Markets Wired

At the Federal Trade Commission’s request, a federal judge has temporarily halted, and frozen the assets of, a Montreal operation that bilked more than $14 million from small businesses and churches in the United States for unwanted listings in online business directories.  The FTC seeks to permanently stop the illegal practices and make the defendants return victims’ money – the scheme has generated more than 13,000 complaints from consumers.

“Hiding behind borders to scam churches and small businesses is a tactic that we’ve seen before,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection.  “Scammers need to know that we have great relationships with our law enforcement partners in Canada and, as this case shows, we can and will work together to protect our consumers.”

According to court papers filed by the FTC, the defendants operated from Montreal, using corporate shells and mail drops in the U.S. to hide their actual location.  Typically, they made phone calls pretending they were verifying contact information to update or confirm existing directory listings.  In some cases, the defendants said they were calling in response to a cancellation request, and asked to verify the organization’s contact information to confirm the cancellation.  In fact, the defendants had no prior relationship with the consumers.

The bills sent by the defendants averaged $499.99 or more and had a “walking fingers” image often associated with a local yellow pages directory.  Some consumers paid, thinking someone in their organization had ordered these listings.  Other consumers paid after the defendants used partially recorded phone conversations with consumers who had verified their contact information to convince them that they had a binding oral contract with the defendants, according to the FTC’s complaint.

Consumers who ignored the bills or refused to pay received collection calls and dunning notices, often with added interest charges, late fees, and legal fees, as well as threats of collection agency referral, credit rating damage, and legal action, the FTC alleged.  To make consumers believe third-party debt collectors were involved, the defendants created two debt collection companies, CC Recovery and M&A Recovery, which also made threats.  The defendants’ threats convinced many consumers to pay the bills, the FTC alleged.

The FTC’s complaint alleges that the defendants violated the FTC Act by misrepresenting that they had a preexisting business relationship with consumers, that consumers had agreed to buy directory listings, and that consumers owed them money.

The defendants are Mohamad Khaled Kaddoura, Derek Cessford, and Aaron Kirby, and 15 companies they ran:  Modern Technology Inc., also doing business as Online Local Yellow Pages; Strategic Advertisement Ltd., also d/b/a Local Business Yellow Pages; Dynamic Ad Corp., also d/b/a Yellow National Directory and Yellowpages Local Directory; Wisetak Inc., also d/b/a Online Public Yellow Pages and US Public Yellow Pages; Wisetak, Inc., also d/b/a Online Public Yellow Pages and US Public Yellow Pages; Internet Solutions LLC, also d/b/a Public Yellow Pages; Yellow Pages Express Inc., also d/b/a Yellow Pages Express; Yellow Pages Online Inc., also d/b/a Yellow Pages Online; CessTech Inc., also d/b/a Yellow US Pages; SEO Online Inc., also d/b/a Yellow Local Directory; SEO Online LLC; SEOOnline, also d/b/a Public Yellow Pages; SEM Pundits Inc., also d/b/a Yellow Pages Online; CC Recovery Corporation, also d/b/a CC Recovery; and M&A Recovery Inc., also d/b/a MA Recovery.
 
The FTC would like to thank the Canadian Anti-Fraud Centre; the Attorneys General of Illinois, Florida, New York, Nevada and Vermont; the Wisconsin Department of Agriculture, Trade and Consumer Protection; the Better Business Bureaus of Arkansas and of Chicago and Northern Illinois; and the Kahnawake Mohawk Peacekeepers for their valuable assistance with this matter.

The FTC also would like to acknowledge the Royal Canadian Mounted Police (RCMP news release in English and French) and the Centre of Operations Linked to Telemarketing Fraud (Project COLT) for their valuable assistance.  Launched in 1998, Project COLT combats telemarketing-related crime, and includes members of the Royal Canadian Mounted Police, Sureté du Québec, Service de Police de la Ville de Montréal, Canada Border Services Agency, Competition Bureau of Canada, Canada Post, U.S. Department of Homeland Security (U.S. Immigration and Customs Enforcement and the U.S. Secret Service), the U.S. Postal Inspection Service, the Federal Trade Commission, and the Federal Bureau of Investigation.  Since its inception, Project COLT has recovered $22 million for victims of telemarketing fraud.

To learn more about directory scams, read the FTC’s When Yellow Pages Invoices are Bogus and Throwing the Book at Business Directory Scams.

The Commission vote authorizing the staff to file the complaint was 4-0.  The complaint was filed in the U.S. District Court for the Northern District of Illinois, Eastern Division.

NOTE:  The Commission files a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest.  The case will be decided by the court.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them.  To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call
1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad.  The FTC’s website provides free information on a variety of consumer topics.  Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.