White-Collar Crime - Telemarketing Fraud

Telemarketing is a form of direct marketing in which representatives from companies call consumers or other businesses in order to sell their goods and services. Tele-marketing services may also be tied in with other forms of direct marketing such as print, radio, or television marketing. For example, an advertisement on the television may request the viewer to call a toll-free number. The overwhelming majority of telemarketing operations are legitimate and trustworthy.

The National Fraud Information Center (NFIC) is a project of the National Consumers League, a nonprofit organization founded in 1992. The NFIC considers itself "a vital resource for consumers and law enforcement agencies in the fight against telemarketing fraud." The National Fraud Information Center reported the following swindles as the top 10 telemarketing frauds for 2003.

• Credit Card Offers (23 percent). Individuals who would normally have difficulty getting a credit card are offered the chance to do so for a fee paid up front. Often, the credit card is never issued. (Average loss: $233)
• Prizes/Sweepstakes (21 percent). Prize awards, often phony, are offered in exchange for a certain amount of money paid up front. (Average loss: $3,031)
• Work at Home Plans (10 percent). The swindler offers expensive kits to launch work-at-home businesses, such as envelope stuffing, that seldom generate much, if any, income. (Average loss: $392)
• Magazines (7 percent). Bogus magazine subscriptions are offered for an up-front fee. (Average loss: $110)
• Advance Fee Loans (6 percent). Similar to credit card scams, for an up-front fee, loans that seldom materialize are offered to individuals who would normally not qualify for a loan through a legitimate lender. (Average loss: $1,662)
• Lotteries/Lottery Clubs (5 percent). Individuals are told they have won, or are offered assistance to win, a lottery, often based in a foreign country. (Average loss: $5,127)
• Buyers Clubs (4 percent). Membership to non-existent buyers clubs that purport to offer deeply discounted prices are offered for an up-front fee. (Average loss: $225)
• Travel/Vacations (2 percent). Offers of free or discounted travel are offered but not delivered. (Average loss: $571)
• Telephone Slamming (2 percent). Telephone customers are tricked into switching their telephone companies, often without knowing that they have agreed to the change. (Average loss: $103)
• Business Opportunities/Franchises (2 percent). Opportunities to start a new business, guaranteed to be an easy moneymaker, are offered for a fee. (Average loss: $5,376)

Characteristics of Telemarketing Fraud Schemes

The USPIS investigates and enforces over 200 federal statutes related to crimes against the U.S. Mail, the Postal Service, and its employees. It investigates any crime that uses the U.S. Mail to further a scheme, no matter where it originated: via phone, mail, or Internet. The USPIS offers a list of guidelines that can help prevent a person from being victimized by a fraudulent telemarketing scheme. This list can be applied to any type of offer, not just tele-marketing offers.

• The offer sounds too good to be true. An unbelievable-sounding deal probably is not legitimate.
• High-pressure sales tactics. A swindler often refuses to take no for an answer; he has a sensible-sounding answer for your every hesitation, inquiry, or objection.
• Insistence on an immediate decision. Swindlers often say you must make a decision "right now," and they usually give a reason, like, "The offer will expire soon."
• You are one of just a few people eligible for the offer. Don't believe it. Swindlers often target hundreds of thousands—and sometimes millions—of solicitations to consumers across the nation.
• Your credit card number is requested for verification. Do not provide your credit card number (or even just its expiration date) if you are not making a purchase, even if you are asked for it for "identification" or "verification" purposes, or to prove "eligibility" for the offer. If you give your card number, the swindler may make unauthorized charges to your account, even if you decide not to buy anything. Once that is done, it may be very hard to get your money back.
• You are urged to provide money quickly. A crook may try to impress upon you the urgency of making an immediate decision by offering to send a delivery service to your home or office to pick up your check. This may be to get your money before you have a chance to think carefully about the offer and change your mind, or to avoid the possibility of mail fraud charges in the future.
• There is no risk. All investments have some risk, except for U.S. Government obligations. And if you are dealing with a swindler, any "money-back guarantee" he or she makes will simply not be honored.
• You are given no detailed written information. If you must send money or provide a credit card number before the telemarketer gives you the details in writing, be skeptical. Do not accept excuses such as, "It's such a new offer we don't have any written materials yet," or "You'll get written information after you pay."
• You are asked to trust the telemarketer. A swindler, unable to get you to take the bait with all of his other gimmicks, may ask you to "trust" him. Be careful about trusting a stranger you talk to on the phone.
• You are told you have won a prize, but you must pay for something before you can receive it. This payment can either be a requirement to purchase a minimum order of cleaning supplies or vitamins, or it can be a shipping/handling charge or a processing fee. Do not deal with a promoter who uses this tactic.

Recent Telemarketing Fraud Arrests

In 2002 the USPIS closed 40 illegal telemarketing operations. Among those companies shut down was a firm in Philadelphia which targeted businesses, offering lighting and maintenance supplies over the phone. The firm would then charge exorbitant amounts for the delivered products. The operators were doing $9.3 million in yearly business at the time they were arrested. Another case involved three Canadians who were arrested by the USPIS for calling elderly Americans claiming the victims had won Cadillacs, if they would pay upfront transportation, tax, and license fees. Some 100 victims lost an estimated $250,000 in the scheme.

On November 17, 2003, Canadians Philip Arcand and his wife, Roberta Galway, were sentenced to 10 years in prison for telemarketing fraud. Their scheme involved calling unsuspecting Americans and offering protection against credit card fraud. Their program would supposedly protect consumers from unwanted charges on their credit cards if their cards were stolen by thieves. To institute the service, the victim was asked to give out his credit card number to purchase it. Later, outrageous charges would appear on the victim's card, whether or not they had agreed to take the "protection" service. In all, some $12 million was stolen from consumers.