Canadians accused of taking more than $3 million in credit card protection scheme. Lawyer says they had permission to charge the elderly.
By MYRON LEVIN - LA TIMES STAFF WRITER August 30 2002
A pair of Canadian telemarketers were indicted Thursday in Los Angeles on federal charges of bilking mostly elderly victims of more than $3 million in a credit card protection scheme.
Philip Arcand, 41, and Roberta Galway, 34, who operated in the Vancouver area of British Columbia, could face federal prison terms of up to 34 years if convicted on all charges, which include mail fraud and committing telemarketing fraud against the elderly.
Canada is a hotbed of phone frauds targeting U.S. seniors because Canadian courts rarely impose prison sentences for financial crimes. U.S. authorities have faced substantial obstacles in extraditing Canadian fraud suspects, but on occasion have arrested suspects when they stepped on U.S. soil.
That's what happened to Arcand and Galway, who had purchased a home in Las Vegas and were arrested there Aug. 14, said Ellyn Lindsay, an assistant U.S. attorney in Los Angeles.
"It's unconscionable that these people made millions of dollars--purchasing fancy houses and sports cars--by victimizing the most vulnerable of our population," Lindsay said.
Arcand and Galway were being held in the federal Metropolitan Detention Center in Los Angeles pending a bail hearing scheduled for Sept. 6.
Operating under such names as American Card Services, Garrison Corp. and Farpoint Services International, Arcand and Galway offered to protect customers from unauthorized use or theft of their credit cards for a fee of $199 to $389 apiece, the grand jury indictment said.
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Farpoint Services International Ltd. ("Farpoint"), is a British Columbia corporation with its offices and principal place of business located in Surrey, British Columbia. |
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Garrison Corporation, Inc., d/b/a Garrison Assurance, Garrison NV, or Garrison Outbound Telemarketing - Las Vegas Nevada. |
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American Card Services, S.A., ("ACS") is a Nicaraguan corporation with its offices and principal place of business located in Surrey, British Columbia. |
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Hyperion LLC has offices located in Surrey, British Columbia, and Las Vegas, Nevada. |
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Consolidated Group of Companies LLC ("CGC") is located at Las Vegas, Nevada. CGC was incorporated with the name Polo Holdings LLC. |
Defendants have also charged consumers fees of between $239 and $399 for debt consolidation packages.
According to the indictment, victims were asked by telemarketers to "verify" their credit card numbers by reading them over the phone. Charges then were put on victims' cards whether they agreed to buy the service or not, the indictment states.
In fact, the indictment says, Arcand and Galway did not provide any services in exchange for the fees and were aware that major credit card firms already insure customers against unauthorized charges.
An affidavit filed by the FBI identified several alleged victims of the scheme from Hawaii, Michigan, West Virginia and Massachusetts, as well as Southern California.
The affidavit quoted Elaine Kuzma, a former employee of Arcand and Galway, as telling investigators that the majority of customers were elderly, and that "some of them understood what was happening, but many did not and were confused. Further, the telemarketers used high-pressure tactics on them."
According to the affidavit, Kuzma also said Arcand and Galway owned an expensive house, a Mercedes-Benz, a Corvette, a BMW and a Ferrari and often traveled to places such as Hawaii and Mexico.
Dominic Gentile, Arcand's lawyer, said his client would plead not guilty. Gentile said certain charges were in error.
"I don't think anybody's credit card was charged without them giving permission to do so," he said. Gentile also said it wasn't true that customers got nothing in return for their payments.
Although the bulk of the charges involve the offer of charge card protection, Arcand and Galway also were accused of processing credit card charges for other telemarketers involved in the illegal sale of foreign lottery chances.
Lindsay said the case "demonstrates that you should never, ever read your credit card [number] over the phone to someone who calls you, even if they say they're with your credit card company."
US - US Attorney - 11/18/03 - A Vancouver man was sentenced today to 120 months in federal prison for operating a $12 million telemarketing scheme that preyed on elderly victims by convincing them to purchase his bogus credit card protection plan.
Philip Arcand, 42, was sentenced this afternoon by United States District Judge Dickran Tevrizian.
In April, Arcand was convicted by Judge Tevrizian of two counts of mail fraud and two counts of illegally mailing lottery materials. From at least 1998 until 2001, Arcand ran the Vancouver-based Farpoint Services International, which was a business that processed credit card transactions for various telemarketing operations, some of which were operating scams.
Arcand also hired telemarketing companies to sell his own bogus product to victims throughout the United States. Those telemarketers sold a fraudulent credit card protection program purportedly offered by Arcand's company, Garrison Assurance.
Arcand's telemarketers called mostly elderly victims in the United States and fraudulently told them that unless they purchased his credit card protection program they could be liable for massive fraudulent charges placed on their credit cards.
The victims were also warned by the telemarketers that computer hackers could break into the computer systems of banks and max out their credit cards and bank accounts, and that the victim would be liable for all the fraudulent charges. (In fact, all major credit card companies hold victims of fraudulent charges liable for a maximum of $50.)
Following a bench trial, Judge Tevrizian found that the credit card protection program and other programs were "illusory products." Judge Tevrizian found the loss in this case to be $12,843,800. Arcand may also be ordered to pay restitution to his victims, and Judge Tevrizian scheduled a February 3, 2004 hearing to discuss that issue.
Arcand is also under indictment in the Northern District of Alabama, where he is charged with 158 criminal counts, including mail fraud, wire fraud, conspiracy, bank fraud and money laundering.
The Los Angeles case is the result of a joint investigation by the Federal Bureau of Investigation and the Royal Canadian Mounted Police through a telemarketing fraud task force known as Project Emptor.
Canada's courts 'joke': U.S. lawyer
Larry Pynn - Vancouver Sun 11/19/03
The Canadian justice system is a lax joke and a breeding ground for scam artists who are ruthlessly bilking countless thousands of elderly Americans out of billions of dollars, a frustrated assistant U.S. attorney charged Tuesday.
"It's the courts and the way the system works," Ellyn Lindsay told The Vancouver Sun from Los Angeles. "I'm sick of this. They need a kick in the ass is what they need."
On Monday, Lindsay successfully prosecuted British Columbian Philip Arcand, 42, for operating a $12.8-million fraud in the U.S. He was sentenced to 10 years in federal prison, and must serve at least 85 per cent of that time before being eligible for parole.
From at least 1998 until 2001, Arcand ran Farpoint Services International, a company registered in White Rock that processed credit card transactions for various telemarketing operations, some of which were operating scams. Arcand also hired telemarketing companies to sell his own bogus product, a fraudulent credit card protection program.
His wife, Roberta Galway, 35, was earlier sentenced to six months in jail.
The couple, separately or together, also face trial next year in Alabama on a 158-count indictment, including bank fraud, money laundering, and telemarketing fraud.
Lindsay said Arcand and Galway are just the latest examples of a vast and continuing problem with bogus telemarketing operations (lottery scams included) that proliferate in Canada because the justice system doesn't take them seriously.
Scam artists sought by American authorities in Canada are typically released from jail pending lengthy extradition proceedings, during which they continue to perpetrate their crimes, she said, adding justice officials in Canada are not keen on launching their own prosecutions because the courts treat fraud artists leniently.
"Canada doesn't care about it," Lindsay said. "They don't prosecute. They don't care about these guys.
"Billions of dollars in fraud from Canadian boiler rooms is targeting senior citizens in the U.S. If there is a prosecution in Canada, people get a slap on the wrist. Any sentence they get, they serve a third of it. It's a joke, and the criminals know it's a joke, so they proliferate."
Geoffrey Gaul, Crown counsel and spokesman for the attorney general's ministry, could not be reached in Victoria to comment.
But Valerie MacLean, general manager of the Better Business Bureau of Mainland B.C., said she fully supports Lindsay's assertions, saying B.C. courts are widely considered to be more lenient than those in the rest of the country, rarely dispensing jail time for commercial crime.
"There has to be a deterrent," MacLean said. "Whatever it takes to change the sentences, to change the whole process, to change the fact these trials are delayed forever."
MacLean's files show the BBB received two complaints from U.S. citizens about Farpoint Services International, in 1999 and 2001, which were forwarded to the U.S. Federal Trade Commission.
A news release from the commission in October 2002 announced that Arcand and Galway and their five related companies -- Farpoint Services International Ltd., Garrison Corporation Inc., American Card Services S.A., Consolidated Group of Companies LLC, and Hyperion LLC -- would pay $436,000 US to settle commission charges against them.
Lindsay emphasized her criticism of the Canadian justice system does not apply to Canadian police officers, singling out Vancouver RCMP for working effectively with the FBI to bring Arcand to justice through a telemarketing fraud task force known as Project Emptor.
"They're amazing and wonderful and helpful and they care. But the courts consider this kind of crime to be a big joke and not serious.
"That's why we have to do it. There are severe consequences down here for targeting the elderly. We're gonna go up there and get them, even if it takes years to do it."
Sergeant Chuck Klaudt of the Vancouver commercial crime section, the RCMP officer in charge of the joint operation, could not be reached to comment Tuesday.
Arcand's telemarketers called mostly elderly victims in the U.S. and fraudulently told them that unless they purchased his credit card protection program they could be liable for massive fraudulent charges placed on their credit cards.
The victims were also warned by the telemarketers that computer hackers could break into the computer systems of banks and max out their credit cards and bank accounts, and that the victim would be liable for all the fraudulent charges.
Said Lindsay: "My victims are elderly. They die and they don't see justice done because the extradition process in B.C. is a joke."
Given the difficulty of extradition, she said, U.S. authorities sometimes resort to plea bargains -- the offering of a reduced sentence in exchange for a guilty plea -- to hurry along extradition proceedings. Or they catch the suspects when they visit the U.S. Arcand and Galway lived part of the year in Las Vegas, where they were arrested.
Lindsay said that although Arcand committed a huge fraud, the amount taken from individual victims through his credit card protection scam was relatively small -- $300 to $400 US. Other frauds can involve "wiping out the life savings" of elderly victims, "destroying them emotionally and financially," she said.
Arcand may also be ordered to pay restitution to his victims. U.S. District Judge Kickran Tevrizian scheduled a hearing for February to discuss that issue.
FTC v. FARPOINT SERVICES, No. 01-CV-1593 (W.D. Wash.)
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Farpoint Services Int'l, Ltd., |
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Consolidated Group of Companies, LLC |
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Roberta Galway, a/k/a Robin Galway, Robin Arcand, Philip Arcand |
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Deceptive practices in violation of Section 5 and the Telemarketing Sales Rule in connection with the sale of credit card loss protection services and credit card laundering. |
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Complaint 10/9/01, |
