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Direct telephone marketing, known more commonly as “telemarketing” has been around since the advent of the telephone. More recently, telemarketing companies use automated telephone calls or “robocalls” as opposed to paying human solicitors to call potential customers. With the increase in telemarketing companies came many negative associations with robocall solicitations. Many of these robocalls lead to scams, and fraudulent transactions where the telemarketing company uses deceptive marketing practices and high-pressure sales tactics to take advantage of unsuspecting consumers. In this case study, we see how the United States acted against several of the most prolific telemarketing companies leading to the largest fines in agency history.
This case study profiles a large spoofing scam targeting US citizens. The case involved six Texas-based telemarketing companies and two business owners, John C. Spiller and Jakob A. Mears. All information in this background comes from the Federal Communications Commission (FCC) press release, three FCC investigator statements, and one newspaper article.
The FCC recently levied the largest fine in its history against a group of six telemarketing companies and their two owners. Texas-based telemarketers Rising Eagle Capital Group LLC, JSquared Telecom LLC, Only Web Leads LLC, Rising Phoenix Group, Rising Phoenix Holdings, RPG Leads, Rising Eagle Capital Group, John C. Spiller, Jakob A. Mears (collectively Defendants) were fined $225 million by the FCC for transmitting over 1 billion robocalls. Many of the calls were illegally spoofed.
Spoofing refers to a relatively new type of fraudulent scheme where criminals use, or attempt to obtain, personal identifiable information or some personal financial information from unwitting individuals with criminal intent. Common types of spoofing transmissions are caller ID, text messaging, websites, email address, and IP addresses. The FCC determined these one billion plus robocalls were made in violation of federal law, specifically The Truth in Caller ID Act and the Telephone Consumer Protection Act (TCPA).
In 2018, the FCC detected a large increase in consumer complaints about robocall traffic related to health insurance sales. It found approximately 23.6 million health insurance robocalls placed each day. The defendants in this case admitted they intentionally used the robocalls to sell short-term, limited-duration health insurance plans to unsuspecting consumers and falsely claimed Aetna, Cigna, United HealthCare and Blue Cross Blue Shield as the health insurers.
Defendant Spiller admitted to the USTelecom Industry Traceback Group that he made millions of spoofed calls per day and knowingly called consumers on the Do Not Call list because he believed this course of action to be more profitable than following the law. The FCC’s Enforcement Bureau designated the USTelecom Industry Traceback Group as the group who coordinated industry-led efforts to trace back the origin of suspected unlawful robocalls.
According to the FCC, Rising Eagle (a defendant company) was responsible for most of the robocalls during the period of time studied, which represented a violation of the TCPA.
Spiller and Mears faced a government investigation, civil charges, and staggering monetary penalties because of their poor decision making. Despite knowing their actions directly violated federal laws regarding telemarketing, the defendants in this case moved forward with their plan anyway.
Spiller and Mears and their businesses were held jointly and severally liable for the monetary damages. Their requests for reduction of the fine were denied by the Commission.
Circumstances like those Spiller and Mears experienced are certainly avoidable. The United States Congress enacted telemarketing laws and authorized the FCC to enforce them. The TCPA (1991) limits unsolicited pre-recorded telemarketing calls to landline telephones and prohibits all autodialed or prerecorded calls or text messages to cell phones. The TCPA law also prohibits persons or businesses from manipulating telephone caller ID information with the “intent to defraud, cause harm, or wrongfully obtain anything of value.” The Truth in Caller ID Act (2009) prohibits telemarketers from perpetrating telephone-based scams on unwitting US citizens.
Armed with such industry-specific knowledge, the defendants in this case should have adhered to law-abiding decisions.
Every business owner bears the responsibility for understanding (and compliance with) federal, state, and local laws that govern business operations. Many of those laws and regulations are industry-specific. It is incumbent upon business owners and leaders to set expectations for business operations. Appropriate policies and procedures along with comprehensive compliance monitoring that is enforced at every level of the operation are essential components of good corporate governance.
Business owners and leaders should understand how authorities pursue violations such as telemarketing fraud. Prisons, however, are filled with people who say they did not know they were breaking the law.
With an extensive depth and breadth of knowledge drawn from personal experience, everyone at Compliance Mitigation understands the complexities of government investigations. We recommend that business owners and leaders understand business laws and regulations, and then implement clear strategies for improved compliance. Indeed, the Department of Justice issued a white-paper on steps a company should follow to qualify for leniency or deferred-prosecution agreements. Such actions, taken in advance, may position businesses for leniency in the event of government investigations. We can help!
For more information, see our free course, Compliance 101.
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