Department of Justice Announces Second Guilty Plea in Multimillion Dollar Prize Promotion Scam

It’s a classic mail fraud scheme with a good ending, as the Department of Justice announced this month that a second defendant pleaded guilty to charges related to the operation of a prize-promotion scheme that defrauded elderly consumers of millions of dollars.

Shaun Sullivan of New York pleaded guilty to conspiracy to commit mail fraud in Long Island Federal Court on May 14. Sullivan was accused of sending mass mailings targeted towards mostly elderly and vulnerable consumers. The correspondence made false promises of large cash prizes in exchange for a small fee, but those who paid never received the prizes. Instead, Sullivan used the scheme to collect over $30 million dollars from the victims, said the DOJ.

According to DOJ, Sullivan “preyed” on elderly consumers by sending them fraudulent mailings to trick them into believing they had won a prize but instead “lined his own pockets” with the fees collected from the victims. In making this guilty plea, Sullivan could face up to twenty years in prison, forfeiture, and fines up to $250,000—an amount representing twice Sullivan’s net gain from the fraudulent scheme.

Sullivan’s guilty plea is the second such plea for the same scheme. Tully Lovisa pleaded guilty in October 2018 to charges related to operating the same prize promotion scheme.

DOJ heralded Sullivan’s guilty plea as an example of coordinated law enforcement efforts to protect the vulnerable and elderly. The matter comes as the DOJ has ramped up enforcement actions against scams targeting seniors after the passage of the bipartisan Elder Abuse Prevention and Prosecution Act. The EAPPA combats elder abuse and financial exploitation of seniors and was signed into law by President Trump in 2017.

This matter also comes on the heels of the largest elder fraud enforcement action in DOJ history. This past February DOJ announced that over 200 defendants faced criminal charges for involvement in financial schemes targeting the elderly. The alleged losses in that nationwide elder law sweep total more than half a billion dollars.

“The Department of Justice will bring to justice those who exploit elderly consumers in violation of federal law,” said Assistant Attorney General Jody Hunt of the Department’s Civil Division. “We are actively working with our law enforcement partners at the U.S. Postal Inspection Service to stop and punish schemes that harm consumers.”

“Protecting the community from mass mailing fraud schemes remains a priority of this Office and the Department of Justice,” added United States Attorney Richard Donoghue.

Key Takeaways

As DOJ emphasized, the EAPPA has given law enforcement stronger teeth to fight fraud targeted at the elderly and it is using them. Expect to see more enforcement actions targeting consumer fraud of elderly populations. Even legitimate prize mailing companies that do pay promised funds to those who win the elusive, against-all-odds sweepstakes have been targeted in private class action litigation, albeit not always successfully, as we’ve covered in a recent edition of StayADvised.

Cochlear Americas Modi ies Ads After NAD Inquiry

Hearing-aid provider Cochlear Americas has agreed to permanently modify certain of its magazine advertisements. The decision came following an inquiry initiated by the National Advertising Division (NAD), the investigative unit of the ad industry’s self-regulating arm. Cochlear Americas will modify its “Ask the Expert” ads to make it obvious that the pieces are advertisements.

Continuing to set standards in Native Advertising, NAD itself initiated the inquiry into the Cochlear Americas ad. The “Ask the Expert” piece advertising the company’s surgically-implanted hearing aids appeared in the October 2018 issue of the AARP Bulletin beside an AARP financial advice column entitled “Your Money.” The author of the piece was identified as a “Cochlear implant surgeon,” and the ad explained how Cochlear implants work and the benefits of the product. At the bottom of the ad Cochlear America included its logo and a link to the company’s website.

Based on its investigation, NAD concluded that the advertisement did not identify itself as an ad and did not distinguish itself from surrounding editorial content, thus misleading readers into thinking the ad was part of the AARP bulletin editorial content. NAD noted it did not review the merits of the advertisement.

Going forward, Cochlear Americas must note in a clear and conspicuous manner that its pieces are advertisements paid for by the company and identify its ads as such regardless of the medium “in a format that consumers will clearly and unambiguously understand,” according to a BBB/NAD press release.

Cochlear America assured NAD that it will comply with the organization’s recommendations to clearly note when a piece is an ad.

Key Takeaways

It is a well-known maxim of advertising that ads must announce themselves as such. This NAD initiated inquiry comes as consumer protection agencies and self-policing organizations alike are emphasizing the importance of clear and conspicuous disclosure that ads are ads–be they in the form of editorial copy, as here, paid advertisements that look like Instagram posts, or any ads in between.

FTC Wins Legal Victory Against Pretend Google Robocall Scheme

A company that claimed to be Google in a bid to extort money from unsuspecting small businesses has this month found itself on the wrong side of a court order. As a Florida district court entered judgments and settlement orders against multiple defendants in the so-called “Pointbreak Media robocall scheme,” the Federal Trade Commission claimed a win in its battle against robocalls. The case is part of the agency’s continuing efforts to combat illegal robocalls.

Multiple FTC complaints had accused the defendants of violating the FTC Act based on defendants’ false representation of being affiliated with Google as well as violations of the Do Not Call rules (DNC). As part of the resolution to the illegal scheme, the district court for the southern district of Florida granted summary judgment against two defendants, approved settlement agreements against six others, and entered default judgments against seven remaining defendants, putting to rest the case against the Florida-based operation.

The FTC’s original complaint filed in May 2018 accused Pointbreak Media scheme operators and individual defendants of violating the FTC Act. The FTC alleged that defendants barraged small business owners with telemarketing calls in which defendants falsely represented that they were affiliated with Google, threatened businesses with removal from Google search results, and made false promises of first-page placement on Google search results.

The FTC amended its complaint in July 2018 to add two counts for violation of the Telemarketing Sales Rule based on allegations that defendants robocalled more than 74 million consumers and more than 14 million numbers on the DNC registry.

Specifically, the PointBreak defendants, who were not in any way affiliated with Google, ran their telemarketing scam by robocalling business owners and threatening them that Google would label their business “permanently closed” unless they “press one” to speak to a “Google specialist.” Business owners who did so were sold a sham service that charged them from $300 to $700 to “claim and verify” their unique “keywords” or risk Google labeling their businesses “permanently closed.”

Adding insult to injury, defendants made follow-up calls to businesses to sell a second program guaranteeing top search results for hundreds of dollars a pop, said the FTC. Further, when defendants could not charge customer credit cards due to high consumer disputes, they withdrew money directly from customer checking accounts without authorization, the complaint alleged.

All the judgments and settlement orders in the case prohibit defendants from engaging in related activities in the future as well as impose steep monetary damages. With respect to the judgment against the two primary perpetrators of the scheme, the court banned defendants Dustin Pillonato and Justin Ramsey from telemarketing, using checks to debit consumer accounts, and promoting search optimization services. The defendants are also prohibited from misrepresenting their affiliation with Google and any other material facts and must pay more than three million dollars in damages.

A default judgment obtained against a number of additional defendants provides for similar relief and also bans those defendants from robocalling or calling any numbers on the DNC registry. The monetary judgments for these defendants are likewise in the millions of dollars.

The three settlements that the court approved ban additional defendants from robocalling and calling numbers on the DNC registry, prohibit misrepresentations, and impose another multimillion-dollar judgment and two smaller judgments of hundreds of thousands of dollars.

As part of the resolution of this matter, the court also entered final settlement orders from March 2019, granting injunctive and monetary relief against three separate defendants.

The FTC’s press release thanked Google for its assistance on the case and also noted that it will use moneys obtained from damages to pay back injured consumers.

Key Takeaways 

Robocalls are a hot topic these days, and with FTC’s action and the press release announcing it, FTC once again highlighted the agency’s commitment to stamping out robocall scams. A key differentiator here in terms of the court’s decision is the egregiousness of the actions and the flagrant misrepresentations made by defendants, which is reflected in the severity of the judgments and settlements.

NAD Finds Mucinex “All in One” Claims (Mostly) Not Misleading

Are Mucinex’s “All in One” advertising claims misleading? It depends, says the National Advertising Division of the Better Business Bureau, which recently concluded that drug company Reckitt Benckiser’s claims that its Mucinex product provides “All In One” relief are misleading in some cases but not in others and recommended that the company discontinue using the latter.

The company ran a number of television, retail and print ads in which it touted the “All in One” benefits of its Maximum Strength Mucinex Fast-Max Cold & Flu. It also placed the “All in One” moniker on the product label—a descriptor the NAD found was not part of the product name.

The challenger, Procter & Gamble, contended that the “All in One” claim is misleading because it sends the message that the one product treats all cold and flu symptoms when Mucinex daytime doesn’t treat runny nose and sneezing, and Mucinex nighttime doesn’t fight mucus.

Reckitt Benckiser countered that the “All in One” claim is always presented in its ads alongside a list of symptoms treated by the product. These disclosures, it argued, prevents any misunderstanding because the list communicates to consumers the truthful message that the product treats the listed symptoms. To support its explanation, Reckitt also provided the results of a consumer perception study it claimed showed that consumers do not understand “All in One” to mean that Mucinex cures all cold and flu symptoms.

NAD rejected the advertiser’s survey for a host of reasons (including the decision to leave the packaging available to the participants, making the study a “reading test”), but nonetheless concluded that the “All in One” claim as used in a 30-second commercial and on the product label was not misleading. It found that the “All in One” claim when used alongside a list of symptoms, whether on the product label or in the commercial, conveyed a message that the product treats all the enumerated symptoms in one product, rather than a message that “All in One” means all cold and flu symptoms.

“Consumers viewing the product label are not likely to miss or ignore that the claim is tied to the specific symptoms listed, because of their proximity and placement immediately adjacent to the claim at issue. With regard to the 30-second commercial, each symptom is spoken by the narrator and highlighted by spanning the entire screen one-by-one. Thus, the overarching message is that the product treats those specifically identified, not that it treats all symptoms,” said NAD in its press release.

NAD reached a different conclusion with respect to the “All in One” claims in a shorter 15-second commercial, two 6-second videos and print ads. In these contexts, NAD found the phrase had the potential to mislead and thus recommended they be discontinued. These commercials feature the headlines: “On average, consumers experience 7+ symptoms during a cold,” and “Get tough on cold and flu symptoms.” Because the shorter commercials and the print ads do not contain a “sufficiently prominent and proximate limitation of the message” to the symptoms, they convey a misleading message that “All in One” treats all cold and flu symptoms, according to NAD.

Reckitt Benckiser said it would comply with NAD’s recommendations.

Key Takeaways 

There is often a thin line between a misleading and truthful advertisement. Key here with respect to the ads NAD found misleading was the time allotted to the shorter videos which did not give sufficient opportunity for consumers to learn about the specific symptoms the drug treats and instead glossed over the symptoms in favor of highlighting all cold and flu symptoms.

Proposed FCC Order Gives the Green Light to Default Call Blocking

Consumers may soon have more tools for combatting robocalls, thanks to the Federal Communications Commission. The agency recently unveiled a new proposal that would make it easier for carriers and consumers to block unwanted telemarketing calls.

Currently, carriers generally require their customers to opt-in to robocall-blocking services. The FCC’s draft proposal, unveiled by the agency’s Chairman Ajit Pai, clarifies that the FCC will allow carriers to automatically block suspicious calls they believe may be robocalls without obtaining their customers’ affirmative consent. If approved by FCC, the proposed measure could see more phone carriers using technology that preemptively blocks unwanted robocalls. The declaratory order is slated for consideration during the upcoming June 6th FCC meeting.

“By making it clear that such call blocking is allowed, the FCC will give voice service providers the legal certainty they need to block unwanted calls from the outset so that consumers never have to get them,” Pai said in a statement. The order could help dispel carrier qualms that they could run afoul of FCC rules if they implement stronger call-blocking tools.

The proposed order encourages carriers to use data and analytics tools like those of call management apps to identify and use patterns to block calls, said the FCC. Carriers could then decide how to proceed on identified robocalls–whether by sending the flagged calls to voicemail, informing customers that they’ve received the call, or blocking the call altogether.

A 2015 declaratory ruling and order intended to clarify certain carrier obligations and rights with respect to blocking robocalls, but many carriers remained confused about what they could do to block them. This uncertainty contributed to the industry’s reluctance to implement default opt-out call blocking on their own, said Pai. The proposed order is intended to clarify this uncertainty.

Additionally, the agency will contemporaneously propose another rulemaking notice to investigate how call authentication and call-blocking tools might complement each other to eradicate robocalls. It recommends exempting carriers from liability if they accidentally block desired calls as a result of implementing certain call authentication standards known in the industry as SHAKEN/STIR.

Ultimately, the FCC wants to provide carriers with flexibility in figuring out what works best for them to block robocalls. While Pai acknowledges there is no “silver bullet” solution, he also noted that the FCC is prepared to develop rules to implement call-blocking measures if carriers don’t address these problems themselves.

Key Takeaways

The FCC’s proposed order mirrors recent legislative developments in the fight against robocalls. This is a hot button issue right now, with Congress recently considering multiple proposals to protect consumers from the scourge of unwanted telemarketing calls. Similar to the STOP Robocalls Act recently proposed and debated by Congress, this FCC measure aims to remove the onus on consumers to deal with the problem by making it much easier for them to block unwanted calls.