KANSAS CITY, Mo. -- The head of a Kansas City-area telephone company has been accused of involvement with a New York organized crime family in fraud schemes involving telephone "cramming" and Internet pornography.
Kenneth Matzdorff, chief executive of Cass County Telephone Co. in Peculiar, was arrested Tuesday by FBI agents at his home in suburban Belton.
He was released on his own recognizance after appearing before U.S. Magistrate Robert E. Larsen.
In a complaint filed last Thursday in New York and unsealed Tuesday, the FBI said Matzdorff was instrumental in establishing a company that it said was the primary vehicle used by the Gambino crime family to submit false billing charges to local telephone exchanges.
The complaint said that while Matzdorff held himself out as owner of USP&C Inc. of suburban Overland Park, Kan., the company was controlled by members of the Gambino crime family.
The complaint said Matzdorff knew USP&C was used to circumvent telephone regulations on billing for adult entertainment services.
A call left at Matzdorff's home Wednesday was not returned. His attorney, R. Stan Mortenson, of Washington, said the complaint was "without basis" and that Matzdorff would "pursue an appropriate defense in light of that."
Federal prosecutors in New York declined to comment on Matzdorff's arrest.
Matzdorff, who is to appear next month in a federal court in New York, was not named in an indictment returned by a federal grand jury there earlier this year. That indictment said the alleged schemes by Gambino family members generated more than $400 million.
That indictment said the "cramming" scheme defrauded people by placing unauthorized charges on their local telephone bills. It said mobsters used shell companies advertising phone sex, psychic hot lines and dating services, encouraging calls to 800 numbers for free samples.
The government said the scheme was concealed through dual sets of materials, one used to solicit and defraud customers and another presented to local telephone carriers.
The complaint accuses USP&C of placing the unauthorized charges on local phone bills, while another company, Overland Data Center, also of Overland Park, received and processed the 800 number calls and still other companies were used to divert customer complaints.
It said USP&C collected payments for the unauthorized cramming and Internet charges and turned most of it over to mob-controlled companies.
Appearing in April at a Missouri Public Service Commission hearing on a Cass County Telephone rate request, Matzdorff denied knowing of any relationship between USP&C and Overland Data Center. But the complaint said he knew the companies were created to conceal the involvement of organized crime figures.
The PSC staff said after the hearing that an audit of Cass County Telephone found no misconduct related to regulated operations, but expressed concern about "the allegations surrounding the company" and said it would consider a starting separate case to monitor those developments.