Relevant Criminal
Laws for Fraud in the United States
Consumer protection laws are designed to protect all consumers,
the gullible as well as the shrewd. The fact that a false statement
may be obviously false to those who are trained and experienced
does not change its character or take away its power to deceive
others less experienced. Our consumer protection laws were enacted
for the protection of the people, many who are trusting and naive
about the wolves of the business world who come dressed in lambs'
clothing.
Enforcement
The Department of Justice conducts both criminal and civil litigation
in combating telemarketing fraud. United States Attorneys' Offices
throughout the country, as well as the Fraud Section of the Criminal
Division of the DOJ, have successfully prosecuted many criminal
cases against fraudulent telemarketers.
The Office of Consumer Litigation of the Civil Division of the
Department, which conducts both civil and criminal litigation in
consumer-related cases, has also prosecuted telemarketing fraud
cases.
Under federal law, state Attorneys General have been given broad
power by the U.S. Congress to combat telemarketing fraud. For example,
a state Attorney General can file lawsuits in federal court and
shut down fraudulent telemarketers through national injunctions
so as to prevent companies from moving on under a different name
after being banned in one state.
Federal mail and wire fraud charges, which had a five-year maximum
penalty, now carry an additional five years for telemarketing fraud
or an additional ten years if ten or more senior citizens are targeted.
In a typical telemarketing fraud indictment that a federal grand
jury would return, the Department of Justice includes charges under
criminal statutes such as wire fraud (18
U.S.C. sect; 1343), mail fraud (18
U.S.C. sect; 1341), and conspiracy to engage in wire and mail
fraud (18
U.S.C. sect; 371). Each of these statutes carries a maximum
term of imprisonment of five years.
The court holds that to sustain a conviction for wire fraud, a
fraudulent telemarketer need not personally call victims to incur
criminal liability for a "co-schemer's" use of telephones
to cheat them.
Mail and wire frauds have a unique characteristic in that each
is complete when the mail or wire has been used. Just the existence
of the scheme plus the use of the mail or an interstate wire to
further the scheme will suffice. Each completed call is therefore
a separate, completed fraud offense, even if the money was not
sent in.
Mail Fraud Statutes (
condensed and paraphrased )
Title 18, United States Code
Section 1301. Importing or transporting
lottery tickets
Whoever brings into the United States a ticket, gift enterprise,
or similar scheme for sale or interstate transfer, or offers prizes
dependent on chance, or any advertisement of such a scheme, shall
be fined under this title or imprisoned not more that two years,
or both.
Section 1302. Mailing lottery tickets
or related matter
Whoever knowingly deposits in the mail, or sends or delivers by
mail:
Any letter or such concerning any lottery, gift enterprise, or
similar scheme offering prizes dependent in whole or in part upon
lot or chance or any payment for the purchase of any ticket or
part thereof.
Shall be fined or imprisoned not more than two years, or both;
and for any subsequent offense shall be imprisoned not more than
five years.
Section 1303. Postmaster or employee
as lottery agent
Any employee of the Postal Service who knowingly delivers any
letter advertising any lottery, gift enterprise, or similar scheme
shall be fined under this title or imprisoned not more than one
year, or both.
Section 2326. Senior Citizens Against
Marketing Scams Act
In addition, under a statute enacted in 1994 as part of the Senior
Citizens Against Marketing Scams Act (18
U.S.C. sect; 2326), federal courts can impose an additional
term of up to five years imprisonment where the mail, wire, or
bank fraud offense was committed in connection with the conduct
of telemarketing.
They can impose an additional term of imprisonment of up to ten
years' imprisonment if the offense targeted persons 55 and older
or victimized ten or more persons 55 and older. A similar enhancement
can be added to the bank fraud sentence
Convicted individuals must also be ordered to pay full restitution
to their victims.
Title 39, United States Code
Section 3005. False representations;
lotteries
(a) Upon evidence that any person is engaged in conducting a scheme
or device for obtaining money through the mail by means of false
representations, or is engaged in conducting a lottery, gift enterprise,
or scheme for the distribution of money, the Postal Service may
issue an order that:
(1) directs the postmaster of the post office at which mail arrives,
to return such mail to the sender appropriately marked as in violation
of this section,
(2) forbids the payment by a postmaster to the person of any money
order or postal note and provides for the return to the remitter;
and
(3) requires the person or representative to cease and desist
from engaging in any such scheme, device, lottery, or gift enterprise.
Section 1341. Frauds & swindles
Whoever, having devised or intending to devise any scheme to defraud,
or to sell any counterfeit or spurious security, sends by the Postal
Service, or by any private or commercial interstate carrier, or
receives any such thing, shall be fined or imprisoned not more
than five years, or both.
If the violation affects a financial institution, such person
shall be fined not more than $ 1 million or imprisoned not more
than 30 years, or both.
Section 1342. Fictitious name or
address
Whoever, for the purpose of promoting, or carrying on any such
scheme or any other unlawful business, uses a fake name or address
shall be fined or imprisoned not more than five years, or both.
Section 1345. Injunctions against
fraud
The Attorney General may commence a civil action in any federal
court to rejoin such violation.
Money Laundering
Because the owners and operators of telemarketing schemes often
use the proceeds to further the scheme —for example, to pay
the costs of their telemarketing business activities, such as payment
of salaries and rent and purchases of "leads" and "gimmie
gifts" —the Department has increasingly included charges
under the federal money-laundering statutes (18 U.S.C. sects; 1956 and 1957).
Each of these latter statutes carries a maximum term of imprisonment
of twenty years and ten years respectively, and provides the Department
with a basis to obtain criminal forfeiture of the telemarketers'
property. In some cases they will even, as appropriate, use RICO charges.
Financial Institution Fraud ( Bank
Fraud )
In cases where fraudulent telemarketers have misled banks when
they applied for merchant accounts to process victims' credit-card
charges, the Department has also charged the telemarketers with
financial institution fraud (18
U.S.C. sect; 1344). That statute carries a maximum term of
imprisonment of 30 years.
Civil Litigation
Telemarketers sometimes engage in unfair practices that may not
rise to the level of criminal violations, but nevertheless harm
consumers. In such cases, the Office of Consumer Litigation frequently
initiates civil litigation at the request of Federal
Trade Commission.
These cases seek enforcement of FTC rules that
govern the conduct of telemarketers such as the Telemarketing Sales
Rule, that directly applies to telemarketers or the Franchise Rule,
that regulates the practices of anyone, including telemarketers,
selling franchise opportunities.
These enforcement actions serve several purposes. First, they
obtain court orders that prohibit misrepresentations and require
the telemarketer to comply with the pertinent FTC rule.
This frequently results in firms going out of business. Firms that
remain in business tend to provide more complete and accurate information
to potential customers.
Second, these actions may obtain civil penalties or consumer redress
from violators, forms of monetary deterrence that can also benefit
victims.
Third, the individuals who are subject to orders in these cases
risk charges of civil or criminal contempt of court if they violate
the court orders. The Office of Consumer Litigation and the FTC, through "Operation
Scofflaw," have sought and obtained terms of imprisonment
against individuals who violate such orders.
Treasury Collection
In many cases involving fraud, the FTC receives
judgments against the defendants so they will attempt to collect
on these with the goal of returning money to the victims.
Collection is often difficult though because the defendants do
not have identifiable assets subject to seizure. So, the
Commission recently began working with the U.S. Treasury for assistance
in collecting these judgments.
The Treasury's Financial Management Services Division is able
to use its collection expertise to aggressively collect amounts
owed by fraudulent telemarketers.
In cases where Treasury is unable to collect after diligent effort,
it will report to the Internal Revenue Service that the uncollected
debt should be treated as income to the defendant, subject to taxation.
Securities Violations
By successfully advocating in the General Assembly for a change
making securities violations felonies, Attorney Generals can initiate
a policy of criminally prosecuting securities violators rather
than handling them administratively.
Role of Phone Companies
A federal law requires phone companies to discontinue or refuse
services to businesses which use their lines to transmit gambling
information. The law has been used primarily to stop bookmaking
operations but has shut down lottery operations as well.
The White-Collar-Crime Victim Protection Act;
( Paraphrased )
The Florida Senate recently beefed up its laws to dissuade scammers
in that state with 2001 SB 540 which took effect July
1, 2001.
Due to the frequency with which victims, particularly elderly
victims, are deceived and cheated out of large sums by criminals
who commit nonviolent frauds and swindles, frequently through
the use of the Internet, they enhanced the sanctions imposed
for such.
(4) A person commits an aggravated white-collar crime, punishable
as provided in section 775.082,
section 775.083,
or section 775.084,
Florida Statutes, if the person, in committing a white-collar
crime, obtains or attempts to obtain $100,000 or more and victimizes:
(a) Ten or more elderly persons,
(b) Twenty or more persons; or
(c) Any state agency or political subdivision of the state.
In addition to a sentence otherwise authorized by law, a person
convicted of an aggravated white-collar crime shall pay a fine
of $500,000 or double the value of the pecuniary gain
or loss, whichever is greater.
A defendant convicted of an aggravated white-collar crime
is liable for all court costs and shall pay restitution to
each victim of the crime, regardless of whether the victim
is named in the information or indictment.
The court shall hold a hearing to determine the identity
of qualifying victims and shall order the defendant to pay
restitution based on his or her ability to pay.
Notwithstanding any other law, the court may order continued
probation for a defendant convicted under this section for
up to 10 years or until full restitution is made to the victim,
whichever occurs earlier.
The court retains jurisdiction to enforce its order to pay
fines or restitution.
If a communication to defraud was sent across jurisdictional
lines the person charged may be tried in the county in which
the dissemination originated, in which it was made, or in which
any act necessary to consummate the offense occurred. As such
a communication made by or through the use of the Internet
is deemed to have been made in every county of the state.
White
Collar Crime Publications for Prosecutors.
Telemarketing
Fraud Research and Advice for Prosecutors - pdf
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