Telemarketing Review - Comment. FTC File No. P994414
Federal Trade Commission
I am responding to the Federal Trade Commissions request for public comment on the Telemarketing Sales Rule (TSR). This rule was created at the behest of Congress via the Telemarketing and Consumer Fraud and Abuse Prevention Act of 1994.
I would like to provide the Commission with a broad view of what I believe is one of the critical failings of the current TSR to aid their examination of telemarketing in general as well as the review of the TSR. I will then suggest several possible regulations the Commission could enact in order to patch the hole currently present in the Telemarketing Sales Rule.
It is clear that there is not only a need for the TSR but that there is need for stronger regulation of the telemarketing industry. USA Today reported on April 12th, 1999 that telemarketers make an estimated 21 million calls a day and that ten of the largest telemarketing companies in the US have the ability to easily contact 560 people a second. Telemarketers could contact every single household in the United States that owns a telephone in about a week! The same USA Today article reported that the United States is perceived as being behind the rest of the world in properly regulating the telemarketing industry. They state, "A telemarketing call in Australia is a rare and surprising event," and "In Japan, it's simply not tolerated because it is so unalterably rude." According to Privacy International telemarketing is simply not acceptable under the laws of the European Union because "there's a recognition that the telephone isn't a public space". The TSR is the only thing that has kept the telemarketing industry from completely overstepping all bounds, therefore there is not only a clear need for the TSR but also a need to extend and expand its regulations.
The Telemarketing Sales Rule has responded to the need for fraud prevention in telemarketing with a large degree of success. However, one area where the TSR needs to be strengthened is in response to Section 2, part 3 of the Telemarketing and Consumer Fraud and Abuse Prevention act "Consumers are victimized by other forms of telemarketing deception and abuse". Even while working within the bounds currently given by the Telemarketing Sales Rule, telemarketing companies, in their constant search to cut costs and increase profits, have violated the privacy and other basic rights of the citizens they are contacting. One specific instance of this I would like to examine is the common industry practice of hiring incarcerated felons (included convicted rapists, persons convicted of sexual contact with a minor and those convicted of murder) and allowing them to make contact with literally hundreds of unsuspecting minors a day.
This practice is very common and well known indeed, Paul Murphy of ABC News in Salt Lake City has discovered that the IRS is currently employing inmates at the Utah State Prison in this fashion. There have been quite a few widely publicized cases of inmates abusing data and resources given to them through prison work programs. One such incident was actually presented by the Federal Trade Commission to Congress in the December 1997 report "Individual Reference Services". In section I, part C of the report, entitled "Risks Associated With Unlawful Uses" the FTC states "In one highly-publicized incident, a prison inmate (and convicted rapist), who, along with other inmates, was retained by an information vendor as a data processor, had legitimate access to a database containing personal information, and then used the information to compose and send a personalized, threatening letter to an Ohio grandmother".
Telemarketing firms that use prison inmates place, along with other convicted felons, convicted child molesters in conversations with children countless times each and every day with very little safeguards. Improper contact and conversations are inevitable and do occur with frightening frequency. Of three of the states that employ the largest percentage of prison inmates (Utah with 18%, Washington with 17% and Minnesota with 17%, all according to a New York Times article on March 19th, 2000) all three have had serious problems with their programs including improper, invasive, illegal and frightening invasion of a (and in most cases, several) females privacy. In each case legislation and regulation on the prison or state level did not come until after several chilling incidents occurred. In one such case a young woman in Washington was abducted and murdered after a prisoner worked in a similar program at the Washington State Reformatory in Monroe, Washington where prisoners were found to have gained access to the personal data of quite a few citizens.
Perhaps what is most frightening is that these inmates have no specific regulation under the TSR or other similar laws to prevent them from attempting to use the resources given to them while conducting this telemarketing for other activities. Indeed, most of the companies hiring inmates instruct their employees never to state they are calling from a jail. If an inmate is caught using the resources in an illegal manner the usual response consists of losing their position and sometimes a disciplinary action on the part of the prison. In one incident in Minnesota a convicted pedophile had gathered the names and personal data of several hundred children after working with a data processing and telemarketing company that had contracted with the prison he was in. While he was investigated for this, it was discovered it was perfectly legal for him to use these resources to compile the list of girls aged 2-13 in Minnesota! There are also no reported repercussions in any of these cases where the company contracting with the prison has had to face any accountability for the actions of their incarcerated employee.
Hopefully by now you agree that there is a problem with the Telemarketing Sales Rule. The use of prison inmates, especially violent and sex crimes offenders, to contact millions of individuals a day obviously needs to be stopped or regulated. What can be done? I purpose that the practice of hiring prison inmates for telemarketing be stopped or, failing that, greatly regulated.
Lets now look at several arguments the telemarketing industry makes supporting their practice of hiring prison inmates.
The telemarketing industry claims that hiring prison inmates allows these prisoners to gain "vital skills" which will help them integrate back into society once they are released and that this reduces repeat offenders. However, what they do not tell you is that telemarketing is not the only trade available to these prisoners but it is one of the most popular among the inmates since it puts the prisoners in contact with so many people "on the outside", especially minors. For-profit corporations by their very definition are not altruistic entities surely the Federal Trade Commission is one organization that is acutely aware of this! It is obvious that these corporations are not doing this to help the prisoners they are doing this because prison inmates represent a very cheap labor base they dont have to provide benefits, vacation time, insurance packages or competitive pay. For this reason I suspect they will vehemently defend this practice.
The industry also likes to claim that hiring prison inmates is OK because they have a greater number of violations concerning improper contact with minors when working with non-incarcerated persons than when they contract with the prison system. If this really is true and they know about it, its obvious there needs to be a close look into the telemarketing industry! Imagine if the day-care industry stated that they had fewer problems when hiring convicted murderers than when hiring convicted child molesters to watch children! The lesser of two evils should simply not be an option when children are involved. If the only ways the industry can find to conduct business repeatedly and knowingly causes harm to minors the business should quite simply not be allowed.
Im certain the industry will claim that they can regulate themselves when working with convicted felons, however you must remember they have been given the chance to do this and have failed they have done nothing that has stopped these incidents from occurring. A USA Today editorial printed on October 25th, 1995 concerning self-regulation of the marketing industry states something thats become painfully obvious in the past five years - "While voluntary compliance might be preferable in an ideal world, its not likely to work in the real world. The reality is that the absence of government prodding has resulted in too many companies doing too little to protect consumers privacy rights". There are no formal guidelines for these companies beyond the requirement of the Telemarketing Sales Rule that they keep all records for a 24-month period. One company working with prison inmates reported that they digitally recorded all phone calls and randomly monitored these calls, however only about 20% of the calls each day were monitored. They also admitted that this practice was not stopping inappropriate contact between prison inmates and minors. This practice is not catching the majority of these incidents and it is painfully clear that nothing short of total monitoring ever will. Most of these companies are using a computer dialing system where the inmate is randomly connected to a call once a connection is made. The companies claim that they carefully regulate what information is given to the prisoners, however in most cases the number called and the person who owns that number is displayed, oftentimes along with the name of a friend or relative who provided the contact information through a referral service. The inmates have proven that this is enough information for them to persuade innocent children to further divulge personal information such as age, address and even physical description! This self-regulation is obviously not working and the Federal Trade Commission must intercede and regulate the use of prison inmates in the telemarketing industry to protect the thousands of innocent children and other unsuspecting citizens being placed in this potentially deadly situation each day. These people have lost their right to vote and in many states once they are released they must allow any area they move to be notified if theyve been convicted of a sex crime and yet through this oversight they are being allowed, even encouraged, to contact countless numbers of minors a day. Clearly something is amiss here.
I hope that the Commission will keep these arguments and counterclaims in mind whenever considering this issue it is clear that this practice is very beneficial to the telemarketing industry and that they will continue it as long as they are allowed to with a total disregard of all consequences.
I have several proposals to make to remedy this situation. Ideally, the practice of hiring prison inmates will be stopped by the Federal Trade Commission. However, since its obvious that the telemarketing industry would lobby strongly against this and stop any attempt to pass such legislation or regulations, I propose a series of regulations be incorporated into the Telemarketing Sales Rule and/or the Telemarketing and Consumer Fraud and Abuse Prevention Act. These regulations aim to increase the protection afforded to minors by the TSR as well as magnify the accountability companies who choose to continue to hire prison inmates have for the actions of those employees. I will present each proposed regulation and the reasoning and justification for it.
First, telemarketers must begin the call with the oral disclosures currently required under the Telemarketing Sales Rule (The identity of the seller, that the purpose of the call is to sell goods or services, etc) as well as establishing the fact that they are talking to someone who is at least eighteen years of age. If they cannot establish this fact then they must request to speak to someone who is at least eighteen years old. If this fails they must then end the phone call without any further attempts at establishing a conversation. This regulation will increase the protection afforded to minors against abusive telemarketing practices. Ideally by not allowing telemarketers to legally speak with minors you can eliminate the damaging and malicious contact between these prisoners and minors. Even in this less-than-perfect world this regulation, combined with the others I will detail, will provide a large degree of protection for minors. A similar regulation was incorporated into the Childrens Privacy Protection and Parental Empowerment Act of 1996, which "prohibits prisoners and convicted sex criminals from processing the personal information of children." However, the telemarketing industry has admitted that these problems occur in the private sector as well so there is an obvious need for further protection of minors, especially when direct contact is being made between an unsuspecting minor and a total stranger. This proposed regulation would provide that protection.
Second, persons convicted of crimes involving a minor must not be allowed to work in these positions. Even with the first proposed regulation in place, violations will occur. Because of this, individuals who have demonstrated that they can and will willfully cause harm to minors must not be given this golden opportunity to do so again. There are enough imprisoned individuals who have not committed such a crime to fill these programs without needing to allow those imprisoned for a crime committed against a minor to have this opportunity. There are also enough opportunities provided within the prison system to work that anyone convicted of a crime against a minor can find work that does not involve contact with minors. This regulation combined with the first would greatly enhance the protection of minors against abusive contact from telemarketers, especially those who are currently serving time for violent or sexual crimes against minors.
The third item I would like to purpose is stiffer, uniform federal punishments for prison inmates who violate the Telemarketing Sales Rule and other laws while telemarketing. Inmates that contact or attempt to contact minors via the resources they are allowed for telemarketing must be punished to send a clear message that this practice will not be accepted. Currently there exists no uniform punishment for inmates who do this the punishment, if any, is decided on an institution and violation-by-violation level. In most cases the only punishment given is a small fine (less than the fines present in most states for throwing a cigarette butt out of your car window!) or a few days in "lockdown". This is not sending a strong or clear message to the inmates that attempts to contact minors will not be tolerated. This regulation would force each and every inmate to be accountable for their actions, something that is surprisingly absent from current regulations.
Next Id like to propose that companies that do choose to continue the practice of employing prison inmates be faced with penalties and legal accountability when these employees violate the TSR or any other law in the course of their work. Currently if an inmate establishes contact with a minor and pursues further personal contact with that minor through the auspices of the telemarketing programs in many prisons the company that hired them will terminate their contract with that prisoner and quickly replace them. Other than losing the money they invested in training that employee, the company that allowed the contact to occur in the first place is not punished at all and is allowed to continue with business as usual. While many state attorney generals offices do try and help parents file charges against the company involved, due to the extreme caseload most AG offices have, little is ever actually done and by the time charges are brought the company involved is often out of business and has disappeared. Regulation such as this must be passed in order to force the company to be explicitly accountable for the actions of their employees, as any corporation should be expected to be.
The fifth and final regulation I propose is federal standards and requirements for monitoring the telemarketing conducted by incarcerated individuals. Most companies that hire prison inmates do currently monitor and record the calls conducted by prison inmates, however this self-regulation is clearly not working. I propose several requirements: all calls conducted by inmates should be recorded and indexed; each inmate should have at least one call per shift monitored in its entirety by a security officer who is familiar with the Telemarketing Sales Rule and other applicable regulations with more frequent "sampling" of calls; archives and monitoring records must be audited regularly for violations of the Telemarketing Sales Rule by a third party or the federal government and if violations are discovered by the auditor or the company itself at any time the Federal Trade Commission must be notified and the violation must become a matter of public record. This will further guarantee that companies that choose to employ prisoners will be held accountable for any violations of the law.
It is my hope that the Commission will consider these proposed regulations and if you do not see fit to incorporate any of them into the Telemarketing Sales Rule you will at least consider taking some action to protect minors from the improper, invasive and damaging contact they are currently being subjected to by these companies who choose to hire incarcerated individuals to conduct telemarketing despite the severe documented problems with this practice. If you have any questions concerning any of my comments or would like me to further elaborate on any of these matters, please feel free to contact me. Thank you for your time and consideration in this matter.
In order to prove that the prison inmates that are being hired to conduct telemarketing on behalf of these companies are violating the privacy and basic rights of minors I have included the report of one such incident in the Utah State Prison.
There are several interesting things you should notice in this report. The first is that inmates circulate the personal information of minors that they obtain from their telemarketing activities to other inmates. This presents a strong argument for disallowing all inmates from working as telemarketers even though pen and paper are not allowed in the telemarketing area, inmates still memorize personal data and then convey it to other inmates so even if you disallow convicted rapists and other such individuals from working in the telemarketing industry, they will still get the personal information of minors from their "friends" who do work as telemarketers. This private information expertly coaxed from these minors will continue to be bartered among the prisoners as long as any of them have access to it.
Also, youll note that the company involved basically stated that theyd give everyone a warning, fire the inmate concerned and continue business as usual without taking any extra steps to prevent this from occurring in the future. Self-regulation is not working.
Another item to note is that the company in this incident, Sandstar, runs the Internet website http://www.familyfilms.com and markets films primarily targeted at children and families and yet contracts with felons currently serving in the Utah State Prison to conduct their telemarketing activities! Their website even has a form that states: "You can show people you care about them by sharing their name and number with us so that we can tell them about our campaign to have more good family movies made. Please enter the names and phone numbers of your friends, relatives, neighbors and other families you know". The data from this form is then used in the Utah State Prison facility to contact these families.
Sandstar Family Entertainment was investigated and a former employee interviewed by ABC Primetime Live for a report which aired on February 18, 1998 entitled "Inmates Inc." which reported on the dangers of allowing inmates to work in the telemarketing industry (This investigation aired almost exactly two years before the incident described in this report occurred and yet apparently nothings been done that has succeeded in stopping or limiting these problems). In response to Chris Wallaces question, "Isn't it asking for trouble to have them in contact with people on the outside taking phone numbers, addresses, information about friends? Isn't it asking for trouble to have them do that?" Michael Clapier of Sandstar stated, "Yeah, you could be asking for trouble". Sandstar knew the risks they were taking and have continued now for over two years to this day to operate in the Utah State Prison all the while allowing these incidents (and worse) to occur. I cannot think of a stronger argument for the federal regulation and restriction of this so-called "industry".
The report is fairly self-explanatory and is an interesting representation of what usually occurs in these incidents. Some names have been altered or removed to protect the minor involved.
DIVISION OF INSTITUTIONAL OPERATIONS
UTAH STATE PRISON
Draper Site Complex
Shift Commanders Office
To: David Worthington, Deputy Warden Security-Support
From: Glenn Perryman, Draper Site Shift Commander
Date: February 28, 2000
Subj: Sandstar Incident
On Friday 25 February 2000 I received a phone call from a Mrs. Smith of Dallas, Texas. Mrs. Smith was very upset that her 15 year old daughter had received a letter from a Utah State Prison inmate she identified to me as Michael Hardy # 23095. Mrs. Smith was very concerned as to how the inmate had gotten her daughters name and address and wanted the correspondence from the inmate to stop. Mrs. Smith also stated that she had asked her daughter about the letter and that her daughter said she didnt know the inmate either. I informed Mrs. Smith that I would look into the matter and would also inform the inmate not to write to her daughter again.
At approx. 1832 hrs on this same night I interviewed inmate Michael Hardy in the Wasatch Infirmary. Hardy told me that he asked his "friend" for names and addresses for pen pals he could write to. Hardy stated that his friend gave him Mrs. Smiths daughters name and address and told him she was 20 years old. I asked Hardy how his friend had gotten the information, Hardy stated his friend worked at Sandstar. When asked who his friend was, Hardy refused to give me a name because he didnt want to be labeled a snitch. The interview was terminated and Hardy was returned to his block.
I contacted Bob at Sandstar and asked if he could assist me with resolving this matter. During our discussion I discovered that Sandstar records all their phone calls. I asked Bob if he could check his data base back from 2-17-00 to see if Mrs. Smiths number had been called, which inmate agent spoke with her and listen to the recorded phone call.
Several hours later Bob contacted me with the information I requested. Bob stated contact with Mrs. Smith occurred on 2-15-00 at 1857 hrs from extension 5066 and that the inmate agent assigned to this extension on this date and time was Benny Martinez # 18636 (Oq-2). Bob told me to contact Ross Conner regarding the audio tape. I contacted Conner by e-mail this evening.
I met with Ross and several others and listened to the audio tape of the conversation. I was informed that the voice on the tape did not belong to inmate Benny Martinez, but was identified as inmate Derriek Cramer # 21548 ( B-Block 232). In the conversation inmate Cramer identifies himself as "Mike" to the minor child and gives a physical description of inmate Hardy. The daughter tells inmate Cramer her age, and further manipulation by Cramer he is able to get the daughter to tell him her full name, address, city state etc. Cramer and the minor state that theyll write to each other and the call is terminated by Cramer. Cramer then is connected to another individual by the computer system and talks to another minor, but this time he identifies himself as "Derriek" and later gives out his birth date to the girl. The name Derriek and his birth date is cross indexed with inmate agents for Sandstar and they identify him as Derriek Cramer. Supervisors positively identify his voice on the tape.
I interviewed inmate Cramer on B-Block. Cramer was informed that his employment with Sandstar had been terminated due to a contract violation and that I had evidence he made contact with a person, through his job, who identified herself as a minor. I also informed Cramer that disciplinary action would be taken by me regarding his actions.
Cramer was asked if hed like to make a statement at this time. Cramer stated that he didnt know what we were talking about and denied all knowledge of the phone conversation which took place between him and the minor on 2-15-00.
Inmate Cramers cell was searched by B-Block custody staff while the interview was taking place. No out of state address were found. Cramer was returned to his cell.
Inmate Cramers employment has been terminated. Sandstar administration will be looking into filing possible criminal charges and their chain of command will be informed. Inmates currently working at Sandstar were notified by supervisors that further evidence of contract violations would be dealt with harshly. Sandstar is continuing to review audio recordings.
SHIFT COMMANDER ACTION:
Inmate Michael Hardy received a verbal warning and was ordered not to contact the child again.
Inmate Cramer was terminated from his employment with Sandstar and a disciplinary will be forthcoming addressing charges of his contract violation. A written recommendation to Captain Herman and Lieutenant Vanleeuwen that his actions also be reviewed in OMR.
The incident was screened with investigator Rex Dana, at this time no action will be taken by CIB.
Sandstar administrators will look into any possible Federal FCC violations which the inmate may have committed and will pass on any pertinent information.
Phone contact was made by me with Mr. & Mrs. Smith. I explained the outcome of my investigation. Sandstar administrators asked also that I inquire with the Smiths to get their permission for Sandstar personnel to contact them regarding this incident. Both Mr. & Mrs. Smith gave their approval for Sandstar to contact them at Mrs. Smiths office number. The Smiths also request ed a copy of the audio tape of inmate Cramers conversation with their daughter. Since the copy of the tape I have is not my property, but that of Sandstars, I directed the Smiths to make that request through Sandstar.
The Smiths were also asked to contact me immediately should any other letters arrive at their residence written by Utah State Prison inmates. The Smiths stated they would.
I will be in contact with Sandstar and UCI personnel regarding the progress of their investigations. Information relating to this or any other related incident will also be passed on to you. If you have any questions please contact me.
cc: Bryant Herman, B-Block Captain