Markets Wired

Under the terms of a court order announced by the Federal Trade Commission today, two individuals and one corporate defendant have been barred from violating the agency’s Telemarketing Sales Rule (TSR) and its Do Not Call (DNC) provisions arising from a telemarketing scheme designed to sell mortgage loans, refinancing services, and other products to U.S. consumers. They were also found liable for $530,000 in damages.

In addition to charging the defendants with calling consumers on the National DNC Registry and failing to pay for access to the list, the case was the first brought by the Commission alleging the transmission of phony caller ID information or none at all. Under the DNC provisions of the TSR telemarketers are required to transmit accurate caller ID information so consumers who do not want to be called in the future can contact them and tell them so.

The Commission’s Complaint

According to the FTC’s complaint, announced in May 2006, Srikanth Venkataraman, formerly of New Jersey and doing business as Scorpio Systems, Ltd., sold mortgage loans, refinancing, and other products and services to U.S. consumers via outbound telemarketing. Scorpio allegedly called numbers on the Do Not Call Registry, failed to transmit its telephone number and name to consumers’ caller identification service, and failed to pay the fee required to access the Registry. The telemarketer transmitted either no caller ID or a phony caller ID number – 234-567-8923 – and, as a result, consumers were unable to contact the telemarketer to stop unwanted calls.

Case History

The Commission’s original complaint was filed at the FTC’s request by the U. S. Department of Justice (DOJ) in U.S. District Court for the District of New Jersey on April 26,2006. In August 2007, the FTC voted to authorize the DOJ to amend the complaint by adding two defendants to the case, Software Transformations, Inc., and Sridhar Bhupatiraju. Software Transformations, Inc., was a successor corporation to Scorpio Systems, Ltd. Sridhar Bhupatiraju is an officer of Software Transformations, Inc. According to the Commission, the defendants named in the amended complaint also participated in telemarketing operations that called numbers on the Do Not Call Registry and failed to pay the fees required to access the Registry.

The Final Court Order

The final court order announced today settles the Commission’s charges against defendants Srikanth Venkataraman, dba Scorpio Systems, Ltd.; Software Transformations, Inc.; and Sridhar Bhupatiraju, individually and as an officer of Software Transformations, Inc. The order prohibits the defendants from violating the TSR in the future, states that they agree not to contest any of the facts alleged in the FTC’s complaint, and are liable for their TSR violations.

The order imposes suspended civil penalty judgments of $530,000 against each of the individual defendants and $160,000 against the corporate defendant – representing the total gross revenues resulting from their telemarketing violations. Based on the defendants’ inability to pay, however, the order requires Venkataraman to pay $15,000, Bhupatiraju to pay $10,000, and Software Transformations to pay $20,000. It also contains a right to reopen the case if the Commission later finds the defendants have misrepresented their financial condition.

The Commission vote authorizing the filing of the stipulated final order in consent of the court action was 4-0. It was filed by the DOJ on behalf of the FTC in the U.S. District Court for the District of New Jersey.

NOTE: This stipulated final order is for settlement purposes only and does not constitute an admission by the defendant of a law violation. A stipulated final order requires approval by the court and has the force of law when signed by the judge.

Copies of the stipulated final 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 and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, click: http://www.ftc.gov/ftc/complaint.shtm or call 1-877-382-4357. 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. For free information on a variety of consumer topics, click http://www.ftc.gov/bcp/consumer.shtm.