A Canadian telemarketing operation that allegedly defrauded businesses on both sides of the U.S. border is now in trouble on both sides of that border.
Datacom Marketing Inc. and several individuals and firms were hit with criminal charges on Friday by Canada’s Competition Bureau, a law enforcement agency that oversees business.
The defendants tricked U.S. and Canadian businesses into paying for unordered directories and listings, netting The $20.7 million in 2002 alone, according to the Bureau.
Earlier this month, the U.S. Federal Trade Commission won a temporary restraining order and an asset freeze in a civil case against the firms and individuals.
The defendants in the Canadian case include Judy Neinstein, Bernard Fromstein and Paul Barnard of Toronto. All three were accused of misleading advertising, deceptive telemarketing and criminal conspiracy, each of which carries a maximum of five years in prison, according to Don Mercer, assistant deputy commissioner with the Competition Bureau. They were also charged with fraud, an offense that carries a maximum penalty of 14 years.
Also facing fraud charges are two Quebec defendants: James Sharo and George Pavlopolous
The defendants were not arrested, but are expected to appear in an Ontario court on July 12, Mercer said.
The corporate defendants include: Datacom Marketing Inc. and Datacom Direct Inc., both based on Ontario; and Datacom Marketing Inc., a Quebec affiliate.
Mercer added that the defendants have also started operating in the United Kingdom.
According to a civil complaint filed on May 9 by the FTC, the companies made unsolicited outbound calls to small or medium-sized businesses in the U.S., claiming that they were calling to verify their name, address and telephone number for a listing in a directory.
This was often followed by a second call to verify the information. These verifications were often taped and used as proof that the parties had authorized the purchase of a directory, the FTC continued.
The callers sometimes mentioned that an invoice was on its way, but they did it so quickly that the victims often failed to realize the import, the complaint stated. The full price, including shipping and handling, was $399.
Victims received print or CD Rom directories. Those who didn’t pay were often turned over to third-party collectors, according to the complaint.
To facilitate the scam, the defendants employed up to 400 telemarketers, mostly “students and immigrants who speak good English,” Mercer said. “Their human resources departments were set up on the premises that there would be a turnover every two weeks, which is what it took for people to figure out that they were working for crooks.”
The temporary restraining order was issued on May 9 by the U.S. District Court for the Northern District of Illinois.
According to the FTC, the case was the latest announced under Global Con, a coordinated international effort to crack down on cross-border fraud.
Both the U.S. and Canadian cases were based on cooperation between the FTC, the Competition Bureau, the U.S. Postal Inspection Service, the Royal Canadian Mounted Police and other government agencies and law enforcement arms.
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