by Jim Kouri - Federal authorities announced on Wednesday that 24 suspects in Costa Rica and the United States have been charged with criminal violations in the Western District of North Carolina and the Southern District of Florida as a result of a three-year investigation into an international sweepstakes scam that defrauded more than 2,000 American victims out of at least $20 million.
A total of 19 individuals have been arrested in the United States and Costa Rica in connection with the probe. Ten individuals were arrested in California, Florida, Nevada, and Texas. Another nine suspects were arrested in Costa Rica. Five suspects remain fugitives.
The latest arrest occurred on Friday, May 19 at Dallas Fort Worth International Airport as a suspect returned from vacation at a Jamaican beach resort. Most of the other arrests took place on May 16 during the simultaneous execution of search and arrest warrants in the United States and Costa Rica. Costa Rican officials devoted more than 150 officers to those raids, which were among the largest in the nation's history.
During the May 16 enforcement action, Costa Rican authorities assisted by US officials executed 17 search warrants in Costa Rica, closing down numerous telemarketing fraud boiler rooms.
The searches in Costa Rica also resulted in the seizure of six firearms, roughly $160 million Costa Rican colones ($320,000 USD), small amounts of morphine, Voice over Internet Protocol (VoIP) technology, and computers. In the United States, agents executed two search warrants, resulting in the seizure of computers and documentary evidence.
The arrests and seizures were the result of an investigation led by US Immigration and Customs Enforcement (ICE), the US Postal Inspection Service, the Department of Commerce Office of Inspector General, the State Department's Bureau of Diplomatic Security, the Department of Justice, the Federal Trade Commission and Costa Rican law enforcement agencies. Officials from Western Union Financial Services, Inc. and Vonage also provided critical assistance to the international investigation.
"The best defense against these types of scams is public awareness. US citizens need to know that federal agents don't call asking for money or asking for money to be sent somewhere. That's not how we do business," said Julie Myers, Assistant Secretary for U.S. Immigration and Customs Enforcement.
"I would also add that if a sales pitch over the phone sounds too good to be true, it probably is."
The investigation began in September 2003 when ICE agents in Miami received information from Montana about victims of a sweepstakes scam that was allegedly being perpetrated by individuals in Miami. ICE agents began working closely with their counterparts and developed evidence to execute federal search warrants at the Miami offices of Knot Data, LLC and Columbia Productions Inc. in August 2004.
Evidence from the searches indicated that these businesses re-sold VoIP technology, manufactured by Vonage, to individuals in Costa Rica. VoIP technology allows individuals to make phone calls that appear to be from any U.S.-based area code chosen by the caller, regardless of the actual location from which the call originates. Further investigation revealed that those purchasing VoIP technology in Costa Rica from the Miami companies were operating fraudulent telemarketing boiler rooms.
Working closely with Costa Rican authorities, ICE agents and their counterparts determined that the operators of the telemarketing boiler rooms in Costa Rica were calling thousands of victims throughout the United States and using VoIP technology to make it appear as though their calls were coming from Washington, D.C. area codes and other locations in an effort to add validity to their fraudulent solicitations.
During their pitch to victims, the fraudsters in Costa Rica typically claimed to be a "US Customs" official or a representative of another federal agency. They would then tell the victims that they had won 2nd prize in a foreign sweepstakes and that, to collect the prize money, the victims needed to send via Western Union anywhere from $1,000 to several thousand dollars to an "insurance entity" in Costa Rica as a "refundable insurance fee."
Victims sent wire transfers to Costa Rica to claim the prizes, but never received any money.
Once the victim had wired the money to Costa Rica, the fraudsters would often call the victims back and inform them that they had actually won 1st prize and that they needed to wire thousands of additional dollars in fees in order to ensure the safe delivery of the prize money.
The defendants and their co-conspirators continued to call victims with this pitch as long as the victims continued to wire money to Costa Rica. None of the victims ever received any prize money.
It is believed that more than 2,000 U.S. victims were defrauded out of at least $20 million through this international sweepstakes fraud.
During the course of the investigation, ICE agents also identified so-called "list brokers" who sold lists of individuals in the United States who had been targeted and/or successfully scammed by deceptive contests, lotteries, sweepstakes and other offers. The investigation revealed that these brokers had leased or sold lists of fraud victims to operators of the telemarketing boiler rooms in Costa Rica.
Phil Ley, Vice President for Corporate Security, Western Union Financial Services, Inc, said, "Western Union takes the issue of consumer fraud very seriously. It has been our longstanding practice to work cooperatively with law enforcement agencies around the world, supporting their efforts to prosecute those who seek to take advantage of the unsuspecting or the vulnerable."