A Montreal-based telemarketing scheme to sell office supplies to small businesses that never ordered them has resurfaced in the news this week, but it's hardly the first fraudulent scheme to have emerged in recent years.
We take a look at similar scams that have made the news and generated millions of dollars for their perpetrators.
Several Montreal companies and individuals are facing criminal fraud charges and charges of deceptive telemarketing and misleading representations under the Competition Act. They sold office supplies, St. John Ambulance medical kits and business directories over the phone at inflated prices or charged companies for products they never ordered.
An RCMP raid in 2007 resulted in several arrests and in fall 2011 charges were laid, but CBC News has learned that one of the companies charged, Express Transaction Services Inc., is still operating. The other companies charged are International Business Logistics Inc., Byte Information Inc. and Comexco Management Inc. Montreal businessman Georges Haligua is believed to have been the leader of the operation, which police say netted more than $170 million and targeted victims in several countries.
Montrealer Michael Mouyal was fined $1 million and sentenced to two years' probation and 240 hours of community service in 2007 for running a telemarketing scam that sold business directories and office supplies at inflated prices and under false pretenses. The scheme is thought to have generated $137 million between 1994 and 2001 for Mouyal and his group of companies, which operated out of Montreal, Toronto and St. John's under names including Merchant Transaction Supplies, Merchant Supply Services and International Business Directories. In February 2012, news organizations learned that Mouyal is again operating a telemarketing business out of Miramar, Fla., and is under investigation by local authorities.
The Alberta company defrauded more than 10,000 businesses, including government agencies and not-for-profit organizations, of $4 million over a three-year period by phoning them up and leading them to believe they had already agreed to a sale and were obligated to close the deal. Two company owners and three managers were convicted of deceptive marketing and fraud.
How to spot a scam
Telemarketing scams are common, and usually those calling are very persuasive. According to the RCMP, these are some of the warning signs of a scam:
- It sounds too good to be true.
- You must pay to win a prize.
- You are asked to provide private financial information.
- A limited opportunity you’ll miss if you don’t act immediately.
DataCom Marketing Inc. (DataCom Direct Inc.)
Telemarketers contacted customers in Canada and the U.S., claiming that they were updating information in their business directory listings. The telemarketers implied that the businesses had ordered a listing in the past and that someone in the company had already authorized an order. The scam generated an estimated $158 million over a 10-year period. DataCom founder Bernard Fromstein was sentenced in 2009 to two years in a federal penitentiary and three years' probation after pleading guilty to deceptive telemarketing under the Competition Act. Another individual received a two-year conditional sentence and proceedings against three others were pending.
People who answered a job ad seeking secret shoppers were sent fraudulent cheques and told to use the money to make purchases at local stores and make observations about customer service and store standards. They were then to send any amount left over back to the company, which claimed to be a market research firm based in St. John's. Since the cheques were fraudulent, however, the money actually came out of the victims' own accounts. The RCMP said it was aware of at least 10 complaints about the company made in 2011 in B.C., but that the scam is widespread across Canada.
Several Canadians tricked 24 elderly and disabled Americans out of about $3 million between 2005 and 2008 by telling them they had won a lottery. The victims were contacted by letter or phone and told they had won a lottery or sweepstakes but were required to pay taxes, administration fees or lawyers' fees before they could collect winnings. The RCMP laid 261 charges in the case, including money laundering, fraud over $5,000 and conspiracy to commit fraud.
This bogus online pharmacy sold $389 US memberships to elderly Americans on the promise of 30 to 50 per cent discounts on prescription drugs. Four individuals, Zonecom Technologies Inc. and two numbered Quebec companies were charged in the U.S. with committing deceptive acts or practices, and the U.S. Federal Trade Commission seized $4.2 million US after freezing their accounts. Charges were also laid in a similar scam, in which a Canadian company operating under the name Union Consumer Benefits debited U.S. bank accounts of $399 US for a medical discount plan that didn't exist. People from the fake company would call U.S. consumers pretending to be with the Social Security administration, Medicare or the victims' banks and persuaded them to disclose their bank account numbers.
A mother and son team and their associates operating out of Kingston and Belleville, Ont. defrauded people in several provinces and in upstate New York out of an estimated $3 million by collecting donations for local charities. The scam was run out of so-called boiler rooms, small call centres outfitted with an autodialer that would make it look like the call was coming from a local number, the Kingston Whig Standard reported. The callers claimed to be collecting money for causes such as teen suicide prevention, youth safety or drug awareness and targeted people who had contributed to legitimate charities in the past, often soliciting small amounts of $25 or $50 that the victims did not question. The RCMP arrested 21 people in connection with the scam.