US Says No Need for Telcos to Pay $3.3mn Illegal Robocall Penalty If They Cannot Afford It

Last week the US Department of Justice (DoJ) settled a big case concerning ‘tens of millions’ of illegal robocalls that sold air duct cleaning services with the bogus promise of removing the COVID-19 virus. The conclusion was that:

  • the telcos who spread the illegal robocalls and their owner promise not to facilitate illegal robocalls again; and
  • they agree to a USD3.3mn civil penalty but do not have to pay it because they cannot afford it.

Prosecutors decided to conclude this case by asking the wrongdoers to show them bank statements, and when the statements indicated there was no money in the bank accounts, they agreed the civil penalty would be suspended. So what happened to the profit that was generated by connecting millions of illegal robocalls?

Voice over Internet Protocol (VoIP) service providers, VoIP Terminator Inc. and BLMarketing Inc., and their owner, Muhammed Usman Khan, agreed to a court order resolving Federal Trade Commission (FTC) allegations that they facilitated tens of millions of illegal telemarketing calls, including some calls to numbers listed on the “Do Not Call” Registry and robocalls that displayed “spoofed” or fake caller ID numbers. This stipulated order resolves a lawsuit the United States filed in federal district court in the Middle District of Florida.

The stipulated order bars the defendants from similar misconduct in the future, requires them to screen and monitor customers, terminate customers if they are engaged in improper telemarketing activity and imposes a $3.2 (sic) million civil penalty, payment of which is suspended due to defendants’ inability to pay.

The court order prepared on behalf of the Federal Trade Commission (FTC) confirms that no real penalty was imposed because they trusted the financial paperwork shown by Muhammed Usman Khan, the owner of the telcos who spread the illegal robocalls.

A. Judgment in the amount of Three Million Two Hundred Fifty-Six Thousand One Hundred Ninety Dollars ($3,256,190) is entered in favor of Plaintiff against Individual Defendant and Corporate Defendants, jointly and severally, as a civil penalty. The judgment is suspended subject to the Subsections below.

B. The Commission’s and Plaintiff’s agreement to the suspension of the judgment is expressly premised upon the truthfulness, accuracy, and completeness of Defendants’ sworn financial statements and related documents (collectively, “financial representations”) submitted to the Commission, namely:

1. the Financial Statement of VoIP Terminator, Inc. signed by Muhammed Usman Khan on February 8, 2022;

2. the Financial Statement of BLMarketing, Inc. signed by Muhammed Usman Khan on February 8, 2022; and

3. the Financial Statement of Muhammed Usman Khan signed by Muhammed Usman Khan on February 8, 2022.

C. The suspension of the judgment will be lifted as to any Defendant if, upon motion by the Commission or Plaintiff, the Court finds that Defendant failed to disclose any material asset, materially misstated the value of any asset, or made any other material misstatement or omission in the financial representations identified above.

Khan and his businesses spoofed phone numbers and called people listed in the USA’s Do Not Call Registry. They served call centers who originated fraudulent calls that tried to trick people into wasting their money. Khan, a Pakistan resident, and his two companies, based in Florida and Virginia, will suffer no real punishment unless they are caught doing something similar. But there is no genuine deterrent unless offenders fear incarceration or the seizure of their assets. The US authorities do a lot of huffing and puffing about enforcing robocall laws but there are no indications that hardened fraudsters and their accomplices will ever receive meaningful punishment.

Many questions are begged when contrasting the effort that the private sector has to put into tracing illegal robocalls with the complacency of US prosecutors. There is no reason to believe the prosecutors would conduct the detailed investigation work required if Khan ever violated the terms of his settlement by creating new front companies or engaging accomplices to spread illegal robocalls in future. The Federal Communications Commission (FCC) recently proposed a large fine for a telco that failed to accurately disclose its Russian ownership even though the disclosure failings dated back to 2011.

Last week I argued that US authorities are obsessed with hounding reputable telcos to distract from their inability to impose real punishment on determined fraudsters who systematically break the law. This story confirms the yawning chasm between US demands for a ‘zero tolerance’ approach to illegal robocalling and what its weak government agencies are capable of delivering in practice.

The news about the inadequacies of the US justice system could not have come at a worse time. Next week the FCC is expected to confirm it will impose greater burdens on international carriers as part of its notional clampdown on illegal robocalls. The US government is effectively outsourcing decisions about the automated blocking of phone calls because their own laws leave them too scared to stipulate which calls should be blocked. US justice is toothless when it comes to dealing with genuine criminals, so bureaucrats have to scrabble around to find other people they can blame and bully instead.

You can read the DoJ news 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.