Iowa leads way in 'undercover phone' work to snare telemarketers

If the staff of Iowa's Consumer Protection Division has a favorite ring tone, it's the one that halts workplace chitchat.

“We have a special telephone that only certain individuals are authorized to answer,” said William Brauch, 54, special assistant attorney general and director of the division.

The phone has as an old-time bell ringer. When it rings, everyone knows it's the “undercover line,” and everyone - except the caller - knows the drill.

“Whoever is taking the calls often will hold up a STOP sign, which is a signal to the rest of us to keep our voices down, because it most likely is a charitable solicitor on the phone,” Brauch said. “We want the caller to believe they are calling someone at their residence.”

More precisely, Brauch's team wants callers to believe they are talking to someone who has a history of parting with money when called at home by strangers.

To bolster the illusion, the state has succeeded in getting an undercover name and phone number on lists that circulate among telemarketers. The state primes the pump by making four or five charitable contributions in small amounts every month.

“Phone calls soon follow,” Brauch said, and the audio recording rolls.

LISTEN: A pair of telemarketers call the Consumer Protection Division's 'undercover phone

LISTEN: A pair of telemarketers call the Consumer Protection Division's 'undercover phone

• Undercover phone trap 1
• Undercover phone trap 2

The most recent undercover-telephone-based action against a telemarketer concluded March 31 with the announcement of a settlement with Associated Community Services of Southfield, Mich.

The Attorney General's Office had accused Associated Community Services of violating Iowa's Consumer Fraud Act by implying that calls made on behalf of Vietnam Veterans of Iowa Inc. were made within Iowa and by failing to disclose it is a professional fundraising company.

In a call recorded in April 2010, a solicitor told a would-be donor: “All the money stays local for the veterans here in Iowa.”

The contract between Associated Community Services and Vietnam Veterans of Iowa provides for an 80/20 split that favors the telemarketer.

The company agreed to change its marketing practices, comply with Iowa laws and pay $35,000 to the state's consumer fraud enforcement fund.

Brauch said the undercover phone was first used in the early 1990s in investigating and bringing criminal charges against people engaged in sweepstakes and other telemarketing scams that targeted the elderly.

“We asked real Iowans if we could have their phone number transferred to our office,” he said. “They would get a new unlisted number … and the state would pay the expenses” temporarily.

The Consumer Protection Division identified potential partners from consumer complaints made by the adult children of older Iowans, he said.

“We researched the law at that time to ensure what we're doing was lawful and within bounds of the ethical guidelines governing lawyers and found out it was, in fact, lawful and entirely ethical as a law enforcement tool,” Brauch said.

The other key issue in taping telephone calls is consent. Iowa is a one-party-consent state. If one of two parties in a call consents to it being recorded, that party need not tell the other about it.

“The issue of undercover taping has been taken up many times by courts and has found to be a legitimate and ethical tool,” Brauch said.

Brauch said Iowa's undercover phone trap became a model for the FBI and other states. A library of tape recordings made in Iowa provided the initial content for a national telemarketing tape library that is housed in Chicago and overseen by the federal government.