Explaining the circumstances behind a $300 million Telemarketing fraud scheme that lead to prosecution, imprisonment, and massive financial costs.
About the Author
My name is Joshua McCarty. I am a Freelance Videographer. I make films bringing awareness to important subjects occurring throughout the world. I served six years in prison because I thought I could outsmart people I attempted to deceive. I spent those six years rebuilding myself mentally and began developing healthier thinking habits. Since my release I have graduated from college with an Associates Degree in Human Resource Management and continue to further my education.
Upon completion of this case study, participants will be able to:
- Understand telemarketing.
- Identify how telemarketing scams victimize consumers.
- Explain how deceiving consumers can lead to charges for white-collar crimes.
- Understand the penalties associated with white-collar crimes.
- Avoid telemarketing scams.
People who work in telemarketing and sales.
Fraud, Telemarketing, Elder fraud, Senior citizens, White-Collar crime, Magazine sales.
Current State of the Industry
Telemarketing scams have become more common in the past few years. With the influx of home-based subscription services and online payments, people become more vulnerable to con jobs and deception. Many people do not understand how their decisions and actions can deeply affect themselves and others. Using the phone as a medium, telemarketers use sales-scripts to deceive people into paying money that they do not owe. Unfortunately, a lot of these people are over the age of 50. The Federal Bureau of Investigation and Postal Inspection Service have focused on these types of crimes. Individuals caught in such white-collar criminal behavior may face job loss, stiff fines and possible federal prison time.
Future State of the Industry
How many times a day do you receive a spam call or email? The practice seems more prevalent today than ever, especially with the incredible ubiquity of technology at our fingertips. Well, state and federal governments have access to this technology too. Government investigators use these tools to thoroughly investigate trends and anomalies and follow up on consumer complaints. Prosecutors, in turn, now seek to impose longer sentences in order to dissuade potential future telemarketers from taking the risk of engaging in unscrupulous activity.
The government ensnared several CEOs and finance managers perpetrating a nationwide telemarketing scheme. This fraud targeted elderly people and caused over $300 million dollars in total damages. These companies would call the victims and deceive them into purchasing or canceling magazine subscriptions. These fraudulent calls caused financial devastation to many elderly people by ridding them of their social security checks, the only source of income for most of them. Postal workers became suspicious of mail activity. The FBI collaborated with the Postal Inspection Service to launch an investigation.
Numerous telemarketing firms contacted customers throughout the United States, offering to sell or renew magazine subscription services for a fee. Perpetrators of the scheme targeted elderly consumers. Their sole means of income stemmed from a pension or social security check. Due to their advanced age, they didn’t have a capacity to earn more.
These companies used sophisticated techniques to generate targeted leads. They focused on the most vulnerable victims and relied upon state-of-the-art CRM (Customer Relationship Management) software to track leads, calls, sales and follow-ups, much as one would expect from a high-quality company offering authentic products and services. These sales occurred from companies located in the United States and Canada.
Some offices had been operating for longer than 20 years. They defrauded hundreds of thousands of elderly victims throughout the United States and Canada. The telemarketers relied upon fraudulent sales scripts as a ploy against these elderly victims. The scammers lied to the victims to deceive them into making payments on debts that they did not owe.
In addition to using deceptive tactics to make victims pay for subscriptions they did not order, the telemarketers also employed a cancellation script. This script scammed victims out of additional money for purported cancellation fees of magazines they never ordered.
The FBI and Postal Inspector’s office became aware of the fraud following complaints of suspicious mail activity. They then carefully and deliberately investigated the claims. Their investigation uncovered a tangled web of firms located in 14 states, 16 judicial districts, and two Canadian provinces. Combined, those companies billed in excess of $300 million.
In all, authorities charged 60 defendants with crimes relating to their preying on elderly people. Those defendants will face enhanced penalties if convicted as a result of their to deceive seniors. The Senior Citizens Against Marketing Scams Act of 1994 (the “SCAMS Act”) applies to charges for conspiracy, mail fraud, and wire fraud.
Using past experience as a guide and the monetary amount of damages claimed by federal prosecutors, many of the charged individuals could possibly receive sentences of 20 years or longer. In the face of powerful federal prosecutors wielding the threat of long sentences, many defendants will choose to cooperate against others in exchange for leniency. Most frequently, people on the lower echelons of the scheme can expect greater flexibility, provided they’re willing to play ball. Many of these cases will play out over the next several years and defendants jockey for position and prosecutors seek to milk as much information as possible, quite probably bringing even more defendants under the umbrella of this massive indictment.
Legislators pass laws to protect citizens from being scammed, with special attention paid to the most vulnerable, such as the elderly. These telemarketing firms violated several of those laws in the SCAMs Act. Considering laws to protect seniors, those individuals who represent the magazine companies could face decades in prison for their role in deceiving and preying on elders.
Many people start their careers with good intentions, wanting to do the right thing. Unfortunately, difficult challenges and life situations, among other reasons, can lead people to stray away from honest thinking, leading them to plot to do mischief. Oftentimes, these people fail to consider the repercussions this type of criminal behavior may bring, whether upon themselves or the victims. The deceit starts off as a “one time thing” then ends up becoming a long-term habit, severely detrimental to their well-being.
The FBI found and charged 60 people for this scheme. The indictments bring criminal charges against many defendants. Some worked in leadership positions, such as CEOs, company owners, lead brokers, call center managers, and telemarketers. Since the investigation is ongoing, investigators expect to discover thousands of additional victims. Prosecutors may convene more grand juries that issue criminal indictments against more people.
If a person plots to do wrong, consequences will eventually follow. In this instance, some of those indicted had been in business for over 20 years. Many served only as employees, not sharing in the full profits of the venture. Yet, all of the defendants came under the same scrutiny. They now face serious charges. I imagine they felt bulletproof. A jury may find it hard to believe that they did not know about the scam. That delusion fell quickly once charges came down, bringing tragedy and turmoil into their lives.
Perhaps these businesses began with legal intentions and practices. Over time, those companies found it easier to scam money using illicit tactics. A compliance program may help legitimate companies stay on track. With a consistent message and focus on doing the right thing, companies help to ensure employees work from the same script, so to speak. Documenting processes and procedures also aid companies in better protecting themselves, should a rogue employee (or group of employees) bring unwanted attention from government authorities.