14 DAY TRIAL // The former president and CEO of a telemarketing company that billed hundreds of thousands of consumers and businesses without their knowledge, was sentenced to 276 months in prison.
Neal D. Saferstein, 37, of Mount Laurel, NJ, was the President and Chief Executive Officer of GoInternet.net Inc., a telemarketing company based in Philadelphia, PA.
According to court documents, between 2001 to 2004, telemarketers working for the company called businesses and consumers and convinced them into accepting a welcome package for Internet-related services.
However, the victims were not being told that simply accepting the packages would trigger monthly bills of $29, which would only stop if they called the company to cancel them.
Also, the packages were intentionally designed to look like bulk mail so that they would get thrown away by recipients without a detailed inspection.
By 2003, GoInternet employed over 1,000 telemarketers and was getting around 7,500 new customers every week.
The company's customer base included over 350,000 businesses and the total fraud is estimated at $75 million.
The investigators alleged that Saferstein made additional efforts to hide the fraud. He prevented customers from receiving notices about the billings and tried to prevent them from getting refunds.
Authorities claimed that he also failed to report over $1.7 million in income to the IRS between 2000 and 2003.
He pleaded guilty on October 30, 2009 to one count of wire fraud, one count of mail fraud and two counts of filing false tax returns.
GoInternet's former Vice President of Customer Service and Regulatory Affairs Tyrone L. Barr, 35, of Philadelphia was also sentenced to one year and one day in prison.
He was accused of doctoring sales-verification recordings to make it look as if telemarketers were obtaining consent from customers to be billed.
Billy D. Light, 41, of Voorhees, NJ, who served as the company's chief information officer, was sentenced to three years probation, six months in home confinement, one hundred hours of community service and a $5,000 fine, for his role in the scheme.
According to a DOJ press release [pdf], U.S. District Court Judge Cynthia M. Rufe also ordered Saferstein to pay the Federal Trade Commission $58 million in restitution and received a $100,000 fine.
This type of fraud, where consumers are being charged without their explicit authorization, is called cramming and is similar to the currently prevalent survey scams that silently sign-up victims to premium rate SMS services.