‘Crammer’ scam targets phones 

Roy and John Lin made a devilish fortune in the details of phone bills, according to a federal investigation.

The San Francisco brothers hired overseas telemarketers to offer directory assistance and other services to small businesses and ordinary Americans, according to a major case to be unveiled this week by the Federal Trade Commission. But their real goal was to sneak small, unauthorized fees onto thousands of monthly bills and hope the charges would go unnoticed, according to court documents.

The scheme, known as “cramming,” proved to be a boon, the documents show. The Lins’ alleged take: $19 million in five years.
The Lins are among a resurgent wave of crammers who may be ensnaring millions of Americans, federal officials and consumer advocates say. A decade ago, the scam was so widespread that it became one of the most profitable business lines of the Gambino crime family.

A wave of federal and state crackdowns pushed the crime into remission. But as phone bills, both conventional and cellular, have become more complex, crammers are making a comeback by using sophisticated marketing techniques and by launching their schemes from overseas to try to escape the purview of U.S. regulators.

Some firms act with such speed that it can be tough for state and federal investigators, along with consumer advocates, to keep pace. Earlier this month, Toyota released a toll-free phone number for its massive car recall. The next day, a Detroit-based wire service printed the phone number with an incorrect digit. By then, a crammer had already set up a scam. Consumers who dialed the wrong number were asked by an unidentified voice to hand over their personal information, such as their Social Security number, and for permission to add a $4.95 charge to their phone bill.

Crammers rely on other firms. Companies called billing aggregators help them get the charges on bills. And the big phone companies look the other way, consumer advocates say. Each of these participants takes a slice of the revenue.
The Lins often didn’t even bother to get the approval of customers, according to FTC documents.

The Lins purportedly sought to sell Web site hosting, Internet yellow pages listings, search engine advertising and other services to small businesses and consumers. Telemarketers reportedly greeted potential customers by saying they needed to “verify and update business information,” without making it clear that they were seeking to add charges to their phone bills.

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Staff Report

Staff Report

A daily newspaper covering San Francisco, San Mateo County and serving Alameda, Marin and Santa Clara counties.
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