May 17th, 2009
Consumer Watch: FTC Builds Case on Telemarketers
By Jeff Gelles
The Philadelphia Inquirer
When the Federal Trade Commission moved last week to shut down three companies that it says are behind a flood of illegal telemarketing calls pitching extended auto warranties, Philadelphia-area consumers were clearly among those cheering.
The FTC said that for the last two years, the companies had made hundreds of millions of calls while flagrantly violating rules against using robo-dialers to call cell phones, and against calling consumers who have registered their numbers on the national “do not call” list.
In documents filed Thursday in federal court in Chicago, the agency showed how one of the companies systematically dodged rules designed to allow consumers to ask never to be called again: It told employees fielding such requests to quit the call and move on. Its motto, posted on office signs: “Hang Up. Next.”
Investigators said a key to the scheme was a technological trick known as “spoofing”: The companies fooled caller-ID devices with fake numbers, so that unhappy recipients could not call back to complain or call authorities to report the violations.
Also key to the scheme were scripts that suggested the callers represented automakers and were offering an extension of manufacturers’ warranties rather than what they were really selling: third-party service contracts of questionable value.
Area residents had their own stories of abuse to add.
Bernie Barczak of Voorhees was so angry at the steady stream of calls that, like many consumers, he decided to play along and request a transfer to a “warranty specialist.” His goal was to get the name and phone number of the company behind the call, so he expressed interest in buying coverage, then feigned an interruption.
“I said, ‘Someone’s at the door. Can I get your number to call you back?’ “ Barczak recalled Friday. He said the sales rep gave him a toll-free number, but still left Barczak frustrated. “The jerk gave me the number to an 800 porn line,” he said.
Lois Hespell of Montgomeryville apparently fell victim to another feature of the deluge of calls the FTC described: that they were originated by so-called sequential dialers that can call every number in an exchange or even an entire area code.
Such dialers work well for certain uses - at least from the calling party’s standpoint. They are how every home in Philadelphia can get a call, say, from Bill Clinton or Ed Rendell during an election campaign. But it is not clear how well the technology meshes with more targeted calls, such as to a list of sales prospects scrubbed of phone numbers on the do-not-call list, as federal law requires.
Hespell, a retired nurse, said she got two such calls over the winter that she would never forget: One came when she was in the hospital, seriously ill, and another when she spent two weeks convalescing in a nursing home.
“I said, ‘Do you know you’re calling a hospital patient?’ She said, ‘Oh, then you’ll have time to listen,’ “ Hespell said, making it clear she was not amused.
Sandra Flowers of Williamstown, Gloucester County, said the calls “have been harassing my family” for months. She got them not just at home and on her cell phone, but also at her office - in the state Treasury Department in Trenton.
“I’ve tried to tell them not to call because I’m on the ‘do-not-call’ list and they hang up before you can get the sentence out. I’ve hung up on them, I’ve hit the number they tell you to hit if you don’t want to receive any more calls, and they still call,” Flowers said.
Mary J. Walsh of Northeast Philadelphia, a retired IRS employee, said she was so frustrated at her inability to stop the calls that she “was almost in tears.” When she told one warranty-company representative that she wanted to be removed from its list, the woman told her it would not help. “She said, ‘A dozen companies are making these calls,’ “ Walsh said.
That part may be true. The FTC got everything it sought last week, including temporary restraining orders against one company that sells the service contracts, Transcontinental Warranty, of Fort Lauderdale, Fla., and against two companies the FTC considers key players in the tide of calls: Voice Touch Inc., of Daytona Beach, Fla., and Network Foundations L.L.C., of Chicago.
But it remains to be seen how much of the problem will be solved by shutting down those companies. Transcontinental is not the only company offering third-party service contracts, or playing fast and loose with how they are portrayed to consumers.
“There are clearly other people out there in the world doing this,” said Steve Baker, lead attorney in the FTC’s case and director of its Midwest regional office.
Still, Baker laughed when told that James Dunne, who owns and operates Voice Touch with his wife, Maureen, contended the FTC was focusing on him unfairly.
Reached by cell phone Friday, Dunne said: “They got the wrong guy. Really, I’m the smallest guy in the food chain.”
Baker said Dunne and his company, working with technology supplied by Network Foundations, were behind a significant proportion of the calls.
“We’re alleging that he wrote or helped write the scripts, that he provided the technology, and that he’s been paid at least $10 million for providing the services over the last two years,” Baker said.
The FTC has a wealth of details about how Voice Touch operated - including a recording of Dunne boasting of having dialed a billion numbers on behalf of a single client - thanks to cooperation from another service-contract company, Missouri’s National Auto Warranty Services Inc., that has been the target of other enforcement actions.
“We do believe that he was making millions of calls a week on behalf of Transcontinental,” Baker said. “No matter how you cut it, it’s staggering.”