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13 Suits Filed in Crackdown on Fraud in Telemarketing

Litigation: The campaign is called the largest on credit card and loan advance-fee schemes. Four cases are in the Southland.


Federal and state authorities Monday announced the filing of 13 lawsuits nationwide in a crackdown on telemarketers who allegedly bilked hundreds of thousands of consumers of fees for loans and credit cards that were never provided.

Officials described the campaign, dubbed Project Loan Shark, as the largest coordinated assault to date on fraudulent advance-fee schemes. The lawsuits against 45 individuals and companies in the U.S. and Canada include four against advance-fee operations in Southern California and the first case ever filed by the Federal Trade Commission against a foreign telephone boiler room operation.

The number of victims in the 13 cases easily exceeds 200,000, with losses in the tens of millions of dollars, according to Charles Harwood, FTC regional director in Seattle. The crackdown was announced at a meeting of the National Assn. of Attorneys General in St. Louis.

Advance-fee schemes use the false promise of loans or credit cards to get desperate consumers to send processing fees ranging anywhere from $20 to thousands of dollars.

The operators typically lure victims by advertising a toll-free telephone number in newspapers or shoppers. Many practitioners use commercial mail drops instead of offices and target consumers hundreds or even thousands of miles away to avoid being confronted by victims.

These scams are particularly "offensive because they often sound very credible at first and they prey upon the most defenseless," said New Mexico Atty. Gen. Tom Udall, whose office filed one of the suits.

They are "particularly enticing to consumers who are the most vulnerable--those out of work, those with poor credit ratings or those who need money right away for emergencies," Udall said.

The FTC filed five of the lawsuits last week and 15 state attorneys general are plaintiffs in the eight others. In some of the cases, authorities have already obtained restraining orders freezing assets and putting court-appointed receivers in charge of the businesses.

"We want to get the money and get it back to the people who lost it," said Russell Dantoft, assistant regional director of the FTC's Chicago regional office, which sued one of the Southern California operations.

The complaint filed in federal court in Los Angeles names Tod A. Silvers, Robert R. Silvers, Adelino Calvo Jr. and seven business names they allegedly used in renting drops in Los Angeles and Santa Monica.

According to the lawsuit, the group took an estimated $3 million from consumers by charging $19 to $25 for credit cards that consumers never got. Instead, according to Dantoft, victims were merely sent a list of banks and other institutions that issue credit cards.

The ads said " 'bad credit . . . no problem, bankruptcy not a problem,' but the banks which they send you on this list do think that's a problem," Dantoft said.

Other Southland parties named in complaints were Bibekanand Satpathy of Los Angeles and his Amstar Investment Corp. and Amstar Finance Corp.; Universal Blue Consultants Corp. of Beverly Hills; and Gregory Alfadly of Anaheim, doing business as the Saxon Group.

None of the California defendants could be reached for comment.

Lawsuits were also filed against firms in Missouri, Texas, South Carolina, Florida, Arizona and the Canadian provinces of British Columbia and Ontario.

Authorities said Ideal Credit Referral Services Ltd. and several closely linked Canadian telemarketers cheated thousands of U.S. consumers who paid processing fees of as much as $600 for loans they never got. Ideal officials could not be reached.

One alleged victim, Babette Sanderberg of North Hollywood, said she not only did not get the loan she was promised, but also got deeper in debt because a friend loaned her the $295 fee she sent to Ideal last fall. "It was devastating," Sanderberg said.

"I'm a single parent and it really hurt me."

The FTC last week filed suit in federal court in Seattle against Ideal, five related firms and eight alleged principals of the firms. Harwood said British Columbia authorities simultaneously sued the company under the province's consumer protection law.

"It's just as easy now to defraud a consumer by telephone or computer from another country as it is to defraud them from the next state," Harwood said.

"There's a lot of evidence to suggest that telemarketers are using international borders as a shield to U.S. law enforcement, and the only way we're going to stop that is through [cooperative] efforts like this," he said.

Most of the lawsuits were filed under the FTC telemarketing rule that took effect Jan. 1. Among other things, the rule makes it illegal for telemarketers to charge a fee in advance of providing a loan.

The campaign announced Monday is the second crackdown launched under the new rule. In April, the FTC and state attorneys general sued 15 credit-repair telemarketers for allegedly defrauding thousands of customers.

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