Journal No. 252 • July 2005
Telemarketing Predators: Finally, Weve Got Their
Telemarketing fraud costs U.S. consumers some $40 billion
annually. Millions are victimized,
and the financial blow can be devastating. More than half
the targets of telemarketing fraud are people aged 50 years
Who are the perpetrators of telemarketing fraud and how
can law enforcement stop them?
To find out, researchers interviewed 47 telemarketing offenders
convicted of Federal crimes. The group included 22 owners,
8 managers, and 17 sales agents; on average, they had been
in telemarketing for 8 years. The researchers also reviewed
the offenders' pre-sentence investigation reports to validate
the information they gave and to paint a more complete picture
of the offenders' lives.
Telemarketing Organization and Routine
Some fraudulent telemarketing organizations consist of
only two or three persons who operate in a community for
only a few days or weeks before moving on. These "rip
and tear" operators, as they are called, depend on
the months-long lapse between the time they begin operating
and the time law enforcement agencies become aware of and
target them. Somewhat larger enterprises, called "boiler
rooms," feature extensive telephone banks and large
numbers of sales agents. These operations have become less
common in recent years, largely because of the law enforcement
interest they attract.
Larger telemarketing operations commonly take on the characteristics
of formal organizations, with hierarchies, a division of
labor, graduated pay, and advancement opportunities.
Fraudulent firms employ sales agents who work from "lead,"
or "mooch," lists purchased from any of dozens
of businesses that compile and sell information on consumer
behavior and preferences. The sales agent generally works
from a script that lays out successful sales approaches
and responses. Promising contacts are turned over to a "closer,"
a more experienced and better-paid sales agent. The hierarchy
of the firms and the routine of turning prospects over to
more experienced closers explain why victims typically report
contact with multiple salespersons.
Characteristics of Typical Telemarketing Predators
Almost all of the offenders interviewed for this study
described their parents as conventional and hard working;
their family financial circumstances were secure if not
comfortable. As with most white-collar offenders, there
were no early precursors of trouble in their life histories.
For the most part, the offenders who were interviewed had
unremarkable educational careers. When asked how they differed
from their siblings or peers, many reported they were aware
of an interest in money from an early age. They generally
sought ways of earning a good income that did not require
hard work and subordination to others. One subject said:
"I've never been a firm believer [that] you've got
to work for a company for 30 years and get a retirement,
like my dad thinks. I'm all about going out [and] making
that million and doing it
very easily. And there are
a lot of ways to do it."
As is typical for other white-collar offenders, the age
at which telemarketing predators begin their criminal activity
is noticeably higher than for street criminals. Of the 47
subjects in the study, 13 had criminal records7 for
minor offenses (e.g., petty theft and possession of marijuana)
and 6 for felonies. Of those with felony records, three
were convicted previously of telemarketing offenses. Overall,
this level of prior criminality is lower than that of other
white-collar criminals. Still, the data show persuasively
that some of the subjects appeared to have recurrent trouble
with the law as adults.
The class origins of these contemporary criminals are more
advantaged than the professional thieves of yesterday, but
to a great extent they live their lives in similar fashion.
They spend their earnings on drugs, gambling, fast living,
and conspicuous consumption. Nevertheless, wielding class-based
presumptions of respectability, they also spend their weekends
on the lake, play golf, and have friends over for a barbeque.
The Attractions of the Lifestyle
Overwhelmingly, the subjects said that they got into and
persisted at telemarketing for "the money." Only
one reported earning less than $l,000 weekly, and most said
their annual earnings were in the range of $l00,000 to $250,000.
Five said that their annual earnings exceeded $1 million.
The fact that they could make money quickly and do so without
incurring restrictive responsibilities added to the attractiveness
of the work. They found the flexible hours, short work days,
and the actual work appealing because it required neither
extensive training nor advanced education.
Asked what he "liked about telemarketing," one
subject's reply was typical: "Well, obviously, it was
the money, and it gave me a career." Some had previous
sales experience before beginning the work, but most did
not. Their introduction to telemarketing was both fortuitous
and fatefulthey either responded to ads in the newspaper
or were recruited by acquaintances who boasted about the
money they were making. Many were foundering on conventional
paths, and telemarketing was a godsend. It came along at
a time when they needed to show that they could make something
Characteristically, these men and women believed they were
outstanding salespersons; they were supremely confident
in their ability to sell over the telephone despite resistance
from those they contacted. Doing so successfully was a high:
I sold [to] the first person I ever talked to on the
phone. And it was just like that first shot of heroin,
it was amazing. It was like, "I can't
believe I just did this!" It was incredible. It was
never about the money after that
It was about the
competition, you know. I wanted to be the best salesman,
and I wanted to make the most money that day. And then
it became just the sale
Gambling and ostentatious living were commonplace for the
offenders in the study. One said that he "would go
out to the casinos and drop thousands of dollars a night.
That was nothingto go spend five grand, you know,
every weekend. And wake up broke!" But as they aged,
offenders had to change their lifestyle somewhat. For older
and more experienced criminal telemarketers, the lifestyle
centered on home and family and impressing others with signs
of their apparent success.
Predators Deny Their Crime
Most of the offenders in the study rejected the labels
"criminal" and "crime" as fitting descriptions
of them and their activities. They acknowledged culpability
grudgingly and employed a range of mitigating explanations
and excuses for their offenses. Claims of ignorance figured
in a high proportion of them. Some former business owners,
for example, said that they set out to maintain a legitimate
operation, emulated the operations of their previous employers,
and assumed, therefore, that their activities violated no
laws. Several said they relied on the advice of attorneys.
Others said they were guilty only of expanding their business
so rapidly that they could not oversee day-to-day operations
adequately. Some said that indulgence in alcohol and illicit
drugs caused them to become neglectful of the practices
of their business. Most claimed the allure of money caused
them to "look the other way."
Both the hierarchy of authority and the division of labor
in telemarketing organizations facilitate denial of crime.
Sales agents claimed their owners and managers kept them
in the dark about the business and its criminal nature.
Others felt insulated from responsibility as long as they
weren't an owner. Owners and managers were prone to blame
rogue sales agents for any fraudulent or deceptive activities.
Telemarketing criminals selectively seize upon aspects
of their victims' behavior and point to these as justifications
or excuses for their crimes. A recurrent theme is: "I
wasn't victimizing customers. I was engaging in a routine
sales transaction, no different than a retail establishment
selling a shirt that is marked up 1,000 percent." Even
those who admitted their criminal wrongdoing held to this
notion. They distinguish their offenses from "common"
You don't actually think of it as a crime while you're
doing it, because it just happens so easily. It's not
like you're putting a gun to somebody, it's not like you're
robbing poor people
all you do a lot of the time
is just make up or tell stories.
Most of the subjects interviewed for this study said that
police attention came as a complete surprise. Nevertheless,
several said that when they became aware that their activities
were under investigation they were unable or unwilling to
terminate them. One likened it to the behavior of drug addicts:
I knew that there's probably a problem out here, but
not a big enough problem to stop making the money we were
making. So one time the local police came and raided us.
They took all of our stuff and everything. [But they]
left our database, our leads
It was the equivalent
of leaving a pile of drugs in the corner for a drug addict.
Sure, we're gonna take it. You know we're gonna take it.
Most subjects attributed their arrest and prosecution to
out-of-control or politically ambitious prosecutors, and
they generally believed their punishment was both unwarranted
and excessive. They claimed the entire problem more appropriately
was a "civil matter" and "should not be in
criminal court." Despite the money they made as telemarketers,
when arrested few of them had significant fiscal resources.
What Can Be Done to Quell Telemarketing Fraud
Investigating telemarketing fraud can be expensive and
time consuming because the fraud can be complex and victims
are usually located in multiple jurisdictions. Both cooperative
efforts by State and Federal law enforcement and proactive
enforcement strategies are required.
Larger criminal telemarketing organizations are giving
way to smaller, less permanent operations and are increasingly
being operated from offshore and cross-border locations,
thus requiring cooperation across national borders. The
Royal Canadian Mounted Police and U.S. law enforcement agencies,
for example, are working together to identify, apprehend,
and prosecute criminal telemarketers. Joint efforts and
task forces have operated in several U.S. cities as offenders
have moved their bases of operation to stay ahead of police
Educational campaigns. Plans for reducing the financial
and psychological toll exacted by telemarketing fraud typically
feature educational campaigns, calls for increased vigilance
by potential victims, and efforts to make it more difficult
for offenders to make telephone contact with potential victims
(as, for example, through the national "Do Not Call"
list). The fact that elderly citizens are among the most
common victims of telemarketers has shaped many of these
Many proposals for enhanced oversight of telemarketing
amount to an admonition to potential victims to "just
say no." Advice of this sort ignores the reasons that
victims become ensnared in these transactions. A majority
do so because fraudulent telemarketers have perfected stratagems
that overcome victims' initial resistance, prey on their
psychological issues, and induce victims to make purchases.
If potential victims were made more aware of these ploys,
perhaps they would be better able to distinguish between
legitimate and criminal pitches.
Clearer State regulations and licenses. One proposal
for controlling criminal telemarketing would require States
to develop clearer and more comprehensive regulations about
sales transactions, which are often ambiguous and subject
to interpretation. Interviews with offenders revealed that
they believed they were not conducting anything different
from ordinary business.
Another proposal calls for States to tighten their business
license requirements as a way of driving the criminal element
out of telemarketing. This may prove difficult to do, however,
since inevitably it will be argued that the measures are
too costly and harm legitimate businesses. The profits from
telemarketing fraud probably exceed the costs of new restrictions,
and the fraudsters might forego the regulatory process altogether.
A more appropriate measure might be to pass on to the telemarketing
industry some of the responsibility and costs for oversight.
Proposals to do so might provide the impetus to move the
industry and its trade associations to a more proactive
stance on controlling fraudulent telemarketing.
Tougher penalties. Sentences imposed on telemarketing
fraudsters have been substantial, but the deterrent effect
of this remains unclear. Criminal telemarketers interviewed
were undeterred by the threat of criminal penalties.
Speedier law enforcement. In the meantime, more
effective prosecution of telemarketing fraud is needed.
The present method of enforcement requires long periods
of surveillance followed by an even longer period of review
before legal action is taken. Safeguards are needed to seize
the assets of fraudulent operations quickly and efficiently.
States might consider appointing a receivership to monitor
an operations financial activities during the ongoing investigative
process. This practice has the potential to mitigate the
damages of telemarketing fraud while additional policy measures
In the final analysis, the extent to which telemarketing
crime can be reduced by crime-control programs may be limited.
Unlike with most victims of street crime, actions by victims
of criminal telemarketers contribute to the successful completion
of the acts that victimize them. The crimes are difficult
to investigate and prosecute. And the potential for enormous
profits in telemarketing fraud is a powerful incentive for
offenders to continue to engage in this illegal activity.
1. Federal Bureau of Investigation's Economic Crimes Unit
Web site, "About the Economic Crimes Unit". Retrieved from the World Wide
Web on September 30, 2004.
2. AARP Foundation, Off the Hook: Reducing Participation
in Telemarketing Fraud, Washington, DC: U.S. Department
of Justice, Office of Justice Programs, 2003.