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Byline: Patricia Odell

It took Terri Lynn McEntire three months to save up $75 to apply for a new credit card after she emerged from personal bankruptcy. But she never got the card. a[broken (vertical) bar] That's because she was one of 132,000 people bilked by mail in a systematic way by a con artist named Victor Taylor. a[broken (vertical) bar] "I feel so violated," she says.

Her story is typical, for long-distance swindling is a growing business in this country. Telemarketing fraud alone cost Americans an estimated $40 billion last year, and the best the courts could do was to order $1.2 billion in restitution. Moreover, the hardest hit consumers have been those least able to afford it - senior citizens and people with serious financial problems.

Some scams result in far greater losses than the one suffered by McEntire. For example, some scam artists charge consumers' credit cards without authorization or an understanding that a purchase was made - sometimes for hundreds of dollars. This is often connected to the sale of membership clubs and magazine subscriptions. And a firm called Professional Golf Products recently bilked golfers for as much as $1,600 by telephone, according to U.S. Attorney Debra W. Yang.

But legitimate direct marketers are also hurt by fraud in several ways. For one, the negative publicity that results makes consumers more skeptical of any promotion delivered via direct mail, e-mail or telemarketing. In addition, people are more reluctant to give their credit card numbers and other personal information to marketers, especially those with whom they haven't done business.

McEntire's problem began when she emerged from bankruptcy and began receiving dozens of advance-fee credit card offers. She responded to a piece from one of Taylor's companies, Colonial Financial Services, which started, "Congratulations, we recently received information that your bankruptcy has been discharged. You have been pre-approved through one of the banks for a MasterCard with a credit line of $2,500."

But Taylor wasn't done with her even after she sent in her money. Months later, McEntire found another offer in her mailbox from the same company with a different return address.

"The audacity," she says.

When it investigated Taylor, the U.S. Postal Inspection Service (USPIS) found that he operated similar scams under the names First American Services and Fallbrook Financial Services, resulting in a total loss to victims of about $4.5 million, according to U.S. Postal Inspector Mike McCarthy.

Taylor used P.O. boxes and mail drops to collect application fees. He had no relationship with MasterCard and none of his customers received cards, McCarthy says. Where did he get his lists? Taylor paid $100,000 for the names of 3 million people, the majority coming from three companies that were not implicated in the scheme: Lists Concepts, Courthouse Lists and Hogan Information, according to McCarthy.

DIRECT was unable to locate Lists Concepts or Hogan Information, and a telephone number for Courthouse Lists did not appear to be working. These firms, none of which is a high-profile list supplier, probably provided Taylor with bankruptcy files compiled from public records.

Taylor treated himself well, spending about $1.2 million on fancy houses and luxury cars, McCarthy continued. The USPIS seized eight properties, two vehicles and seven bank accounts totaling about $238,000, the inspector adds.

Taylor was convicted of 16 counts of mail fraud in Los Angeles in 2000 and sentenced to 60 months in federal prison. In March of this year, he received another four years and three months for running a similar scheme while awaiting sentencing in the first case, McCarthy says.

Felons like Taylor cannot prosper without unsuspecting consumers. But they also cannot operate without a network of enablers including mailing list companies, service bureaus and printers.

Such vendors are hard to implicate and unlikely to be prosecuted in fraud cases. The Federal Trade Commission has the authority to go after "assisters and facilitators" of fraud but must prove that the vendor had knowledge of the activity or put on binders to avoid knowing it. "It's difficult," says Allen W. Hile, assistant director of the FTC's division of marketing practices.

One firm, Allstate Business Distribution Center Inc., "assisted or facilitated others who violated the FTC Act," and acted as a "service provider for telemarketers, soliciting sales for non-durable office supplies," according to the FTC. The firm and its owner Robert Matz were prohibited from helping violators as part of a settlement with the FTC last year.

Moreover, legitimate marketers are also being victimized by swindlers. Some sources say lists are likely stolen from the back doors of service bureaus, and through "dumpster divers" at printers and other places where lists are maintained. And because lists are now transferred from place to place by floppy disc, CD ROM and e-mail, that makes it vastly easier to duplicate the files, says Liberta Abbondante, vice president of circulation at Forbes Inc.

"It's very widespread," Abbondante adds. "Almost every publisher in the country has had a list stolen whether they know it or not."

Another growing concern is the authenticity of sample mail pieces, submitted by list brokers for approval by list managers and owners prior to rental. Some managers are increasingly scrutinizing the pieces, calling to verify phone numbers and addresses, and surfing Web sites to ensure the legitimacy of the offer. Those deemed suspicious for any reason, including content, are rejected for rental.

For example, one mailing piece submitted for www.stockmagic.com was rejected by at least one list management firm because there was no way to contact Stock Magic, and the Web site also did not include an address or phone number.

The offer promoted a 30-day free trial for a newsletter, Market Trends Online. To sign up, prospects were asked to register at the Web site, where personal information was collected including name, address, phone number and credit card number.

Matt McQuail, an account executive at List Services Corp. who brokers for Stock Magic, says he had no problem submitting the mail piece for rental even though it was rejected.

"We just go elsewhere," McQuail says. "That's the nature of the game."

But Stock Magic agreed to add the requested information after told of the rejection, according to McQuail.

"We as list owners look to our manager for the first line of defense," says Abbondante. "If the manager passes it through, you assume that it's gotten the seal of approval."

DMA ethical guidelines require that every offer clearly identify the marketer's name and postal address or telephone number, or both, at which the consumer may obtain service. But some brokers repeatedly submit mail pieces that are rejected by list manager, says one manager. "We should be more aggressive in doing something about it," the manager adds.

Marketers "do have an obligation to know who they are renting the list to and what that list will be used for," adds Patricia Faley, vice president of ethics and consumer affairs for the Direct Marketing Association. "If you have an advertiser that's going to rip off consumers, that same advertiser is likely to rip off merchants as well and marketers know that."

Some direct marketers find that their very identity has been stolen. Publishers Clearing House has struggled for years to protect its name from fraudulent telemarketers who operate under the guise of PCH. Victims are told they have won a prize from PCH and need to pay a fee to collect the prize, says Christopher L. Irving, senior director of consumer affairs for PCH.

Despite consumer education, PCH still receives about 100 "contacts" a month from people complaining that the PCH name was used in a telemarketing call or mail piece, Irving adds. After PCH settled with numerous states over its own marketing practices, scam artists picked up on that fact and began placing calls to consumers claiming that in order to collect their settlement, they needed to pay a fee in advance. And not long after 9/11, the National Fraud Information Center (NFIC) warned that fraudulent telemarketers, pretending to be from PCH, told consumers that winnings could not be delivered because mail service was disrupted because of the terrorist attacks. That caller asked to be wired $2,500 to expedite delivery.

Sweepstakes and prize scams ranked third during the first half of the year on the NFIC's list of top 10 telemarketing frauds. Credit card offers ranked No. 1 followed by work-at-home plans. More than a quarter of all consumers who reported telemarketing fraud to NFIC's hotline during that period were age 60 or older, those most likely to be taken in by sweepstakes and prize scams for an average of $2,752.