FTC Sues to Halt Three Cross-Border Business Directory Scams

The Federal Trade Commission has filed suit to halt the illegal operations of three telemarketing boiler rooms in Montreal, Canada. The agency alleged that the telemarketers bilked thousands of small- and medium-sized U.S. businesses and non-profits, including churches, schools, and charities, out of millions of dollars by deceiving them into paying for listings they never ordered in worthless business directories.

The FTC lawsuits, filed in federal court in Illinois, are part of a joint initiative with Canadian law enforcement authorities called “Operation Mirage” that is aimed at cracking down on business directory scams. The FTC charged that the three telemarketing operations targeted businesses and other organizations with schemes to mislead them into paying hundreds of dollars each for unwanted business directory listings. The court has issued temporary restraining orders in the three cases.

In their phone calls to businesses and non-profits, the telemarketers often have posed as well-known local “yellow pages” directories, and have told employees who answer the phone that they are calling to verify addresses and telephone numbers, the FTC’s complaints stated. The telemarketers then used the “verifications” as the basis to claim that these organizations agreed to listings that often cost $400 or more. The FTC alleged that the companies then sent their victims invoices that again often imply that they are well-known yellow-pages companies. Many businesses and organizations simply paid these invoices. Those that did not were harassed with threatening phone calls and letters. To hide their location, the companies have used mailing addresses around the United States, in Miami; Phoenix; Plattsburgh, New York; Port Barre, Louisiana; Russell, Illinois; Milwaukee, Wisconsin; and Jersey City, New Jersey, the FTC alleged.

The FTC’s complaints alleged that the companies made three misrepresentations that violated the FTC Act. First, they led the small businesses and non-profits they targeted to believe that there was a pre-existing relationship between them. Second, they falsely claimed that those organizations had agreed to purchase directory listing services. Third, they falsely claimed that the organizations owed money for these supposed services.

The Commission vote to authorize staff to file each of the complaints was 4-0. The complaints were filed in U.S. District Court for the Northern District of Illinois against: 6555381 Canada Inc. and 3189651 Canada Inc., both companies doing business as Reed Publishing, among other names; 6654916 Canada Inc., National Yellow Pages Online LLC, 9187-4131 Quebec Inc., DRS Without Prejudice Inc., and the operators of those companies, Riaz A. Butt, Faheem Ahmed Mughal, Nabeel Azmat, Sohail Azmat, and Bilal Ahmed Malik; and against Integration Media Inc., doing business as GoAm Media, and GoAm’s principal, Stephane LaChapelle. Butt, the only individual defendant who resides in the United States, lives in the Milwaukee, Wisconsin area.

The FTC has been granted temporary restraining orders against GoAm Media and Stephane LaChapelle, and against 6555381 Canada Inc. and 3189651 Canada Inc., doing business as Reed Publishing, halting the deceptive practices and freezing the defendants' assets. A temporary restraining order freezing the defendants' assets also was entered in the case against 6654916 Canada Inc., National Yellow Pages Online LLC, 9187-4131 Quebec Inc., DRS Without Prejudice Inc., and their principals. The Commission is seeking permanent injunctions that would force the defendants to give up their ill-gotten gains so that those funds can be used for consumer redress.

The FTC appreciates the assistance of the Canadian Competition Bureau and Project COLT, a multi-agency, U.S.-Canada partnership formed in the 1990s to combat telemarketing fraud.

NOTE: The Commission files complaints 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. Complaints are not a finding or ruling that the defendants have actually violated the law.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

(FTC File Nos. 082-3262, 092-3030 and 092-3119)
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