Kentucky: Sixty Defendants Charged In $300 Million Nationwide Fraud

Kentucky: Sixty Defendants Charged In $300 Million Nationwide Telemarketing Fraud Scheme

(STL.News) – United States Attorney Erica H. MacDonald today announced three separate indictments charging 60 defendants for their roles in a $300 million nationwide telemarketing fraud scheme that targeted elderly and vulnerable victims.  The charges include conspiracy, mail fraud, wire fraud, and violating the Senior Citizens Against Marketing Scams Act of 1994 (the “SCAMS Act”).  The defendants are located in 14 states, 16 judicial districts, and two Canadian provinces.

“This case represents the largest elder fraud scheme in the nation.  More than 150,000 elderly and vulnerable victims across the United States have been identified in what is essentially a criminal class action,” said United States Attorney Erica H. MacDonald. “Unfortunately, we live in a world where fraudsters are willing to take advantage of seniors, who are often trusting and polite.  It’s my hope that this prosecution is a call for vigilance and caution.  Combatting elder fraud and abuse is one of the Justice Department’s top priorities and I applaud our investigative partners for their grit and dedication in tackling, at the systemic level, this widespread fraud.”

“The thieving greed of fraudsters who target senior citizens knows no bounds,” said FBI Minneapolis Special Agent in Charge Michael Paul.  “Using a tactic like telemarketing magazine sales, these deceitful scam artists bilk hard earned money from their aging victims – leaving so many financially devastated in their retirement years and without recourse for recovery.  The FBI is working intently to help ensure our elderly fellow citizens are protected and not defrauded.”

“When the U.S. Mail is used for the purposes of committing fraud, and in this case, a particularly insidious type of fraud- elder fraud, it’s the job of the Postal Inspection Service to aggressively investigate and ensure America’s confidence in the integrity of the U.S. Mail,” said Inspector in Charge Ruth Mendonҫa.

According to allegations in the indictments and documents filed with the court, over the past 20 years, the defendants devised and carried out a telemarketing scheme to defraud more than 150,000 victim-consumers located across the United States, many of whom are elderly and vulnerable.  The scheme was carried out by a network of dozens of fraudulent magazine sales companies located across the United States and in Canada.  The companies operated telemarketing call centers from which their employees made calls using deceptive sales scripts designed to defraud victim consumers by inducing them—through a series of lies and misrepresentations—into making large or repeat payments to the companies.

The indictments allege that the defendants used fraudulent sales scripts to carry out their scheme.  Many of the defendants used a fraudulent “renewal” script in which the telemarketers falsely claimed to be calling from the victim-consumer’s existing magazine subscription company about an existing magazine subscription package.  The telemarketers often claimed—falsely—to be calling with an offer to reduce the monthly cost of an existing subscription.  In reality, the company had no existing relationship with the victim-consumers and was actually fraudulently signing the victim-consumers up for expensive and entirely new magazine subscriptions.

The effect was that a single consumer went from having one magazine subscription to, at times, more than a dozen, all with different fraudulent magazine companies, each “sold” under the auspices of “reducing” the consumer’s monthly rate.

United States v. Rahm, et al., 20-cr-232, charges 43 defendants with carrying out a conspiracy to use the fraudulent renewal scripts to defraud more than 125,000 victims out of more than $300 million.

The indictments further allege that some of the defendants employed a “cancellation” script.  The cancellation scripts targeted people who had previously fallen victim to a fraudulent magazine sales scam.  Taking advantage of the victims’ desperation to make the magazine subscriptions stop, defendants using the cancellation script falsely claimed to be calling from the magazine “cancellation department.”  The defendants offered to consolidate and cancel the victim-consumers’ existing magazine subscriptions and to pay off the victims’ “outstanding balance” in exchange for a large lump-sum payments.  In reality, the companies had no relationship with the victim-consumer and the victim-consumer did not owe any money to the company.  The “balances owed” were completely made up and the defendants stole the victims’ money.

United States v. Timmerman et al., 20-cr-233, charges nine defendants who worked for one of three Canadian companies that used the cancellation script to defraud more than 20,000 victim-consumers in the United States out of approximately $30 million.

United States v. Mathias et al., 20-cr-231, charges eight defendants in Mississippi and Georgia who used the cancellation script to defraud more than 13,000 victims of approximately $4.5 million.

The indictments charge defendants at all levels of the conspiracies, including Scheme Leaders, Company Owners, Call Center Managers, Telemarketers, and Lead Brokers.  The Scheme Leaders provided an array of services to companies involved in fraudulent magazine sales, including customer relationship management (“CRM”) software programs that tracked orders, sales, and other customer information for companies involved in the fraudulent magazine sales scheme.  The Scheme Leaders also provided leads to the Company Owners and sent out confirmation letters, invoices, bills, and collections letters to victim-consumers who had been defrauded by fraudulent magazine sales companies.  The Company Owners operated telemarketing call centers and provided lead lists and fraudulent sales scripts to their telemarketing employees.  These companies were operating in 14 states across the country, including Minnesota, Florida, Georgia, Mississippi, California, Iowa, Kansas, Missouri, Illinois, Colorado, Arizona, New Mexico, North Carolina, and Arkansas.  The Call Center Managers trained the Telemarketers to use the fraudulent sales scripts to defraud victim-consumers.  The indictment also charges Lead Brokers, who bought and sold lead lists of victim-consumers to fraudulent magazine sales companies.  Many of the consumers on this list were elderly and susceptible to fraudulent and deceptive sales tactics and particularly valuable to companies engaged in fraudulent magazine sales. Accordingly, the lead lists commanded a significant premium and sold for as much as $10 or $15 per name.

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