Canadian Defendants Charged with Bilking U.S. Consumers in Nationwide Business Directory Scam

The Federal Trade Commission has charged several Canadian-based companies and their principals with targeting United States consumers in a scheme to trick them into paying for unordered business directories and listings in the directories. The defendants allegedly scammed numerous small businesses and nonprofit organizations out of millions of dollars by billing them for directories and listings they did not order or authorize. The FTC alleges that when consumers refused to pay the invoices, the defendants turned them over to their collection company that masqueraded as an independent debt-collection agency. This in-house collection company proceeded to harass consumers in an attempt to get them to pay.

According to the FTC’s complaint, the defendants have made unsolicited telemarketing calls to various businesses and organizations across the United States since 2003. The defendants tell consumers that they are merely verifying the consumer’s name, address, and telephone number for a listing in a business directory. The defendants mislead consumers into believing that someone in their organization previously authorized the purchase of the directory and listing. If consumers are reluctant to verify the listing information, or do not believe that their company has ordered the directory and listing, the defendants assure them that they have a trial period, typically 30 days, during which they can review the directory at no cost. The defendants then record consumers verifying their business information.

The complaint alleges that the defendants subsequently mail invoices to consumers, typically billing them between $349 and $459 for the Commutel Business Directory CD-ROM, and between $249 and $399 for the American Business Solutions Directory CD-ROM. Unlike the defendants’ representation in the initial telephone call, however, the invoices list the consumer with whom the defendants spoke as the person who authorized the order. After receiving these invoices, the FTC alleges, many consumers realize that no one from theirorganization ordered a directory listing. When consumers call to cancel the orders, the
defendants claim that the recorded verification call is a “binding oral contract,” and thus refuse to cancel.

In many instances, according to the complaint, when consumers refuse to pay the invoices, they are referred to the defendants’ in-house collection company, which allegedly harasses them with frequent telephone calls, dunning notices, and threats to initiate legal action and damage consumers’ credit ratings. When consumers advise these collecting defendants that they do not owe anything because no one in their organization ordered the business directory and/or listing, or because they were assured that they had a trial period during which they could review the directory, the collecting defendants nevertheless continue their collection efforts. The FTC contends that many consumers ultimately pay the invoices because they believe it is the only way to stop the harassment.

The FTC’s complaint names Global Management Solutions; Commutel Marketing; American Business Solutions; Ty Nguyen, a.k.a. Hiep Manh Nguyen; Cory Kornelson; Byron Steczko; Kelly Nguyen, a.k.a. Phu Minh Huy Nguyen; and Minh Tam Vo. American Business Solutions and Commutel Marketing run telemarketing operations out of Victoria, British Columbia, and Montreal, Quebec. Global Management handles debt collection for American Business Solutions and Commutel Marketing out of Montreal, Quebec.

The complaint alleges that the defendants violated the FTC Act by misrepresenting that:

• consumers previously authorized the purchase of a business directory and/or directory listing;
• consumers agreed to purchase a directory and/or directory listing;
• consumers have a right to review the directory on a trial basis without incurring financial obligation; and
• consumers owe money to American Business Solutions and Commutel Marketing for the business directory and/or directory listing.

The federal district court in Washington has granted an order temporarily halting the defendants’ business practices and freezing their assets. A preliminary injunction hearing is scheduled for March 15, 2005. In addition, on February 22, 2005, the Victoria Police Department executed a criminal search warrant against the American Business Solutions business premises and arrested Kelly Nguyen, the company president, on fraud charges. The same day, the Canada Competition Bureau executed a criminal search warrant against the Global Management Solutions’ and Commutel Marketing’s business premises.

The FTC received significant assistance in this case from the Victoria Police Department; the Canadian Competition Bureau in Montreal, Quebec, and Vancouver, British Columbia; the
Canada Revenue Agency; the Royal Canadian Mounted Police; the Business Practices and Consumer Protection Authority of British Columbia; the U.S. Postal Inspection Service; the State of Nevada Office of the Attorney General; the Washington State Office of the Attorney General; and the Better Business Bureaus of the Southland in California; Delaware; Detroit and Eastern Michigan; Metro Washington, DC; and Eastern Pennsylvania.

The Commission vote to authorize staff to file the complaint was 5-0. The complaint was filed under seal in the U.S. District Court, Western District of Washington, in Seattle, on February 15, 2005.

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 complaint 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.

(FTC File No. 032 3259)
(Civil Action No. C05-0265 TSZ)