Denver, Colorado - The Justice Department Tuesday announced criminal charges in two separate cases against defendants accused of knowingly furnishing fraud schemes with information on elderly potential victims. The charges coincide with World Elder Abuse Awareness Day, a day intended to raise public awareness of the fight against elder abuse, neglect and financial exploitation.
“These matters underscore the importance of World Elder Abuse Awareness Day and the continuing threat posed by all forms of elder abuse, including elder fraud schemes that bilk seniors of their life savings,” said Deputy Assistant Attorney General Michael D. Granston of the Justice Department's Civil Division. “As the actions announced today make clear, companies and individuals that knowingly commit or facilitate elder fraud schemes will be held accountable.”
On June 14, the U.S. District Court for the District of Colorado arraigned a marketing company, KBM Group LLC, on a criminal information alleging that it sold millions of Americans’ information to perpetrators of elder fraud schemes. KBM Group and the Justice Department simultaneously filed a deferred prosecution agreement (DPA) with the court, in which KBM Group agreed to settle the charges. The agreement is under consideration by U.S. District Court Chief Judge Philip A. Brimmer in Denver.
Under the terms of the DPA submitted to the court, KBM Group would pay a total of $42 million, with $33.5 million of that amount going to compensate victims of fraudulent schemes that used consumer data sold by KBM Group. KBM Group also agreed to implement significant compliance measures designed to safeguard consumers’ data and prevent its sale to individuals or entities engaged in fraudulent or deceptive marketing campaigns.
In a similar case, the U.S. District Court for the District of Colorado unsealed an indictment yesterday charging Robert Reger, 53, of Boulder, Colorado, and David Lytle, 60, of Leawood, Kansas, with conspiracy to commit mail and wire fraud, and substantive mail and wire fraud charges, for allegedly participating in the sale of millions of Americans’ information to perpetrators of elder fraud schemes. According to the indictment, Reger and Lytle engaged in this conduct while employed at Epsilon Data Management LLC, a marketing company that resolved its criminal liability through a DPA with the Department of Justice earlier this year. Under the terms of that DPA, Epsilon agreed to pay a total of $150 million, with $127.5 million of that amount going to compensate victims of fraudulent schemes that used consumer data sold by Epsilon. Reger served as senior vice president of Epsilon’s Data Practice and Lytle served as a Business Development Manager.
As part of their negotiated DPAs, both KBM Group and Epsilon acknowledged that they sold consumer lists to a number of mass-mailing fraud schemes that sent false “sweepstakes” and “astrology” solicitations to consumers. Those solicitations stated that each consumer recipient had won a large prize or individualized psychic service that they could obtain by paying a fee. In reality, the solicitations — as known to KBM Group and Epsilon employees — were mass-produced mailings and victims who paid a fee received nothing of value. As reflected in the consumer lists sold by KBM Group and Epsilon to perpetrators of the fraud schemes, the schemes disproportionately affected the elderly and other vulnerable individuals.
“Each day we see elder financial abuse we are reminded we have more work to do,” said Chief Postal Inspector Gary Barksdale of the U.S. Postal Inspection Service. “The actions announced today demonstrate our commitment to investigating companies and individuals who facilitate the victimization of older Americans. These bold actions and the payment of compensation to the victims of these schemes should not be overlooked by corporations. The U.S. Postal Inspection Service and its federal law enforcement partners have demonstrated we will continue to work tirelessly to keep our communities and our vulnerable populations safe from financial exploitation.”
Subject to consideration by the court, the KBM Group DPA provides that KBM Group must select, and cover the costs of, an independent claims administrator to distribute the $33.5 million to identified victims with established losses caused by fraud schemes that used KBM Group data. The claims administrator will contact identified victims directly. More information about the victim compensation amount and fund distribution will be posted at the following website: https://www.justice.gov/civil/case/united-states-v-kbm-group-llc. Victims of elder fraud schemes may also contact the National Elder Fraud Hotline, which provides services to seniors who may be victims of financial fraud. The hotline is staffed by experienced case managers who provide personalized support to callers. The hotline’s toll-free number is 833-FRAUD-11 (833-372-8311).
The U.S. Postal Inspection Service investigated both the KBM Group and Epsilon cases.
Assistant Director John W. Burke and Trial Attorney J. Matt Williams of the Civil Division’s Consumer Protection Branch and Assistant U.S. Attorneys Rebecca Weber and Hetal J. Doshi of the U.S. Attorney’s Office for the District of Colorado are prosecuting the KBM Group case. Trial Attorneys Alistair Reader and Ehren Reynolds of the Consumer Protection Branch and Assistant U.S. Attorney Hetal J. Doshi of the U.S. Attorney’s Office for the District of Colorado are prosecuting the Reger and Lytle case.
World Elder Abuse Awareness Day was first recognized by the Justice Department in June 2010. Since that time, government, non-profit organizations, and advocacy groups have used the day to draw attention to the extraordinary harm senior citizens experience from elder physical abuse and financial exploitation.