At the request of the Federal Trade Commission, a U.S. District Court has halted a Canadian operation that raked in as much as a million dollars a month by tricking businesses into paying for unordered and unwanted business directories and listings. The court issued a temporary restraining order with an asset freeze against the defendants. This was the latest case announced today as part of “Global Con,” a coordinated, international effort to crack down on cross-border fraud.
"The FTC is proud of its mission to protect American consumers from fraud, and the actions we are announcing demonstrate that our commitment is strong no matter where the fraudulent activity takes place," said Deborah Platt Majoras, Chairman of the Federal Trade Commission.
According to the FTC’s complaint, the defendants called businesses implying that someone in the company already authorized a listing in their business directory and saying they were simply verifying information. In fact, there was no authorization. Some consumers thought they were merely being asked to verify their listing for the local Yellow Pages. The defendants’ own training documents instructed their telemarketers:
REAL WORLD: THEY HAVE NOT PAID
PHONE WORLD: EVERYONE HAS BOUGHT BEFORE
You can’t say they have done this before, or paid for this before. That is a lie.
You are leading them to believe that they have paid/done this before.
It is not your fault if they think they have done this before.
When the telemarketers call, they often do not identify their company’s name, but instead say they are with the “Records Department” of one of the many directories that the defendants were hawking: American National Business Directory 2001-2002, Southeast Business Directory 5th Edition, Georgia State Business Directory, North Carolina/South Carolina/Virginia Business Directory, New Jersey Business Directory 5th Edition, New York Business Directory 4th Edition, California Business Directory 5th Edition, Pacific Business Directory, Arizona/Colorado/New Mexico Business Directory, US Business Directory 11th Edition, Iowa State Business Directory, Central Business Directory, and others. The defendants ask the business to confirm its name, address, and telephone number for the directory listing.
After getting the listing information, another telemarketer would call back from the “shipping department” to verify the provided information for shipping. The defendants would record this telephone call and later use the recording as “proof” that the directory’s purchase was authorized.
When the businesses received the directories, they typically found them to be useless, and also reported that often listings were missing, incomplete, or inaccurate. About a week after shipping a directory, the defendants sent an invoice, typically for $399. They used a mail drop in Nashua, New Hampshire, as their “U.S. Mailing Address.” Businesses that did not pay were harassed by the defendants. If that failed, the defendants turned over the accounts to a third-party collection agency, which continued to harass the small businesses and non-profits that the defendants typically targeted.
The defendants – Datacom Marketing Inc. (Ontario Corporation No. 1431798), Datacom Direct Inc. (Ontario Corporation No. 1417524), Bernard Fromstein, Judy Provencher, Paul Barnard, Judy Neinstein, and Stanley Fromstein – operated call centers in Toronto and Montreal. In its complaint, the FTC alleges the defendants falsely represented that: they had an existing business relationship with the customer, consumers had agreed to purchase business directories or listings, and consumers owed money for business directories and/or listings in business directories. To protect U.S. consumers, the FTC is seeking a monetary judgment for restitution to defendants’ victims and an injunction against further deceptive conduct.
This case was brought with the invaluable assistance of the United States Postal Inspection Service, Canada’s Competition Bureau in Vancouver, British Columbia, the Service de Police de la Ville de Montréal, and the Toronto Strategic Partnership. The Toronto Strategic Partnership consists of the FTC, Competition Bureau Canada, the Toronto Police Service – Fraud Squad, the U.S. Postal Inspection Service, the Ontario Ministry of Government Services, the Ontario Provincial Police – Anti-Rackets, the Royal Canadian Mounted Police, and the United Kingdom’s Office of Fair Trading.
The Commission vote to authorize staff to file the complaint was 5-0. The complaint and temporary restraining order were entered by the U.S. District Court for the Northern District of Illinois on May 9, 2006, with the seal lifted May 11, 2006.
For more information on business directory scams, visit the Commission’s Web site, Business Directory Scams Try to ‘Give You the Business’ at: http://www.ftc.gov/bcp/edu/pubs/business/alerts/alt024.shtm
NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant has actually violated the law. The case will be decided by the court.
Copies of the legal documents associated with these cases are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint in English or Spanish (bilingual counselors are available to take complaints), or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to thousands of civil and criminal law enforcement agencies in the U.S. and abroad.
Steve Baker or John Hallerud
FTC’s Midwest Region