At the request of the Federal Trade Commission, the U.S. District Court for the Northern District of Illinois has halted a Canadian operation that raked in as much as a million dollars a month by allegedly tricking businesses into paying for unordered and unwanted business directories and listings.
The court issued a temporary restraining order with an asset freeze against the defendants. The complaint and temporary restraining order were entered by the court on May 9 with the seal lifted May 11.
The defendants — Datacom Marketing Inc. and Datacom Direct Inc., Bernard Fromstein, Judy Provencher, Paul Barnard, Judy Neinstein and Stanley Fromstein — operated call centers in Toronto and Montreal.
In its complaint, the FTC alleges the defendants falsely represented that:
· They had an existing business relationship with the customer;
· Consumers had agreed to purchase business directories or listings;
· And consumers owed money for business directories and/or listings in business directories.
To protect U.S. consumers, the FTC is seeking a monetary judgment for restitution to defendants’ victims and an injunction against further deceptive conduct.
According to the FTC’s complaint, the defendants called businesses implying that someone in the company had already authorized a listing in their business directory and said they were verifying information when, in fact, there had been no authorization. Some consumers thought they were merely being asked to verify their listing in the local yellow pages directory.
When the telemarketers called, they often did not identify their company’s name, but instead said they were with the “Records Department” of one of the many directories that the defendants were hawking, such as American National Business Directory 2001-2002, Southeast Business Directory 5th Edition, Georgia State Business Directory, North Carolina/South Carolina/Virginia Business Directory, New Jersey Business Directory 5th Edition, and New York Business Directory 4th Edition.
The defendants asked the business to confirm its name, address, and telephone number for the listing.
After getting the information, another telemarketer would call back from the “shipping department” to verify the provided information. The defendants would record this telephone call and later use the recording as “proof” that the directory’s purchase was authorized, the FTC said.
When the businesses received the directories, they typically found them to be useless and also reported that listings often were missing, incomplete or inaccurate. About a week after shipping a directory, the defendants sent an invoice, typically for $399. They used a mail drop in Nashua, NH, as their “U.S. Mailing Address.” Businesses that did not pay were harassed by the defendants, the FTC said.
If that failed, the defendants turned over the accounts to a third-party collection agency, which continued to harass the small businesses and non-profits that the defendants typically targeted.
The case was announced by the FTC as part of “Global Con,” a coordinated, international effort to crack down on cross-border fraud.