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565 lottery scammers arrested in global operation

May 23, 2006, 6:41 pm

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Massive 14-month investigation spans the globe and brings more than 500 fraudsters to justice

More than 2.8 million people in the U.S. paid to obtain credit cards, claim sweepstakes winnings and get in on lucrative investments that turned out to be too good to be true, officials said Tuesday as they announced hundreds of arrests in an international investigation.

Authorities in five countries have arrested 565 people in fraud schemes that netted more than $1 billion. Many of those arrested are west Africans who were attempting variations of the notorious Nigerian Internet scam, the Justice Department said.

Many of the victims were elderly or immigrants. One scam consisted of telephone calls to Spanish-speaking U.S. residents who were seeking to establish credit and were promised credit cards in return for a couple of hundred dollars. The cards didn't exist, said Federal Trade Commission Chairwoman Deborah Platt Majoras.

"Those that prey on consumers know their vulnerabilities," Majoras said at a Justice Department news conference with Attorney General Alberto Gonzales. "They zero in on those who will actually believe them."

The scams were carried out through telemarketing, mass mailings and the Internet and included bogus lottery, prize and sweepstakes offerings, invitations to pour money into nonexistent investments and supposedly legal enticements to avoid paying taxes, officials said.

In the Nigerian scam, criminals send junk e-mail to thousands of unsuspecting people offering them a share in a large fortune in exchange for a smaller amount of money up front. The con artist takes the money and then disappears.

Gonzales called the 14-month investigation, dubbed Operation Global Con, "the largest enforcement operation of its kind." It has so far resulted in 139 arrests and 61 convictions in the United States and another 426 arrests in Canada, Costa Rica, the Netherlands and Spain.

Last week, Costa Rican and U.S. authorities made arrests in a telephone-based scam in which prospective victims received offers of up to $4.5 million from the Sweepstakes Security Commission and other fictitious organizations. The winners first had to pay "insurance fees." Some victims were contacted again, this time by people pretending to be customs officials who demanded additional payments, the department said.

Transcript of 'Operation Global Con' Press Conference

The following is the complete transcript of the "Operation Global Con" press conference, attended by U.S. Attorney General Alberto Gonzales, Trade Commission Chairman Debra Majoras, Chief Postal Inspector Lee Heath, Attorney General Francisco Dall 'Anese Ruiz of Costa Rica and Chip Burns, Assistant Director of the Criminal Division of the FBI.

ATTORNEY GENERAL GONZALES: Good afternoon. I'm joined by Federal Trade Commission Chairman Debra Majoras, Chief Postal Inspector Lee Heath, Attorney General Francisco Dall 'Anese Ruiz of Costa Rica and Chip Burns, Assistant Director of the Criminal Division of the FBI.

Over the past 15 months, United States and foreign law enforcement agencies have targeted international fraudulent mass marketing schemes in the largest enforcement operation of its kind. The results of Operation Global Con have been dramatic with 565 arrests both here and abroad.

We all know the annoyance of phone calls, junk mail and SPAM and pop-up ads that bombard us with seemingly incredible financial offers. For millions of Americans these intrusions have been more than a nuisance. Operation Global Con targeted international mass marketing schemes. These criminals use telemarketing, the Internet and mass mailings to cheat unsuspecting people through bogus investments, fake lotteries, and sweepstakes schemes, phony credit cards and tax frauds.

In Miami, Florida, for instance, two defendants allegedly duped investors in the United States and Europe for more than $3 million. Investors in Discovery Capital believed it to be legitimate because the defendants would occasionally use funds received from new investors to send out purported interest and dividends. Allegedly the rest of the money went to fancy cars and million dollar homes for the defendants.

In the United States alone, law enforcement conducted 96 investigations into this kind of criminal conduct and arrested nearly 140 people. Along the way, nearly 3 million victims have been defrauded of more than $1 billion. We have succeeded by working together with our international allies including authorities in Canada, Costa Rica, the Netherlands and Spain to take down even more criminals abroad. Among other supportive countries have been the United Kingdom, New Zealand and Nigeria.

This close cooperation enabled us to develop virtual task forces. Cutting-edge technology enables us to reduce the actual exchange of personnel typical of international task forces. Our virtual task forces with Costa Rica and the Netherlands provide a new model for bringing international con artists to justice.

In such a massive effort we have many people to thank. From our foreign partners, I'd like to thank the Royal Canadian Mounted Police, the Costa Rica Attorney General's Office, the Costa Rica Judicial Investigation Organization, the Amsterdam Police, the Dutch Public Prosecutor, the Competition Bureau of Industry Canada, the Phone Buster's National Call Center in Canada and our six joint US-Canadian task forces across Canada.

I would also like to thank our American partners, the US Postal Inspection Service, the Federal Bureau of Investigation, US Immigration and Customs Enforcement and the Federal Trade Commission plus the Diplomatic Security Service, Department of Commerce Inspector General, Internal Revenue Service Criminal Investigation, and Commodities Futures Trading Commission along with 30 US Attorney Offices and the Criminal and Tax Divisions of the US Department of Justice. As you can see, there's been a lot of people working together to address this issue. I want to thank all of our partners, thank all of the agencies involved in this effort as we fight for consumers everywhere.

And now I'd like to turn the podium over to the Chairman of the FTC.

MS. MAJORAS: Thank you, Attorney General Gonzales.

The Federal Trade Commission enforces competition and consumer protection laws to promote a free and vigorous marketplace. The challenges we are facing include fraudulent telemarketers, SPAMmers, and con artists who defying national boundaries strike from anywhere in the world and prey on our US consumers.

We are meeting these international challenges with a robust program that combines our own law enforcement actions with collaborations with law enforcement partners here and around the world. During Operation Global Con, the FTC filed 21 federal court cases against 143 defendants and halted multi-national mass marketing scams that cost American consumers more than $150 million.

We stopped deceptive advance free credit card offers, bogus medical discount card pitches, fraudulent business opportunities and deceptive SPAM. For example, in a case against Call Center Express, we obtained a $13.9 million judgment against scammers who used telemarketing boiler rooms in Venezuela and Guatemala to trick Spanish-speaking Americans into paying advance fees that range from 149 to $299 for non-existing credit cards. The court permanently banned the defendants from marketing any credit products to consumers. They had advertised the cards on television in our country and promised thousands of people that they would have quick access to credit cards regardless of their credit histories. The court permanently banned them and we put them out of business.

And in FTC v. USA Beverages we stopped a business opportunity fraud whose perpetrators were actually in Costa Rica but who used Voice Over Internet Protocol, VOIP as we know it, to make it appear to American consumers as though they were operating from and calling them from within the United States.

Increasingly the key to successfully prosecuting these cross- border frauds is the coordination among law enforcers and the FTC participates in whatever capacity is needed. As part of this effort, for example, an FTC staff attorney was designated as a Special Assistant United States Attorney to assist the Justice Department in the prosecution of the sweepstakes scam based in Costa Rica which the Attorney General just mentioned.

I join Attorney General Gonzales in thanking the Costa Rican authorities for assisting our law enforcement efforts in bringing these perpetrators to justice.

And just last week in FTC v. DataCom Marketing we stopped a Toronto-based operation that may have taken as much as $1 million a month from American business for business directory listings that they neither wanted nor needed. And we worked closely with the US Postal Inspection Service, Canada's Competition Bureau in Vancouver, the Montreal Police and members of the Toronto Strategic Partnership on this investigation of this scam. The Competition Bureau executed search warrants on the defendants' offices and provided the FTC with the ceased documents that we used to support our case. So these results confirm the tremendous benefits that we can get when we work together.

Much enforcement work remains in the area of multi-national mass marketing fraud and we are committed to continuing to root out and shut down these global scammers. I'd like to thank very much all of our law enforcement partners and, in particular, the Attorney General for the work that we have done together with the Department of Justice. Thank you very much.

CHIEF POSTAL INSPECTOR HEATH: Our global economy creates a wealth of opportunity for both the legitimate businesses to offer a wide variety of goods and services to their customers. Mass marketing has evolved through the use of the Internet, telemarketing and direct mail as a highly effective method to reach customers.

And while the vast majority of these solicitations are legitimate, there exists a criminal element which has copied this business model and turned it into a cash machine for unlawful enterprises.

Today we have trumped the criminals with our own business model. Operation Global Con is a reversal of fortune for international swindlers who exploit those who can least afford to bear the loss including older Americans, the disabled, and others who are disadvantaged in our communities. Our model has built an effective partnership of prosecutors, law enforcement, regulators, and international authorities.

The United States Postal Service is the linchpin of a $900 billion mailing industry. This industry thrives on the trust that the American public has in that commerce transacted through the US mail is secure and free from compromise. Postal inspectors are dedicated to preserving this trust in their relentless pursuit of criminals engaged in mail fraud.

As an example of the many successes attributed to Global Con, Postal Inspectors conducted parallel investigations in February of 2006 with the Amsterdam Police. In our operation dubbed Dutch Treat this partnership shuttered an advance fee scheme in the Netherlands that targeted American consumers and individuals from several other countries.

The Nigerian criminal organization behind this scheme defrauded over 200 Americans of more than $1.3 million. The number of victims and losses continues to climb as we delve deeper into the scheme and review additional evidence.

The defendants SPAMmed e-mail accounts claiming that a terminal cancer patient's desire to bequest $55 million to charity was at risk unless the victim would help fund up front legal expenses, taxes and bank fees. In compensation, victims were offered a percentage of the inheritance which never materialized.

Four suspects were indicted on charges of mail fraud, wire fraud, and bank fraud, three of whom were arrested in the Netherlands by Amsterdam Police. The fourth defendant is currently a fugitive. Remarkably more than 20 perspective victims in the United States were saved from losses totally more than a half-a-million dollars when Postal Inspectors and their partners intervened during the investigation.

In another case, Postal Inspectors worked side-by-side with our Costa Rican law enforcement partners in Operation Jackpot which was designed to dismantle an international sweepstakes scheme that targeted thousands of elderly US citizens. Victims lost in excess of $15 million. The criminals led their victims to believe that they had won hundreds of thousands of dollars but to get their winnings the victims had to pay up-front insurance fees, usually several thousand dollars. The winnings, of course, never came.

Over 20 individuals have been charged with various federal crimes including mail fraud. Within the last several weeks searches and arrests have been carried out in Costa Rica, Florida, Texas and California.

Invaluable assistance has been provided by the US Immigration and Customs Enforcement, the US Department of Commerce, the Federal Trade Commission, the US State Department Diplomatic Security Service and momentarily the Attorney General for the Republic of Costa Rica will provide you with more insight regarding this large-scale investigation which took place in his country.

I hope the victims find a measure of solace in the justice that has been served. These crimes are particularly tragic in that they are preventable. Armed with the right knowledge, most consumers can recognize a fraudulent scheme and make the right decision before they become a victim.

I'd like to thank the Attorney General for his leadership in protecting the American public and acknowledge the outstanding contributions by our international partners from Costa Rica, the Netherlands and Canada and our domestic partners at ICE, the FBI and the FTC. Thank you.

ATTORNEY GENERAL DALL 'ANESE RUIZ: Good afternoon, Attorney General Alberto Gonzales, all the authorities gathered here today and members of the press.

Operation Global Con has allowed Costa Rican law enforcement officers, prosecutors and judges, this around 160 personnel, to perform in a coordinated effort to work with their counterparts in the United States to combat international mass marketing fraud schemes. This criminal activity was based in San Jose, Costa Rica, but the illegal effects were felt by US citizens.

With this operation we were able to arrest five suspects, confiscate approximate 300,000 US dollars and obtain a great amount of evidence. On the other hand, our police have shown good preparation and performance and I must congratulate our Director General of the OIG, Mr. Jorge Rojas who is also here with us today.

If we have to repeat this joint work to look for more suspects or to combat other types of crimes, we will be more than happy to do it. Let this commitment be clear and a firm message to all international criminals to resign from the idea to establish their criminal networks in Costa Rica because there they will not find their way to evade from other countries the justice from other countries like in this case from the United States.


QUESTION: Judge Gonzales, yesterday you told us that you were going to allay the concerns of Members of Congress about the search that was conducted on Capitol Hill over the weekend. And apparently, if I may say so, sir, it appears that those efforts so far have failed somewhat.

The Speaker of the House says that it was done in the wrong way. And the Majority Leader says, "I wonder whether anybody at the Justice Department has looked at the Constitution lately." Those are members of your own party, sir.

I'm wondering if you have something more that you can tell them today publicly that would alleviate their concerns about a possible violation of the separation of powers.

ATTORNEY GENERAL GONZALES: We are in discussions privately about what can be done to alleviate the concerns. I obviously, personally, and the Department collectively, we have a great deal of respect for the Congress as a co-equal branch of government, as a separate and independent branch of government and, obviously, are sensitive to their concerns. As I indicated yesterday we are working to try to address those concerns. We have had discussions with the House. Those began last night. We hope to have discussions today to continue working on this.

We respectfully, of course, disagree with the characterization by some. We believe, of course, that we have been very careful, very thorough in our pursuit of criminal wrongdoing and that's what's going on here. We shouldn't lose sight of the fact that the Department of Justice is doing its job in investigating criminal wrongdoing. We have an obligation to the American people to pursue the evidence where it exists.

Obviously, of course, there are additional considerations in this particular case. We want to continue to try to work with the Congress to alleviate the concerns. I talked about yesterday this being a unique step in response to a unique set of circumstances. It is true it has never been done before. The reason it has never been done before is not because there's never been corruption in the Congress unfortunately, as there has been corruption in the Judiciary Branch and corruption in the Executive Branch unfortunately. The reason it has never been done before is because we have before been able to reach an accommodation, to reach an agreement to receive the evidence that we need to prosecute wrongdoing through a subpoena. For a variety of reasons, that could not occur here. We worked very hard over a period of time to get the information, the evidence that we felt was important to a criminal investigation.

At the end of the day, the decision was made that this was absolutely essential to move forward with that investigation. But, again, we understand the sensitivity of this matter and we are going to continue to work with the Congress, to speak with the leaders in the Congress so that we can allay their concerns.

QUESTION: Attorney General Gonzales, as long as we are talking about something different, the VA matter, are you concerned that the Justice Department, the FBI was notified so long after this data went missing and in essence you came to the trail when it was cold?

ATTORNEY GENERAL GONZALES: What I will say about that is that as soon as we were notified of the problem we immediately sprang into action. As soon as I was advised by Secretary Nicholson, I called the FBI Director and directed that we put whatever resources was necessary to address this issue. And so I am focusing on what we can do moving forward to successfully conclude this investigation and specifically questions about what may have happened in the past before all that, I will defer to the VA.

QUESTION: I'd like to just follow up on that. Is there any reason to think that this material is in the hands of someone who would exploit for identity theft? Or, contrariwise, is there any evidence to think it's been thrown away or never will be put to that purpose?

ATTORNEY GENERAL GONZALES: We just do not know. We just do not know. We have no reason to believe that people understand that the thieves understand what kind of information that they have and whether or not they have taken advantage of that. We do not know whether or not they have thrown away, you know, the information. We just do know, but we did feel that out of respect and in deference to our veterans that this was something that we needed at least make them aware of and to take appropriate steps to prevent themselves from becoming victims of those who would want to steal their identity.

QUESTION: Attorney General Gonzales, can you tell us when you were notified?

ATTORNEY GENERAL GONZALES: As I talked about yesterday -- do you mean in terms of when the theft occurred?


ATTORNEY GENERAL GONZALES: I will give out that information at the appropriate time. I talked about the fact that we want to be as forthcoming as we can about the information. I know there has been some information in the media, some confirmed, some not confirmed. I am not comfortable at this time to talk about specific facts without talking to my investigators to ensure that I am not going to say something that inadvertently somehow screws up an investigation or disrupts or harms an investigation would be a better term of saying that.

QUESTION: Attorney General, I would just like to get back to the subject at hand here, but your own numbers on this indicate a rather slim conviction rate to say the least. None in Spain. None in the Netherlands. None in Costa Rica. Twenty percent in Canada. Forty percent in the United States. Dealing with all those other countries, namely, Canada which has been a huge irritant I know for US Attorneys when it comes to cross-border crime of this type where the average sentence in a Canadian court is about two to three months for committing this type of crime. Have you transmitted your concerns to either the Dutch government, the Canadian government, your friend from Costa Rica, about the nature of the fact that justice systems in other countries do not seem to recognize the seriousness of the crimes.

ATTORNEY GENERAL GONZALES: Listen, I do recognize that we are dealing with justice systems that are different from the United States. They have different crimes, different penalties and different sentences. We have to respect that. We also, of course, have to deal with the issue of extradition in some cases, sharing of information. So these are challenges that exist not just with respect to these kinds of crimes but with respect to all kinds of crimes such as terrorism and child pornography and trafficking for example.

To answer your question, yes, we have had discussions -- I have not had direct discussions with my colleague here about this specific issue; but, of course, I often have discussions with my counterparts overseas about the challenges that exist because of the differences in our laws and what can we do to accommodate those differences. In some cases take advantage of differences.

Believe me, we have had numerous conversations about this. We understand the challenges that exist because of our different legal systems and different sentencing regimes.

QUESTION: Just to follow up on that one. Let's take Canada specifically. Have you put in a request of the Canadian authorities to have the perpetrators in Canada extradited to the United States --

ATTORNEY GENERAL GONZALES: I do not know if there has been a specific extradition request but we can certainly give you that information with respect to Canada.

Yes, sir?

QUESTION: Attorney General Gonzales, I was wondering if you could explain why the administration felt that it was necessary to collect the telephone detail records from the phone companies in your anti-terror -- the President has addressed this in a limited way, but I wondered if you could.

ATTORNEY GENERAL GONZALES: There has been no confirmation about any details relating to the USA Today story. Now, the President has confirmed that with respect to domestic collection, none of that is occurring in the United States without a court order. He has also indicated that we understand we have legal obligations in terms of collection of certain kinds of information. And those legal obligations are being met.

I will say that what was in the USA Today story did relate to business records. As some of you may know the US Supreme Court I believe in 1979 in Smith vs. Maryland held that those kinds of records do not enjoy fourth amendment protection. There is no reasonable expectation of privacy in those kinds of records.

There is a statute that deals with -- there is a statutory right of privacy but that statute recognizes that with respect to business records there are a multiple number of ways that the government can have access to that information, to business records and, of course, the government such as the FBI can issue national security letters and obtain them through those means. There are a number of legal ways, of course, that the government can have access to business records.

Yes, sir?

QUESTION: Attorney General, in terms of the 2.8 million victims, any idea how many of those may be from other -- are the majority of them from the United States? Or are there victims in Canada and the other countries as well?

ATTORNEY GENERAL GONZALES: Well, the 2.8 million victims are here in the United States and obviously there are other victims in other parts of the world. I do not know what those numbers would be nation by nation. I do not know whether or not -Any idea Madam Chairman?

We can get that information for you.

QUESTION: I have a question. Can you illuminate the specific criminal cases found in Costa Rica and the name of the criminal organization?

THE INTERPRETER: He is not allowed to go and give out any particular information related to the ongoing investigations in Costa Rica. He did say that they have been able to identify approximate 200 Costa Ricans that were involved in this operation, but they are not allowed to go into particular details.

QUESTION: Judge Gonzales, as long as we are talking about the concerns of veterans and lawmakers today and everybody who owns a telephone, can you tell us about the concerns that were raised after your remarks on Sunday where it appeared that you were burning to jail journalists for receiving and publishing classified information.

ATTORNEY GENERAL GONZALES: I am glad you asked this question.

QUESTION: Did you really foresee approving cases like that going forward of prosecuting journalists?

ATTORNEY GENERAL GONZALES: I was responding to a question about is there a possibility, is there a statute that would seem to allow the prosecution and the publishing of certain kinds of classified information. And such a statute exists. So the possibility is there. But let me just, let me try to reassure journalists. My primary focus quite frankly is on leakers who share the information with journalists and, of course, I would much prefer to deal directly with responsible journalists and try to persuade them that writing or publishing a story that jeopardizes or compromises national security, secret programs of the United States which been very effective in protecting America against terrorist groups like al Qaeda that it would be better not to publish those kind of stories.

I would prefer, much prefer to work with the press and try to prevent those kinds of stories from running as opposed to doing something else.

STAFF MEMBER: Last question.

QUESTION: If I may ask a question for both you and the FTC CHAIRMAN? Are you surprised that so many people fell for these scams, some of which seemed to be pretty obviously phoney?

CHAIRMAN MAJORAS: No. I am afraid that surprise went away right after I took this job. The fact of the matter is that those who prey on consumers know their vulnerabilities. They know their audience. They know who to go after. So, for example, take the phoney credit card scam on the Spanish-speaking Americans. What the scammers know is that many of these Spanish- speaking Americans are new to our country, do not have an established credit rating here in our country. And so they may fall for, "Hey, it doesn't matter whether you have a good credit record. We'll give you a credit card anyway." They want to establish a financial life here in the United States, so they want that and so you might know that it is too good to be true, but these folks are learning and there is a vulnerability there. And that is what we find time and time again with scammers. They zero in on those who will actually believe them.

Weightloss fraud is a huge one that you know we deal with at the FTC. And you think to yourself, "How on earth can anyone believe that if you rub this cream all over you body and go to sleep that you are going to lose weight by morning?"

And yet diet and exercise is really hard and people want to believe that something else will help them to lose weight. So we take it as it comes and we try to protect consumers. If it is deceptive, we want to go after it.


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