They used robotic dialers capable of sequentially calling every number in every area code across the United States.
They made hundreds of millions of phone calls to consumers, businesses, and government agencies, even to 911 emergency centers, unrestrained by laws barring such calls.
They touted "extended warranties" on automobiles, using marketing scripts and materials designed to mislead consumers into believing that their actual warranties were about to expire.
To keep from getting caught, they used an electronic trick called "spoofing" that displayed fake numbers on caller-ID systems. One bogus number was used so often that it was listed in more than 11,000 complaints to the Federal Trade Commission.
Those are among the allegations that the FTC made in lawsuits filed in federal court in Chicago yesterday against three companies it accuses of joining in a massive telemarketing scheme - "an enterprise utterly permeated with fraud," the FTC said in court papers.
Investigators said that working together, the three companies illegally violated the privacy of millions of consumers and may have snared thousands into buying auto-service contracts of questionable value.
FTC officials said the dimensions of the scheme were not entirely clear, partly because the case was rushed to court after Wachovia Corp. inadvertently let slip to the defendants that investigators had demanded bank records.
Concerned that documents would be shredded and funds moved offshore, the FTC notified the companies yesterday of its plan to seek a restraining order, said Steve Baker, head of the FTC's Midwest regional office.
Within hours, a federal judge in Chicago issued a temporary restraining order against one of the companies, Transcontinental Warranty, based in Fort Lauderdale, Fla. The order barred Transcontinental from making deceptive claims, froze its assets, and put the company under control of a court-appointed receiver.
A hearing is scheduled for noon today seeking similar relief against two other companies, Voice Touch Inc., of Daytona Beach, Fla., and Network Foundations L.L.C., of Chicago.
The FTC said the two companies developed a system for placing large numbers of calls, routing prospects to "closers," and flouting telemarketing laws.
The lawsuits said that over the last two years, Voice Touch and Network Foundations had provided their call-routing system to Transcontinental and at least two similar clients. One of them, National Automotive Warranty Services Inc., a Missouri company that also does business as Dealer Services and USfidelis, is cooperating with the FTC's investigation, Baker said.
In court papers filed yesterday, the FTC says that one of Voice Touch's principal operators, James Dunne, has advised clients that they can ignore complaints that they are violating the federal do-not-call list, because their calls could not be traced.
The FTC said Transcontinental "heeded Dunne's advice, directing its telemarketers to simply hang up on consumers who ask to be removed from the calling list, without honoring such requests."
The FTC said Transcontinental's "motto posted on signs around the office is: 'Hang Up. Next.' " It said the motto "epitomizes the utter contempt that defendants and their clients have for consumers' privacy and the law."
At a telephone news conference yesterday announcing the lawsuits against Transcontinental, Voice Touch, and Network Foundations, FTC Chairman Jon Leibowitz said the companies made "extraordinary efforts to hide their identities" from call recipients and the government agencies they complained to.
The FTC said Transcontinental's training manual "instructs sales representatives to answer the question 'Who are you?' with the following lie: 'We are the Warranty Service Center. We provide extended warranty services for ________ (Ford, GMC, Honda, Toyota, Nissan, etc.) throughout the United States and Canada.' "
Leibowitz said the FTC was not alleging that the service contracts sold by Transcontinental were shams, but said it considered them to be "very, very suspect."
Neither Dunne nor officials at Transcontinental or Network Foundations could be reached yesterday for comment.