Markets Wired

Charles P. Farrugia, a defendant in a Federal Trade Commission lawsuit against a fraudulent telemarketing scheme based in Canada, has agreed to settle FTC charges for his role in allegedly scamming American businesses into paying for business directories and listings they didn’t order.

In May 2006, the FTC charged Datacom Marketing, Inc. (Ontario Corporation No. 1431798), Datacom Direct, Inc. (Ontario Corporation No. 1417524), Bernard Fromstein, Judy Provencher, Paul Barnard, Judy Neinstein, and Stanley Fromstein with running a cross-border fraud operation. Farrugia, who was acting as the corporate defendants’ president when the case was filed, was added as a defendant in November 2006.

Under the settlement entered by the court on April 9, 2008, Farrugia is barred from misrepresenting that consumers have a preexisting business relationship, that consumers have agreed to purchase business directories or listings in directories, or that consumers owe money for business directories or listings in directories. He also is barred from misrepresenting, or failing to disclose, any fact material to a consumer’s decision to purchase or use any product or service. In addition, during outbound telephone calls, Farrugia is barred from failing to disclose the seller’s identity, that the call’s purpose is to sell goods or services, and the nature of the goods or services. He also is prohibited generally from violating the Telemarketing Sales Rule.

The settlement also prohibits Farrugia and his agents from selling, disclosing, or otherwise benefiting from consumers’ personal information obtained from the activities alleged in the Commission’s complaint. In addition, the settlement prohibits Farrugia from attempting to collect payment on any account established prior to entry of the court’s order, and cashing checks, totaling about $470,000, sent by American consumers.

The settlement includes a $7,603,094 judgment against Farrugia, which will be suspended upon payment of $275,000 in a specified timely manner. The full judgment will be imposed if the defendant fails to meet the specified payment terms or is found to have misrepresented his financial condition. The settlement also contains standard record-keeping provisions to allow the FTC to monitor compliance with the court’s order.

In a settlement announced in September 2007, the original defendants agreed to pay $505,000 and forfeit $1,030,000 in uncashed checks and unpaid invoices. Farrugia, likewise, gives up any claims that he may have to uncashed checks and unpaid invoices.

This case was brought with the assistance of the United States Postal Inspection Service, Canada’s Competition Bureau in Vancouver, British Columbia, the Service de Police de la Ville de Montréal, and the Toronto Strategic Partnership. The Toronto Strategic Partnership consists of the FTC, Competition Bureau Canada, the Toronto Police Service – Fraud Squad, the U.S. Postal Inspection Service, the Ontario Ministry of Government Services, the Ontario Provincial Police – Anti-Rackets, the Royal Canadian Mounted Police, and the United Kingdom’s Office of Fair Trading.

The Commission vote to authorize staff to file the proposed stipulated final order was 4-0. The stipulated final order was entered in the U.S. District Court for the Northern District of Illinois, Eastern Division.

NOTE: This stipulated final order is for settlement purposes only and does not constitute an admission by the defendant of law violations. This stipulated final order has been approved by the court, signed by the judge, and has the force of law.

Copies of the order are available from the FTC’s Web site at http://www.ftc.gov and from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint in English or Spanish or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at http://www.ftc.gov/ftc/complaint.htm. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to more than 1,600 civil and criminal law enforcement agencies in the U.S. and abroad.