Telemarketing fraud thrives amid slack law enforcement, report finds

December 29, 1991|By Los Angeles Times

WASHINGTON -- Telephone marketing swindlers cheat American consumers out of as much as $15 billion a year because federal and state law enforcement agencies are understaffed, poorly coordinated and often misdirected, according to a new congressional report released yesterday.

A two-year study of telemarketing fraud conducted by the House Committee on Government Operations concluded that the Department of Justice, and particularly the FBI, "have not given telemarketing fraud investigations and prosecutions the priority they deserve."

The report said that 1,000 inactive telephone marketing fraud cases are languishing in the files of law enforcement agencies across the country. The FBI offices in Los Angeles, San Diego, Las Vegas and Miami alone reported 684 such cases in mid-1990. Department of Justice officials were not immediately available for comment on the report.

One of the most serious roadblocks to better enforcement is the federal government's failure to establish a central clearing house for law enforcement information, the report said.

While the Federal Trade Commission offers state prosecutors data on its own investigations of telemarketing fraud, other key federal agencies, including the FBI, the Securities and Exchange Commission and the Commodity Futures Trading Commission, refuse to participate in the program, the report said.

As a result, "a state prosecutor or a regional office of a federal agency receiving . . . complaints does not know the extent of the fraud . . . or whether there are any ongoing investigations . . . by other agencies," the committee stated.

"Telemarketing fraud has resulted in the transfer of probably tens of billions of dollars from . . . the elderly throughout the nation to young salesmen in Southern California," said Representative Doug Barnard Jr., D-Ga., chairman of the committee that conducted the study.

"It is an insane, intergenerational transfer of money from people who need it desperately in their mature retiring years to a bunch of people who blow it up their nose or spend it on Porsches," said former Assistant U.S. Attorney David Katz when he testified at committee hearings.

Experts have pegged annual consumer losses to telephone swindlers at between $3 billion and $15 billion, the report said.

To better fight the problem, the committee said, Congress should create a federal telemarketing fraud clearing house, require all federal law enforcement agencies to cooperate and beef up the Federal Trade Commission's budget for investigations.

The committee also suggested the Department of Justice shift some prosecutors and investigators from savings and loan and bank fraud cases to telemarketing cases, encourage U.S. attorneys around the country to deputize state prosecutors to assist with federal cases and increase its efforts to secure longer prison sentences for those convicted of telemarketing crimes.

Telemarketing fraud can mean any scheme using telephone communications to cheat victims. Fraudulent telemarketers make a pitch to purchase goods, services or investments, or to pay a fee for a prize, ostensibly of great value.

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