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Telemarketing Fraud

Business & Professions Code 17511.9 BPC - Telemarketing Fraud 

Due to the recent prevalence of fraud committed over the phone, California regulates telemarketers stringently. Suppose you're accused of using the phone to make fraudulent sales or using dishonest methods to sell a product or service.

In that case, you could be charged with telemarketing fraud under California Business & Professions Code 17511.9 BPC.

Telemarketing fraud laws make it a crime to use fraud or deceit to sell good or services.

In other words, it's a crime for someone to use a deceitful or fraudulent business scheme by using a telephone to sell goods or services.  A prosecutor can file BPC 17511.9 charges as a misdemeanor or felony crime (wobbler).

Telemarketers must follow certain restrictions on how they can conduct their business. Most people are aware of receiving unsolicited annoying phone calls from someone or an automated voice message attempting to sell something.

Telemarketing is a vast and profitable business; most calls come from legitimate companies attempting to sell their products. However, it's not uncommon to receive fraudulent phone calls that are a scam. Often, these target vulnerable people, especially elderly citizens.  

Telemarketing fraud is a white-collar crime where someone uses deceit, trickery, or a fraudulent business scheme over the phone to sell something or commit another crime.

A classic example includes a situation where a caller will claim they work for Internal Revenue Service and tell somebody they are under investigation for back taxes but could quickly resolve the case if they pay a small fee. Next, they will ask them for their social security and credit card numbers. 

Depending on the circumstances of the alleged fraud, you could face up to three years in prison if convicted. Our California criminal defense attorneys will examine this law in more detail below.

What Constitutes Telemarketing Fraud?

The term "telemarketing fraud" covers a wide range of potential offenses, but generally speaking, BPC 17511.9 defined telemarketing fraud as doing one of two things via telephone:

  • Willfully engaging "in any act, practice, or course of business which operates or would operate as a fraud or deceit" (e.g., selling a fraudulent or nonexistent product/service); or
  • Using "any device, scheme, or artifice to deceive in connection with the offer or sale" (i.e., selling a product using fraudulent means).

This definition includes "scamming" a customer by phone and selling a legitimate product by making false or misleading statements, misrepresenting the nature of a service you're selling, or using deceptive tactics to pressure someone into buying something they don't really want or need.

According to BPC 17511.9, any of the following could be criminally charged for acts of telemarketing fraud:

  • The seller (i.e., the company offering the product/service);
  • A salesperson (i.e., an employee of the company);
  • An independent contractor; or
  • A third-party agent (e.g., a telemarketing company hired to sell the product)

In other words, these target people using a phone to sell something through using an unlawful scheme, such as fraud or deceit, which is an act that results in an unfair benefit or when it causes harm or loss to someone else. The related crimes include:

  • Penal Code 653(m) PC - annoying phone calls,
  • Business and Professions Code 17500 BPC - false advertising.

What Are Some Examples of This Crime?

EXAMPLE 1: Fred is a telemarketer for an extended warranty company. To increase his sales, he starts scamming callers into buying the extended warranty by telling them the warranty on their product is expired, and there is a history of failure on their product—even though those statements are untrue.

Although the product itself may be legitimate, Fred could be charged with telemarketing fraud for making false statements to sell the product—and if his company sanctioned this tactic, they could also be charged.

EXAMPLE 2: Danielle, posing as a representative for a software company, gets hold of the company's client list and starts calling them, warning that the software has a bug that could destroy their computer.

For $50, she will remotely install a bug fix to protect their computer. No such bug fix exists or is needed, for that matter. Danielle is guilty of telemarketing fraud.

What Are the Penalties If Convicted?

Violating BPC 17511.9 is a "wobbler" offense in California, which means it can be charged as either a misdemeanor or a felony, depending on the facts of the case and your criminal history. If charged as a misdemeanor, telemarketing fraud is punishable by:

  • Up to one year in county jail; and
  • Up to $10,000 in fines per offense.

If you're charged with a felony and are convicted, the fine per offense remains the same, but you could be sentenced to up to 3 years in prison.

For either misdemeanor or felony offenses, the judge may opt to impose probation instead of jail/prison time, Summary probation for misdemeanors, or formal probation for felony offenses.

What Are the Common Defenses for Telemarketing Fraud?

To prove you guilty of telemarketing fraud, prosecutors must show three things beyond a reasonable doubt:

  • You were a seller, salesperson, agent, or independent contractor authorized to sell;
  • You willfully used a "device or scheme" via telephone to sell something; and
  • You did so using fraudulent tactics or defrauding the other person.

Thus, most defenses to BPC 17511.9 will have something to do with refuting one of these components. Common defenses are discussed below.

Perhaps we can argue you were not selling anything. Maybe you made the phone calls as alleged, but you made no false claims and were not actively trying to sell a product or service. For example, you might have been conducting market research.

Defenses for Telemarketing Fraud
There are several common defenses to challenge telemarketing fraud allegations.

Perhaps we can argue that you believed you were speaking truthfully.  Telemarketing fraud must be proven as a willful attempt to deceive. You are not guilty of fraud if you thought you were making factual statements about what you were selling.

Perhaps we can argue that there was no fraudulent activity. For example, you may have been a little too aggressive in your sales tactics, but you did not make any misrepresentations about your product or service.

Perhaps we can argue that you can't be considered a salesperson as defined under the statute. According to the elements of the crime, it must be proven that you were acting as a salesperson or agent of the seller.

If you are under a criminal investigation for telemarketing fraud, a prefiling intervention might persuade the prosecutor from filing formal charges before court, called a “DA reject.”

The Los Angeles-based criminal defense law firm of Eisner Gorin LLP can be reached for an initial case review by phone or using the contact form.

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