TR Daily FTC, States Settle With Robocallers Over Fundraising Fraud
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Thursday, March 4, 2021

FTC, States Settle With Robocallers Over Fundraising Fraud

The Federal Trade Commission, the District of Columbia, and 46 agencies from 38 states have reached settlements with Associated Communications Services, Inc., and related defendants involved in what the FTC said was "a massive telefunding operation that bombarded 67 million consumers with 1.3 billion deceptive charitable fundraising calls (mostly illegal robocalls)," ultimately leading to the collection more than $110 million by the defendants.

The defendants "knew that the organizations for which they were fundraising spent little or no money on the charitable causes they claimed to support—in some cases as little as one-tenth of one percent," the FTC said in a press release. "The defendants kept as much as 90 cents of every dollar they solicited from generous donors on behalf of the charities," it added.

In addition to the allegations of fraud, "[i]n many instances, the complaint alleges, ACS and later Directele [a spinoff of ACS operated by two ACS senior managers, Nikole Gilstorf and Tony Lia, also named as defendants] knowingly violated the Telemarketing Sales Rule (TSR) by using soundboard technology in telemarketing calls. With that technology, an operator plays pre-recorded messages to consumers instead of speaking with them naturally. Use of such pre-recorded messages in calls to first time donors violates the TSR. Use of the technology in calls to prior donors also violates the TSR unless call recipients are affirmatively told about their ability to opt out of all future calls and provided a mechanism to do so; the defendants did not make that disclosure. Most of Directele’s soundboard calls originated from call centers in the Philippines and India," the press release says.

Although the settlements, which are pending court approval, would subject each of five groups of defendants to a monetary judgment of more than $110 million, nearly all of those amounts have been suspended for inability to pay, leaving the defendants required to pay a total of $485,000 and the net proceeds from the sale of one defendant’s vacation home in Michigan and another’s ski boat, according to the FTC press release.

It says that the payments by the defendants will go into a fund to be held by the state of Florida, pending court approval for the money to be "contributed to one or more legitimate charities that support causes similar to those for which the defendants solicited."

In addition to the monetary judgments, each of the companies and individuals named as defendants "will be permanently prohibited from conducting or consulting on any fundraising activities and from conducting telemarketing of any kind to sell goods or services. In addition, they will be prohibited from using any existing donor lists and from further violations of state charitable giving laws, as well as from making any misrepresentation about a product or service," the FTC press release says.

A press release from California Attorney General Xavier Becerra (D.) also said the defendants would be enjoined from initiating or assisting others in initiating robocalls or from violating the TSR.

A press release from New York Attorney General Letitia James (D.) noted that "ACS called more than 1.3 million phone numbers more than 10 times in a single week and 7.8 million numbers more than twice in an hour. More than 500 phone numbers were even called 5,000 times or more."

The agencies joining the FTC in the settlements are the attorneys general of Alabama, California, Colorado, Connecticut, Delaware, the District of Columbia, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Tennessee, Texas, Utah, Virginia, Washington, West Virginia, Wisconsin, and Wyoming; the secretaries of state of Colorado, Georgia, Maryland, North Carolina, and Tennessee; and the Florida Department of Agriculture and Consumer Services and the Utah Division of Consumer Protection.

The case was filed with the U.S. District Court for the Eastern District of Michigan (Southern Division). —Lynn Stanton, [email protected]

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