Discount mulberry baywater Outlet call moguls outwitted the government and completely wrecked the Do Not Call list
On the morning of Oct. His name was Aaron Michael Jones, or possibly Michael Aaron Jones, and in any case, he went by Mike. According to court documents, Mike was a father and widower. He lived well, paying $25,000 a month for a Spanish Colonial Revivalin a gated community near Laguna Beach, Calif. He also employed a personal chef, drove a couple of Mercedes, and maintained a gambling account at the Bellagio in Las Vegas.
Jones sustained his lifestyle by spamming people with robo calls. He worked with a revolving cast of co workers under the auspices of about a dozen corporations. At the core of his enterprise was a computer program capable of blasting out irritating, prerecorded phone messages to just about anyone in the country. Jones allegedly paid for exclusive access to the program, which he then rented out to other robo callers. He and his associates also used it to peddle their own off brand products, including auto warranties, home security systems and search engine optimization tools. Anyone curious or lonely enough to listen to one of Jones’ robo calls, then press “1,” would be directed to a call center, which often meant one or two of Jones’ underlings sitting in a room in Irvine, Calif.
The FTC was investigating Jones’ empire and had called him to Washington to testify under oath. The companies affiliated with Jones may have been dubious two weeks earlier, Google had filed suit against one called Local Lighthouse for trademark infringement and false advertisement but the feds were more concerned with the robo calls themselves. Virtually all robo calls, whatever they’re selling, are illegal. And Jones had made a staggering number of them. According to the FTC, he was facilitating roughly a billion a year, more than any individual it had ever identified. But a curious thing happened as they began asking questions: Jones didn’t deny much of anything. When Evans tried to pin down the volume of calls he was capable of placing, he answered, “I did a lot,” then punched out an estimate on his phone’s calculator. Jones eventually grew restless and tried to move the interview along: “Obviously, the underlying issue is the calls are illegal. We know that already.”
Afterward, he returned to California and resumed robo calling. In January 2017, the FTC sued him. Five months later, a federal judge banned him from telemarketing and hit him with a $2.7 million penalty. He didn’t bother contesting the judgment. (Jones emailed me that he’d “love to discuss” the matter, then stopped responding to messages.)
Jones, it appears, didn’t really care about getting caught. The same goes for the rest of the robo calling industry. The financial rewards of bothering people on the telephone are clearly greater than the risks. “We continue to bring cases and shut down as many folks as we can,” says Janice Kopec, the FTC’s point person on robo calls. “What we recognized, though, was we shut down an operation and another one springs up behind it almost instantaneously.” Hence our modern scourge. In 2015, the call blocking app YouMail estimated that close to a billion robo calls were being placed every month. Two years later, that number has leapt to 2.5 billion. At best, these calls annoy. At worst, they defraud. By far, they constitute the top consumer complaint received by the FTC.
In theory, there is a fix: the National Do Not Call Registry, created in 2003. Today, 230 million numbers are on it. The point, obviously, is to not be called. And yet the FTC receives 19,000 complaints every day from list members who have, in fact, been called. There is a battle being waged over the inviolability of our telephone numbers over the right to not be bothered. On one side there is Mike Jones and his robot army. On the other side, there is the federal government and its list. It is clear who’s winning. But why?
The educated criminal skims the cream from every new invention, if he can make use of it.” So said a Chicago police inspector in 1888, describing an early telephone scam. A wealthy trader had installed a telephone line between his home and office, one of the first in the city. One weekday, according to a 19th century newspaper called the Electrical Review, a smartly dressed man identifying himself as Thomas Jefferson Odell knocked on the trader’s door and asked his butler for use of the house phone. The butler obliged. Odell called the trader at his office. “The cook, the chambermaid, and your wife are lying here bound and gagged,” he told him, asking for $20,000 in ransom. The trader delivered the cash to one of Odell’s accomplices, then rushed home to find his wife in fine shape and none the wiser.
Over the next half century, telephone scams became problematic enough that MGM produced a short film to warn of their dangers. It ran 19 minutes and featured a gang of swindlers who compiled telephone numbers of financially distressed people, then got them to invest what they had left in a bogus horse racing scheme. The movie was called “Sucker List.”
A few decades later, nuisance calls evolved to include legitimate sales pitches. In the 1960s, door to door salesmen were suffering. The rise of two income families meant fewer women were home during the day to buy their products. In 1967, a public relations consultant named Murray Roman saw a business opportunity, creating a telephone sales operation that could reach customers well into the evening. In his first major campaign, he hired 15,000 women to place a collective million calls a day from their homes on behalf of the Ford Motor Co. The idea wasn’t to sell cars at least not yet but to gauge consumer interest. This was called lead generation, and it professionalized the sucker list. Roman’s success rate was low, but his call volume was high enough to make up for it. Of 20 million people reached, 187,000 turned out to be decent leads. Of those, 40,000 bought cars. Ford, according to a 1976 article in the Harvard Business Review, made $24 million on the gambit. Telemarketing was born.
Murray Roman died in 1984, just before people would have started blaming him for ruining their lives. Two years later, a Virginia telecom analyst named Douglas Samuelson invented something called predictive dialing. The technology allowed department stores and politicians and scammers to dial widely and quickly, while weeding out phone lines that were busy or unresponsive. The industry grew exponentially; aggravated customers began to wail to their government representatives. In 1991, Congress passed a law that curtailed some telemarketing activities and created the first Do Not Call registries. Unfortunately, the registries weren’t maintained by the government but by companies doing the telemarketing, and the only way to get on them was to call the companies themselves. Nothing changed.
By 2003, the national telemarketing crisis had grown acute enough to warrant bipartisanship. A nationwide Do Not Call Registry would be established and the FTC would administer it. The House bill to create it passed 412 to 8. Only Ron Paul, Jeff Flake and a handful of other shrink the state types dissented. George W. Bush marked the occasion with a Rose Garden announcement. “When Americans are sitting down for dinner, or a parent is reading to his or her child,” he said, in dad voice, “the last thing they need is a call from a stranger with a sales pitch.” Telemarketing groups would have to pay to download lists of numbers on the registry, organized by area code. If they were later found to have called any of those numbers, intentionally or not, they could be fined up to $11,000 per call.
All but telemarketers were elated. In three months, 50 million people signed up. Syndicated columnist Dave Barry called it the most popular government program since the Elvis stamp. The industry, meanwhile, filed several lawsuits against the FTC, arguing its new toy violated their First Amendment rights. “It will be like an asteroid hitting the Earth,” predicted Tim Searcy, then the chief executive of the American Teleservices Association. “Two million people will lose their jobs.” Barry, capturing the national mood, responded by printing the ATA’s phone number in a column and suggesting his readers flood it with calls. The lawsuits failed, the Do Not Call list became a permanent fixture, and telemarketing never recovered.
“It changed the industry dramatically,” says Stuart Discount, CEO of the Professional Association for Customer Engagement, which is just the new name of the beleaguered American Teleservices Association. “A lot of the outbound calling became calling your own customers, trying to increase their value. Cold calling or trying to sell something really took a hit.” Set aside that it was now verboten to dial a wide swath of the country. Would someone on a Do Not Call list really be receptive to an unsolicited sales pitch? The registry, says the FTC’s Kopec, was “the nail in the coffin for outbound telemarketing.”
It was an era of good feelings and uninterrupted square meals. And it ended almost as soon as it began.
Ami Dziekan, 41, has worked for the Federal Trade Commission since she graduated from Georgetown Law in 2004. She began her career as a staff attorney before being named program manager of the Do Not Call Registry in 2010. Kopec and her boss Lois Greisman oversee the FTC’s big picture robo call strategy, while Dziekan manages the list’s day to day operation. (The registry’s customer service people the human beings fielding calls from dissatisfied list members are employed by a contractor with offices in Indianapolis and Albuquerque.)
“I have a reputation of having an office full of plants and pictures of family,
” Dziekan says, glancing around happily. By federal government standards, her L’Enfant Plaza office building is an inviting one: “If I open my door, I get to look out of a window, which is nice.” Dziekan, lives on Capitol Hill and is active in her church, said. Her outlook on life is admirably sunny, given that her job entails dealing with two kinds of people: consumers who don’t want to be called, but are; and telemarketers who want to call, but can’t.
In simpler times, this wasn’t a major problem. By downloading the list of numbers on the Do Not Call Registry, and then declining to call them, telemarketers largely policed themselves out of existence. By the late 2000s, though, a new threat had emerged: robo calls. Instead of live telemarketers, working for recognizable companies, a new breed of humanoid irritants came calling with all manner of crappy sales pitches and outright scams. Robo calling itself was not new; a robo call is just another word for a prerecorded phone message. Public schools have been using them forever to announce snow days and two hour delays. But now, the technology far more efficient than traditional telemarketing, in that a live human is needed only once a customer decides to engage was being marshaled for profit and fraud.
Suddenly “Rachel from Cardholder Services,” the ubiquitous fake bank rep, was plotting to take your money. Around tax season, fake Internal Revenue Service agents came calling, too. They left menacing messages like, “This is a final notification call to inform you that there is an arrest warrant issued against your name and your identity.” From there, targets would be directed to call a number where an operator would be waiting to bilk them. In one scheme, victims were commanded to drive to their grocery stores and pay phantom back taxes in the form of iTunes gift cards. For their part, legitimate companies began outsourcing illegal robo calls to third parties. (Last year, a federal judge hit Dish Network with a $280 million penalty in part for doing that. Dish Network says it’s appealing.) And none of this includes the related problem of spam text messages.
In the quaint era of man made telemarketing, it was mainly large corporations like Ford that could pay for the infrastructure and manpower to dial thousands of numbers at once. A couple of technological shifts changed that. One was the advent of voice over Internet protocol (VoIP) dialing. This is the technology that makes Skype possible and is now used by a bulk of the country’s telephone landlines. VoIP “allows telemarketers to make lots and lots of calls for less money, from anywhere in the world,” says Will Maxson, an assistant director in the FTC’s consumer protection bureau. “It also allows you to set up shop, tear down, move. All you really need to make a lot of calls is a computer and an Internet connection.” Combine that with an automated dialing platform, plus some co workers, and you’re Aaron Michael Jones.
Equally important was the rise of call “spoofing,” or faking a telephone number. Back in another quaint era, you may recall, Paris Hilton was accused of hacking into Lindsay Lohan’s voice mail by pretending to call it from Lohan’s phone. All it took was a perfectly legal $10 “SpoofCard.” (SpoofCard terminated Hilton’s account.) Robo callers were employing more sophisticated tools, but the principle was the same. It allowed them to entice targets by calling from numbers that bore their own area codes, and, simultaneously, throw law enforcement off their scent.
In 2009, the FTC responded by outlawing almost all robo calls, exempting those from political organizations, schools and other entities not trying to sell you things. Now, it was not only illegal to call a number on the registry, it was illegal to solicit any customers using robo calls. The ban had no perceptible effect. From 2010 to 2011, the number of annual Do Not Call complaints jumped from 1.6 million to 2.3 million, the largest increase since the list’s inception. The following year, the number rose again by nearly 70 percent. Last year, the FTC received a record 7.2 million complaints, and the calls were as disreputable as ever. The top violations reported were debt reduction schemes, vacation and timeshare offers, warranties and protection plans, and impostors. (Most of these were robo calls, though live holdouts remain.)
Meanwhile, a shift occurred in the way people thought about unwanted calls. The Do Not Call Registry had promised tranquility. Now, it couldn’t deliver. This made people angry twice: once at the robo calls, then again at the impotent gatekeepers letting them through. “We know that there are people who put their faith in the Do Not Call Registry as blocking every single phone call that they do not want,” says Dziekan. “I try to be flattered that they think I can block every single call that they don’t want. Unfortunately, I can’t.”
Here’s a sad anecdote: In 2013, the FTC published a blog post on its website. It was called “10 years of National Do Not Call: Looking back and looking ahead.” The post featured a cute graphic and plucky copy. “To etiquette purists, the 10th anniversary dictates gifts of metal,” it read. “The FTC presents this iron clad guarantee: You can count on us to continue to take action against companies that violate the Telemarketing Sales Rule.” Later that day, a commenter named Helen wrote, “Awesome!!!” But every year, a dozen or so new comments would appear, and as time went on, they grew darker. “I think you all have done an awful job,” wrote one commenter in 2016. “The Spammers still call with NO fear of our Government.” Added another: “You no longer function at all.”
At the root of this public relations problem is a likely misapprehension about how the Do Not Call Registry works. When you add your number to the list, nothing actually happens. No legal muscle or technological wizardry suddenly prevents a solicitor from calling you. All the list does is provide you with vague recourse in the event you are called, by allowing you to complain that someone has called you. So, you can report the violation by calling a toll free number or filling out a form on the Do Not Call website. Then, if the number you were called from shows up in enough complaints, the FTC will leap into action and prosecute the offending dialer.
Except, it almost certainly won’t. In the age of live telemarketing, the mere threat of prosecution or penalty was enough to deter companies with shareholders and reputations to protect. In the robo calling epoch, dialers couldn’t care less. One, nobody knows who they are or where they’re calling from, because they all spoof their numbers. Two, more of them are doing it every year, since it’s cheap and easy to blast out automated calls from anywhere in the world. All this makes it nearly impossible to identify robo callers, let alone penalize them. At a hearing on robo calls in October, Sen. Susan Collins, R Maine, said she was getting so many of them, she had disconnected her home phone. “The list,” she said, “doesn’t work.”
Kopec, the FTC’s de facto robo czar, drew a distinction between two eras of the Do Not Call Registry. “Prior to the beginning of the robo call epidemic, we really approached the problem in two ways: law enforcement and consumer education,” she said. Now, she no longer has the resources to realistically tackle the problem. With an annual budget of $300 million by contrast, the FBI’s is $9 billion the FTC is a relatively puny federal agency. There are only 43 employees in the Division of Marketing Practices, which oversees unwanted calls. None of them, including Kopec, work full time on the issue. Ami Dziekan, who works in a different department, is the lone steward of the Do Not Call Registry. Since the robo call ban went into effect in 2009, the FTC has brought just 33 cases against robo callers. In those cases, defendants have been ordered to pay nearly $300 million in relief to victims, and nearly $30 million in civil penalties to the government. But even then, the FTC can’t force perpetrators to pay the fine if they argue they’re broke. Which robo callers often seem to be. So the FTC has only collected on a fraction of those sums: $18 million in relief and less than $1 million in penalties.
(Point of clarification: The FTC is the sheriff here. Its job is to prosecute shady business practices, and robo calls tend to be shady. But various other state and federal agencies, including the Federal Communications Commission, also police nuisance calls. In theory, there are legal distinctions between which kinds of cases the FCC and FTC can bring,
though neither agency could explain these to me clearly. As a practical matter, an FTC spokesmanfigures, it doesn’t matter: “There are enough violators in this space to keep us both busy.”)