On March 27, 2020, the US Department of Justice announced that injunctions had been issued in the US District Court for the Eastern District of New York against eight individuals and entities, barring them from facilitating fraudulent robocalls to thousands of individuals across the United States. The injunctions are the first of their kind ever obtained by the Department of Justice. Two separate actions are involved.
In the first complaint, United States v. Nicholas Palumbo, et al, the government alleged that the defendants, who operated intermediary carriers that connect voice-over-internet protocol (VoIP) calls from abroad to telephone lines within the United States, had not only participated in fraudulent robocalling schemes, but had also been put on notice by consumers, by major US network carriers, and state attorneys general in Missouri and Indiana, that calls being made through the defendants’ systems spoofed numbers belonging to the United States Citizenship and Immigration Service and Department of Homeland Security, and were intended to extort money from consumers. In issuing preliminary injunctive relief, the court noted that the government had met its burden of demonstrating probable cause that the defendants were engaged in a widespread pattern of telecommunications fraud intended to deprive call recipients of money and property, that the defendants knew, should have known, or were recklessly indifferent to the fact that “their network is an instrumentality of a vast telecom fraud,” and that they have knowingly facilitated their clients’ illicit conduct. The court’s order enjoins the defendants from providing call termination services for US-terminating calls, providing direct-inward-dial or toll-free services for calls originating in the US, and destroying or deleting records in connection with the case. The court also ordered Somos, Inc, the entity designated by the Federal Communications Commission to administer the US toll-free calling system, to temporarily suspend all toll-free numbers registered to the defendants.
In the second complaint, United States v. John Kahen, et al, the DOJ alleged that the defendants used the US telephone system to engage in predatory wire fraud schemes that victimized individuals in the US, particularly the elderly and other vulnerable populations, by serving as gateway carriers to foreign call centers and foreign voice-over-internet protocol (VoIP) carriers. On March 2, 2020, and March 23, 2020, consent decrees were entered, permanently enjoining the individual defendant Jon Kahen, and the corporate defendants, Global Voicecom, Inc., Global Telecommunication Services Inc., and KAT Telecom, Inc., from, in summary:
- committing or conspiring to commit wire fraud as defined by 18 USC §§ 1343 and 1349;
- doing business with the Kahen defendants or their agents, employees or affiliated entities;
- using the US telephone system to convey fraudulent calls, recordings or spoofing calls;
- providing call termination services for calls terminating in the US, carrying VoIP calls terminating in the US for fraudulent calls that impersonate or spoof the telephone numbers of government agencies or other institutions;
- providing direct-inward-dial or toll-free services for US-origin calls in connection with fraudulent calls or recordings;
- receiving or sending payment in connection with fraudulent calls;
- acting as an employee, agent or consultant for anyone engaged in the enjoined conduct, and;
destroying records in connection with this action.
As part of the settlements, the Kahen defendants undertook to implement anti-fraud monitoring, mitigation and know-your-customer processes and procedures, to include best practices requirements in employee and third-party contracts, and to notify the US and the Court of the compliance procedures it has adopted, should KAT elect to resume operation as a VoIP carrier. The consent decree also requires KAT to notify its customers since 2016 of the settlement.
On January 29, 2020, a purported Telephone Consumer Protection Act class action was filed by consumers who claimed to have received calls from the defendants.