ABC News Investigations of the Year: Phantom Debt Collectors
Feds bust California man on 21 counts of wire fraud.
Dec. 31, 2012 — -- This week, the Blotter is reprising five different Brian Ross Unit investigations that made a difference in 2012. Today: Offshore scammers con American consumers into paying off millions in non-existent debts.
Hundreds of thousands of cash-strapped Americans were being targeted by abusive debt collectors operating out of overseas call centers, part of what authorities were calling a massive scam that targeted struggling Americans -- especially those who have gone online to apply for payday loans. Armed with personal information from those pilfered applications, the threatening callers, who claimed to be debt collectors poised to initiate legal action, managed to pry loose millions of dollars from their victims -- even when the victims never owed money in the first place.
"This is what we call a phantom debt collection scam," said Jon Leibowitz, the chairman of the Federal Trade Commission. "It's a very pernicious and innovative new fraud."
An ABC News investigation pried into the scam and found that, working through call centers in India, the fake debt collectors had dialed at least 2.5 million calls, persuading already cash-strapped victims to send them more than $5 million. Some reported receiving dozens of calls per hour. They were victims like Cindy Gervais, of New Orleans, who went online for a quick loan when her husband's car was hit by a driver who didn't have insurance. READ the original ABC News report.
WATCH the original ABC News report.Even though Gervais paid the loan off, the so-called "phantom" debt collectors with Indian accents began calling to say she still owed money.
"He more or less told me that if I didn't pay, they were going to have someone on my doorstep to arrest me," she told ABC News. "And that they were going to contact my place of business, and tell them what kind of person I am."
At first, she said she resisted. Then the calls became more frequent, and started to ring on her cell phone, and at the grocery distribution company where she had worked for 27 years.
"I was more or less in panic mode because he told me there would be someone before noon at my place of business to arrest me and take me to jail," she said tearfully. "So I agreed to pay him."
After receiving scores of complaints, investigators with the Federal Trade Commission said they began tracking the calls, and following the payments. They alleged the payments led them to a California company run by an Indian-American named Kirit Patel, and that such scams would not be possible without American front men.
"I would say that all roads of this scam, or many of the roads of this scam, lead back to Mr. Patel," said the FTC's Leibowitz.
ABC News tracked Patel for weeks, from the suburbs of San Francisco to Austin, Texas. When he was finally located at his son's home in Texas, he declined to be interviewed, instead hustling into his house and trying to hide his face from cameras. His lawyer, Mark Ellis, said in June he believed it was far too early to pass judgment on his client. Ellis, a Sacramento-based attorney, told ABC News that Patel was hired for a nominal fee to set up an American shell company, and had no idea what the call centers in India were doing.
Impact: In August, United States Attorney Benjamin B. Wagner announced that Patel, 68, of Tracy, California, was charged by a federal grand jury with 21 counts of wire fraud and mail fraud for a fraudulent debt collection scheme, a crime that carries a potential sentence of 20 years in prison or a $250,000 fine, or both.
The indictment alleges that Patel established a front company named "Broadway Global Master" that was used to process the payments after victims relented and provided credit card numbers to avoid arrest over the nonexistent debts. The case is currently being adjudicated in federal court in Sacramento. Patel has pleaded not guilty.
