Canadian Telemarketers Face Jail

A Canadian telemarketing operation that allegedly defrauded businesses on both sides of the U.S. border is now in trouble on both sides of that border.

Datacom Marketing Inc. and several individuals and firms were hit with criminal charges last month by Canada's Competition Bureau, a law enforcement agency that oversees business. In addition, the U.S. Federal Trade Commission won a temporary restraining order and an asset freeze in a civil case against the same defendants.

According to a civil complaint filed May 9 by the FTC, the companies made unsolicited outbound calls to small or medium-sized businesses in the United States, claiming they were calling to verify firms' names, addresses and telephone numbers for listings in a directory.

This was sometimes followed by a second call to verify the information. These verifications often were taped and used as proof that the parties had authorized purchase of a directory, the FTC continued.

The callers sometimes mentioned that an invoice was on its way, but they did it so quickly that the victims often failed to realize the import, the complaint stated. The full price, including shipping and handling, was $399.

Victims did receive print or CD-ROM directories, but the names of many who didn't pay were turned over to third-party collectors, according to the complaint.

U.S. and Canadian businesses were tricked into shelling out $20.7 million (U.S.) in 2002 alone, the Competition Bureau reported.

The firms employed up to 400 telemarketers, mostly “students and immigrants who speak good English,” said Don Mercer, the Competition Bureau's assistant deputy commissioner. “Their human resources departments were set up on the premise that there would be turnover every two weeks, which is what it took for people to figure out they were working for crooks.”

The defendants in the Canadian case include Judy Neinstein, Bernard Fromstein and Paul Barnard of Toronto. All three were accused of misleading advertising, deceptive telemarketing and criminal conspiracy, each carrying a maximum of five years in prison, according to Mercer. They also were charged with fraud, an offense that carries a maximum penalty of 14 years.

Two Quebec defendants, James Sharo and George Pavlopolous, are facing fraud allegations as well.