[Congressional Record Volume 144, Number 78 (Tuesday, June 16, 1998)]
[Senate]
[Pages S6426-S6427]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                         ADDITIONAL STATEMENTS

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                          TELEMARKETING FRAUD

 Mr. KYL. Mr. President, I would like to say a few words on the 
subject of telemarketing fraud. In particular, I will discuss the 
severity of telemarketing fraud, the House and Senate telemarketing 
fraud bills, and the United States Sentencing Commission's recently 
proposed amendments to the sentencing guidelines.
  At the outset, I would like to commend Representative Goodlatte for 
his sponsorship of H.R. 1847 and for his leadership in combating 
telemarketing fraud.


                Telemarketing Fraud is a Serious Problem

  Mr. President, I would like to take a few minutes to describe the 
severity of the problem of telemarketing fraud. According to Maryland 
Attorney General J. Joseph Curran, Jr., telemarketing fraud is probably 
the fastest growing illegal activity in this country. Senior citizens 
appear to be the most vulnerable to chicanery of this kind. Fred 
Schulte, an investigating editor for the Fort Lauderdale Sun-Sentinel 
and an expert on telemarketing fraud, has pointed out that senior 
citizens are often too polite or too lonely not to listen to the voice 
on the other end of the line. As one telemarketing con man who has 
worked all over the country put it: ``People are so lonely, so tired of 
life, they can't wait for the phone to ring. It's worth the $300 to 
$400 to them to think that they got a friend. That's what you play 
on.''
  These criminals prey on the vulnerable of our society. In one case, 
Nevada authorities arrested a Las Vegas telemarketer on a charge of 
attempted theft. The telemarketer was accused of trying to persuade a 
92-year-old Kansas man who had been fraudulently declared the winner of 
$100,000 to send $1,900 by Western Union in advance to

[[Page S6427]]

collect his prize. Another example: a Maine company showed real 
telemarketing creativity. For $250, the so-called Consumer Advocate 
Group offered to help consumers recover money lost to fraudulent 
telemarketers--but it provided no services, according to Wisconsin 
Attorney General James Doyle, who sued the Maine firm plus four other 
telemarketers.
  In 1996, more than 400 individuals were arrested by law-enforcement 
officials working on Operation Senior Sentinel. Retired law-enforcement 
officers and volunteers, recruited by AARP, went undercover to record 
sales pitches from dishonest telemarketers. Volunteers from the 2-year-
long Operation Senior Sentinel discovered various telemarketing 
schemes. Some people were victimized by phony charities or investment 
schemes. Others were taken in by so-called premium promotions in which 
people were guaranteed one of four or five valuable prizes but were 
induced to buy an overpriced product in exchange for a cheap prize. One 
of the most vicious scams preyed on those who had already lost money. 
Some telemarketers charged a substantial fee to recover money for those 
who had been victimized previously--and proceeded to renege on the 
promised assistance. By the time the dust settled, it took the Justice 
Department, the FBI, the FTC, a dozen U.S. attorneys and state 
attorneys general, the Postal Service, the IRS, and the Secret Service 
to arrest over 400 telemarketers in five states, including my home 
state of Arizona.

  Clearly telemarketing fraud is on the rise. It is estimated that 
eight out of ten households are targets for telemarketing scams that 
bilk us of up to $40 billion annually. There are many seniors in my 
state and across the country who must be protected against this type of 
fraudulent activity. According to Attorney General Reno, it is not 
uncommon for senior citizens to receive as many as five or more high-
pressure phone calls a day. Mr. President, malicious criminal activity 
like this must be punished appropriately.


                   The House- and Senate-Passed Bills

  The House and the Senate have passed bills which direct the U.S. 
Sentencing Commission to increase penalties for those who purposefully 
defraud vulnerable members of our society. The House bill, which passed 
by a voice vote, increases sentences by four levels for general 
telemarketing fraud, and by eight levels if the telemarketing fraud 
either victimized ten or more persons over age 55 or targeted persons 
over age 55.
  The Senate-passed bill, which was approved unanimously, requires the 
Sentencing Commission to ``provide for substantially increased 
penalties'' for those convicted of telemarketing fraud offenses. I 
repeat: ``substantially increased penalties.'' This language was 
carefully chosen; a two level increase is not substantial. The Senate-
passed bill also requires the Commission to ``provide an additional 
appropriate sentencing enhancement if the offense involved 
sophisticated means, including but not limited to sophisticated 
concealment efforts, such as perpetrating the offense from outside the 
United States.'' Further, the Senate-passed bill requires the 
Commission to provide an additional appropriate sentencing enhancement 
for cases in which a large number of vulnerable victims . . . are 
affected by a fraudulent scheme or schemes.'' These provisions were 
carefully crafted to ensure that those perpetrating telemarketing scams 
would be severely punished.


           The Sentencing Commission's Proposed Enhancements

  The United States Sentencing Commission recently issued an amendment 
that would increase by two offense levels--the smallest possible 
increase--the penalties for fraud offenses that use mass-marketing to 
carry out fraud. The amendment would also provide a two level 
enhancement in the fraud guideline if (i) the defendant relocated, or 
participated in relocating, a fraudulent scheme to another jurisdiction 
to evade law enforcement or regulatory officials; (ii) a substantial 
part of a fraudulent scheme was committed from outside the United 
States; or (iii) the offense otherwise involved sophisticated 
concealment.
  These proposed amendments are a step in the right direction, but the 
step is too small. In addition to these enhancements, the Sentencing 
Commission should, as the Senate-passed bill says, substantially 
increase the penalties for telemarketing fraud.


                               Conclusion

  Telemarketing fraud is a serious problem. The Sentencing Guidelines 
should reflect this but they do not. From the House- and Senate-passed 
bills, it should have been clear to the Sentencing Commission that 
Congress wanted significant increases in the guidelines, not the minor 
ones included in the Commission's proposed amendments.

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