A federal judge has halted and frozen the assets of a Canadian group that the Federal Trade Commission says bilked more than $14 million from small businesses and churches in the U.S. in an online business directory scheme.
The FTC wants to permanently stop the illegal practices and make the defendants return victims' money. The commission says the scheme has generated more than 13,000 complaints from consumers.
The commission says Mohamad Khaled Kaddoura, Derek Cessford and Aaron Kirby ran 15 companies as part of the scheme and operated out of Montreal, using corporate shells and mail drops in the U.S. to hide their actual location.
Contact information for the defendants could not be found.
The group typically made phone calls pretending to verify contact information to update or confirm existing directory listings. Or they said they were calling in response to a cancellation request, and asked to verify the organization's contact information to confirm the cancellation, according to the FTC. In fact, the defendants had no prior relationship with the consumers.
The Canadian group then sent bills that averaged $499.99 or more and had a "walking fingers" image often associated with a local yellow pages directory.
Some consumers paid, thinking someone in their organization had ordered these listings. Others paid after the defendants used partially recorded phone conversations from the prior calls to convince them that they had a binding oral contract with the defendants, according to the FTC's complaint.
The FTC says consumers who ignored the bills or refused to pay received collection calls and notices with added interest charges, late fees and more. Some received threats of collection agency referral, credit rating damage and legal action. To make consumers believe third-party debt collectors were involved, the FTC says defendants created two debt collection companies, which also made threats.
"Scammers need to know that we have great relationships with our law enforcement partners in Canada and, as this case shows, we can and will work together to protect our consumers," Jessica Rich, director of the FTC's Bureau of Consumer Protection, said in a statement.
The commission says the defendants violated the FTC Act by misrepresenting that they had a preexisting business relationship with consumers, that consumers had agreed to buy directory listings and that consumers owed them money.
The complaint was filed in the U.S. District Court for the Northern District of Illinois and the case will be decided by the court.