The ring leader.

• Author: Noland, Terrance
• Position: Ivy James Lay; computer crimes

Playing the numbers, a Triad computer nerd turns employee theft into an international crime wave.

It's past 9 a.m., and Knight Shadow is late for the interview. It's not his fault. The federal prison camp at Seymour Johnson Air Force Base is on lockdown for a surprise head count. That happens once or twice a week, in addition to check-ins every two hours.

The delay adds to the anticipation. He's one of the menacing new breed of criminal known as cybercrooks, who prowl on-line, wielding computers as weapons and striking terror in the hearts of businessmen vulnerable to their techno-trickery.

Knight Shadow, a k a Ivy James Lay, is one of the most notorious. He was the center of an international crime ring peddling stolen calling-card numbers. Its reach spanned from Los Angeles to Germany, Spain and beyond. Lay was the supplier, his light fingers tapping into a computer to steal up to 100,000 card numbers from MCI's switching station near Greensboro, where he worked as a night-shift technician. He distributed them on-line through his middlemen, guys like "Killer" and "Legend." They found a ready market in European hackers and software pirates, who used them mostly to call bulletin boards to chat or download stolen programs.

MCI called it the largest fraud of its kind, and it went on for more than a year. The volume of calls was so great it forced AT&T to add overseas capacity so callers wouldn't get "all circuits busy" signals. Fraud complaints doubled at some phone companies, which had to beef up their staffs to handle them. MCI had five investigators on the case full-time for nine months.

The scheme came crashing down in September 1994 when Secret Service agents raided Lay's Haw River home. By then, early estimates said, more than $50 million in fraudulent long-distance calls had been racked up. One card alone had $99,000.

GTE lost so much money on this and a similar scheme, it did away with international calling on its cards for a while. MCI, AT&T and others installed new security systems to sniff out fraud quicker. One AT&T investigator claimed the inflated flow of international calls may have affected the balance of trade.

Lay is part of modern-crime mythology - elevated to that status partly by the public's fear of a technology it doesn't fully understand. He was No. 8 on the Pittsburgh Post-Gazette's Internet's Most Wanted list, alongside such techno-hooligans as Kevin Mitnick, the fugitive hacker nabbed in Raleigh in 1995.

Lay pleaded guilty to federal credit-card fraud and got 38 months. He's been doing time since May 1995 at the Goldsboro prison camp (which, though housed on base, has no direct tie to the Air Force). It's a minimum-security facility, holding only nonviolent criminals. Seventy percent of the 460 are here on drug convictions; the rest, white-collar, mostly fraud.

Encircled by pine trees, the eight one-story barracks sport peach and pink concrete block, with cream columns in front and triangular orange roofs. It looks like a nouveau-Aztec middlebrow retirement center. Inside, though, the barracks are spartan. Rows of 8-by-10-foot cells with 5-foot rose-colored concrete walls form a maze of institutional cubicles. Each cell has a plain metal bunk bed, desk and two lockers. But no bars.

There are no armed guards, either only "counselors" and "custody officers." Outside, no fences, just bright-red signs on the perimeter that read "Out of Bounds." Escapes are rare. "We had one walk away last year," public information officer Rodney Tabron says. Make no mistake, this is prison. The barriers might be imaginary, but the confinement is real.

At 20 past 9, Jim Lay shuffles into the visitors center, dressed in green prison garb and white tennis shoes. His shoulders are rounded, his black hair plopped to one side. He wears tinted, oversized glasses. Though 6-1 and 215 pounds, he's unassuming. That's no shock if you've seen photos of the nerdy Kevin Mitnick.

The two visiting areas are taken up by horticulture and drug classes for inmates, so Tabron puts us in a concrete-block room just big enough for two people and a small round table. He sits outside the open door.

Soft-spoken yet chatty, Lay, 31, is anxious to tell his story for the first time. (MCI security officials, through a spokesperson, declined to talk about the case, saying they'd rather put the incident behind them and that disclosing details on their investigation might aid hackers.) He's curious, too, about what's happened to the eight others charged in the scheme, most of whom were sentenced after he went in. They range from the 25-year-old son of a Beverly Hills developer to a 58-year-old retired steelworker in Blaine, Minn. Lay has met only one in person. Five got jail or community-center time, though not as much as he did. Two got probation. One is facing similar charges in Germany.

"We never looked at it to the point of going to jail. If we had considered that, it wouldn't have been worth the risk," Lay says. "That's how we looked at it: There's no big-time crime here. I knew I would lose my job - let's put it that way."

For all the money he cost phone companies - calculated eventually at $23 million to $38 million - Lay figures he made only $50,000. The irony is that unlike Mitnick, who stole for sport, Lay did it for the money. He used the dough to fix up the house, buy a truck, take his wife and three stepchildren on vacation to Denver, stuff like that. "I wasn't planning on going where I went with it," says Lay, whose MCI gig paid $29,300 a year. "I wasn't looking at saying, 'I want to be the world's largest calling-card supplier.' I was looking at making $2,000 to take care of some things we needed. But when you get one small amount of money, you find other things you need. You're just never satisfied."

Stripped of the hype, Jim Lay is no different from the employee who pilfers office supplies or dips into the petty-cash drawer. Like most employee thefts, his was a crime of opportunity, fueled by greed and resentment. His just had bigger consequences.

Lay got his first computer when he was 15, not long after his parents divorced. He...