Telemarketers Who Spoofed 1bn Robocalls Threatened with $225mn Fine

The Federal Communications Commission (FCC), the US comms regulator, has proposed a record USD225mn fine for a Texan-headquartered business that allegedly spoofed the caller IDs of a billion robocalls. The fine, if imposed, would be levied on John C. Spiller and Jakob A. Mears, who do business under several names, including Rising Eagle and JSquared Telecom. The FCC accuses them of using misinformation to sell medical insurance to consumers around the USA:

Rising Eagle made approximately 1 billion spoofed robocalls across the country during the first four-and-a-half months of 2019 on behalf of clients that sell short-term, limited-duration health insurance plans. Mr. Spiller admitted to the USTelecom Industry Traceback Group that he knowingly called consumers on the Do Not Call list as he believed that it was more profitable to target these consumers. He also admitted that he made millions of calls per day, and that he was using spoofed numbers.

The robocalls falsely claimed to offer health insurance plans from well-known health insurance companies such as Aetna, Blue Cross Blue Shield, Cigna, and United Health Group. For example, one call stated: “Are you looking for affordable health insurance with benefits from a company you know? Policies have all been reduced nationwide such as Cigna, Blue Cross, Aetna, and United just a quick phone call away. Press 3 to get connected to a licensed agent or press 7 to be added to the Do Not Call list.” If they did press 3, consumers were transferred to a call center with no affiliation to the named companies, where call center representatives then would attempt to convince the consumer to purchase an insurance product sold by one of Rising Eagle’s clients. Rising Eagle’s largest client, Health Advisors of America, was sued by the Missouri Attorney General for telemarketing violations in February 2019.

The Texan Attorney General is also suing Spiller, Mears and their businesses, with the support of the Attorneys General of Arkansas, Indiana, Michigan, Missouri, North Carolina, and Ohio. They assert that the robocallers violated the Telephone Consumer Protection Act, and between them they could also potentially secure enormous damages, begging a question about how much the defendants could afford to pay. Their court filing illustrates how the telemarketers bombarded consumers around the USA:

JSquared provides VoIP services to Defendants Rising Eagle, Spiller, and Mears through which Defendants initiate illegal robocalls described in this Complaint.

Defendants, in generating leads for their clients, have placed billions of abusive robocalls to the residential and/or cellular telephone numbers of consumers nationwide, including in the states of Arkansas, Indiana, Michigan, Missouri, North Carolina, Ohio, and Texas.

Although Defendants are aware of the various federal and state telemarketing laws intended to protect the privacy of consumers from unwanted and harassing phone calls, Defendants willfully initiate calls to consumers in disregard for such laws.

Between January 1, 2019, and May 14, 2019, for example, Defendants initiated at least 136 million robocalls calls (sic) to the residential and/or cellular telephones of Texas residents. Similarly, during that same time period, Defendants initiated more than 11 million robocalls to residents of Arkansas, 25 million robocalls to residents of Indiana, 42 million robocalls to residents of Michigan, 14 million robocalls to residents of Missouri, 44 million robocalls to residents of North Carolina, and 56 million robocalls to residents of Ohio.

FCC Chairman Ajit Pai (pictured) blasted the robocallers for the harm they had done:

One disabled and elderly recipient attested to having fallen down attempting to answer these repeated calls. The scam also caused the companies whose Caller IDs were spoofed by Rising Eagle to become overwhelmed with angry call-backs from aggrieved consumers. At least one company was hit with several lawsuits because its number was spoofed, and another was so overwhelmed with calls that its telephone network became unusable.

What made Mr. Spiller’s scheme so insidious from a consumer perspective was something he admitted to investigators. Not only did he make millions of calls a day using spoofed numbers, but he took particular care to include customers who had put their names on the National Do Not Call Registry because he “found his sales rates… rose substantially” when he did so. Rising Eagle even continued to make abusive robocalls despite being warned on multiple occasions that the calls were unlawful and were generating complaints.

All five FCC Commissioners approved the proposal to fine the robocallers; this proposal is technically known as a Notice of Apparent Liability (NAL). The NAL is effectively a warning about the worst punishment that might be levied. The accused parties have an opportunity to make representations and this may lead the eventual fine to be reduced.

Pai praised the USTelecom Traceback Group for their assistance in pinpointing the source of the robocalls.

And I think it’s important to highlight that this enforcement action was made possible, in part, thanks to a collaborative and ongoing effort between our own Enforcement Bureau staff and experts from the USTelecom Industry Traceback Group. Along with our action to clamp down on COVID-19-related robocall scams with the Federal Trade Commission and the Department of Justice, today’s NAL is another example of how collaboration across government and with industry can bring robocallers to justice.

Commissioner Brendan Carr oddly took the opportunity to focus on the increased efforts being made to target robocallers based outside of the USA. This might be interpreted as a signal that the US authorities intend to be more aggressive when dealing with fraudsters that hope to evade punishment for exploiting US consumers by locating their operations beyond the country’s borders.

Since many of those placing these illegal calls operate overseas, we issued new rules to crack down on international robocalls and have begun working with international partners to trace them back and shut them down. We authorized carriers to block calls that they believe are part of illegal robocalling schemes, just like Gmail blocks your spam.

Commissioners Jessica Rosenworcel and Geoffrey Starks, the two Democrats who sit on the five-person Commission, both made identical criticisms of the Department of Justice, who are legally responsible for collecting fines determined by the FCC. Per Starks’ statement:

The threat of large fines as a deterrent means nothing if we systematically fail to actually collect on them, including coordinating with the Department of Justice. That means better follow-through on the entire life of an enforcement action. We must work harder to ensure on the back end that our enforcement efforts reap actual, measurable results, and then be transparent about how we’re doing to put violators on notice that we mean business. Otherwise, we’re just creating more headlines.

Their criticism is clearly politically motivated; the FCC had the same issue when the Democrats were in the majority, as would be obvious to Rosenworcel, who first became a Commissioner in May 2012. However, the problem is genuine. Fines are no deterrent if nobody ever really gets fined. But it was a shame to see the story being misreported by various journalists. The issue with reliance on the Department of Justice to collect fines will not be properly understood unless it is explained to readers, and that also requires historical context. It was also disappointing to see some journalists choosing to quote Rosenworcel, who is the most outspoken populist on the Commission, whilst failing to acknowledge that Starks made the same criticism.

You can read the FCC’s press release here.

Eric Priezkalns
Eric Priezkalns
Eric is the Editor of Commsrisk. Look here for more about the history of Commsrisk and the role played by Eric.

Eric is also the Chief Executive of the Risk & Assurance Group (RAG), a global association of professionals working in risk management and business assurance for communications providers.

Previously Eric was Director of Risk Management for Qatar Telecom and he has worked with Cable & Wireless, T‑Mobile, Sky, Worldcom and other telcos. He was lead author of Revenue Assurance: Expert Opinions for Communications Providers, published by CRC Press. He is a qualified chartered accountant, with degrees in information systems, and in mathematics and philosophy.