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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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