Factors Which Allow
The Problem To Continue
Perception is everything. As long as people cling to the
mistaken belief that they are immune from being scammed they will
harbor the notion that victims must deserve their fate.
Authorities, like us all, associate mental images to certain crimes. White
collar crimes invoke non-threatening images of guys in suits, not
thugs in balaclavas. And naturally we treat such individuals
with respect and courtesy rather than fear and severity.
It appears at times that our justice system does not place adequate
emphasis on fraud and other white collar crimes especially when
it is considered a non-violent victimless crime. One disturbing
fact is how the offense is perceived, not as a criminal offense
at all, but as simple bad judgment on the part of victims, by both
the general public and by the victims themselves.
This perception can lead to a tendency to blame the victims for
their own losses. It affects how society sees the victims, and
how the victims see themselves. This in turn can influence the
way the offense is treated by law-enforcement and regulatory agencies,
and when offenders are convicted, by the courts which sentence
Compared to the murderers, rapists and urban gangsters that get
the headlines, white-collar criminals just don’t scare the
public very much. They don’t leave a chalk outline on the
sidewalk or blood spatter on the wall. So while violent crimes
demand a high profile response from the police, the cost of white
collar crime is significant but hard to measure in human costs.
Underestimation of Losses
The price tags attached to some economic crimes are so staggering
that they are difficult to comprehend. As an example, the price
of bailing out a single corrupt savings and loan institution surpassed
the total of all the bank robberies in American history.
Recent FBI statistics place the average
take of an armed bank robbery at $3,177 while the Data Processing
Management Association reports that the average computer crime
loss to banks may be as high as $500,000.
Adult children are simply stunned to discover their parents have
been bilked out of tens of thousands of dollars by personable telemarketers.
While few laws are enforced 100%, white collar crime has a much
lower margin of non-enforcement. Fraud and other white collar
crime is not a priority for police departments. They are required
to devote their resources to crimes of violence and, due to lack
of trained personnel and financial resources, are not always able
to investigate and prosecute suspected fraud and other white collar
Situation in the U.K.
Priorities set for the police by the Government do not cover fraud,
so the specialist investigators are often diverted to dealing with
other sorts of crime, according to Ken Farrow, head of the City
of London Police fraud squad.
He said: "There is little or no incentive for local police
chiefs to commit already stretched personnel to combating economic
crime. The situation is compounded by dwindling numbers of qualified
fraud investigators as experienced officers retire and are not
The Serious Fraud Office handles only 80 to 100 of the most serious
cases and the Metropolitan Police generally deals only with cases
of involving amounts over £750,000, leaving the rest "to
under-resourced local police forces. This means many fraud reports
Mr. Farrow said: "Local police forces cannot deal with all
of the fraud reported because they are starved of resources and
have to focus on other policing priorities set by the Government
- such as violent crime, drugs, car crime and burglary."
"There are only 500 to 600 police fraud investigators dedicated
to tackling economic crime in the UK. And, at any one time, half
of these may have been diverted from fraud cases to deal with other
forms of serious crime."
A government report has recommended creating a national fraud
squad at a start-up cost of £85m, but nothing has happened.
Much fraud is undetected, unreported or unpursued so all estimates
involve guesswork. National Economic Research Associates put the
total economic cost at £13.8 billion a year in a report in
Many law-makers and judges are of the mind that, with an already
overloaded justice system, jails should be used for violent offenders
only, so fraudsters are given what are perceived as lenient sentences,
or an absurdly low penalty in comparison to the crime committed,
such as alternative sentencing (e.g. warnings, probation etc.)
or by "buying their way out" of prison by paying a fine
A white-collar criminal, now rich off the spoils of others, can
afford the best lawyers, and due to their perceived non-violent
nature, is often sent to a country club institution for a short
period of rest. AARP research indicates that
less than 5% of people believe that fraudulent telemarketers are "hardened
White-collar crime, because it requires planning, is a prototypical
example of deferrable conduct, but to prevent it through deterrence
the punishment must be designed to teach offenders that crime does
not pay. Evaluation of rehabilitation programs found that most
did not rehabilitate offenders, mainly because changing another’s
behavior is difficult especially when that person doesn’t
want to change.
Police say Canada's slap-on-the-wrist justice for deceptive telemarketing
makes it a dream location for unscrupulous operators. And this
brand of fraud has become one of the biggest criminal industries
in the country, say police and business experts. They estimate
there are more than 1,000 misleading operations in Canada, pitching
everything from bogus lottery winnings to credit cards to loans.
One prominent example cited by many lawyers and police officers
involves a groundbreaking 1999 case in which a Toronto-based telemarketing
firm —World Media Brokers —was convicted of illegally
selling Canadian lottery tickets to Americans.
The company was handed an $80,000 fine —small potatoes,
says Peter Mueller, an assistant U.S. attorney in Seattle. "They
didn't do anything with them." Detective-Inspector Larry
Moodie of the OPP, who investigated the World Media Brokers case,
shares that frustration.
"An $80,000 fine is nothing. It's less than a day's income
for these guys," he says. "As a police officer, I'd like
to see them go to jail, but in Canada that's rare for a crime that
doesn't involve violence. It makes us look bad."
The justice handed out to World Media Brokers is typical of the
kind of sentences deceptive telemarketers receive in Canada, police
say. In addition, the pace of Canadian justice in dealing with
telemarketing fraud is snail-like.
Forty-two Toronto boiler rooms have been shut down since February,
2000 by the Toronto Strategic Partnership, a project involving
Toronto police, the OPP, the provincial government, the Competition
Bureau, the U.S. Federal Trade Commission and the U.S. Postal Inspection
Yet, more than two years later, the 134 charges laid in those
cases have yet to make their way through the courts, says Rob Dowler,
a director with Ontario's Ministry of Consumer and Business Services.
The ministry has won nearly 70 convictions since 1994 under the
Loan Brokers Act, designed to protect consumers from telemarketers
offering up-front-fee loans. The courts have levied just over $1
million in fines in those cases and handed out a total of 31 months
of jail time —a collective punishment lighter than sentences
routinely levelled against lone offenders in the U.S.
By contrast, Toronto telemarketer Walter Fantin, who faced American
justice in a Buffalo court, was sentenced in March to nearly five
years in prison and ordered to repay $8.9 million (U.S.) he took
from investors in a massive fraud scheme.
Assistant U.S. attorney Mueller has tried two major cases involving
Canadian telemarketing firms and he says American justice officials
perceive Canadian courts as "soft" on this crime.
"The Canadian legal system is unwieldy," he says.
"It doesn't respond well. Judges are lazy; prosecutors ...
put on their robes, (but) the defence lawyers really control the
system.... The impression you get is that you don't find tough
"There aren't any."
There are basic social rules, such as the "golden rule",
that we live our day to day lives by, that keep us from hurting
or depriving each other. The social norms, morals, and values that
define what is right or wrong are lacking in these individuals.
As a result, an uninformed public is increasingly falling prey
to older, wiser, and technically inclined criminals seeking financial
gain at little risk of legal consequences.
There are a number of societal trends having a direct impact on
the escalation of white collar crime.
advances allow for new types of crimes to be committed.
criminals are now committing frauds against aging victims.
perceived seriousness of fraud within the justice system
is lessened as an emphasis is placed on violent crimes.
pressures on organizations and government sectors have resulted
in the elimination of public fraud prevention programs.
and financial resources of police agencies are insufficient
to deal with the escalating volume of fraud-related complaints.
The benefits of a common integrated
database can include standardization of information capture and
exchange at the detailed occurrence/records management level,
aiding the efforts of all that fight fraud in the law enforcement,
regulatory and criminal justice communities.
The FTC has significant powers and resources to stop fraudulent
practices, such as the ability to obtain injunctions and asset
freezes which enable them to stop fraudulent conduct soon after
they obtain evidence of it, to preserve wrongfully obtained assets,
and to provide redress to as many aggrieved consumers as possible.
However, while their authority exists before U.S. judges, it
does not extend to foreign courts. Canadian telemarketers are aware
of these jurisdictional limitations and take advantage of them.
While the FTC has obtained personal jurisdiction over Canadian
defendants in U.S. courts because of their transactions in the
U.S., so long as defendants and their assets remain in Canada,
preliminary and permanent injunctions issued by U.S. courts cannot
reach them to halt their conduct.
Moreover, if the FTC obtains a judgment for consumer redress,
enforcement of that judgment across borders is difficult at best
because asset freezes reach only property held in or controlled
by someone in the United States. Accordingly, faced with a typical
FTC action, Canadian defendants can often continue to operate their
deceptive businesses in Canada, defrauding U.S. residents and dissipating
In the scenario where the Vermont Attorney General wanted to
put an end to Canadian telemarketers ripping off seniors in Vermont
he had to devote considerable time to a series of cases which he
hope to prosecute in conjunction with the U.S. Attorney’s
Office, District of Vermont.
These cases represented approximately 15 Canadian telemarketing
scams that used a Vermont mail receipt service and a Vermont address
when defrauding customers, both in Vermont and around the country.
Under the direction of an Assistant United States Attorney the
FBI and United States Postal Inspection Service spent over six
months gathering subpoenaed financial records related to the various
They are expected to take over 200 hours of prosecutor time to
prepare a prosecution analysis report which will be used to further
focus their investigation, the next phase of which would likely
involve writing a series of Mutual Legal Assistance Treaty (MLAT)
requests for searches in Canada.
From there they will need to write more MLAT’s for arrest
warrants and then begin the grand jury phase, and hopefully, begin
the extradition process from Canada.
Unfortunately, the International Affairs Office at the U. S.
Department of Justice is severely backlogged with MLAT requests,
to the point where they urge state investigators and prosecutors
to develop and utilize all possible informal investigative channels.
This usually means having contacts in other jurisdictions, or in
these cases, in another country, that one can call and ask for
investigative information in an informal manner that is outside
the MLAT process. The only way to have contacts in Canada, though,
is to work to develop them. This takes visits, time, and reciprocity.
The difficulty for states in investigating and prosecuting cross-border
telemarketing fraud, include:
(1) Slow extradition process--After a defendant
has been charged in the United States it can take years for the
federal government and Canada to go through the process required
to have the defendant sent to the United States to stand trial;
(2) Cost of Sending Witnesses to Canada--The
Canadians want the United States to pay to transport victims to Canada
to testify at the trial or sentencing of a fraudulent telemarketer, but
states do not have excess resources for this;
(3) Cost of sending US investigators to Canada--Canadian
officials do not have the resources to devote to cases being developed
in the US and state officials do not have the resources to sustain investigations
north of the border;
(4) Lack of funds to file asset freezes in Canada--If a telemarketer
has assets, the best way to get restitution for victims is to freeze
the assets before the criminal action is filed; this routinely costs
from $15,000 to $40,000 in fees to Canadian attorneys.
Properly Assign Various Areas of Responsibility
Having taken note of the overwhelming number and variety of frauds
which exist, along with the also numerous departments and agencies
which overlap in the administration and enforcement of even more
laws, you can see how efforts to combat these crimes might get
bogged down or entirely defeated.
Were I to organize a concerted effort to combat this problem I
would start first by setting certain standards or guidelines for
action and responsibility.
First off, local police should act on complaints only if they
determine that the perpetrator is local in nature and is not involved
in a larger out-of-area telemarketing operation. This determination
should be done surreptitiously to avoid spooking a group into destroying
evidence and closing down.
The role of local police is enhanced by acting as support for
the agency responsible for larger operations, whoever that may
Secondly, securities regulators should concern themselves only
with organizations which have properly registered with them. All
unregistered organizations or individuals should be deemed fraudulent
unless and until the assigned law enforcement agency wishes to
assign the case over to them for strictly administrative sanction
The moment that regulators perceive, through investigation or
inquiry, that any operation or individual has acted in a fraudulent
nature involving other than local victims, the case should be handed
over to the assigned law enforcement agency. All locally-based
fraud cases should be handed over to the local police for action.
Consumer and commercial affairs departments should avoid getting
involved in any fraud-related crimes as described in this book
and should concern themselves with the administrative shortfalls
of normally legitimate retail operations or borderline abuses by
No telemarketing operations, pyramid schemes or business opportunity
scams will fall within their venue unless given over by the assigned
law enforcement agency or it is determined that civil action or
their involvement is warranted in order to secure easier conviction
Centralize Information Retrieval and Dissemination
All consumer complaints falling within known fraudulent boundaries
shall be forwarded to the appropriate agency by any agency which
One agency shall be responsible for the gathering of all complaints
centrally but shall act as an administrative collection and dissemination
The benefits of a common integrated database can include standardization
of information capture and exchange at the detailed occurrence/records
management level, aiding the efforts of those that fight fraud
in the law enforcement, regulatory and criminal justice communities.
Investigation and Enforcement
Investigation and enforcement shall be handled by separate units
broken down by various specialties.
For instance, depending on available funding and resources, separate
task forces could focus in on the distinct areas of Sweepstakes,
Foreign Lotteries, Credit Card Protection, Pyramid Schemes, Business
Opportunities, Work At Home Offers, Fraudulent Investments, Charitable
Telefunders, Travel Clubs and Vacation Packages, Vanity Frauds,
Loan Brokers and Credit Repair, How-To Manuals, Prime Bank Fraud,
Home Equity and Renovation Scams, Nigerian Fraud, Business Supply
Under no circumstances would I set up conflicting agencies whereby
one handles internet-based frauds and the other telemarketing based.
Such distinction needlessly divides resources to go after the same
person who is simply using both modes of advertising. There are
plenty of responsibilities to go around without inter-agency rivalries
or duplication of efforts.
Each unit, as described, would focus in on the specific operations
of which they are specialists, both nationwide and cross-border.
The only exception, or addition rather, would be a special task
force, made up of seasoned professionals in this field, who would
head up attacks on the weak links of these operations.
Each of these special task forces would be mobile and have the
resources to send out advance parties of scouts to access the threat
of the investigated operation, based on its size and duration of
operation. They would seek to inform local police of the nature
of the crime and request assistance as and when required.
They would attempt to perform early forensic accounting and arrest
pre-steps such as bank account information, participant identification,
merchant accounts, phone records and wiretaps as required.
A central focus of the investigation shall be on the eventual
retrieval of victim funds along with lead lists.
The full resources of this task force shall be made available
during a major bust along with other supportive or commandeered
State or provincial law enforcement and consumer protection agencies
should have a representative on each task force although the majority
of agents should be federal.
The central unit ultimately responsible for all of the task forces
shall be based in each nation’s capital and overseen by the
Attorney General or Solicitor General but shall have limited yet
reasonable representation rotationally selected from the members
of the association of State/ Provincial Attorney Generals.
These representatives shall make up the litigation and prosecutorial
aspect of the task forces, providing legal guidance and support
through all phases of arrest, conviction and retrieval of victim
Target Weak Links
Rather than focusing on the difficult task of victim information
retrieval, which can develop into a logistical nightmare, I would
focus instead on the vulnerably exposed underbelly of these operations.
For example, even though they might make ten of thousands of phone
calls, they probably only have twenty lines in use. And even though
they charge the accounts of thousands of credit card holders they
likely only have under a dozen merchant accounts.
This is where the focus on education should be. Right within the
unwitting support structures of these operations; the credit card
companies, post offices, banks, delivery services and the classified
departments of the media. Once educated, what these service providers
once thought of as a normal, legitimate business may soon warrant
Other examples include targeting their advertising efforts by
examining e-mail offers and magazine classifieds. Do internet searches
for such keywords as "mega", "get rich", "opportunity", "offshore" and
other such terms which can be gleaned from past and present examples.
Brokers and Specialty Item Providers
The fact that companies exist which perpetuate these crimes through
the seemingly administrative and legitimate sale of victim lists
and bogus prizes should be a major cause of alarm.
It is also an opportunity to zero-in on yet another weak link.
Through undercover sting operations and the tracking of shipments
from obvious or discovered suppliers of "space pens", "credit
card protection services" and other props to the main crime,
officials can move in like cruise missiles.
Lambastes Law Enforcement
18 Apr 2001
Your web site is great! Keep up the good work.
Please add my URL to your searchable database of links: www.financialcrimes.org
Most fraud sites focus on the crime. Mine will try to help the
victim start the recovery process.
I have practiced law for over 40 years and tried a large number
of civil fraud cases to judgment. I have yet to get the District
Attorney of San Diego County to file criminal charges in any of
Combined law enforcement spend billions of dollars on patrols
for traffic tickets; smash, grab and run crimes; traffic accidents
and the like. Very little money and time is spent tying to nab
the financial criminal before his/her scam collapses. I hope that
through my web site, I can develop a database of financial crimes
which are "unreported" (reported, but cops refuse to
write it up as a "case"), truly unreported, "reported" but
not investigated, "reported" and "investigated" but
not prosecuted, prosecuted but not convicted, "get-off-easy" plea
bargains, and failure to order or obtain restitution through the
criminal court process.
This problem is probably endemic throughout the nation. It is
time law enforcement and prosecutors change their priorities. It
seems that the only financial crimes prosecuted by the local DA's
are those in which governments, banks or politically well-connected
persons and firms get ripped off. The average Joe does not seem
to count. I want to change that.
James E. Miller
Attorney at Law
I sense your frustration in the system and I share it with you
for various reasons. You would think I was the scammer by the amount
of help I get from the law and government here.
The arduous task of developing and running a proper web site is
quite daunting and expensive but rewarding all the same. I hope
to eventually establish a referral system whereby attorneys such
as yourself can benefit from my traffic of victims for some kind
of reasonable contingency percentage fee.
Any suggestions before I go broke trying to make a living on book
Talk again soon I hope,
As to referrals, the State Bar of California is very strict on
sharing fees. Attorneys can share fees only with other attorneys
and only on the basis of the work the referring attorney actually
does. Licensed attorney referral services (typically the local
bar association) can also refer clients for a fee.
There are many prepaid legal plans, owned by non-lawyers. You
can have the referral system since you out of state. The problem
is on my end.
I have yet to find any site which specifically focuses on the
failure of law enforcement to investigate financial crimes and
the failure of the prosecutors to prosecute financial crimes. If
you know of any let me know.
Thought I would just mention that the only reason I have refrained
from really blasting the inaction of the authorities is that I
hoped they might support or buy my book. Nothing could be farther
from reality. They treat me like so much dirt, not even acknowledging
the donated books I send them.
Worse still, unless I sensationalize a battle against them the
media has no interest in the topic either. I know that they are
severely hampered by certain factors so I feel for them to a certain
extent but my patience is wearing thin.
I agree totally. The DA represents law enforcement and his or
her own financial and career interests, not the victim. We need
to ally ourselves with the many victim rights movements.
Years ago, John Van De Camp, a Stanford Law School classmate of
mine, was on the felony complaint desk in the Los Angeles DA's
office. I discussed the office's conviction rate which he said
was about 58% of cases filed. At the time, the San Diego DA was
touting his conviction rate of over 90%. Van De Camp replied that
his office files on cases where they are reasonably sure the suspect
was guilty, not just on the slam dunk cases. The S. D. DA only
filed on the slam dunk cases, so I reported to Van De Camp. His
reply was that the S. D. DA was letting a lot of cases go un-prosecuted
which should have been prosecuted. Mr. Van De Camp later became
Attorney General of California.
Thus, there are different standards used by prosecutors, called "prosecutor's
discretion". We need to raise the standards in most, if not
all communities. We can do this by getting more competent DA's
and by funding their offices with more cash to be put to good use
in fighting financial crimes. Both are focuses of my web site.
Media will not take an interest until there is a contest for the
office of DA. We need to pick and back likely candidates. We need
to have sufficient facts, well researched and rock solid, with
which to defeat the incumbent DA, if he or she is not doing the
job we expect. IN short, we need to be the source of good data
the challenger can use.
The Department of Justice (both California and Federal) keeps
some crime statistics, but only of the cases actually filed. No
one, it seems, keeps facts of the financial crimes not investigated,
or not filed.
We need to collect that information by direct means. The easiest
way is to create a web site for each community which has a DA. We
need to collect complete details on each case not investigated
or not prosecuted. Each case should be reviewed by a competent
criminal law attorney so that an informed opinion can be given
to the public. We must be careful not to create libel suits against
us, thus the names, places and references should be disguised.
We need to get the word out as part of raising the standards of
which crimes get investigated and which get prosecuted. Who
is your local DA? Are there newspapers which report on financial
crimes and the resulting prosecution. Do you have any trade groups
or citizen groups which would be willing to support the cause?
I'll help you where I can.
I admire your gumption. I have a hard enough time just promoting
public awareness and you want to change the entire legal system.
Probably the best way to create enough momentum would be to piggyback
an organization such as Crimestoppers. I haven't had much luck
even getting links on their sites but I try to be patient.
What you propose seems totally overwhelming to me based on the
terrible government response I have had to date. Too many various
agendas all restricted by budgets.
I am counting on the many, very mad people, who have been ripped
off, tried to get the matter investigated or prosecuted, but have
been rebuffed. In time we can hope to get some subscription funding
to our "newsletter", e.g., a letter we jointly create
and permit all financial crime web sites to "sell" to
their subscribers, of which we get a piece of the action.
I am not unmindful of the magnitude of the undertaking. All great
ideas start with one person. We need the multiplier effect of many
like-minded persons. You are the first of many of my allies to
come. You are not alone.
Start by keeping "score" of the crime log commonly found
in each police department or sheriff's office. Look for financial
crimes and try to contact the victims. Place a small ad under "notices" in
the local newspaper classifieds, giving a brief message and listing
your web site.
Keep the faith!
Consumer protection litigation is an area that tends to cause
career burnout. I thought about applying at our AG's office, but
we've recently had some tax cuts and the legislature decided that
the AG Consumer Protection Department should be reduced by 38%.
I just talked to an assistant AG last week and told him of a
scam that I had researched. He asked me how much money they were
bilking from Washington residents. $3.3 million per year. He said
that's below the AG's radar screen under the current budget.
Consumer Protection Lawyer in Seattle 04/02
Center for Problem Oriented
Policing - good resource site for info on solving the underlying
problems of crime.
Problems the Authorities Have Keeping Up with Scams - article