The Federal Trade Commission has charged three Canadian telemarketing companies operating boiler rooms in Quebec and Ontario with engaging in fraudulent business practices in the sale of business directories and non-durable office supplies. The defendants employ approximately 400 telemarketers and have injured thousands of U.S. businesses using deceptive practices. The Commission alleges the defendants violated the FTC Act and the Telemarketing Sales Rule (TSR) in the offering and sale of these products. A federal district court judge in Cleveland has entered a temporary restraining order prohibiting the defendants' fraudulent practices and freezing their assets.
"Fraudulent Canadian telemarketers who are preying on U.S. businesses are facing a double whammy, " said J. Howard Beales III, Director of the FTC's Bureau of Consumer Protection. "We've coordinated our law enforcement action with our Canadian counterparts, which means that cross-border con artists can expect consequences in both countries."
According to the FTC, telemarketers for two of the corporate defendants falsely represent that someone at the business previously ordered a business directory similar to the Yellow Pages. Generally, the telemarketers ask consumers to verify their shipping addresses and use the verified shipping address to claim that a directory had been ordered. Many consumers tell the callers that they did not order and do not want the directory; but they receive one anyway. Consumers seldom learn about the cost of the directory until they receive an invoice for about $300, sometime after the consumer receives the directories. Many consumers pay the invoice in the mistaken belief that they are obligated to pay for it.
The third corporate defendant's telemarketers pitch the sale of non-durable office supplies, such as, printer rolls for automated credit card machines, machine ribbons, credit card machine cleaners, and counterfeit detection pens. This defendant's telemarketers make an initial call to the consumer to obtain the name of an employee associated with purchasing office supplies. The telemarketers also use this opportunity to confirm the shipping address for the business. The defendant's telemarketers then make a second call in which the telemarketers ask for an employee by name. Using the information obtained in the first call, the telemarketer leads the consumer to believe that the telemarketer represents the regular supplier or someone associated with the regular supplier of printer rolls. Consumers agree to accept the shipments because they believe that they previously placed an order. In some cases, consumers state that they do not want office supplies sent to them, but receive them anyway. The defendants later send the consumers invoices for approximately $100 to $200, many times the cost of similar items purchased from legitimate suppliers.
The complaint alleges that the defendants violated the FTC Act by falsely representing that consumers previously ordered non-durable office supplies or business directories and that the defendants were the consumers' regular supplier. The complaint also alleges that some defendants violated the TSR by making false and misleading statements to induce payment for goods or services, failing to disclose the identity of the seller to consumers, and failing to disclose the sales purpose of the calls. The complaint names as defendants: Hanson Publications, Inc. (Hanson), 9069-5057 Quebec, Inc. (Hanson-Quebec), Associated Merchant Paper Supplies, Inc. (AMPS), Albert Mouyal, Adrian P. Towning, and Charles Hamouth.
The FTC investigated this case in conjunction with the Competition Bureau of Canada, which has filed criminal charges against the defendants. The United States Postal Inspection Service and the Connecticut Attorney General's Office also provided assistance in the investigation.
The Commission vote to authorize staff to file a complaint was 5-0. It was filed in the United States District Court for the Northern District of Ohio, Eastern Division, on November 8, 2002, under seal, and the seal was lifted on November 14, 2002.
(FTC Matter No. 022 3219)
(Civil Action No. 1:02 CV 2205)
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