60 Defendants, 150,000 Victims, $300 Million: The Magazine Telemarketing Mega-Case

And it turned into what the U.S. Attorney called the largest elder fraud scheme in the nation.

What happened?

On October 28, 2020, the U.S. Attorney's Office for the District of Minnesota, part of the Department of Justice (DOJ), announced three indictments charging 60 defendants in a $300 million nationwide telemarketing fraud scheme. The charges include conspiracy, mail fraud, wire fraud and violating the Senior Citizens Against Marketing Scams Act of 1994 (the SCAMS Act). Defendants were spread across 14 states, 16 judicial districts and two Canadian provinces.

More than 150,000 elderly and vulnerable victims had been identified. The U.S. Attorney called it "essentially a criminal class action."

The scripts

According to the indictments, over 20 years a network of dozens of fake magazine sales companies in the U.S. and Canada ran call centers using deceptive scripts.

The "renewal" script. Telemarketers falsely claimed to be calling from the victim's existing magazine company about an existing subscription, often offering to lower the monthly cost. In reality, they had no relationship with the victim and were signing them up for brand-new, expensive subscriptions. Some victims ended up with more than a dozen subscriptions, each sold as "reducing" their rate.

The "cancellation" script. This one targeted people who'd already been scammed. Callers claimed to be from a "cancellation department," offering to cancel and consolidate subscriptions and pay off an "outstanding balance" for a big lump sum. The balances were made up.

The three cases

• United States v. Rahm, et al., 20-cr-232: 43 defendants, renewal scripts, more than 125,000 victims, more than $300 million.
• United States v. Timmerman, et al., 20-cr-233: nine defendants at three Canadian companies, cancellation scripts, more than 20,000 victims, about $30 million.
• United States v. Mathias, et al., 20-cr-231: eight defendants in Mississippi and Georgia, cancellation scripts, more than 13,000 victims, about $4.5 million.

The defendants included scheme leaders, company owners, call center managers, telemarketers and lead brokers. Scheme leaders provided customer relationship management (CRM) software, leads and billing letters. Lead brokers sold lists of victims for as much as $10 or $15 per name.

The Federal Bureau of Investigation (FBI) and the U.S. Postal Inspection Service (USPIS) were involved. The indictments are allegations, and each defendant is presumed innocent unless proven guilty.

Update: trial verdict

On November 7, 2023, the U.S. Attorney's Office announced that a federal jury convicted three more defendants after a month-long trial before Judge John R. Tunheim: Amondo Antoine Miller, 47, of Littleton, Colorado; Tashena Laverna Crump, 39, of Minneapolis; and Ballam Hazeakiah Dudley, 37, of Plymouth, Minnesota. They were found guilty of multiple counts of conspiracy to commit mail fraud, mail fraud and wire fraud. According to the evidence, some victims were billed by as many as ten companies at a time, with more than $1,000 in monthly magazine charges.

Here's the thing ...

Lead brokers got charged. The scheme leaders who supplied the CRM software got charged.

If you sell data or software to call centers, read that again. A list of elderly people who've been scammed before, sold at a premium? Everyone in that chain knew what it was for.

What to do this week

• Know what your leads are and where they came from.
• Never claim to be someone's existing provider.
• Ban "cancellation department" pitches that collect money to stop charges.
• Look at your tech customers. Who uses your CRM, and for what?

Build things that help people. Not this.