FTC Halts Fraudulent Internatioal Call Scheme

The Federal Trade Commission has obtained a court order temporarily halting Iowa defendants from running an allegedly fraudulent scheme to get consumers to place lengthy and expensive calls, unknowingly, to Guyana or the Caribbean, for which they received a per-minute payment from the foreign telephone company. The FTC alleged that Daniel B. Lubell, doing business as Mercantile Messaging and DB&L, Inc., has solicited consumers to call what turned out to be an international number for information about free accommodations in Hawaii, to enter a sweepstakes for a free Hawaiian vacation, and to obtain information about free or discount travel. Lubell did not inform consumers that they would incur a significant charge -- up to $2.33 a minute or more than $30 for listening to the entire message -- on their telephone bill, that even after calling they could enter the sweepstakes only by mail, or that they first had to buy an airline ticket to benefit from the information he was selling.

According to the FTC complaint detailing the charges in this case, what consumers actually heard when they placed a call was a 15-minute, repetitive, recorded message that explained how to get bumped from oversold flights in order to obtain free airline tickets. The message also gave consumers an address to which they had to write in order to get an entry form for the sweepstakes. Consumers were told that Lubell and his firms do not charge for the information they provide, when, in fact, they receive 37 cents a minute for whatever length of time consumers stay on the line, the FTC alleged.

Upon the filing of the FTC complaint in federal district court in Iowa, the judge granted the FTC’s request for a temporary restraining order halting the scheme and freezing the defendants’ assets. The FTC is seeking redress for consumers and a court order permanently barring Lubell and his companies from engaging in similar schemes in the future. Lubell lives in Bettendorf, Iowa, where corporate defendant DB&L, Inc., is located. Mercantile Messaging, L.L.C. is based in Rock Island, Illinois, but also uses a Moline, Illinois address.

In addition to announcing today’s case, the FTC issued a consumer brochure titled "International Telephone Number Scams" cautioning consumers to be aware that they are placing international calls when dialing any telephone number beginning with 011 or with one of many new Carribean area codes, such as 809, 758 or 664.

"The scheme here deliberately evaded the federal law requiring disclosure of the costs for pay-per-call services. It did not, however, evade detection and enforcement under other consumer protection laws," said Jodie Bernstein, Director of the FTC’s Bureau of Consumer Protection. "While the FTC’s 900-Number Rule has given consumers key cost disclosures about 900 numbers and other pay-per-call services, lately we’ve seen a proliferation of fraudulent international calling schemes that fall outside the rule. New technologies, so useful to consumers, can, as in this case, be quickly manipulated by con artists. We will continue our law enforcement efforts, but consumers can help by being very cautious when they receive an unsolicited message asking them to call an unfamiliar area code. Before doing so, consumers can check with their local telephone carrier to find out the location of the area code and how much the call will cost."

According to Wisconsin Attorney General James E. Doyle, the chance to win a free Hawaiian vacation during this time of year sounds great to many consumers who live in the Midwest. "However, a trip offered through an international telephone number scam won’t take you very far," Doyle said. "You won’t avoid the cold weather or get a good tan. All you will receive is a higher phone bill."

According to the complaint in the Lubell case, the defendants had been sending solicitations to consumers since at least January 1996. The numbers these solicitations directed consumers to call included "area code" 011-592-1820, and (809) 563-9642. In five counts listed in the complaint, the FTC charged Lubell and his firms with:

• falsely representing that consumers could enter a purported sweepstakes by calling the specified telephone numbers (in fact, the only way to enter was by mail);
• representing that consumers would receive information about how to fly free on commercial airlines, but failing to disclose that, in order to benefit from the information, consumers had to buy an airline ticket with no assurance that they would be bumped from an oversold flight so that they could obtain the equivalent of a free ticket;
• falsely representing that they do not charge for the information they provide when, in fact, they received a portion of the revenues earned by foreign telephone companies for the calls consumers made to the advertised numbers;
• violating the FTC’s Telemarketing Sales Rule by failing to tell consumers in outbound sales calls (1) that the purpose was to sell information, and (2) before the consumer pays for placing a call to obtain that information, the total cost of the call.

The Commission vote to authorize staff to file the complaint was 5-0. It was filed in the U.S. District Court for the Southern District of Iowa, Davenport Division, on Dec. 16. A hearing on the FTC's request for a preliminary injunction continuing the conduct prohibitions and asset freeze is scheduled for Dec. 27. The case was filed with the invaluable assistance of the Office of the Iowa Attorney General, the Office of the Mississippi Attorney General, the U.S. Postal Service and the Bettendorf and Des Moines, Iowa, Better Business Bureaus.

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 FTC complaint and the consumer brochure, International Telephone Number Scams, are available from the FTC's web site at http://www.ftc.gov and from the FTC’s Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest FTC news as it is announced, call the FTC's NewsPhone recording at 202-326-2710.

(FTC File No. 972 3028)
(Civil Action No. 3-96-CV-80200)