The Federal Trade Commission has shut down a huge international telemarketing scam, forbidding 13 individuals and entities from telemarketing for life, in one of the largest such bans in agency history.
According to the FTC charges, the Assail Telemarketing Network racked up more than $100 million in deceptive telemarketing sales, including hundreds of thousands of phony advance-fee credit card packages. The defendants allegedly ran the bogus operation through a network of telemarketing boiler rooms, Canadian front men, and outsourced fulfillment and customer service centers. Telemarketers would call consumers with poor credit records and tell them that they were guaranteed to receive a MasterCard for an advance fee. Consumers, however, did not receive a MasterCard or any other legitimate payment device. The defendants maintained their own telemarketing boiler rooms and also kept contract boiler rooms in the United States, Canada, India, and the Caribbean, the agency alleged.
The 13 individuals and entities under the lifetime telemarketing bans include Assail, Inc., its four officers, a major telemarketing boiler room operator and his companies, the three front companies, a Canadian facilitator, and the mastermind of the scheme’s deceptive corporate structure. The four settlements announced on January 24, 2005, include three with Assail officers and a fourth with Lawrence Silverman, the alleged creator of the deceptive corporate structure of the scheme, and his company, Lamar Holdings, Inc. In keeping with standard FTC practice, the settlements with the Assail officers contain a suspended $30 million judgment, payable in full if the court finds that they lied about their financial status. The settlement with Silverman, who was previously prosecuted in Florida and placed on probation for a prior telemarketing fraud, includes a $50 million suspended judgment and $1.9 million disgorgement order, which will be triggered if he is found to have lied about his or Lamar’s financial condition. The settlement with Lamar also contains a $1.9 million suspended judgment to account for proceeds traceable to Silverman that were deposited with Lamar.
These settlements were all finalized in the wake of a $106 million judgment against Assail and its president, Kyle Kimoto. The court entered the $106 million judgment after finding that Kimoto concealed more than $3 million in assets from the FTC. The court also jailed an associate of Kimoto, James Fales, for civil contempt for helping Kimoto hide some of those assets by transferring them overseas, including an effort to buy diamonds in South Africa. Two other Kimoto associates, Richard Fritzler, Sr. and Richard Friztler II, along with their company, Nevada Corporate Services, Inc., avoided a contempt hearing by agreeing to pay $300,000 that the FTC alleged they had received for helping Kimoto hide these funds.
Significance: The Assail investigation and settlements are key accomplishments for the FTC, given the size, complexity, and global reach of the telemarketing scam.