire fraud and conspiracy to commit money laundering.

The indictment alleges that Frost, president of Mid-America Payphones, and Nordstrom, its vice-president of sales, led the scheme, which involved programming the company’s public pay phones (located in Wisconsin and in other Midwestern states) to automatically dial certain toll-free numbers between 2004 and 2007.

The indictment claims the company collected $1.2 million in fees through these calls, including ones to Dell, Panasonic and Delta Airlines.

Here’s how it alleges they collected the fees:

Whenever someone dials an 800 number at a public pay phone, there is typically no charge for it, but the company that owns the phone (such as Mid-America Payphones) collects a 49.4 cent fee (as determined by the FCC) from the phone carrier (such as AT&T) that administers that particular 800 number.

The indictment alleges Mid-America Payphones collected these fees fraudulently when it programmed its pay phones to call 800 numbers automatically.

According to the indictment, the numbers chosen by the company placed the phones in what company leaders called “automated hell,” time consuming automated prompts. Staff members were instructed to test toll-free numbers to find ones that would place phones in these time-consuming loops.

“Automated hell” was sought because the phone had to stay on the line long enough for the company to collect the 49.4 cent fee.

Nordstrom is also charged with making false statements to federal agents and the grand jury.

According to a press release, the investigation was conducted by the U.S. General Services Administration and the Internal Revenue Service.

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