Bust Heightens Attention to Industry Image

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As Federal and State law officials last month announced charges against 1,000 people as part of the biggest crackdown on telemarketing scams ever, some industry leaders expressed concern over whether the prevalence of fraud would cloud consumers' image of the industry.


"I would just hope that the law enforcement agencies distinguish to the public that there is a legitimate industry and there are others on the fringes who are frauds," said Derrick J. Vlad, senior vice president of marketing and corporate development for ICT Group.


Others noted media attention to scams has not had an impact on the business of legitimate telemarketers.


"I think it's starting to become so common that it is not really hurting us. Because [fraud] is all associated with bilking unsuspecting people, our telemarketers don't hear any backlash," said Russ Housley, CEO of GLS Teleservices.


However, legitimate industry players resent being lumped together with fraudulent telemarketers in the same conversation, he added.


"We always hate to hear that, because one apple is bad, the whole barrel is bad. We have had instances where someone has had a heart attack while on the phone with us and we have called an ambulance for them. That's what separates us from the frauds," he said.


Operation Double Barrel, the 30-month crackdown announced by U.S. Attorney General Janet Reno in mid-December, involved agents taping telephone solicitations made by dishonest telemarketers targeting the elderly. The Federal Bureau of Investigation had cooperated with federal prosecutors and 35 state attorneys general on the project which resulted in 795 people charged in 218 federal criminal cases and 194 people charged in 100 state investigations. The fraudulent offers included everything from employment to foreign exchange investments.


Many of the anti-fraud precautions that have become standard in the industry are a useful way for companies to distinguish themselves from scams.


"In terms of us being able to separate ourselves from corrupt third parties, such as slammers for long distance phone companies, we have our telemarketers digitally monitored by independent third parties and the reports are passed on to our clients through our quality and assurance department," Vlad said. "We make sure that we have covered the actions of our employees and documented it."


GLS Teleservices' representatives soothe consumer concerns by clearly identifying who they work for and what client they represent, and by giving out an 800 number to call for more information.


"We do get the odd person who tells us that his name is on a do-not-call list but we apologize and say we don't know how that happened and correct it," said Housley. "Since most of our clients are Fortune 500 companies we have to protect their reputations as well as our own."


The American Teleservices Association, which has identified ethics issues as an area for continued focus, expressed the hope that crackdowns would improve the industry's image.


"There is a clear distinction between legitimate telemarketers and persons using the telephone to conduct criminal activity or telefraud. These recent actions clarify the distinction," said J. Scott Thornton, ATA CEO.


Officials at the Direct Marketing Association expressed similar sentiments.


"Fraud victimizes businesses and it victimizes consumers. Anything that undermines confidence in the telephone marketing medium hurts legitimated telephone marketing efforts. If we can help root out and identify fraudulent operators, the DMA is generally supportive of those efforts," said DMA spokesman Chet Dalzell.


The American Association of Retired Persons, which also aided the investigation, has been educating seniors about scams and helping them identify legitimate telemarketers, said Ted Bobrow, spokesman.


"We are very careful not to lump legitimate telemarketers in with frauds," Bobrow said. "We educate people on how to recognize a scam that is either done over the phone or through the mail. We will continue to work with law enforcement as well."


The AARP contributed to Operation Double Barrel by having volunteers record phone calls from telemarketers and track different types of scams Bobrow said. More than 12,000 tape recordings were collected as evidence against the accused telemarketers.


The association also alerts people who are on lists used by fraudulent telemarketers that they have been targeted for scams, said Bobrow in explaining that disreputable companies have identified and compiled lists of people who have been telemarketing victims previously and are more vulnerable.


"These are called mooch lists and are available for sale on the black market," Bobrow said.


Convergys Corp., Cincinnati, also aided in the investigation, by lending some of its call centers for the use of the authorities and by AARP volunteers.


"We didn't provide facilities to all the locations where the operation was taking place, but we did provide them when we could," said Garth Howard, senior vice president of corporate strategies and advancement for Convergys.
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