Accused of Scamming US Businesses Into Paying for Unordered Business Directories & Listings
Canadian telemarketers will pay $505,000 to settle Federal Trade Commission charges that they scammed United States businesses into paying for business directories and listings that had never been ordered. In addition, the FTC will return checks worth about $470,000 that were sent to the telemarketers and seized as part of the law enforcement action. Also, the telemarketers will not be able to collect on invoices worth about $560,000 that they had already sent before their operations were halted by the temporary restraining order requested by the FTC.
According to the FTC, the telemarketing operation used what they called an “assumptive sales approach” to trick United States businesses into believing that someone at the company had placed an order for a business directory or directory listing. The defendants made an initial telephone call and led businesses to assume that a purchase had already been authorized. During a second, recorded call, the defendants asked a series of leading questions to make it appear the directory had been ordered. A directory was then sent to the business – along with an invoice for $399. According to the FTC, businesses would often just pay the invoice without even realizing that they were being scammed.
The corporations, Datacom Marketing Inc. (Ontario Corporation No. 1431798) and Datacom Direct Inc. (Ontario Corporation No. 1417524), and Judy Neinstein and her brother, Stanley Fromstein, both owners of Datacom, will pay $455,000 to be returned to consumers. Paul Barnard, a former president of the companies, will pay $50,000. All of the defendants are prohibited from misrepresenting: that consumers have a preexisting business relationship; that consumers have agreed to purchase business directories or listings in directories; or that consumers owe money for business directories or listings in directories. In addition, during outbound telephone calls, the defendants must disclose their identity and that the purpose of the call is to sell goods or services. They cannot violate the Telemarketing Sales Rule. The court has found a third owner and sibling, Bernard Fromstein, and his common-law wife, Judy Provencher, in default. Litigation continues with the most recent president of the companies, Charles P. Farrugia. Criminal charges are pending in Canada against many of the defendants: Judy Neinstein, Bernard Fromstein, and Paul Barnard, as well as the corporations.
This case was brought with the invaluable assistance of the United States Postal Inspection Service, Canada’s Competition Bureau in Vancouver, British Columbia, the Service de Police de la Ville de Montréal, and the Toronto Strategic Partnership. The Toronto Strategic Partnership consists of the FTC, Competition Bureau Canada, the Toronto Police Service – Fraud Squad, the U.S. Postal Inspection Service, the Ontario Ministry of Government Services, the Ontario Provincial Police – Anti-Rackets, the Royal Canadian Mounted Police, and the United Kingdom’s Office of Fair Trading.
The Commission vote to authorize staff to file the stipulated final orders was 5-0. The stipulated final orders for permanent injunction were filed in the U.S. District Court for the Northern District of Illinois.
Note: This stipulated final order is for settlement purposes only and does not constitute an admission by the defendant of a law violation. A stipulated final order requires approval by the court and has the force of law when signed by the judge.
The FTC works for the consumer 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, click http://www.ftc.gov/ftc/complaint.shtm or call 1-877-382-4357. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to more than 1,600 civil and criminal law enforcement agencies in the U.S. and abroad. For free information on a variety of consumer topics, click http://ftc.gov/bcp/consumer.shtm.
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