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Crime & Justiceby Fern Shen9:32 amSep 6, 20130

Do kiosks that pay cash for used cellphones promote theft?

PART 1: Amid lobbying, a Council bill originally banning “reverse-vending machines” now sets the stage for them to come into Baltimore.

Above: At an ecoATM in Towson Town Center, Aamiyra Muhammad gets $27 for a three-year-old iPod.

Machines that let people trade in used cellphones, iPods, tablets and other mobile devices for instant cash – spitting out hundreds of dollars for newer models – sprang up all over the Baltimore area this past year.

There are now 16 of the ATM-sized kiosks in area shopping malls, with many just outside the city line.

Do these automated stations, billed as “green” because they keep trashed electronics out of landfills, encourage cell phone theft by giving criminals an easy way to unload stolen mobile devices?

D.C. police chief Cathy L. Lanier thinks so. She has flat-out blamed so-called “reverse vending machines,” made by San Diego-based ecoATM, for doing just that in her city.
PART 2: “Guns, fists, rope – tools of the trade for cellphone thieves”

“I think this is not a good system. I’m sure it’s increasing the problem,” Lanier said on WTOP radio in February. She told the Washington Post about a person who recently “dropped 22 phones in 30 days” at an ecoATM kiosk outside Washington, and got about $2,000 in cash.

Meanwhile in Baltimore, street crime is up 6%. About 50% of thefts in the city now involve cellphones and there is also concern here that ecoATMs could potentially be stoking it, according to James H. Green, director of government affairs for the Baltimore Police Department.

Their availability “has provided an easy and efficient means of selling stolen goods, which in turn has resulted in an increase in the theft of [mobile] devices,” says City Budget Chief Andrew Kleine.

In June, Councilman Bill Henry introduced a bill (13-0237) banning the kiosks, which Kleine’s memo was written in support of. (Eleven other Council members are listed as bill co-sponsors, together with Council President Bernard C. “Jack” Young.)

Since then, Baltimore’s already-spiking cellphone theft problem has continued – taking a violent turn in some cases, with walkers and joggers targeted in neighborhoods across the city. They include:

• The July 21 beating of a man in Little Italy, attacked by youths who broke his jaw, knocked out his teeth and took his Samsung Galaxy III.

• An August 14 incident in which two men trying to steal a phone from a woman on Roland Avenue shot and critically wounded the 36-year-old man who came to her aid.

• The August 18 incident in a Dundalk alley in which two men jumped out of car, put a cord around a pedestrian’s neck and demanded his cellphone.

• A thief who, on August 23, pointed a handgun at a man walking in the 800 block of E. Belvedere Avenue, pushed him down and made off with cash and his iPhone.

David Mersten, chief legal officer for ecoATM, testifies at City Council hearing. Their lobbyist Sean Malone (right) listens. (Photo by Fern Shen)

Sean Malone (far right), a lobbyist with strong ties to Mayor Rawlings-Blake as well as Gov. O’Malley, listens to testimony by his client, ecoATM, at the City Council committee hearing. (Photo by Fern Shen)

“Not Malicious”

Something else has happened over the summer as well: Councilman Henry modified his stance against the kiosks.

He has been working on amendments to his “ban” that could allow the kiosks to come into Baltimore, provided they conform to existing city laws governing pawn shops.

Why? Henry said he’s taken the measure of the people behind ecoATM and “I’ve detected a hint of the zeal of activists in them.”

“They started this with the idea of thinking of themselves as recyclers . . . They’re good people,” he said in a phone interview with The Brew. 

“I don’t claim to be a mind reader,” Henry continued, “but I’ve come to the conclusion after two conversations with them that they’re not malicious, and they’re honestly making a good faith effort to work with us.”

In addition to meeting with company officials, Henry said, he has also talked about the bill with the company’s local representative, Sean Malone, a former top operative for Gov. Martin O’Malley who partners with his wife, Lisa Harris Jones, at the top-earning lobbying firm at City Hall.

City Councilwoman Mary Pat Clarke took note of Malone’s role at a June hearing that drew two company representatives.

“We’ve got a one-page bill and two pages of amendments – that sounds familiar,” she said to them. “Is he charging you guys by the page?”

Tapping a Huge Market

Purchased in July for $350 million by Outerwall Inc. (which also owns Coinstar and Redbox), ecoATM now has 650 kiosks in the U.S. The kiosks are equipped with technology that allows them to identify thousands of mobile devices and give the seller money on the spot.

The five-year-old start-up is tapping a growing supply of used phones, as Americans buy 175 million new mobile devices annually and recycle relatively few of them. It’s a phenomenon that adds to the planet’s glut of e-waste but also fuels a lucrative international trade – and troublesome black market – for used phones.

EcoATM marketing director Ryan Kuder said that 20% of the phones the company buys are re-sold overseas. “Most of the phones we buy find a second life. They’re used again after being repaired,” he said. “A smaller number are recycled – smelted down.”

Officials of ecoATM have taken issue with those who say they are attracting crooks who want to unload “hot” electronics.

Safeguards Against Criminals

Cell phone theft was occurring before ecoATMs came along, Malone said, “and there is no connection anyone can point to between us and what’s happening with crime now.” Many other markets for hot phones exist, he said, including online buyers, pawnshops and storefront electronics shops.

Malone also pointed to the safeguards that ecoATM has put in place to deter criminals:

The ecoATM kiosks at Security Square Mall attract attention. (Photo by Fern Shen)

The ecoATM kiosks at Security Square Mall attract attention. (Photo by Fern Shen)

They require sellers to hold up their driver’s license to the machine’s scanner, stick their thumb in a thumbprint reader and be photographed and monitored remotely via video, screened in real time by staff in San Diego.

Sellers must be over 18 and have a government-issued photo id. The company holds the phones for 30 days. Records of all transactions are made available upon request to the police.

Kuder said only five of every 10,000 phones they buy are determined to be stolen and that the company returns the phones at their own expense and helps police track the thieves.

“If you’re a criminal, why would you want to sell your phone at one of these places, when you could just get cash for it from some guy on the street?” Kuder asked.

Capturing Impulse Sellers

Critics say the system is not foolproof. “It can easily be circumvented,” Kleine observed in his memo to the Council.

For example, “straw sellers” with valid IDs and clean records could be used to bring merchandise to the machines. And with phones that are turned off or have dead batteries, the serial number on the phone cannot be read. That means it’s not immediately possible to know whether the person selling the dead phone to ecoATM is the actual owner.

Adding to the time lag, few owners can come up with their phone’s serial number on the spot. (“Could you tell me right now what yours is?” Green asked. I couldn’t.)

In June, Councilman Henry pointed out to City Paper that “if they were serious,” ecoATM would send a check to the addressee on the license, rather than spit out money “at the point of sale.”

Since then, he says he has realized that taking away the instant cash feature would hurt the company’s business model.

“It would deter some of the impulse sellers,” he said. “They would be losing a percentage of their legitimate sales by people who like the idea of getting cash right away.”

Re-crafting the Council Bill

Henry points out that the ecoATM kiosks are already illegal in Baltimore since they don’t conform to existing second-hand dealer laws that require pawnshops to identify and catalog the merchandise they buy.

He said his bill will probably be re-worded to ban the devices “unless they can be brought in line with these laws,” adding that the company and local law enforcement are exploring ways that can happen.

One way, he said, might be to modify the kiosks so they can read serial numbers found inside mobile devices once the battery covers are pried off. The bill is scheduled to come up on second reader at the City Council’s meeting this Monday (Sept. 9).

Meanwhile, Henry said, broader discussions have continued about a regional or statewide approach to regulating ecoATMs, which are permitted in other jurisdictions. (Kiosks can be found in Howard, Anne Arundel, Baltimore, Carroll, Harford and Charles counties.)

Henry said he is crafting a resolution calling for Annapolis lawmakers to write laws or regulations governing the devices.

Representing the Baltimore Police Department and leading those talks, Green said his goal is to “come up with a system that is timely and accurate and leads toward catching the perpetrators.”

What Two Sellers Said

On a recent afternoon, Tara Yeager, who live near Owings Mills, took several phones out of her purse, and plunked them into one of two ecoATM kiosks at Security Square Mall. One, a six-month-old Samsung Galaxy Stellar, would only bring $6.

“I’m not doing that,” she scoffed, putting the device back in her purse, explaining that she has done better selling old devices person-to-person.

“If you go to Eastpoint Mall and start asking around, there are people all around there who will buy your phone,” she said. That’s not to say the ecoATMs haven’t come in handy for her.

Tara Yeager, shown here at a Security Square Mall ecoATM kiosk, said she once got $400 for an iPhone from one. (photo by Fern Shen)

Tara Yeager, shown here at a Security Square Mall ecoATM kiosk, said she once got $400 for an iPhone. (Photo by Fern Shen)

“I got, like, $400 for an iPhone5 in one of these,” Yeager said. How did she come to be selling such a phone? “I had this iPhone and I wasn’t doing too well on paying the bills on it,” Yeager said.

The return can be significant on some devices, she said. “”You got some iPods, they go for hundreds of dollars.”

Much less of a veteran of electronics resales, Aamiyra Muhammad, was attracted to the Towson Town Center ecoATM kiosk because its ‘cash-for-someting-in-your-drawer’ concept caught her eye. The next time she was in the mall, she brought with her an old iPod that she no longer used and was pleased to get $27 for it.

“It’s really great, it really makes sense!” the first-time user said, as the machine spit out money. “You take something you weren’t using and instead of throwing it out, you get money for it. Right away!”

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