[House Report 105-158]
[From the U.S. Government Publishing Office]
105th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 105-158
_______________________________________________________________________
TELEMARKETING FRAUD PREVENTION ACT OF 1997
_______
June 26, 1997.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______________________________________________________________________
Mr. McCollum, from the Committee on the Judiciary, submitted the
following
R E P O R T
[To accompany H.R. 1847]
[Including cost estimate of the Congressional Budget Office]
The Committee on the Judiciary, to whom was referred the
bill (H.R. 1847) to improve the criminal law relating to fraud
against consumers, having considered the same, report favorably
thereon with an amendment and recommend that the bill as
amended do pass.
The amendment is as follows:
Strike out all after the enacting clause and insert in lieu
thereof the following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Telemarketing Fraud Prevention Act of
1997''.
SEC. 2. FORFEITURE OF FRAUD PROCEEDS.
Section 982(a) of title 18, United States Code, is amended by adding
at the end the following:
``(8) The Court, in sentencing a defendant for an offense under
section 2326, shall order that the defendant forfeit to the United
States any real or personal property--
``(A) used or intended to be used to commit or to promote the
commission of such offense, if the court in its discretion so
determines, taking into consideration the nature, scope, and
proportionality of the use of the property in the offense; and
``(B) constituting, derived from, or traceable to the gross
proceeds that the defendant obtained directly or indirectly as
a result of the offense.''.
SEC. 3. SENTENCING GUIDELINES CHANGES.
Pursuant to its authority under section 994(p) of title 28, United
States Code, the United States Sentencing Commission shall review and
amend the sentencing guidelines to provide a sentencing enhancement for
any offense listed in section 2326 of title 18, United States Code--
(1) by at least 4 levels if the circumstances authorizing an
additional term of imprisonment under section 2326(1) are
present; and
(2) by at least 8 levels if the circumstances authorizing an
additional term of imprisonment under section 2326(2) are
present.
SEC. 4. INCREASED PUNISHMENT FOR USE OF FOREIGN LOCATION TO EVADE
PROSECUTION.
Pursuant to its authority under section 994(p) of title 28, United
States Code, the United States Sentencing Commission shall amend the
sentencing guidelines to increase the offense level for any fraud
offense by at least 2 levels if the defendant conducted activities to
further the fraud from a foreign country.
SEC. 5. SENTENCING COMMISSION DUTIES.
The Sentencing Commission shall ensure that the sentences,
guidelines, and policy statements for offenders convicted of offenses
described in sections 3 and 4 are appropriately severe and reasonably
consistent with other relevant directives and with other guidelines.
SEC. 6. CLARIFICATION OF ENHANCEMENT OF PENALTIES.
Section 2327(a) of title 18, United States Code, is amended by
striking ``under this chapter'' and inserting ``for which an enhanced
penalty is provided under section 2326 of this title''.
SEC. 7. ADDITION OF CONSPIRACY OFFENSES TO SECTION 2326 ENHANCEMENT.
Section 2326 of title 18, United States Code, is amended by inserting
``, or a conspiracy to commit such an offense,'' after ``or 1344''.
Purpose and Summary
H.R. 1847, the ``Telemarketing Fraud Prevention Act of
1997,'' increases penalties for fraudulent schemes committed by
illegitimate, criminal telemarketers. The bill directs the
United States Sentencing Commission to review and amend the
guidelines to provide a sentencing enhancement for any offense
listed in Sec. 2326 of title 18, United States Code. Section
2326 is the penalties section of the Telemarketing Fraud
chapter of the criminal code. The Sentencing Commission is
instructed to increase the sentence by at least 4 levels for
general telemarketing fraud, and increase by at least 8 levels
if the defendant victimized persons over the age of 55. The
Sentencing Commission is also directed to increase the offense
level for any fraud which involved criminal activities
committed from a foreign country.
H.R. 1847 also requires that a defendant convicted of a
telemarketing scam forfeit all property used in the offense, or
any proceeds received as a result of the offense. Finally, the
bill includes a conspiracy provision, to allow prosecutors to
punish the organizers of these illegal activities.
Background and Need for the Legislation
Older Americans are popular targets for fraudulent
telemarketers. Many elderly people are lonely and appreciate
having someone to talk to, even if that person is asking for
money. Others are too polite, or too intimidated, to hang up on
their callers. A survey conducted by the American Association
of Retired Persons shows that two-thirds of older victims
simply can't tell an honest sales pitch from a dishonest one.
1
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\1\ American Association of Retired Persons, Telemarketing Fraud
Victimization of Older Americans, January, 1996.
---------------------------------------------------------------------------
These con artists blend psychology with salesmanship to
persuade their elderly victims to send them money. They
sometimes feign friendship, and ask questions about the
victim's families, neighbors and pets. They encourage their
victims to share personal information, which they later use
against them. If the victim resists, the callers sometimes
become abusive, or threaten bogus lawsuits. If met with
continued resistance, the con artist simply sells the elderly
person's name to another fraudulent telemarketer, and the cycle
begins anew. 2
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\2\ See, Consumer Fraud Prevention Act,: Hearing on H.R. 1499
Before the Subcomm. on Crime of the House Comm. On the Judiciary, 104th
Cong., 2nd Sess. No. 97 (April, 1996).
---------------------------------------------------------------------------
Although older Americans are prime targets for fraudulent
telemarketers, they are certainly not the only citizens
victimized by these crimes. Fraudulent telemarketers strike at
all ages, sexes, financial and educational levels. Many
otherwise savvy consumers are tricked into believing that the
caller is collecting money for a religious or charitable
organization. Other crooks promote phony investment schemes. A
common ploy is for the caller to claim that the victim has won
a valuable prize, and to collect that prize, the victim need
only send a few hundred dollars to cover taxes and shipping
charges. The victim is then plagued by additional telephone
calls, with the caller promising bigger and grander prizes each
time if more money is sent. Often, paltry trinkets are mailed
to the victim to keep the charade alive.
One of the most vicious scams is the ``recovery room''
operation. Recovery room operators buy lists from other
fraudulent telemarketers containing the names of victims and
how much money they have already lost. In this particularly
cruel scam, the con artists then call the victims pretending to
be private investigators or attorneys. They pledge to recover
the money the victims have already lost to the other
telemarketers, in return for an enormous advanced fee. Most
victims are so desperate that they are willing to try anything,
and they send the requested payment to the recovery room
operators.
The Federal Trade Commission estimates that telemarketing
fraud costs consumers about $40 billion a year. Many people
lose thousands of dollars, some have reported losing their
entire life's savings. H.R. 1847 strikes back at crooked
telemarketers by forcing them to forfeit all real or personal
property used in the offense, or any proceeds received as a
result of the offense. It also directs the U.S. Sentencing
Commission to amend the guidelines to provide a sentencing
enhancement for any telemarketing offense. The punishment shall
be even harsher for criminals who purposely target the elderly.
Moreover, the bill includes conspiracy language, so prosecutors
can attack those crooks who arrange and organize crooked
telemarketing schemes, but who are also crafty enough to avoid
committing the fraud themselves.
Hearings
No hearings were held on H.R. 1847.
Committee Consideration
On June 12, 1997, the Subcommittee on Crime met in open
session and ordered reported the bill H.R. 1847, by a voice
vote, a quorum being present. On June 18, 1997, the Committee
met in open session and ordered reported favorably the bill
H.R. 1847 with amendment by a voice vote, a quorum being
present.
Vote of the Committee
There were no recorded votes.
Committee Oversight Findings
In compliance with clause 2(l)(3)(A) of rule XI of the
Rules of the House of Representatives, the Committee reports
that the findings and recommendations of the Committee, based
on oversight activities under clause 2(b)(1) of rule X of the
Rules of the House of Representatives, are incorporated in the
descriptive portions of this report.
Committee on Government Reform and Oversight Findings
No findings or recommendations of the Committee on
Government Reform and Oversight were received as referred to in
clause 2(l)(3)(D) of rule XI of the Rules of the House of
Representatives.
New Budget Authority and Tax Expenditures
Clause 2(l)(3)(B) of House Rule XI is inapplicable because
this legislation does not provide new budgetary authority or
increased tax expenditures.
Congressional Budget Office Cost Estimate
In compliance with clause 2(l)(3)(C) of rule XI of the
Rules of the House of Representatives, the Committee sets
forth, with respect to the bill, H.R. 1847, the following
estimate and comparison prepared by the Director of the
Congressional Budget Office under section 403 of the
Congressional Budget Act of 1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, June 25, 1997.
Hon. Henry J. Hyde,
Chairman, Committee on the Judiciary,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 1847, the
Telemarketing Fraud Prevention Act of 1997.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Mark
Grabowicz.
Sincerely,
James L. Blum
(For June E. O'Neill, Director).
Enclosure.
H.R. 1847--Telemarketing Fraud Prevention Act of 1997
CBO estimates that implementing H.R. 1847 would result in
additional federal costs, subject to the availability of
appropriated funds, to accommodate prisoners for longer periods
of time, but such costs would be less than $500,000 annually
for the next five years. Enacting H.R. 1847 also could lead to
an increase in direct spending and receipts; therefore, pay-as-
you-go procedures would apply. However, CBO estimates that any
increases in direct spending and receipts would likely be less
than $500,000 annually.
H.R. 1847 would direct the United States Sentencing
Commission to increase penalties recommended for telemarketing
fraud. The commission has assigned each federal crime a base
offense level, numbered from 1 to 43, which corresponds to a
certain recommended length of imprisonment, with higher numbers
reflecting longer prison terms. The bill would direct the
commission to amend the federal sentencing guidelines to
increase the base offense level by at least 2 levels if the
offense involves use of a foreign location, by at least 4
levels for any case of telemarketing fraud, and by at least 8
levels if elderly victims are involved. In addition, the bill
would subject any real or personal property used in or gained
from telemarketing fraud to forfeiture to the United States.
According to the U.S. Sentencing Commission, the bill's
provisions probably would affect fewer than 10 individuals per
year. Assuming no significant change in the number of annual
convictions, CBO estimates that additional costs of longer
prison sentences would be less than $500,000 a year for at
least the next five fiscal years, subject to the availability
of appropriated funds.
Because the maximum fine for an offense increases as the
offense level increases, the bill's sentencing enhancements
also could result in increased criminal fines. Therefore,
enacting H.R. 1847 could increase governmental receipts through
greater fine collections. However, CBO estimates that any such
increase would be less than $500,000 annually. Criminal fines
are deposited in the Crime Victims Fund and spent the following
year. Thus, the change in direct spending from the fund would
match any increase in revenues attributable to H.R. 1847, with
a one-year lag.
Finally, enacting H.R. 1847 could lead to more assets
seized and forfeited to the United States, but we estimate that
any such increase would be less than $500,000 annually in
value. Proceeds from the sale of any such assets would be
deposited as revenues into the assets forfeiture fund of the
Department of Justice and spent out of that fund in the same
year. Thus, the change in direct spending from the asset
forfeiture fund would match any increase in revenues to that
fund.
H.R. 1847 contains no intergovernmental or private-sector
mandates as defined to the Unfunded Mandates Reform Act of 1995
and would have no significant impact on the budgets of state,
local, or tribal government.
The CBO staff contact for this estimate is Mark Grabowicz.
This estimate was approved by Paul N. Van de Water, Assistant
Director for Budget Analysis.
Constitutional Authority Statement
Pursuant to rule XI, clause 2(l)(4) of the Rules of the
House of Representatives, the Committee finds the authority for
this legislation in Article I, section 8 of the Constitution.
Section-by-Section Analysis
Section 1. Short Title
This section states that this bill shall be cited as the
``Telemarketing Fraud Prevention Act of 1997.''
Sec. 2. Forfeiture of Fraud Proceeds
This section states that a defendant convicted of an
offense under Sec. 2326 of title 18, United States Code, shall
be ordered to forfeit any real or personal property--(A) used
or intended to be used to promote the commission of the
offense; or (B) constituting, derived from, or traceable to the
gross proceeds that the defendant obtained directly or
indirectly as a result of the offense.
Sec. 3. Sentencing Guidelines Changes
This section directs the U.S. Sentencing Commission to
review and amend its guidelines to provide a sentencing
enhancement for any offense listed in Sec. 2326 of title 18,
United States Code. The Committee expects the Commission to
ensure that sentences, guidelines and policy statements are
appropriately severe, and reasonably consistent with other
relevant guidelines and directives. The Committee further
expects the Commission to review the guidelines to avoid issues
of double counting for the same or substantially similar
offenses. As an example, the Committee leaves to the Sentencing
Commission's discretion whether an adjustment for vulnerable
victims would be appropriate with an adjustment for
telemarketing fraud targeting persons over the age of 55.
Sec. 4. Increased Punishment For Use Of Foreign Location To Evade
Prosecution
This section directs the U.S. Sentencing Commission to
review and amend the guidelines to increase the offense level
for any fraud offense by at least 2 levels if the defendant
conducted activities to further the fraud from a foreign
country. Again, the Committee expects the Commission to ensure
that the sentences, guidelines and policy statements are
appropriately severe and reasonably consistent with other
relevant directives, and avoid issues of double counting.
Sec. 5. Clarification Of Enhancement Of Penalties
This section clarifies that section 2326 is a penalty
enhancement.
Sec. 6. Addition Of Conspiracy Offenses To Section 2326 Enhancement
This section adds conspiracy language to Sec. 2326 of title
18, United States Code. This will allow prosecutors to target
the organizers of fraudulent telemarketing activities.
Agency Views
No agency views were received on H.R. 1847.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3 of rule XIII of the Rules of the
House of Representatives, changes in existing law made by the
bill, as reported, are shown as follows (existing law proposed
to be omitted is enclosed in black brackets, new matter is
printed in italic, existing law in which no change is proposed
is shown in roman):
TITLE 18, UNITED STATES CODE
* * * * * * *
PART I--CRIMES
* * * * * * *
CHAPTER 46--FORFEITURE
* * * * * * *
Sec. 982. Criminal forfeiture
(a)(1) * * *
* * * * * * *
(8) The Court, in sentencing a defendant for an offense under
section 2326, shall order that the defendant forfeit to the
United States any real or personal property--
(A) used or intended to be used to commit or to
promote the commission of such offense, if the court in
its discretion so determines, taking into consideration
the nature, scope, and proportionality of the use of
the property in the offense; and
(B) constituting, derived from, or traceable to the
gross proceeds that the defendant obtained directly or
indirectly as a result of the offense.
* * * * * * *
CHAPTER 113A--TELEMARKETING FRAUD
* * * * * * *
Sec. 2326. Enhanced penalties
A person who is convicted of an offense under section 1028,
1029, 1341, 1342, 1343, or 1344, or a conspiracy to commit such
an offense, in connection with the conduct of telemarketing--
(1) * * *
* * * * * * *
Sec. 2327. Mandatory restitution
(a) In General.--Notwithstanding section 3663 or 3663A, and
in addition to any other civil or criminal penalty authorized
by law, the court shall order restitution for any offense
[under this chapter] for which an enhanced penalty is provided
under section 2326 of this title.
* * * * * * *