Last Updated Jan 11, 2011 1:36 PM EST
Here's a bit of good news for consumers: The Federal Trade Commission announced today that it has shutdown The Dolce Group Worldwide, a robo-calling operation that tricked people into buying extended car warranties that had more holes than a colander. Under a settlement reached with the FTC in which he admitted no wrong-doing, Fereidoun "Fred" Khalilian, the company's principal, agreed to be permanently banned from the telemarketing business. If you are a celebrity gossipoholic, you may remember that Khalilian once ran a couple of cheesy Florida nightclubs (now defunct) with Paris Hilton. in 2008 he pled guilty to misdemeanor battery after a woman accused him of rape.
The robo-calling scam worked like this. You might be sitting at home minding your own business when the phone rang. An automated voice announced that -- oh no! -- your car warranty would soon expire. When it did, you would be on the hook for costly repairs. To avoid that, you were asked to "press one." At that point, a human being came on the line saying he was with the "service contract department" -- implying that it was the service department of your car's manufacturer -- and asked you to "verify" your information in a process I described when I first wrote about this scam. According to court papers filed by the FTC, the automatic dialers called numbers randomly without knowing whether those at the other end of the line had car warranties, whether the warranties were expiring or even whether they owned cars. While you were on the phone with the rep, a computer matched your phone number to your address and name so the rep could act as though he knew who you were.
Once you supplied the make, model and year of your car, a "senior specialist" -- really a closer, came on the line and blatantly lied that he represented the manufacturer of the car you owned -- Honda, Nissan, GM or whatever. He would warn you that your "account is on final notice," as though you hadn't paid your bills. Then he sold you an extended warranty.
What did it cover? Well, whatever you wanted. "The defendants tell consumers the warranty will cover any part consumers specifically ask about," asserted the FTC. Struts? Sure. Power seats? Yep. Only after you bought would you learn that the warranty, sold under the name "My Car Solutions," was not affiliated with your carmaker. It had a 90-day waiting period, excluded parts of the engine and transmission and any breakdown caused by "pre-existing conditions." The cost, on average, was about $1,200 to $2,400, and those who signed up basically got nothing.
Unfortunately, nothing may also be what they get back. Although the settlement included a judgment of $4.2 million in restitution to consumers, the FTC found that Khalilian had only $50,000 in assets. Carmen Christopher, staff attorney of the agency's Enforcement Division, says that the telemarketing business has a high overhead -- for automated dialing services and the salaries of salespeople. "Most of the money was spent," she says. His apartment was liquidated, but given the bad economy, the luxury goods Khalilian indulged in don't fetch much, "perhaps only 10 cents on the dollar," she says. The receiver and the FTC, however, have the authority to monitor Khalilian and seize any assets or income he earns in the future, and if there's enough, it will go back to consumers.
If the past is prologue, then any restitution is likely to come from the revenues of a new fraud that Khalilian might mount. Previous FTC action dinged him for deceptively pitching travel packages in 2001. That time he agreed to a settlement banned him from all travel-related telemarketing. And, while he's now banned from all telemarketing, I think consumers would be safer if he were banned from walking outside for a while--and put in prison where he belongs.
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