Fraudulent telemarketing operations display an ugly underbelly of society. The tragedy of telemarketing fraud is that its perpetrators often target elderly victims who have contributed so much to our society. Who are the victims? They are our veterans of World War II and Korea. They are our retired school teachers. They are our parents and grandparents. Many of the victims come from a time and place where one's word was his bond, and they are easy prey to a con artist who will say 'whatever it takes to separate victims from their money. Who are the people who have been prosecuted for victimizing our nation's elderly? They are white collar thugs who contribute nothing to our society. They choose to satisfy their greed by bilking others instead of doing an honest day's of work. They strip victims not only of their hard earned money, but also of their dignity. They are swindlers who con our senior citizens out of their life savings by playing on trust, sympathy, and sometimes loneliness. "I would rather be taken advantage of by someone who placed a gun in my ribs than be cheated by someone I trusted," wrote an elderly victim recently.

Fraudulent telemarketers not only rob their victims of their hard-earned financial assets, but also of their human dignity. Victims are derisively referred to by their swindlers as "mooches." Many older Americans are exploited at a time when they are particularly vulnerable. They are sometimes mentally infirm and frequently lonely. An alarming number are suffering from debilitating grief over the loss of a lifetime spouse at the precise time they are tapped by a telemarketer. One of the telemarketers prosecuted by our office collected obituaries from various newspapers so that he could take advantage of recent widows and widowers.

Telemarketers have said that they don't fear prosecution because they count on their victims' physical or mental infirmity, perhaps even impending death, or the shame surrounding victimization, to prevent their testimony at trial. Often these elders get trapped in a downward spiral of repeated victimization as they grow increasingly desperate to recoup their losses. Their adult children contact our office in fear that their parents are no longer financially able to support themselves; and the elderly victims implore us not to reveal the full extent of their losses, fearing that their last measure of independence will be taken away from them by their well-meaning children.

As United States Attorney for the District of Nevada, I have become aware that Nevada has been given a black eye by the actions of an entire industry engaged in fraudulent telemarketing. Telemarketing fraud is a national problem with no state immune from its impact. In 1994 alone, the Telemarketing and Consumer Fraud Unit of the Nevada Attorney General's Office received nearly 5,000 letters from telemarketing victims from across the country, and an additional 6,000 telephone calls, complaining about Nevada-based operations. It is estimated that $40 billion a year is lost through telemarketing fraud. At one point, it was estimated that over 10,000 people in the Southern Nevada area were involved in telemarketing. Despite Nevada's identity as a center of fraudulent telemarketing activity, the reality is that telemarketers have migrated from state to state and have entrenched themselves in various states including California, New York, Florida, Tennessee, Texas, Colorado, and Georgia. There is also growing concern about telemarketing scams that operate outside our national borders.

The scope of the telemarketing problem is revealed by the chart showing the number of FBI field offices that participated in the recent initiative called Operation Senior Sentinel. Each of these cities represents locations where American citizens are being swindled. This chart does not begin to reflect the total number of telemarketing locations or the locations of victims throughout the country. I have seen telephone bills totalling thousands of dollars per month with calls going to every nook and cranny in this country. Each of these calls represents a victim or potential victim. The chart listing targeted victim categories shows that the elderly represent the vast majority of the people defrauded by telemarketers.

Fraudulent telemarketers would want you to believe that they are no different from reputable companies such as L. L. Bean or J. C. Penney. Originally telemarketing just meant selling a product or service by telephone -- a perfectly legitimate activity. As more and more crooks use telemarketing as a criminal device, however, the term has come to connote telephone fraud involving high pressure sales techniques and phony promises of valuable awards. The various schemes are illustrated on the chart titled, "Senior Sentinel, Types of Schemes." Typical schemes include "prize" or "product" schemes," whereby the telemarketer promises thousands of dollars, free vacations or new vehicles, in order to induce a victim to buy overpriced vitamins or key chains. Bogus charities that play on sympathy and offer phony awards for large donations have been very successful lately. If a victim receives anything at all in return for the money sent to a telemarketer, the items are generally worth far less than represented; in some cases, they are no more than worthless junk. I have brought a sampling of the trinkets that victims received after sending large sums of money. A particularly ruthless form of telemarketing is the "recovery" room operator who falsely promises to "recover" for victims money they have already lost to telemarketers -- for a substantial up front fee, of course.

Telemarketing sales presentations are really carefully scripted pitches designed to trap the unwary, to close a sale by whatever means necessary. Telemarketers get paid by generous commissions, living by the proposition that whatever brings profit is permissible. The life blood of these swindlers are lead lists of people who have been defrauded in the past and are known to be particularly vulnerable. An experienced salesperson can make $50,000 to $90,000 a year, and an aggressive telemarketer can make over $450,000 in a single year. Yet often when these con artists are brought to justice, it is impossible to recover anything to compensate their victims because most of their money has gone to purchase illegal drugs or to support an extravagant lifestyle.

Our office recently prosecuted Edward Gould who is before this committee today. He convinced an elderly Seattle woman that he could recover $84,000.00 which she lost in the past to telemarketers if she sent $28,251.00 to him as a fee. Gould flew to Seattle, rented a Jaguar, and visited the victim at her home. Gould told her that if he did not recover the money, the $28,000 she paid him would be fully refunded to her. The victim explained to Gould that she needed help in recovering her money so she could make a down payment on a home for her daughter and her son-in-law who is wheelchair-bound and blind as a result of exposure to Agent Orange. When a nurse brought the victim's son-in-law into the room, Gould advised the victim that his own father had been ill and confined to a motorized wheelchair but was recovering and would no longer need the wheelchair. Gould said he would send the wheelchair to the victim for her son-in-law.

Following receipt of $28,251.00 from the victim, Gould rented a three bedroom suite at the Four Seasons Hotel, purchased clothes and accessories, and travelled to various nightclubs in a limousine with two female hotel employees. Gould returned to Las Vegas the next day, flying first class. Gould is pending sentencing after pleading guilty to racketeering conspiracy and agreeing to forfeit over a half of a million dollars to the government.

Another recovery operation prosecuted by our office involved Steven Tinsley, also known as Joe Colone. A tape recording and transcript of Tinsley's telephone call to a victim have been submitted to this committee. As the tape reveals, Tinsley falsely promised the victim, that for a fee of $640, he would recover approximately $33,000 that the victim had lost in the past to fraudulent telemarketing scams. The victim described to Tinsley his poor financial condition and that he had no money until he received his next Social Security check. Undaunted, Tinsley continued to pressure the victim into sending money and eventually said he would take $240 up front and the balance after recovery of the funds. In reality, Tinsley had no intention of recovering any money for the victim. This tape gives you a sense of the tactics that callous telemarketers use to extract any amount of money they can from their elderly victims.

Tinsley pled guilty to multiple counts of wire fraud and was sentenced to 41 months in prison. Like many telemarketers, Tinsley has an extensive criminal history, including convictions for assault and narcotics offenses. The owner of the telemarketing business in which Tinsley was employed and other salesmen are currently pending trial. This case was brought to our office by the Federal Trade Commission who provided the tape, transcript, and other victim affidavits which were instrumental in our prosecution of this operation.

Another pervasive telemarketing scam is commonly referred to as a "rip and tear" scheme. In such a scheme, the telemarketer makes calls from a motel room, apartment or phone booth and induces a victim to send money, generally through a wire service or to a mail drop, by promising the victim that he or she will receive a large cash prize. The telemarketer disappears after receiving the victim's money and the telemarketer moves on to another location using another name.

These rip and tear schemes often involve multistate activity and money laundering. My office prosecuted one such operation using the racketeering statutes to dismantle a criminal enterprise that called victims throughout the United States from Nevada, induced them to send funds to mail drops in Southern California, and then sent individuals to California to retrieve the funds and launder them through a check cashing establishment in that state. When the victims started to complain about receiving nothing in return for their funds, the defendants simply changed the names of their operations and switched postal drops. The federal racketeering statute was used to embrace the wire fraud and mail fraud emanating from Nevada and the money laundering from California.

In handling numerous telemarketing frauds we have found that Nevada telemarketers do not defraud Nevadans; criminals in Nevada use the state as a base to victimize citizens of other states. Telemarketers have relied on jurisdictional barriers between states as well as geographical distance to avoid prosecution. If the victims were located in the same state as the boiler rooms, prosecution would be much easier.

Because of the multistate nature of the crime, telemarketing fraud is a nationwide problem requiring the commitment of state and federal law enforcement. The Nevada Attorney General and I formed a telemarketing task force consisting of investigators from the FBI, the Internal Revenue Service, United States Secret Service, United States Postal Inspector and the Nevada Attorney General's Office. State investigators and attorneys work side by side with federal agents and prosecutors in a cooperative effort to combine resources in pursuit of these criminals. In other districts such as the Southern District of California and the District of Arizona, my fellow United States Attorneys participate in similar telemarketing task forces. Through this combined effort, over one hundred telemarketing criminals have been prosecuted and convicted in Nevada and nearly two hundred defendants are currently under indictment and pending trial.

Operation Senior Sentinel involved unprecedented cooperation between, state and local law enforcement on a national basis. The success of Senior Sentinel illustrates Attorney General Janet Reno's philosophy that effectively addressing a widespread national problem requires that state, local and federal authorities work together to find solutions and to share resources and expertise. Senior Sentinel's success was derived from the use of AARP volunteers and law enforcement personnel to take over the phone lines of elderly victims who had been repeatedly defrauded and to tape record calls from telemarketers. The tape recorded pitches, which were replete with fraudulent misrepresentations, became the basis for criminal indictments and search warrants. My office and federal prosecutors from the Fraud Section of the Department of Justice brought indictments against 26 illegal telemarketing operations believed to be responsible for bilking 52,000 seniors out of an estimated $58 million dollars in a mere 2 years. An initiative this extensive would not have been possible in a district like Nevada with limited prosecutive resources without the support and presence of the Department of Justice in sending trial attorneys to prosecute cases in Nevada. Nationwide, over 400 arrests of fraudulent telemarketers were made in a single day.

The federal sentencing guidelines have been instrumental in guaranteeing lengthy prison sentences where defendants' conduct is aggravated by large losses, false testimony, or the commission of further criminal activity while on pretrial release. Recently in the District of Nevada, one rip and tear defendant was sentenced to 10 years in prison following his conviction by a jury. Many federal judges have applied the Bail Reform Act to prohibit telemarketers from engaging in any form of telemarketing while pending trial. Additionally, all convicted telemarketers are prohibited from engaging in any form of telemarketing during their period of supervised release or probation. These prohibitions prevent telemarketers from returning to fraudulent activity following their indictment or conviction. Those that do are subject to violation of conditions of release and enhanced penalties. Most importantly, the more telemarketers who are convicted, the less elderly victims are being swindled.

Following the press coverage of Senior Sentinel, many scam artists switched from the traditional prize and promotion schemes to a newer, less publicized fraudulent schemes such as investment in wireless cable, gemstones, ostrich farms, and film production. Fewer calls are now being made by prize promotion, charity, and recovery boiler rooms.

Telemarketing fraud, like other criminal activity, cannot be completely eradicated. So long as there are criminals intent on making an easy buck, there will be scams. Vigilant law enforcement is necessary to respond to telemarketing fraud, to punish those who perpetrate it, and to deter others from entering the arena.

The importance of state and local involvement in attacking telemarketing fraud cannot be overemphasized. An important tool is the initiation of "victim venue" cases, that is, prosecuting telemarketers where the victim, rather than the boiler room, is located. In such prosecutions, telemarketers are forced to travel to other states to face their victims. There is great trepidation on the part of these scam artists to be tried in the victims' forum, often rural, where there is no tolerance for telemarketers; allowing the victim to testify locally reduces the stress of the criminal justice experience. Federal agents have shown me posted notices recovered from boiler rooms instructing their con men not to solicit in certain so-called "bad states" such as New Mexico or Iowa. The telemarketers understand that the states listed on these "don't call" boards will aggressively prosecute them, even in rural locations. Aggressive prosecution of "victim venue" cases provides a major deterrent that state and local government can use to keep scam artists from calling into their jurisdictions.

One thing we can all do is to warn our aging parents and friends, especially those living out of state and away from the protective eye of family, to be alert to these parasites who exploit loneliness and trust.

This concludes my prepared remarks, and I will be happy to try to address any questions you may have. Thank you for the opportunity to be here today.