Telemarketing Fraud Operations
Telemarketing fraud operations are defined simply by the principle medium of contact used to perpetrate the fraud. They should not be, but are often confused with legitimate telemarketing operations and call centers which, though potentially annoying, make up a large industry and workforce.
|Operations may consist of a single individual,
a complex call centre, or a makeshift and portable office facility
set up with a bank of phones. If calls have not been preceded
with promotional materials but are made from lists of leads
or at random, then they shall be deemed as being outbound calls.
If consumers are encouraged or induced to call a number on their own, then the call and operation are deemed to be of an incoming or inbound nature.
The Federal Trade Commission estimates that in excess of 14,000 fraudulent telemarketing businesses currently operate in North America.
Telemarketing Fraud in Canada
As of 2001, criminal telemarketing fraud operations in Canada remain strongly concentrated in three major metropolitan areas: Montreal, Toronto, and Vancouver.
•Montreal The greater Montreal area is the location of approximately 5 to 10 large telemarketing operations, plus an unknown number of smaller telemarketing operations. These operations, which use anywhere from a single operator to nearly 30 employees, concentrate on schemes offering foreign lottery chances and prizes or sweepstakes, as well as so-called "recovery rooms."
•Toronto The greater Toronto area has approximately 50 to 60 fraudulent telemarketing operations, some of which can be as large as 40 or 50 employees. These operations are conducting a variety of schemes, including offering advance-fee loans, credit-card "protection," stock swaps; prizes and sweepstakes; and "investment-grade" gemstones.
•Vancouver The lower mainland area of British Columbia – including Vancouver, Burnaby, North Vancouver, Richmond, and Surrey – has approximately 220 to 250 fraudulent telemarketing operations. These operations, which typically use anywhere from 3 to 35 or 40 employees, concentrate on schemes involving foreign lotteries, investments in so-called "British bonds," credit-card protection, recovery rooms, and fraudulent billing of compromised credit cards.
A number of these operations take extraordinary measures to increase the difficulty of successful investigation and prosecution. These measures include using cell phones (sometimes in conjunction with prepaid "calling cards"), which can be discarded after several weeks of intensive use; using stolen identity cards to open mail drops for receipt of payments that victims mail to them; using multiple mail drops that shuttle victim-related mail through multiple destinations; impersonation of FBI and Customs agents or RCMP officers, to make victims believe that law enforcement is already aware of their losses; contracting with other telemarketing "boiler rooms" to do their work; and laundering of fraud proceeds through foreign bank accounts.
In addition, U.S. and Canadian law enforcement have noted the involvement of organized crime in some of these telemarketing operations, although organized crime does not dominate fraudulent telemarketing as a whole.
Toronto a hotbed for phone fraud
Telemarketers sell phony credit cards to U.S., Europe
By Robert Cribb and Christian Cotroneo 11/02/02
Dale is lying.
The telemarketer, covered in tattoos and wearing a blue bandana around his head, is convincing a stranger on the other end of the phone to trust him with a bank account number.
"We're not telemarketers," he tells his hesitant American customer. "We're a bank. There's a difference."
The person on the other end of the line may have visions of a well-heeled businessman, in a pin-striped suit, surrounded by marble pillars. But it's far from reality.
The austere and dingy third-floor office, on Yonge St. near Queen, where Dale sits with about 20 other telemarketers, bears no resemblance to a bank branch.
There's precious little of his skin not covered with ink, and precious few things he won't say to make a sale.
Welcome to the boiler room.
Many legitimate telemarketing firms operate in Canada, selling everything from museum memberships to newspaper subscriptions. But experts say there are as many as 500 shady operations in Toronto alone, with thousands of telemarketing workers making deceptive pitches to Americans and Europeans.
These offices may not look like much, but it takes only polished phone patter —filled with half-truths and outright lies —to land sales.
Dale has just sold one unsuspecting American a "Gold MasterCard" with a "zero per cent interest rate" and "no annual or monthly fees" —all for a one-time membership payment of $199 (U.S.).
A MasterCard doesn't arrive. In fact, the credit card giant isn't involved with the telemarketing company. The card offer is part of a "package" of services offered under the business name U.S. Guardian.
With his sale, Dale is one step closer to his weekly paycheque of $800, tax-free.
And, since a valid credit card never comes, Dale's target joins the thousands of consumers being defrauded.
Instead of the promised card, some receive applications for "stored value" cards, which can be used only to tap money customers have already put into an account, much like a debit card. Others receive coupon books and information on applying for products or services, such as cell phones or satellite dishes.
How do you move what amounts to a package of coupons?
Part of it is salesmanship —those twisting, charming pitches that swing through each sale with the greatest of ease. An ability to think quickly and creatively is definitely an asset. But that's not enough to ring up big sales.
"You gotta lie," Dale tells a reporter posing as a new recruit.
"This is telemarketing. You tell them they're approved (for a credit card), but they're not. ...You just gotta say whatever you need to say to get the sale."
Thousands of Americans —mostly people with bad credit and heavy debts —are lured by the promise of a new card. Buffered by an international border, which offers added protection against prosecution, offices in Toronto, Montreal and Vancouver are turning plastic promises into a billion-dollar industry. And ringing up Canada's reputation as a telemarketing titan.
Most major Canadian cities have telemarketing boiler rooms —small sales offices that can spring up and close down overnight. Usually, the only desk furniture is a telephone.
Montreal and Toronto have sophisticated operations with hundreds of call centres specializing in unsecured credit cards. Vancouver has earned a reputation as an international capital of foreign lottery scams, promising customers big winnings on overpriced tickets.
Targets tend to be poor, often elderly, people with a lot of debt and little chance of obtaining credit. Their names may appear on "sucker" lists, especially if they have fallen for misleading pitches in the past. Companies buy and sell these names.
Officially, call centres use a script that's scrutinized by a legion of lawyers.
But the script has little to do with what agents actually say on the phone.
Telemarketing success relies on the creative sales pitch. The bigger the lie, the fatter the bottom line.
At another boiler room across town, Vicki is getting a bit testy with her prey.
"What do you mean you're confused?" she says sharply to the person on the other end of the phone. "I've explained it to you. It's very simple. There's nothing illegal here."
Her forehead crumples with disgust as she scolds the Texan.
"You have to make a decision right now," says Vicki, a law school student.
"It's a one-time offer. Is the problem with the membership fee? You weren't listening. I told you there are no surprise or hidden fees," she says in a brisk monotone, her eyes rolling toward the ceiling.
"The $199 is the last fee you will ever pay. It's a real credit card that does everything a real credit card does. Is it so difficult to understand?"
Vicki tells customers the card comes from a company called Trans America and has no annual fee. But the information sheet, handed to employees on their first day on the job, states: "There is an annual fee, approx. $45.00 per annum."
"Now I need the account number to process the application," she tells her customer.
Pen in hand, her arm darts to a piece of paper. Bingo. She begins scribbling down the numbers being read to her over the phone.
This is Vicki's third sale of the morning at this boiler room on Danforth Ave. near Coxwell.
About 30 small desks line the walls, each with a telephone.
Vicki is one of the office heavyweights, able to land a solid 10 to 15 sales a day between law classes.
"People can walk out of here with $3,000 a month," she tells a newcomer to the office. "I wouldn't have any other job. I like the money. I can article at a Bay Street law firm and they pay $200 a week. Two hundred! It's a big Bay Street law firm, but so what? I come here and make far more than that."
She's got the golden patter, a mix of quick and creative answers to any questions, truth notwithstanding.
"We're just trying to boost consumer spending in the aftermath of 9-11," she tells her next customer. "We want to see your credit rating grow like a tree."
How does a law student get into the phone fraud business?
Pick up a newspaper classified section. "Fresh start!" one ad heralds.
"New beginning," proclaims another.
Show up for the interview and you could be working within minutes.
Boiler room managers in Toronto don't ask for identification, experience or a resumé.
Even teenagers who have never owned credit cards could find themselves selling after little more than a slap on the back.
If you can speak English and read the pitch, and embellish it without tripping up on guilt, you're likely in.
"We don't take off any taxes or CPP or nothing," one manager tells a new recruit. "It's all clear money. We pay every Friday."
There are no tax deductions since most telemarketers are considered "independent contractors." They are paid by the hour, or earn about $20 commission per sale, or receive a blend of hourly pay and commission.
Handing out scripts with the slow, steady gravity of a blackjack dealer, manager Jerry prepares four new workers for their boiler room duties.
Words to live by. Words to sell by. Words by Jerry —and he guards them like a holy manuscript.
"These do not leave this address; this office; this building; 181 Eglinton Ave. East. Two reasons: Number one, any of you guys could be working for the competition. You ain't getting my script.
"The second is, we deal with private information. We deal with bank account numbers from people. When people put pieces of paper in their pockets, or purses, I start to get a little nervous.
"Now, let me show you a few things here," Jerry says, glancing at his papers.
He reads in a steady drone, breaking his monotone only with a yawn.
"If you read it like that, I'm not going to put you near a phone. I've got to have some kind of personality."
Something along the lines of infomercial tycoon Susan Powter, he suggests, brandishing her picture.
"She is totally obnoxious," Jerry says. "She says she used to be 380 pounds. Now she's a pin. She's full of shit, excuse my language.
"She's obnoxious, she's intense, she's got energy. Is she rich? Tons of money."
There's that word again. Money always brings a smile to Jerry's face.
When he says it, thin lips curl upward naturally on the second syllable.
His green eyes glimmer beneath the low visor of a New York Yankees baseball cap.
Jerry leads them into a small room about half the size of a high school portable, where three operators sit at Spartan desks, phones pressed to their ears. An operator hands him the phone.
"Mrs. Provost?" he asks in bright tone with a newly minted twang. "Bear with me, Mrs. Provost. My computer's got arthritis today."
With one hand, he taps the surface of the empty desk, as though typing feverishly at an invisible computer. With the other, he flicks through a stack of papers, each containing names, addresses and phone numbers of other potential customers in the same state, South Carolina.
"Oh, you're from Ladson," Jerry says. He tells her about a road trip, an aunt who lives in the area and an excursion to the local reservoir. No one knows if Jerry's married. Or even has an aunt. But there isn't a town in the United States that doesn't boast one of his relations.
The only real hurdle for fraud-bent telemarketers is their moral compass. And even religion can be exploited for the pitch.
Luke doesn't separate church from the state of his wallet. The Pentecostal Christian sells a little of his soul with each call.
"My soul is with thee," he sings to himself, while punching keys on the phone.
A Bible sits open next to him.
"My soul is with theeee ... Hello is Melanie there?"
His rich preacher's voice breeds familiarity.
"Hello, is Olivia there?" he croons into the receiver. "Do you know when she will be back?" May I ask who I'm speaking to?
"Oh, you're Chianna. You're the main one I was looking for. ... Do you have a pen and paper handy there, angel?
"You sound fine," he purrs. "I got to come down there. I want to be in your presence."
She hangs up.
"My soul is with thee," he sings in a low, milky drawl. "My soul is with thee."
"Hi there, big guy," he greets his next potential customer. "I see you're in Alabama. Beautiful state. How's the weather down there today?"
Slowly, he works into the pitch.
"I'm just calling you today with some good news. It says here on the computer that you've been approved for the Gold MasterCard you applied for."
Luke has neither a computer in front of him nor any indication that his customer had ever applied for a MasterCard.
But the approach is a proven ice-breaker, agents say.
"I just need to confirm some details, including the spelling of your name, address and a couple of other things. Sound good there?"
Then comes the killer moment in each pitch —the point where agents have to reveal the big $199 upfront catch.
Luke is having a tough time getting over that hump today.
"Now there is a one-time membership fee of $199 for the card, which I can arrange to have paid for out of your bank account."
He pulls the phone receiver away from his face and smiles. "He hung up on me. Oh well."
Spencer, another office ace, has a slick way around that awkward moment when he has to request a customer's bank account number.
"Okay sir, I have your bank account number in front of me here on the computer," he says, despite having no computer or bank account number before him.
"I just need to verify it with you. It all came in with your application. Can you read it back to me in order to process the order? Can you do that now, please?"
The target hesitates.
"No, I can't read it out to you, sir, because we're not allowed to read people's account numbers out over the phone. You have to read it back to me .... Okay, the information is confidential. We have to confirm the account number by you reading it. Our security office will read it back to you in 20 minutes."
All too often, the telemarketer's victim responds by reciting a bank number.
Later, when a newcomer asks Spencer about the job and his particular pitch, he shrugs his shoulders.
"I just say what I have to say to sell them, you know? You have to sell yourself. I don't talk about the details or how the card works. Sometimes I say it's 4.9 per cent interest rate just because it sounds good... This is life, man. I don't feel shitty. I don't care."
And that sentiment rings true when angry customers call.
A ringing telephone always means an irate client. They didn't receive their credit card. Their account was debited on the wrong date. The bank didn't approve their card.
One telemarketer recalls how he finally picked up only to listen to a furious client. The customer had been systematically hung up on every time he called.
"Sir, I apologize for how we treated you," the telemarketer told him.
"Then I hung up," he snickers.
A woman from Tuscon, Ariz., gets her call answered. She complains that the card she agreed to pay for hasn't arrived, even though some of the $199 has been removed from her account.
A reporter working undercover in the boiler room, who takes her call and contact information, asks Dale what to do.
"Just tell her you'll ask your supervisor to look into it and get back to her. But you don't have to give it to anyone. Don't worry about it."
A couple of cubicles away, someone gets a call from a dissatisfied customer asking for a supervisor.
"A supervisor? Sure, just one moment. I'll try to find someone."
He waves another telemarketer over to take the call. He isn't a supervisor.
"Yes, hello," the man tells the caller. "Okay, just call our customer service telephone number. It's based in Buffalo."
But that number is disconnected.
In the afternoon, Rocco, one of the managers, offers to show some new recruits the company's big Yonge St. office. The office car is a shiny new PT Cruiser.
"Do you like Eminem?" he calls to the recruits in the back seat.
Music up. Windows down.
The car wedges abruptly out into the middle of a busy intersection.
"In telemarketing, there are no stops," he continues. "You can make as much as you want."
Rocco turns into an unmarked alley near Wellesley and Yonge. Scarcely out of the car, he is hailed by three young men shouting down from a fire escape. He returns the greeting and climbs the steps.
"I'm giving them a tour," he points back. "I want to show them how a team works."
Wall-to-wall windows catch every last ray of the afternoon sun in the large, open office. In the far corner, a smaller office is walled in glass.
Like the Danforth office, pictures and slogans provide stark inspiration.
"Persistence: Chance favours those who persist."
This office, Rocco says, generates 150 sales per day; the entire family of offices, under the same Ontario numbered company, makes something like 750.
He introduces everyone, along with their earnings.
Dave, one of three young men playing cards in a corner, makes about $2,000 a week. Tax-free. Greg hunches over a phone, a 50-something in a suit and tie. He smiles when he sees Rocco —and holds up a finger: He's in the middle of a sale.
"He's got the bank account number right now," Rocco beams with pride.
Unlike most other offices, there's an air of permanence here. Photographs of smiling young children adorn the space above a desk.
There are no rookies. These are the top sellers —proven people who worked their way up from other offices.
"It's a real team," Rocco enthuses. "It's what I'm trying to build in my office."
Alan sits a few desks down. He's a 100-sales-a-week man. A juggernaut.
"These guys are all focused, man," the boss looks on, an approving smile stamped across his broad face.
High flyers thriving in a low-life industry
By Christian Cotroneo and Robert Cribb - Staff reporters 11/03/02
Domenic Capogreco flashes a sly grin at Josephine "the sex machine."
His head swivels from the poker table, where chips are bought with the toss of a $100 bill. Eyes move from the stripper's face down her barely covered body.
Moments later, the boyish entrepreneur is getting a "wraparound" —Josephine's ivory legs encircling his mid-section and delivering a faceful of breast.
It's the early hours at a stag party filled with some of the biggest players in Toronto's seedy, multibillion-dollar telemarketing trade.
They're the high flyers in a low-life industry.
Sporting expensive clothes, gold chains and bulging wallets, these young tycoons run telemarketing boiler rooms across Toronto —small, high-pressure sales offices that can spring up and close down overnight. Usually, the only desk furniture is a telephone.
Each day, hundreds of sales agents pitch misleading credit card offers to poor, often elderly, Americans.
Canada has become the international headquarters of telemarketing fraud —a reputation that is spreading around the world as victims and their advocates blame lax Canadian enforcement for their misfortune. Most telemarketers in this country run honest operations, selling a wide array of goods and services. But police and government experts estimate between 300 and 500 deceptive telemarketing boiler rooms operate in Toronto alone —many more across the country.
Capogreco, 29, lives in a sprawling home in King City, north of Toronto, complete with a three-car garage. He's the registered owner of a posh silver Acura 32T and runs two telemarketing offices pitching misleading credit card offers to Americans.
His targets are generally people with a lot of debt and little chance at getting a credit card from their bank. They pay $249 (U.S.) for what they believe will be a major card. It never comes.
What they receive by mail is a "benefits" package containing application forms for products or services such as cell phones and satellite dishes —all with hefty service charges —and a plastic card only good for buying items from an included catalogue. The package also includes an application for a "stored value" credit card that, if obtained, amounts to little more than a debit card —users have to provide their own money up front.
Thousands have complained to governments and consumer advocates, saying they'd been misled.
Capogreco is listed in public records as sole director of IMD Marketing and FCE Marketing, both run out of nondescript Toronto buildings.
FCE is in a second-floor office at 1980 Yonge St., south of Eglinton. A sign out front beckons new recruits: "Wanted: Telemarketers; Guaranteed Wage; $ Big Bonuses $."
IMD is located on the third floor of a retail building near the corner of Eglinton Ave. and Yonge St. Inside, telemarketers spend their days dialing for dollars across the U.S.
Hundreds of such offices are spread across the city's downtown core, many run by young, wealthy owners, like the ones celebrating at the stag.
"If the police raided this place tonight," mused one partygoer, "the whole industry would be shut down."
Toronto telemarketers have quietly collected millions, helping finance affluent lifestyles at the expense of the most vulnerable of U.S. citizens. Susan Tepfer, a 46-year-old grandmother in Texas, liked the sound of a credit card with a $2,000 limit when a company called in June.
The call came from a Toronto boiler room, it's not clear which among several in the city marketing a "benefits package" under the name American Capitol.
Susan and her husband, Jack Tepfer, live on a plot of land on a dirt backroad of a small town called Whitney —a middle-of-nowhere place that Toronto telemarketers somehow found.
The Tepfers moved to the country for the low property taxes. But there's no work.
That's why Susan works two days a week in Dallas, a 90-minute drive. The rest of the time, she works from her computer at home. Because of chronic illness, Jack is unemployed.
He has suffered three heart attacks, a hip replacement, and back surgery. The hip cost $10,000, a recent cardiogram ran up a bill for $8,000.
Financial constraints and a pile of medical bills made the credit card offer sound attractive.
"I was vulnerable," she says, digging out a stack of unopened medical bills.
"We got 20 medical bills for Jack last week alone.
"Some of them are little bills, some of them are bigger, but I thought I could pay for them all at once on that card."
Susan's brother, who didn't have medical coverage, recently suffered a heart attack too. She has been supporting him and has her own health concerns. She suffers from a fatigue disorder that causes chronic aching and sleep problems.
After giving telemarketers her account information on the telephone, she was mailed a package full of coupons and application forms for other credit cards. Some of the paperwork asked for more money.
"It sounded good on the phone," she said. "They told me I could move the balance from my other cards on to this one. They gave me a contract number and a pin code. But when I called back, the number was disconnected."
She kept calling, trying other numbers. "I finally did get through to someone and said, `This doesn't look good. I want my money back.' And they said no.
"I'll never see that money again. It's gone. The Better Business Bureau couldn't help us because it's all been out of state."
"It's the principle of it," says husband Jack. "Not the money. It's all been a lie."
Once telemarketers complete a sale, they tell the customer to stay by the phone because a "verification officer" will be calling shortly. In that second conversation, the verification officer simply confirms details such as the customer's name, address, bank account number and bank address. The conversation is recorded as evidence of the customer's permission to withdraw funds.
By all accounts, telemarketing in Toronto is a freewheeling industry —decentralized, with many overlapping networks. Police crackdowns tend to net a handful of players, leaving unscathed a host of other telemarketers who offer the same, or similar, misleading packages. Those police busts haven't put a dent in this booming trade.
Among the boiler rooms selling American Capitol, until recently, were Capogreco's FCE and IMD.
Emerging from his Yonge St. office last week, Capogreco walked across the street and into a Canada Trust branch. A few moments later, he re-emerged with a roll of cash, counting it as he sauntered into a bagel shop, then back into the office.
It was the same day Sarah Nash lost her job at FCE.
The 27-year-old had only been there a week when she realized "something underhanded was going on."
It started when a customer called to complain and put a stop to the payment she'd made to FCE.
"The customer had been trying to get in touch with us for a while. I told a manager and he just crumpled up the piece of paper with her number and name. A reputable company would follow up with customer complaints."
Nash started asking questions about the "package" FCE sends out to customers.
She didn't get any answers.
"I told them I wanted to research the company and tell customers where the package was mailed from. Domenic (Capogreco) said, `New York, I think,' which was weird. I said I wanted the number. They said there was no number and it wasn't any of my concern and to just do my job."
A day later, she confronted management.
"I couldn't complete the day knowing I'd be taking money from these people," says Nash, the daughter of an Anglican minister. "I told them, `You're ripping people off and I hope you believe in karma because it will come back and hit all of you.' Then I just said, `Shame on you.' That's when they fired me.
"I think it's horrible that there are so many of these companies (in Toronto). They have to crack down on it. These are vulnerable people on hard times, trying to restore their credit. It's horrible to prey on them like this."
In an interview with The Star, Capogreco said he wasn't familiar with the product his agents sell to Americans.
"I haven't seen it," he said. "Basically, we're selling the benefits package. You're getting the credit card with the package. And the package is being sent out to them. We have a customer service department ... They do all the back-end stuff. I do none of that stuff."
He says he doesn't know where the customer service department is located.
What about customers who say they were misled?
"You get that from time to time. The only control we've got is if the customer calls customer service department. Then they'll take care of it from that point ... I usually give (agents who are the subject of customer complaints) three chances. It depends on how bad it is. If it's extremely, extremely, extremely bad, I'll get rid of them right away. But if it's something that's minor, I give them three chances."
Inside one of Capogreco's boiler rooms, it's clear agents will do whatever it takes to make a sale. Slips of paper with key sales slogans are tacked on cubicle walls. Sales staff are given a script approved by lawyers, but that's just a starting point once they go to work.
"It's a dirty, lying profession," says Tom Adams, an IMD manager, speaking to a Star reporter who worked at the company undercover.
"I'll sell it to a single mother of four who lives in a trailer park and know her kids won't have clothes to go to school. And I'll sleep well," says Adams, whose office is inconspicuously located above a Swiss Chalet restaurant at 181 Eglinton Ave. E.
"As far as I'm concerned, if you're stupid enough to give me your account number, you deserve to get screwed."
Recently, Adams pitched the credit card offer to a man who was having his home phone redirected to his hospital room.
"He has asbestos poisoning and bronchitis. He was telling me his life story. His wife died five years ago."
Adams sold him the package.
"He said `Thank you, Jesus.' Everyone knows what they're doing is wrong. No one uses their real names. I use Tom Adams when I'm on the phone."
Telemarketers generally earn an hourly wage with bonuses for good sales numbers, or a $20 commission per sale, or a blend of both.
Until recently, IMD and FCE telemarketers have represented themselves to customers as agents of Delaware-based American Capitol. Now they're selling a package from Missouri-based Royal Star Benefits. Both are grand sounding corporate names for companies with U.S. addresses. But those addresses only serve as a mail drop, allowing Canadian telemarketers to represent themselves as Americans.Both American Capitol and Royal Star have plenty of complaints registered against them in the United States.
After logging more than 1,000 inquiries about American Capitol, Delaware's Better Business Bureau issued a statement in May, saying, "according to our research, funds are withdrawn (from the accounts of customers) but no credit cards have been issued ... Our file shows mail sent to this company was returned by the post office as unable to locate. The phone number is a number out of Canada."
The company's Wilmington, Del., address amounted to nothing more than a rented telephone number and mail forwarding service. The building's management cut American Capitol off in June on the grounds that the firm "is in violation of state and federal laws," according to documents obtained by The Star.
American Capitol is actually registered in Toronto under the name First Beneficial Credit with two listed directors —Viktor Golub and Armand Petrou. The corporate address on Yonge Street is a postal box.
In August, American Capitol/First Beneficial Credit was sued by the U.S. Federal Trade Commission in connection with more than 450 consumers who received misleading credit card offers.
"It's all closed down now," said Golub, who made newspaper headlines earlier this year for having almost $800 worth of unpaid parking tickets, landing him on the Toronto Parking Authority's "most wanted" list. At the time, he said the parking authority had overcharged him.
Last week, he vowed to resist the U.S. Federal Trade Commission. "I've got a lawyer. We're fighting."
Andrew Cove, a Florida lawyer representing Golub and Petrou, says U.S. authorities were overzealous in charging American Capitol.
"(The FTC) will occasionally take action that is misplaced or is in error or is unwarranted," says Cove, who represents a "long list" of Canadian telemarketing firms facing charges in the U.S.
"And with all due respect to the commission, we believe this is one of those cases and we fully expect to be able to show that in court."
Following the FTC action two months ago, American Capitol/First Beneficial ceased operations, says Cove.
Since then, Toronto telemarketers such as Capogreco have been selling Royal Star Benefits, a similar "benefits package" that includes a major credit card offer.
Glenn Stevens, known as Gomer to his friends, runs a telemarketing operation at 4632 Yonge St., just south of Sheppard Ave., called RS Marketing.
He leans back in his black leather chair and spreads a comfortable smile across his face as he speaks with reporters. Down the hall, about 10 telemarketers work the phones selling the Royal Star package.
The L-shaped desk in front of him is dominated by two flat-screen computer monitors.
He glances from one to the other, then to the little white security monitor that lets him keep an eye on his employees.
A stack of multi-coloured paper rises up in one corner of the office. These are the leads —contact information for thousands of Americans —that are bought and sold within the industry.
Asked about customer complaints regarding Royal Star's "benefits" package and the way it is sold, Stevens insists his agents sell no illusions.
"We try the best we can to do it as clean as possible," he says.
"The bottom line is customers are going to be pissed off. Some customers won't. Those customers that do get pissed off, because they were promised something that they didn't receive, they will receive their money back. That's it."
False promises do happen, he admits.
"Yeah, there (are) assholes that get on the phone and tell the customer whatever they want to hear, just to make a sale and to look good ... If they do that, if they do sell it like that, there have to be controls."
Asked how he stops his agents from lying, Stevens says, "It's very hard, very hard. That's the problem.
"All those people that do have a complaint should call customer service and tell them, `I didn't get an unsecured card and I'd like my money back,' and they'll get their money back." Customers contacted by The Star say that doesn't happen. Stevens says the head office for Royal Star Benefits is in St. Louis.
Royal Star does have a St. Louis address, but it's actually for a company that supplies virtual offices to clients.
A Royal Star presence is nowhere to be found. And the Web site associated with the company (http://www.yourbenefitz.com) contains no contact information.
Asked about Royal Star's missing location in St. Louis, Stevens says, "No, there's an office. There should be an office."
If there is, even the St. Louis Better Business Bureau can't find it. "We are getting a lot of calls about them," says Scott Thomas, of the St. Louis BBB.
"But they don't actually have a physical location down here. I had heard the proprietors resided in Canada. We're looking to gather information on them because we have had inquiries."
They're not the only ones.
Ed Madgedson, who runs a U.S.-based consumer watchdog Web site called ripoffreport.com, has logged thousands of complaints about Canadian-based telemarketers, including Royal Star Benefits.
"For telemarketing scams, Canada seems to be the place," he says. "All the crooks from the United States locate their business in Canada to save money, because it costs them less and they also think authorities in the U.S. will have a tougher time going after them."
The fact that telemarketers like IMD are located in Canada sometimes compounds the loss for customers, he says.
"These people who order the credit card don't realize the company they're dealing with is in Canada," he says. "They start calling the number to complain but don't realize they're calling Canada and have phone bills of $800 or more."
With hundreds of agents working the phones 12 hours a day, six days a week, Americans are getting calls every few minutes from local offices.
Telemarketers "took my money and took me for a ride," says Faye Balunsat, a 24-year-old living in San Francisco, who bought the American Capitol package.
"I was collecting unemployment and I declared bankruptcy when I was 22. After they took my money, I'd call every week asking where my credit card was and they'd say next week, next week."
Then, the phone number she was given was disconnected.
"I cried. I really cried. It's so wrong."
James Craig, who lives near Cleveland, got a call from an American Capitol marketer in April, after declaring bankruptcy.
"I took a chance and gave my account number and the money was taken out as scheduled," he says.
The card never arrived.
"I went through three supervisors who didn't do anything. Then I found out the 866 number I was dialing was a Sprint Canada commercial number. That led me to the fact it was a Canadian."
Nadine Holmes, a 53-year-old single woman in Detroit, also fits nicely into credit card telemarketers' target group. She fell for American Capitol too.
"That money was real important to me. I live paycheque to paycheque. Now I feel cheated and upset that the government would let them keep doing this to people. Somebody should put a stop to it."
The parking lot outside the Presidente Banquet Hall in Vaughan, where the approximately 200 men are gathered for the stag party, resembles a luxury car dealership, punctuated by Porsches and BMWs.
Two telemarketers are urging three others to join them elsewhere at a private party.
"There's going to be Playboy bunnies, man," says one. "It's going to be filled with Playboy bunnies. Just come. We'll meet you there."
Inside, there's loud banter over the large speakers.
"What do you say to a woman with two black eyes?" the MC bellows into the microphone. "Nothing. You already told her twice."
Hoarse laugher follows.
Just then, the room is filled with a pounding techno beat featuring the same words repeated over and over: "Beat That Bitch With A Bat."
Smiles all around.
With files from Christopher Hutsul
TheStar.com Link to this great article. If only temporarily, their original articles were good enough to hit a nerve.
Telemarketers close down in wake of Star series
Robert Cribb and Dale Brazao, Staff reporters, Nov. 9, 2002.
Telemarketing boiler rooms have abruptly shut across Toronto in the wake of an investigation into Canada's multi-million-dollar phone-fraud industry.
Shock waves rippled through that industry when The Star last weekend unveiled widespread and shady telemarketing practices in the city. Several bustling operations have fallen silent, no longer pitching misleading credit card offers and other scams to vulnerable Americans, often elderly or cash-strapped.
At dozens of locations starting Monday, telemarketing employees reporting for work were told to go back home. Or they found an abandoned workplace with locked doors and desks stripped of phones.
The closings have cost the industry "hundreds of thousands of dollars," said Toronto Police Detective Jim White, of the anti-fraud tactical unit.
But although battered by the shock of public exposure, Toronto's shady telemarketers will bounce back, he added. There's simply too much easy money to be made in this fly-by-night industry for its practitioners to just walk away.
"They can shut down and open again overnight," White said.
Telemarketing firms closed for business include IMD Marketing and FCE Marketing, both run by Domenic Capogreco, 29, of King City. Public records list him as sole director for both companies.
FCE Marketing's Yonge St. office, just south of Eglinton Ave., was dark this week. In earlier days, its desks were filled, well into the evening, with telemarketers pitching a misleading credit card offer to Americans. Gone was a sign in front of the building stating: "Wanted: Telemarketers; Guaranteed Wage; $ Big Bonuses $."
At Capogreco's IMD location, above a restaurant on Eglinton Ave. near Yonge, a sign on the locked door stated: "Sorry folks, we will be closed for a week."
Telephone calls to the companies went unanswered and Capogreco could not be reached for comment.
Another telemarketing firm profiled by The Star, called RS Marketing, was also shut. Run by Glenn Stevens, the company's Yonge St. office, just south of Sheppard Ave., was locked and its door covered with notices from couriers unable to deliver their packages.
Stevens could not be reached for comment.
The chill reached into boiler rooms across the city.
"I showed up Monday for work and the manager pulled me into his office and said: `Did you see the paper on the weekend? We have to shut down because of the heat,'" said Lowell Schrieder. The 28-year-old actor had worked in a boiler room near Sheppard Ave. and Dufferin St. since August and had secretly shot videotape of the operation in hope of making a documentary.
"Once I became a regular at the office, I realized it was completely wrong," Schrieder said, adding that the company promoted a credit card offer similar to what was exposed by The Star.
A telemarketing employee at yet another boiler room on St. Clair Ave. W. said workers were abruptly sent home Monday.
"We had called the owner, on the weekend, about the stories in the paper," she said, not revealing her name. "He got back to us (Monday) morning saying, `You're fired, get off the premises, all of you get out.'"
The office was subsequently abandoned - its phones removed and sales "scripts" pulled from the wall. Left behind were strips of masking tape, where the scripts had once been mounted, and motivational posters with slogans such as: "Smile While You Dial," "Sell Now Shag Later," and "Sell, Sell, Sell, Sell, Sell."
A copy of Monday's Toronto Star was in the trashcan, opened to a page with a story about the city's telemarketing industry.
One prospective employee, at still another boiler room, had hoped to start work this week. Giving the nickname "Sharkey," he said he was to be trained Monday but found the Yonge St. office, just south of Bloor, had shut.
"The lights are off. I knew it was too good to be true," Sharkey said, gazing at the company's blue and yellow sign. "I couldn't believe how easy it was to be hired here. They just asked my name and phone number and told me to start the next week."
An anonymous worker at another Toronto operation said: "Everybody's shutting down. They've been destroying documents and getting rid of anything suspicious that the police might find."
Canada is considered the international headquarters of telemarketing fraud - an industry that finds a welcoming home here thanks to relatively light sentences in the courts and scarce police resources.
Most telemarketers in this country run honest operations, selling a wide array of goods and services. But police and government experts estimate between 300 and 500 deceptive telemarketing boiler rooms operate in Toronto alone - many more across the country.
Capogreco's companies targeted people who had high debt and poor credit ratings, pitching them a major credit card for $249 (US). After they paid, the card never came.
What they received by mail was a "benefits" package containing application forms for products or services such as cell phones and satellite dishes - all with hefty service charges - and a plastic card only good for buying items from an included catalogue.
The package also had an application for a "stored value" credit card that, if obtained, amounted to little more than a debit card. Stevens' firm marketed the same package.
Thousands have complained to governments and consumer advocates, saying they'd been misled.
White, of the Toronto police, said he plans to investigate the companies identified by The Star. But he warned limited resources hamper police in their fight against deceptive telemarketers.
Detective-Sergeant Barry Elliott, an Ontario Provincial Police officer who oversees a North Bay-based telemarketing complaint line called PhoneBusters, says police efforts dedicated to stamping out Canada's massive telemarketing industry are "a joke."
"These (deceptive telemarketers) aren't stupid," he said. "They know there are only a few guys investigating them, and the chance of getting charged and convicted is (the same chance as) winning the lottery."
Police investigators say Malvern Crew gang ran huge lucrative sideline - Americans lose millions to local telemarketers scam
NICK PRON - COURTS BUREAU - Toronto Star
05/14/04 - Detectives are calling it the great untold story behind Wednesday's dramatic police sweep to dismantle the Malvern Crew.
The street gang terrorized the northern end of Scarborough with violence and intimidation, police say, but its power didn't come only from the business end of a gun.
New members were seduced by the lure of easy money in what was widely known in the criminal subculture as "the Firm" —a telemarketing scam that generated millions of dollars, investigators say.
None of the 64 suspects arrested in Wednesday's sweep has been charged with the telephone scam.
"The investigation continues and requires further investigation to ensure all the dots are connected," said Detective Staff Inspector Tony Crawford, head of the fraud squad.
He said that police will lay further charges, such as fraud and identity theft, against the operators and ringleaders behind the scam, whose victims were mainly elderly Americans.
Detectives with the Toronto police fraud squad say gang leaders long ago realized that white collar crime was the way to go, because of the huge profits to be made and the light jail sentences if they were caught.
"Get nabbed walking around with a gun, and you're looking at some stiff jail time," said Detective Jim White of the fraud squad.
"But if you get done for a fraud, you get a kiss from the courts."
White said the unsuspecting Americans were duped into applying for the phony loans through ads in newspapers throughout the United States, then calling toll-free numbers that led back to modern day "boiler rooms" —equipped with mainly cellphones and laptops —in Scarborough and throughout Toronto, he said.
The would-be applicants were then asked for personal information, such as their addresses, driver's licence details and credit cards, as if they were applying for a loan through a bank, he said.
Then came the hook. Before they could get a loan, they had to pay an "insurance premium" in case they defaulted on the payments. The upfront money, said White, ranged from $500 to a high of $11,000.
The victims were told to send the cash in money orders via Western Union to depots around the GTA.
Low-level members of the gang, known as "runners," were then sent to pick up the money, he said. If they got caught, they typically only knew the identity of the person who sent them on the runs, not the more senior members of the gang, said White.
According to police figures, last year 12,192 people reported they had been victims of the phony loan scam, losing a total of more than $56 million. Up to the end of April this year, 4,285 people have reported losing a total of $19 million.
White said that many of the boiler room operations responsible for the scam had connections with the Malvern Crew, either through runners, those who ran the boiler rooms, or senior gang members who set up the operations.
A typical recruit, he said, could make around $5,000 during the summer for doing the runs to Western Union offices, as was the case with one 15-year-old girl arrested earlier.
"Having all that money gave her instant status with her peers," he said. "She was able to buy fancy clothes, treat her friends and have a good time partying."
Runners who proved themselves to be trustworthy then moved up to the next stage, selling small amounts of drugs like crack cocaine or marijuana, he said.
Then comes the biggest status symbol of them all, "the privilege" of buying a gun through the gang, he continued. Street prices for the illegal firearms range from $1,800 to $2,000, he said.
The eventual goal of many gang members is to run their own loan scam operations,which vary in size. One operation recently busted by the police had five laptops and about a dozen cellphones.
In another, there were 28 cell phones.
The stolen information is used to buy cell phones, make bogus credit cards, or even used to get loans, White said.