Table Of Contentv\ CONSUMER FRAUD PREVENTION ACT OF 1995
^ Y 4. J 89/1:104/97
Consuner Fraud Prevention ftct of 19...
HillAKlJNG
BEFORE THE
SUBCOMMITTEE OX CRIME
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTH CONGRESS
SECOND SESSION
ON
H.R. 1499
CONSUMER FRAUD PREVENTION ACT OF 1995
APRIL 18, 1996
Serial No. 97
v\ CONSUMER FRAUD PREVENTION ACT OF 1995
Y 4. J 89/1:104/97
Consuner Fraud Prevention Act of 19...
hLJllAKlJNG
BEFORE THE
SUBCOMMITTEE OX CRIME
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTH CONGRESS
SECOND SESSION
ON
H.R. 1499
CONSUMER FRAUD PREVENTION ACT OF 1995
APRIL 18, 1996
Serial No. 97
COMMITTEE ON THE JUDICIARY
HENRY J. HYDE, Illinois, Chairman
CARLOS J. MOORHEAD, California JOHN CONYERS, Jr., Michigan
F. JAMES SENSENBRENNER, Jr., PATRICL\ SCHROEDER, Colorado
Wisconsin BARNEY FRANK, Massachusetts
BILL McCOLLUM, Florida CHARLES E. SCHUMER, New York
GEORGE W. GEKAS, Pennsylvania HOWARD L. BERMAN, California
HOWARD COBLE, North Carolina RICK BOUCHER, Virginia
LAMAR S. SMITH, Texas JOHN BRYANT, Texas
STEVEN SCHIFF, New Mexico JACK REED, Rhode Island
ELTON GALLEGLY, California JERROLD NADLER, New York
CHARLES T. CANADY, Florida ROBERT C. SCOTT, Virginia
BOB INGLIS, South Carolina MELVIN L. WATT, North Carolina
BOB GOODLATTE, Virginia XAVIER BECERRA, California
STEPHEN E. BUYER, Indiana ZOE LOFGREN, California
MARTIN R. HOKE, Ohio SHEILA JACKSON LEE, Texas
SONNY BONO, CaUfornia MAXINE WATERS, California
FRED HEINEMAN, North Carolina
ED BRYANT, Tennessee
STEVE CHABOT, Ohio
MICHAEL PATRICK FLANAGAN, IlUnois
BOB BARR, Georgia
Alan F. Coffey, Jr., General Counsel/StaffDirector
Julian Epstein, Minority StaffDirector
Subcommittee on Crime
BILL McCOLLUM, Florida, Chairman
STEVEN SCHIFF, New Mexico CHARLES E. SCHUMER, New York
STEPHEN E. BUYER, Indiana ROBERT C. SCOTT, Virginia
HOWARD COBLE, North Carolina ZOE LOFGREN, California
FRED HEINEMAN, North Carolina SHEILA JACKSON LEE, Texas
ED BRYANT, Tennessee MELVIN L. WATT, North Carolina
STEVE CHABOT, Ohio
BOB BARR, Georgia
Paul J. McNulty, Counsel
Glenn R. Schmitt, Counsel
Daniel J. Bryant, Assistant Counsel
Nicole F. Robilotto, Assistant Counsel
Tom Diaz, Minority Counsel
(II)
CONTENTS
HEARING DATE
Page
April 18, 1996 1
TEXT OF BILL
H.R. 1499 3
OPENING STATEMENT
McCollum, Hon. Bill, a Representative in Congress from the State of New
York, and chairman. Subcommittee on Crime 1
WITNESSES
Barker, John F., vice president, National Consumers League, and director.
National Fraud Information Center 93
Brendel, Evalyn, vice chair. North Carolina State Legislation Committee,
AmericanAssociation ofRetired Person 98
Cincotta, Tony, officer, Montgomery County Police TrainingAcademy 73
Dembin, Mitchell D., Chief, General Crime Section, U.S. Attorneys Office,
Southern District ofCalifornia 48
Downs, MaryAnn, telemarketing victim, Raleigh, NC 10
Martin, James L., president, 60 PlusAssociation 102
Owens, Charles L., Chief, Financial Crimes Section, Federal Bureau ofInves-
tigation 36
Ritchey, Ann Marie, daughter oftelemarketingvictim, Reston, VA 20
Thompson, R. Bruce, II, special counsel. North Carolina Department ofJus-
tice 78
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Barker, John F., vice president. National Consumers League, and director,
National Fraud Information Center: Prepared statement 94
Brendel, Evalyn, vice chair, North Carolina State Legislation Committee,
AmericanAssociation ofRetired Person: Prepared statement 99
Dembin, Mitchell D., Chief General Crime section, U.S. Attorneys Office,
Southern District ofCalifornia: Prepared statement 52
Downs, Mary Ann, telemarketingvictim, Raleigh, NC: Prepared statement .... 14
Heineman, Hon. Fred, a Representative in Congress from the State ofNorth
Carolina: Prepared statement 9
Martin, James L., president, 60 PlusAssociation: Prepared statement 104
Owens, Charles L., Chief, Financial Crimes Section, Federal Bureau ofInves-
tigation:
Letter dated August 25, 1995, to Chairman McCollum, from Andrew
Fois, Assistant Attorney General, Offiice ofLegislative Affairs, Depart-
ment ofJustice 59
Prepared statement 38
Ritchey, Ann Marie, daughter oftelemarketing victim, Reston, VA: Prepared
statement 22
Schumer, Hon. Charles E., a Representative in Congress from the State
ofNewYork: Prepared statement 31
Thompson, R. Bruce, II, special counsel. North Carolina Department ofJus-
tice: Prepared statement 79
(III)
IV
Page
APPENDIX
Statement of Hon. Sheila Jackson Lee, a Representative in Congress from
the State ofTexas Uj
,._
CONSUMER FRAUD PREVENTION ACT OF
1995
THURSDAY, APRIL 18, 1996
House of Representatives,
Subcommittee on Crime,
Committee on the Judiciary,
Washington, DC.
The subcommittee met, pursuant to notice, at 9:42 a.m., in room
2237, Rayburn House Office Building, Hon. Bill McCollum (chair-
man ofthe subcommittee) presiding.
Present: Representatives Bill McCollum, Howard Coble, Fred
Heineman, Steve Chabot, Charles E. Schumer, Robert C. Scott, Zoe
Lofgren, and Melvin L. Watt.
Also present: Paul J. McNulty, chief counsel; Nicole F. Robilotto,
assistant counsel; and Tom Diaz, minority counsel.
OPENING STATEMENT OF CHAIRMAN McCOLLUM
Mr. McCollum. The Subcommittee on Crime is called to order.
The subject matter today is the growing problem of telemarket-
ing fraud and victimization of the elderly. Older Americans have
rapidly become the preferred targets of fraudulent telemarketers.
These victims come from an era when a person's word, like a hand
shake, could be trusted. Because of the difficulty in telling a legiti-
mate telephone pitch from an illegitimate one, they fall prey to
these conniving callers.
As a result, their losses are often staggering. The Federal Trade
Commission estimates that telemarketing fraud costs consumers
about $40 billion a year. One Ohio widow lost $240,000 to over 50
different telemarketers. She believed that she was donating to
charitable organizations. A 92-year-old California woman gave
more than $180,000 to telemarketers. She then lost over $5,000
more to another telemarketer who told her he could recover her
originally lost money in return for a large advance fee. Some sen-
iors have unwittingly given their enter life savings to telefrauds.
Fraudulent telemarketers are constantly refining their cons. If
one pitch doesn't work, they smoothly switch to another one. They
pressure and conjole until their overwhelmed victim finally surren-
ders the money. If necessary, these telephonic muggers become
abusive and threatening. When they're finished wringing money
from their victims, the telemarketers sell the victim's name to an-
other operation, and the calls begin anew.
This isn't to say that telephone calls are the only way our senior
citizens have been victimized by swindlers. Home improvement
fraud, for example, is rapidly becoming the "con de jour" all across
the country. Not only homeowners are targeted by scam artists
(1)
who convince the homeowner that repairs are necessary and even
critical. They begin with minor repairs or cleanings, and then they
find rotten roofs, collapsing decks, loose chimneys, termites. The
list is endless.
Most of the homeowners are unfamiliar with home repair prob-
lems of physically unable to inspect themselves. Like the victims
of fraudulent telemarketers, these victims are too often embar-
rassed to report.
The good news is that law enforcement is beginning to fight
back. In December, the Department of Justice, with the aid of
State and local law enforcement officials, arrested over 400 people
in 15 States on fraud charges. These arrests were the results of an
undercover operation known as Senior Sentinel. The sentinels were
elderly volunteers who allowed law enforcement agents to record
phone calls from dishonest telemarketers. The volunteers played
the role ofinnocent victims, and the tapes were the basis of the ar-
rests.
To strengthen the Federal attack against scam artists, my good
friend from North Carolina, Mr. Heineman, has introduced legisla-
tion which speaks to this important issue. H.R. 1499, the
Consumer Fraud Prevention Act, will establish forfeiture for any
property obtained from proceeds ofa fraud offense and will also en-
sure that a payment of restitution has priority over any fine or for-
feiture penalties. The bill also directs the U.S. Sentencing Commis-
sion to increase the offense level for fraud crimes committed
against vulnerable victims or committed from a foreign country in
order to impede prosecution.
I commend the gentleman for his efforts to combat this serious
problem, and I hope that today's hearing will offer a useful and im-
portant information tool on the tricks and scams of telephone con
artists. I also expect the subcommittee will be enlightened on what
programs currently exist to protect and educate older Americans
about telemarketing fraud.
[The bill, H.R. 1499, follows:]
104th congress H.R. 1499
1st Session
To improve the criminal law relatingto fraud against consumers.
IN THE HOUSE OF REPRESENTATIVES
April 7, 1995
Mr. Heineman (for himself, Mr. C!oble, Mr. Taylor ofNorth Carolina, Mr.
Burr, Mr. Jones, Mrs. Myrick, Mr. Ackerman, Mr. Blute, Mr.
Bono, Mr. Bryant of Tennessee, Mr. Calvert, Mrs. COLLINS of Illi-
nois, Mr. COOLEY, Mr. Cunningham, Mr. Fox of Pennsylvania, Mr.
HoKE, Mr. HOLDEN, Mr. King, Mr. LiPlNSKi, Mr. McHUGH, Mr.
Metcalf, Mr. Paxon, Mr. Sensenbrenner, Mr. Smith ofTexas, and
Mr. Ballenger) introduced the following bill; which was referred to the
Committee on theJudiciary
A
BILL
To improve the criminal law relating to fraud against
consumers.
1 Be it enacted by the Senate and House ofRepresenta-
2 tives ofthe United States ofAmerica in Congress assembled,
3 SECTION 1.SHORTTITLE.
4 This Act may be cited as the "Consumer Fraud Pre-
5 ventionAct of 1995".
1
2
1 SEC.2.FORFEITURE OFFRAUD PROCEEDS.
2 (a) Civil.—Section 981(a)(1) of title 18, United
3 States Code, is amended by adding at the end the follow-
4 ing:
5 "(G) Any property, real or personal, con-
6 stituting, derived from, or traceable to, any pro-
7 ceeds obtained directly or indirectly to a viola-
8 tion of section 2326. Notwithstanding any other
9 provision of law, any property forfeited under
10 this subparagraph, or the proceeds of such
1 property, shall be used, to the extent needed, as
12 determined by the Attorney General, for the na-
13 tional information hotline estabhshed under sec-
14 tion 250008 of the Violent Crime Control and
15 Law Enforcement Act of 1994 and other en-
16 forcement of section 2326.".
17 (b) Criminal.—Section 982(a) of title 18, United
18 States Code, is amended by adding at the end the follow-
19 ing:
20 "(6) The Court, in sentencing an offender
21 under section 2326, shall order that the offender
22 forfeit to the United States any real or personal
23 property constituting or derived from proceeds that
24 the offender obtained directly or indirectly as a re-
25 suit of the offense. Any property forfeited under this
26 paragraph, or the proceeds of such property, shall be
•HR 1499 IH
