Telemarketing Scams a Rising Canadian Export

One of Canada’s fastest-growing exports to the United States is telemarketing fraud, which takes in about $70 million a year mainly from elderly Americans, including many in California.

In an operation called Project Colt, agents from the U.S. Customs Service and the FBI have been working with the Royal Canadian Mounted Police and some local Canadian police forces to fight telephone scams.

So far, they have recovered and returned to victims about $12 million.

Officials say Canada has become a paradise for this kind of fraud because the penalties there, usually a fine or short prison term, are generally much lighter than in the United States, where offenders can be sentenced to five years in prison for each defrauded victim.

The perpetrators, mostly Canadians and some Americans, operate “boiler rooms” where hundreds of people make calls 16 hours a day, seven days a week. They often use lists of people who are widowed or have Alzheimer’s disease. Officials say there are 40 to 50 boiler rooms operating in Montreal alone, the biggest Canadian center.

One of the largest phony lottery operations netted $120 million, said Robin Landis, a senior special agent for Customs Service in Washington.

Vancouver and Toronto also are host to many illicit operations, he said.

In a typical scheme, victims get a phone call telling them it is their lucky day, that they have won a lottery jackpot or other big prize. For the prize money to be released, they are told, they must pay a duty, tax or fee of several thousand dollars. They are asked to send a check or wire the money to a bank account or a postal box--quickly, so they do not forfeit the prize money.

To make it look official, victims often are given phony award numbers and telephone numbers for contacting lottery officials.

In reality, Customs Service officials say, no duties are ever levied for claiming a foreign lottery prize or on money or checks moved across U.S. borders.

Sharon Hawkins’ 75-year-old mother, who lives in Tucson, eventually sent close to $30,000 through Western Union after a man called and told her she had won $10 million in the Canadian lottery, although she had never played it.

Hawkins’ mother, who did not want her first name used, cleaned out her checking account and took cash advances against her credit cards after getting several calls early last year.

“She wanted to believe them,” Sharon Hawkins said. “These people were just so nice.”

Like many elderly people, her mother was susceptible to a friendly and sympathetic voice, said Hawkins, who contacted police.

“I was just horrified. I had no clue that she was so gullible,” she said.

By asking victims to send the money through Western Union, the con artists can feel they can safely pick it up at any one of hundreds of offices.

The lighter penalties in Canada for telemarketing fraud have led the Canadian Mounties to try to extradite suspects to the United States.

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Scams Include Phony Lottery Jackpots, Bonds

Examples of telemarketing fraud originating in Canada, according to the U.S. Customs Service:

LOTTERY SCAMS

* Customs officers in November 1999 return two cashier’s checks worth a total of $68,000 to an 83-year-old woman in La Jolla, Calif. Telemarketers had told her to send the money to pay for customs duties and taxes so she would be eligible to receive a $2-million Canadian lottery jackpot.

* Customs and FBI agents in Los Angeles arrest two Canadians in November 1999 after they present a bogus $5.5-million check for a lottery prize to an 81-year-old woman at her home. They were asking her for $140,000 in taxes on the winnings.

* U.S. and Canadian authorities arrest 25 people in a lottery prize scheme in February believed to have targeted 150 Americans a day, taking in about $7 million a month. Members of the group allegedly had posed over the phone as customs officers and Internal Revenue Service agents.

PHONY BONDS

* Royal Canadian Mounted Police in January 2000 shut down a “boiler room” telemarketing operation in Vancouver, British Columbia, that sold phony British bonds to hundreds of American seniors. In a related move, the U.S. attorney in Seattle charges a company with fraud. The victims’ names were on a “sucker list” of people who had previously been ripped off in other telemarketing schemes.

CREDIT CARD SCAM

* In April 2000, the Denver chapter of the Better Business Bureau warns of a scam originating in Canada in which a company offers protection from fraudulent credit card charges for a $300 fee, asking people for their credit card numbers in the process.

GEMSTONES FRAUD

* Also in April 2000, Canadian Brent Boyd pleads guilty in federal court in Vermont and is sentenced to 10 years in prison for his role in a gemstone telemarketing scam aimed at Americans. Authorities say scheme operators vastly overstated the gems’ quality and value.

PHONY SWEEPSTAKES

* Customs issues a warning to Arizona residents in December after telephone con artists tell elderly residents they have won a sweepstakes in Canada and ask for money to cover customs duties.

* Alaska residents get phone calls in March telling them they have won $250,000 in a Canadian sweepstakes and need to send $2,500 in taxes and duties to a Western Union account in Quebec. Customs officials and Alaska Atty. Gen. Bruce Botelho issue a warning to state residents.