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Telemarketing Fraud Probe Targets Clearwater Company

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By STEPHEN THOMPSON | The Tampa Tribune

Published: May 20, 2008

Updated: 05/20/2008 04:39 pm

CLEARWATER - There's a modest storefront at 1800 Drew St. that might give the casual observer the impression the business is there to sell T-shirts. There are golf and T-shirts inside, and a sign out front reads: "USA Financial Retail Store."

When federal authorities went there recently, however, they say they discovered a telemarketing boiler room inside with about 15 people. The real name of the business is American Financial Card Inc., according to the Federal Trade Commission, and its staff persuaded people over the telephone to pay a few hundred dollars up front for a credit card that often never arrived.

Losses to American Financial customers over a two- to three-year period are an estimated $15 million, said Bradley M. Elbein, the regional director of the FTC's Southeast Region.

The enterprise was one of many cited today as federal, state and local authorities gathered at various news conferences throughout the nation to announce the results of Operation Tele-Phoney, described by the FTC as one of the largest telemarketing crack-downs in history.

While American Financial, which has been put into receivership, hawked good credit card deals, other telemarketers promised people to consolidate their debt and credit, or offer them time-shares, authorities said. The Florida Attorney General's Office recently took action against a Clearwater telemarketing company that promised to rescue people from foreclosure.

Nationwide, and sometimes working with Canada, authorities have initiated 180 enforcement actions against telemarketing companies, involving more than 500,000 victims and more than $100 million in losses. Forty-two people have been indicted, 32 have entered pleas, and 17 people have been sentenced, Elbein said.

While some victims lost their money through telephone conversations, others lost their money over the Internet. The victims were often elderly, Hispanic, black, and in dire financial circumstances.

"Fraud is one of the worst poisons to commerce and telemarketing fraud is one of its worst manifestations," FTC Chairman William E. Kovacic said at a Washington, D.C., news conference that was broadcast over the Web. There, a Syracuse, N.Y., woman spoke of how her 94-year-old mother was charged $400 for light bulbs she didn't remember ordering over the phone.

Of the 180 actions, the FTC has initiated action in 13 cases. Of those 13, three were taken against enterprises in Pinellas County – American Financial, which has been put into receivership, plus a company in Clearwater and another one in Pinellas Park, authorities said.

All three ventures asked people to pay money up front for credit cards, Elbein said. The telemarketers purchased mailing lists of people with poor credit histories, then took advance fees directly out of victims' checking accounts, said Deborah Berry, operations manager for Pinellas County Justice & Consumer Services.

In 2005, Pinellas County ranked second for consumer fraud complaints in the nation. That means more people were complaining about enterprises operated out of Pinellas than they were almost everywhere else in the country. That ranking has since been knocked down to 129th, said Victoria Butler, chief of the economic crimes division for the Attorney General's Office.

As part of Operation Tele-Phoney, investigators with the Department of Agriculture and Consumer Services visited 98 telemarketing boiler rooms in five counties, including Pinellas and Hillsborough, since October 2007, said Stuart Scott, senior financial investigator with the division of consumer services.

Thirty-one of the businesses were in violation, with 188 people unlicensed, he said. In the vast majority of cases, those unlicensed were given an opportunity to get their licenses in order and were only arrested after they continued to make their pitches unlicensed.

All told, twelve people were charged with being an unlicensed salesperson, which is a third-degree felony, Scott said. There were also $164,000 in fines issued.

"Telemarketing is not only annoying, but it can be deceptive and sometimes blatantly illegal," Attorney General Bill McCollum said in a prepared statement. "Consumers deserve to be protected and this cooperative effort exemplifies what our federal, state and local partners can do with combined resources for the good of our citizens."

Reporter Stephen Thompson can be reached at (727) 451-2336 or spthompson@tampatrib.com.

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