The Ultimate Guide to the Federal Phone and Telemarketing Fraud Statutes - Federal Lawyer
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The Ultimate Guide to the Federal Phone and Telemarketing Fraud Statutes

Federal Phone and Telemarketing Fraud Statutes

Phone and telemarketing fraud remain top priorities for the U.S. Department of Justice (DOJ), Federal Trade Commission (FTC), and other federal agencies. As the Legal Information Institute (LII) explains, “Phone and telemarketing fraud refers to any type of scheme in which a criminal communicates with the potential victim via the telephone. . . . Victims have difficulty distinguishing between reputable telemarketers and scam artists . . . [and frequently include] include the poor, the elderly, and immigrants without strong English skills.”

The federal crime of phone and telemarketing fraud is defined in 18 U.S.C. Sections 2325 and 2326. Additionally, 18 U.S.C. Section 2327 requires that the courts issue a restitution order to compensate “all victims” in phone and telemarketing fraud cases. In this Ultimate Guide to the Federal Phone and Telemarketing Fraud Statutes, we provide an overview of the elements of the crime, the enhanced penalties that Sections 2326 and 2327 impose, and some potential defenses to phone and telemarketing fraud allegations.

The Federal Phone and Telemarketing Fraud Statutes: An Overview

Understanding the federal phone and telemarketing fraud statutes requires a bit of explanation. This is because there is no federal statute that establishes the crime of phone and telemarketing fraud specifically. Instead, 18 U.S.C. Section 2325 defines what constitutes “telemarketing or email marketing,” and then 18 U.S.C. Section 2326 establishes enhanced penalties for certain crimes committed “in connection with the conduct of telemarketing or email marketing.”

Under Section 2325, “telemarketing or email marketing” is defined as:

“[A] plan, program, promotion, or campaign that is conducted to induce—(A) purchases of goods or services; (B) participation in a contest or sweepstakes; (C) a charitable contribution, donation, or gift of money or any other thing of value; (D) investment for financial profit; (E) participation in a business opportunity; (F) commitment to a loan; or (G) participation in a fraudulent medical study, research study, or pilot study, by use of one or more interstate telephone calls, emails, text messages, or electronic instant messages initiated either by a person who is conducting the plan, program, promotion, or campaign . . . .”

As you can see, there is nothing inherently criminal about the conduct described in Section 2325. This is purely a definition of what constitutes phone or telemarketing (or email marketing) for purposes of imposing the enhanced penalties established under Section 2326.

Now, to gain a better understanding of the crime of phone and telemarketing fraud, we can take a look at Section 2326. This section of the U.S. Code states, in part:

“A person who is convicted of an offense under section 1028, 1029, 1341, 1342, 1343, 1344, or 1347 or section 1128B of the Social Security Act (42 U.S.C. 1320a–7b), or a conspiracy to commit such an offense, in connection with the conduct of telemarketing or email marketing . . . [shall be punished as provided for herein].”

Rather than establishing a stand-alone offense of phone and telemarketing fraud, Section 2326 imposed enhanced penalties in cases in which individuals use phone and telemarketing schemes to commit other specified federal white-collar crimes. These crimes include:

  • Identity theft (18 U.S.C. Section 1028)
  • Unauthorized access to computers or information (18 U.S.C. Section 1029)
  • Mail fraud (18 U.S.C. Section 1341)
  • Using a fictitious name or address (18 U.S.C. Section 1342)
  • Wire fraud (18 U.S.C. Section 1343)
  • Bank fraud (18 U.S.C. Section 1344)
  • Healthcare fraud (18 U.S.C. Section 1347)
  • Social Security fraud (42 U.S.C. Section 1320a-7b)

Section 2326 also covers conspiracies to commit these crimes. Thus, even if a phone or telemarketing scheme does not ultimately result in the commission of any of the crimes on this list, all individuals involved can still face the same penalties based on their respective roles in a criminal phone and telemarketing fraud conspiracy.

Penalties for Phone and Telemarketing Fraud Under 18 U.S.C. Sections 2326 and 2327

The significance of committing one of the white-collar crimes listed in Section 2326 while using a phone or telemarketing scheme as defined in Section 2325 is that the use of a phone or telemarketing scheme triggers enhanced penalties. These penalties are outlined in Section 2326 and 2327.

Under Section 2326, individuals convicted of crimes involving phone and telemarketing schemes are subject to additional terms of imprisonment. The additional term is either 5 or 10 years, and is imposed on top of (not in lieu of) the prison sentence imposed for the underlying federal white-collar crime. Section 2326 provides that individuals convicted of phone and telemarketing fraud:

  • “(1) shall be imprisoned for a term of up to 5 years in addition to any term of imprisonment imposed under any of [the crimes listed above], respectively; and
  • “(2) in the case of an offense under any of those sections that—(A) victimized ten or more persons over the age of 55; or (B) targeted persons over the age of 55, shall be imprisoned for a term of up to 10 years in addition to any term of imprisonment imposed under any of those sections, respectively.”

Under Section 2327, individuals convicted of phone and telemarketing fraud must also be sentenced to restitution. This additional penalty is mandatory, as subsection 2327(a) states that, “the court shall order restitution to all victims of any offense for which an enhanced penalty is provided under section 2326″ (emphasis added). Subsection 2327(b)(4)(B) goes on to clarify that, “[a] court may not decline to issue an order [of restitution] because of—(i) the economic circumstances of the defendant; or (ii) the fact that a victim has, or is entitled to, receive compensation for his or her injuries from the proceeds of insurance or any other source.”

The amount of restitution owed under Section 2327 is calculated based on “the full amount of the victim’s losses.” Subsection 2327(b)(3) provides that, “the term ‘full amount of the victim’s losses’ means all losses suffered by the victim as a proximate result of the offense.”

Potential Defenses to Charges Under the Federal Phone and Telemarketing Fraud Statutes

Individuals targeted in federal phone and telemarketing investigations have several potential defenses available. Of course, as with all federal white-collar crimes, the specific defenses that are available in any particular case depend on the unique circumstances involved. With this in mind, some examples of potential defenses to the imposition of enhanced penalties under 18 U.S.C. Sections 2326 and 2327 include:

  • The Alleged Scheme Did Not Involve “Telemarketing or Email Marketing” – To be subject to the enhanced penalties imposed under Sections 2326 and 2327, an individual must use “telemarketing or email marketing” to commit a crime listed in Section 2326. If an individual’s activities do not constitute “telemarketing or email marketing” as defined in Section 2325, then the enhanced penalties do not apply. Along with defining this term, Section 2325 also establishes exceptions for certain activities that are not deemed “telemarketing or email marketing” for purposes of criminal enforcement.
  • No Commission of a Crime Listed in Section 2326 – To be prosecuted as phone or telemarketing fraud, an alleged scheme must involve one of the crimes listed in Section 2326. If federal prosecutors cannot prove the underlying crime, then they do not have a case to pursue. As a result, when defending against federal phone and telemarketing fraud cases, targets, defendants, and their counsel should focus not only on the telemarketing aspect, but on the elements of the underlying crime as well.
  • Inadequate Evidence to Meet the Government’s Burden of Proof – Regardless of the facts at hand, the burden of proof always rests with the government in federal criminal cases. If federal agents and prosecutors are unable to collect the evidence they need to prove guilt beyond a reasonable doubt, then prosecution is unwarranted. This makes executing a proactive defense strategy during the government’s investigation critical. In many cases, it will be possible to avoid an indictment by convincing prosecutors that they do not have (and will not be able to obtain) the evidence they need to move forward.
  • Inadmissibility of the Government’s Evidence Due to Constitutional Violations – If prosecutors have the evidence they need to move forward, then another potential defense strategy may be to fight to keep the government’s evidence out of court. Unconstitutional wiretaps, raids, and other investigative tactics can all render the government’s evidence inadmissible in court. Without admissible evidence, prosecutors won’t be able to prove guilt beyond a reasonable doubt.

Again, these are just examples. While federal investigations involving allegations of phone and telemarketing fraud present enhanced risks, there are a variety of ways to fight these allegations both in and out of court. For those who are under investigation or facing charges, the best approach is to engage experienced defense counsel as soon as possible.

Request a Complimentary Consultation with a Federal White-Collar Defense Lawyer

Our federal white-collar defense lawyers represent clients throughout the United States in phone and telemarketing fraud cases. If you are under investigation or facing charges under the federal phone and telemarketing fraud statutes, you can call 888-680-1745 or contact us online to arrange a complimentary consultation.

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