United States: FTC Takes Second Swing At Alleged Telemarketing Terror

Commission says security system company VMS ignored settlement agreement

Millions and Millions

Back in 2014, the Federal Trade Commission hit VMS, a seller of home security systems and home security monitoring services, with a complaint, charging that the company made phone calls to persons registered on the National Do Not Call Registry and ignored requests by call recipients to cease further calls.

The complaint outlined a series of alleged abuses, including more than one million outbound calls to numbers that were on the registry, failure to secure consent from the consumers for the calls, and some interesting and novel schemes to add sales leads to their call lists.

One such scheme allegedly included calling consumers under the pretense of executing a home safety survey. At the end of the call, as a supposed reward for finishing the survey, the consumer was offered a chance at a free home security system. According to the Commission, VMS sales people would return the call and start to pitch.

VMS settled with the Commission in 2014, promising that it would abstain from calling registered numbers and from calling consumers who asked not to be called again. The settlement also included a $3.4 million penalty, reduced to $320,700 due to inability to pay.

Bear, Poked

But in an unusual turn of events, the Commission returned to take a second bite out of VMS with another complaint, and it's a doozy.

The FTC claims that VMS (now renamed Alliance Security Inc.) committed misrepresentation under the FTC Act, assisted abusive or deceptive telemarketing acts, misrepresented its affiliations, and failed to identify the seller in their calls – all violations of the Telemarketing Sales Rule – and obtained credit reports on possible target consumers without a permissible purpose, a violation of the Fair Credit Reporting Act. Numerous affiliated companies were drawn into the fray as co-defendants.

At the heart of the FTC's complaint was an alleged disregard by VMS/Alliance of the 2014 settlement agreement and consent order. "Indeed, the day after this Court entered the 2014 Order," the complaint reads, "Alliance's own employees placed 622 outbound telephone calls to numbers listed on the DNC Registry. On the one-year anniversary of this Court entering the 2014 Order, Alliance's own employees placed 1,729 outbound telephone calls to numbers listed on the DNC Registry."

The Takeaway

The calls that triggered the second complaint were, according to the Commission, so incessant that some customers were agreeing to have a home security system installed – simply to have the opportunity to speak face-to-face with the installers and ask them to tell the company to desist.

The FTC also claims that VMS/Alliance was misrepresenting itself during some of those calls as ADT, a well-known security system company. And in a bizarre twist on one of the complaints – that Alliance was unnecessarily requesting credit reports on a number of consumers – the Commission accused VMS/Alliance of attempting to request the credit reports of government luminaries, including Barack Obama, Joe Biden, Bill Clinton and Donald Trump.

The new co-defendants – telemarketing companies and their principles who the FTC claims aided VMS/Alliance in a number of schemes too baroque to describe here – settled with the Commission on March 22, 2018. As of one week later, litigation against VMS/Alliance and its owner and officer, Jasjit Gotra, is ongoing in Massachusetts District Court, where both the old and the new complaints were filed.

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