Lead Generation Techniques Used
by Con Artists for Direct Mail Fraud and Telemarketing Scams
List Brokers Facilitate Fraud with Target Marketing
of Fraud Victims
03/05 - DES MOINES. Attorney General Tom Miller said today that
the Consumer Protection Division of his office has asked the Polk
County District Court to order Walter Karl, Inc. -- a major U.S.
list broker and list management service based in Pearl River, NY
-- to provide information in response to the State's investigation
of direct mail and telemarketing schemes.
"Telemarketing schemes continue to harm Iowans, especially elderly Iowans,
and they often rely on well-established U.S. businesses that facilitate what
they know or should know is unlawful predatory activity," Miller said.
"In this instance, our investigation seeks to determine whether Walter Karl's
services are used by fraudulent operators, and whether the list-broker should
have known of such activities. Our overall objective is to deny deceptive telemarketers
access to the crucial tools they need," he said.
In a filing made yesterday in Polk County District Court, Miller's office
told the Court that, "After a period of cooperation - albeit slow
and fitful cooperation - Walter Karl refused to provide certain key information" in
response to the Consumer Protection Division investigation. The Attorney
General's filing asked the Court to order Walter Karl to respond fully,
under oath, within 30 days to specific investigative questions posed
earlier by the Consumer Protection Division.
The filing seeks information such as what Walter Karl knows about how
lists were created, how lists were used and by whom, and steps the company
takes to ensure that persons using a list are not defrauding people on
the list.
"Fraudulent telemarketers continue to plague Iowans, but most of the worst
schemes now operate from Canada and other countries. They are hard to stop," Miller
said.
"But Federal Trade Commission rules give us a strong tool. The FTC Telemarketing
Sales Rule prohibits anyone from providing substantial assistance or support
to a telemarketer when they know or should know that the telemarketer is using
certain deceptive or abusive tactics, and we have authority to enforce the rule," he
said.
"So now we are focusing on U.S. businesses that may provide crucial 'cooperating
infrastructure' to deceptive telemarketers - companies that make the automatic
withdrawals from consumers' bank accounts, for example," Miller said. "In
this instance, we are investigating whether Walter Karl's list brokering and
management services are used by fraudulent operators - and whether the company
knew or should have known as much."
Today's filing is called an "Application for Order Enforcing Attorney
General's Civil Investigative Demand." It asks the Court to prohibit
Walter Karl from doing business in Iowa if it fails to comply with a
Court order to fully respond to the State investigation.
The court filing explains that the Consumer Protection Division came
to focus on Walter Karl, Inc., as the division sought to track down the
source of fraudulent-appearing sweepstakes-prize mailings received by
an elderly Iowan in late 2003 and 2004 - mailings an investigator recognized
as resembling or appearing to be "screening mailings" designed
to create a list of vulnerable consumers who would be good targets for
subsequent telemarketing fraud. (Click here for investigator Barb Blake's
affidavit filed 3-2-05 with the Application to Enforce.)
Further investigation established a link between the questionable mailing
enterprises and the list management business of Walter Karl, Inc., where
lists developed by the mailing enterprises were being rented. Sweepstakes
mailings provided to the Court were traced to "Granite Wholesalers" and "Skypoint," both
believed to be located in Canada and Australia. The Walter Karl website
advertised a Granite Wholesalers list of 118,966 names characterized
as "avid sweepstakes players," according to the filing, and
a Skypoint list of 108,894 names characterized as "sweepstakes enthusiasts."
According to the State filing, other lists offered at the Walter Karl
website included lists described as "cash-hungry individuals," "impulsive
buyers. . . primarily mature," "hard core sweeps fanatics," "credit-seeking
individuals...looking...for ways to regain a good credit standing," and
sweepstakes contestants "over the age of 40, with household income
of approximately $25,000."
Last year, the Consumer Protection Division issued a formal "Civil
Investigative Demand" under the Iowa Consumer Fraud Act to determine
the extent to which Walter Karl's list brokering and management services
are used by fraudulent operators. Yesterday's filing asked the Court
to order Walter Karl to fully respond to the Civil Investigative Demand.
The court filing contains numerous pages detailing what information is
being sought and why, and how Walter Karl has "refused to provide
certain key information, including information it had earlier agreed
to provide."
The filing says: "Details regarding who rented lists of ostensibly
vulnerable (and often elderly) consumers, and for what purposes those
lists were rented, is a core part of the Attorney General's inquiry.
For example, it would be important to learn whether telemarketers in
Canada submitting suspect telemarketing scripts are nevertheless able
to obtain lists of demonstrably vulnerable retirees identified as having
an acute interest in prize promotions."
The suspected links between sweepstakes mailings and high-stakes telemarketing
fraud:
The Consumer Protection Division filing discusses how "low-stakes" sweepstakes
mailings may be connected to higher-stakes deceptive telemarketing. Iowans
may receive mailings that appear to indicate they may be winners of large
sweepstakes prizes (say, $1 million), if they only will pay some kind
of "authorization fee" or "report fee" or "transfer
fee" of, say, $29.95 or $24.99.
The division believes that persons who respond to such mailings often
are put on lists used by Canada-based deceptive telemarketers. (Consumers
also lose the "fees" they paid.) A typical big-ticket telemarketing
scam from Canada might involve a call to a vulnerable older Iowan, a
pitch that the Iowan had won millions in a lottery or sweepstakes or
prize promotion - and a requirement that the Iowan pay $1,000 or $5,000
or even more to collect the prize. (The schemes use many ruses to justify
the advance payment the victim must make to receive the millions in prize
money - paying taxes in advance, customs fees, etc.) Victims win no big
prize, and they lose what they pay.
The Consumer Protection Division has undertaken other action to tackle
problems of deceptive mailings and deceptive telemarketing, including
challenging businesses that may "facilitate" such schemes:
* Last April, a Polk County District Court Judge completely banned a
direct mail and telemarketing operation owned by Richard Panas from doing
any business in Iowa. In late 2003 and early 2004, Miller's office obtained
an impound order and seized about 22,000 pieces of mail that were headed
to Panas and his businesses based in Rock Hill, SC -- via a mail "drop
box" in Clive, Iowa. The Consumer Protection Division alleged the
mail was from vulnerable older people all over the country who had been
tricked into sending checks to Panas in response to his bogus prize mailings
- and alleged that names of people who responded would go on lists used
by other con-artists for big-ticket fraud schemes.
Among other items, the Attorney General's filing yesterday asks the Court
to order Walter Karl, Inc., to provide details and documents relating
to Walter Karl's management or brokering of lists for Panas, and vice
versa.
* Last September 3, the Consumer Protection Division obtained a court
order to impound or seize mail coming to another commercial mail-drop
box in Des Moines, interrupting an alleged scheme to deceive elderly
consumers into thinking they were winners of huge sweepstakes prizes.
Mail coming to the box - which was then shipped to businesses based in
Vancouver, Canada -- would make a 'hot list' for telemarketing fraud
or other schemes.
* Last September 17, the Attorney General's Office filed suit in Federal
District Court alleging that an Arizona electronic withdrawal company "facilitated
consumer fraud" by enabling deceptive telemarketers to automatically
withdraw money from people's bank accounts without proper authorization.
On October 7, the Court entered a preliminary injunction ordering "Teledraft,
Inc." to comply with federal and Iowa laws concerning telemarketing
fraud and other abuses while the lawsuit is pending.
* On Feb. 15, 2005, Attorney General Tom Miller announced that "Electracash,
Inc.," a third-party ACH or automated clearing house processor located
in Signal Hill, Cal., &has stepped up to the plate and agreed to
take many positive steps to avoid processing withdrawals for fraudulent
schemes." The company also paid a total of $15,774 to 56 Iowa victims
of a telemarketing scam. Electracash did not perpetrate the scam, but
the con-artists used the company to access people's bank accounts through
the ACH system.
Articles on telemarketing fraud lead generation.
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