FTC Stops Fraudulent Sales of Business Directory Listings Canadian Scammers Targeted Small U.S. Businesses

Canadian defendants accused of fraudulently selling business directory listings have been banned from the business directory industry to settle charges brought by the Federal Trade Commission. The primary defendants are paying $165,000 in consumer redress. The FTC alleged the defendants called small U.S. businesses saying they wanted to “renew” the company’s directory listings when, in fact, no prior relationship existed. One individual defendant is subject to a default judgment of almost $9 million. Today the FTC also is announcing a new consumer education brochure, entitled: Business Directory Scams Try to ‘Give You the Business’.

The defendants, Datatech Communications Inc.; 9102-3127 Quebec, Inc. (doing business as I-Point Media); Elias Bakomichalis; Gregory MacNeil; and Robert Brewer are based in Montreal, Canada. They targeted American consumers exclusively, contacting small businesses and representing that they were calling to “renew” the businesses’ directory listings. Some employees who talked with the defendants agreed to the “renewal” because they thought they were merely continuing an existing business relationship. When invoices for $299 were forwarded to their accounts payable departments, however, the businesses allegedly found that they were billed for “purchasing” a directory listing, and that the company had never purchased such a listing before. The defendants routinely denied requests to cancel the directory listings and harassed customers who refused to pay, according to the FTC, saying their credit rating would be damaged and sometimes referring their accounts to collections.

As part of a default judgment against Brewer and a settlement against the others, the defendants are banned from the business directory industry and from assisting others involved in the industry. They also are prohibited from misrepresenting any future sales they make and required to disclose: their identity when they make outbound sales calls; that the purpose of the call is to make a sale; and the nature of what they are selling. They must stop all collections related to the business directory sales. Finally, the defendants (except Brewer) will pay $165,000 in consumer redress, which is based on their ability to pay. They are also subject to a suspended judgment of $9.1 million, the total amount of consumer injury in this case, which they will be responsible for if it is later found they misrepresented their financial status. The FTC received a default judgement against Brewer for $8,986,759. Finally, both orders contain standard record-keeping provisions to ensure the defendants’ compliance with their terms.

The FTC amended its complaint to dismiss charges against 9106-3925 Quebec Inc. Canadian authorities are conducting a criminal investigation into the defendants’ deceptive practices, and have taken action against the defendants for unpaid income and payroll taxes. This case represents successful cooperation between the U.S. and Canadian authorities, especially Canada’s Competition Bureau.

In its new brochure, Business Directory Scams Try to ‘Give You the Business,’ the FTC notes that businesses, churches, and fraternal and charitable organizations lose millions of dollars a year to bogus firms that mislead them into paying for unordered and unwanted directory listings. The FTC offers tips to avoid these scams, including asking the caller for a previous edition of the directory and contacting the listed advertisers. The brochure is available on the FTC’s Web site at http://www.ftc.gov/bcp/conline/pubs/buspubs/directoryalrt.htm.

The Commission vote authorizing the staff to file the stipulated final order was 4-0. On August 11, 2005, the U.S. District Court for the Northern District of Illinois, Eastern Division entered the stipulated final order for permanent injunction; the order of dismissal for 9106-3925 Quebec Inc.; and the default judgment against Brewer.

NOTE: This stipulated final order is for settlement purposes only and does not constitute an admission by the defendants of a law violation. A stipulated final order requires approval by the court and has the force of law when signed by the judge.

Copies of the stipulated final order 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 hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.