Infotel faces charges

Telemarketers received government incentives to set up in St. John's

Rob Antle rantle@thetelegram.com
Published on June 5, 2010

The key figures behind a telemarketing operation lured to Newfoundland by federal grants and provincial tax breaks are facing criminal charges.

Three brothers - Gordon Frank, 53, Theodore Frank, 49, and Sean Frank, 43, all from Montreal - and six companies they operated face deceptive telemarketing charges.

The key figures behind a telemarketing operation lured to Newfoundland by federal grants and provincial tax breaks are facing criminal charges.

Three brothers - Gordon Frank, 53, Theodore Frank, 49, and Sean Frank, 43, all from Montreal - and six companies they operated face deceptive telemarketing charges.

The charges relate to alleged business directory scams that vacuumed in an estimated $60 million over five years.

The federal Competition Bureau believes at least some of the activities took place in St. John's.

The six charged companies collectively fall under the Infotel umbrella.

In June 2001, Infotel set up shop in St. John's. The company landed in Newfoundland - at least in part - thanks to government incentives.

Less than a year after Infotel's arrival, a series of Telegram reports detailed the company's cloudy corporate structure and dubious record with consumer regulatory agencies in Canada, the United States and United Kingdom.

Businesses and non-profit groups alleged they were billed for directory listings they never ordered, and that Infotel sales personnel claimed to be asking for a renewal of a listing when none actually existed.

The cost of the company's British business directory was £189.95 (C$430 in 2002). The American directory sold for US$289.95 (C$455 at the then-exchange rate).

The Telegram also revealed that Infotel came to Newfoundland after being offered EDGE status by the provincial government - a designation that qualified the company for tax holidays - and ultimately received more than $200,000 in direct assistance from Ottawa.

At the time, then-Liberal industry minister Kelvin Parsons dismissed the newspaper's reporting as misleading, noting that Infotel had passed an "extensive background check" by the internationally-recognized independent financial audit firm PriceWaterhouseCoopers.

"None of the background checks on Infotel produced anything that would cause us concern," Parsons said in an April 27, 2002, news release.

But two and a half years later, in December 2004, federal agents executed a search warrant at Infotel's St. John's office.

Not long after the raid, Infotel changed its name to Vericom. By 2006, the company had dialed down its operations in St. John's.

In April - more than five years after raiding Infotel's offices - the Competition Bureau finally laid charges.

The matter is expected back in a Montreal courthouse in July.

The defence has yet to enter a plea, according to Competition Bureau spokeswoman Gabrielle Tasse.

The charges relate to Infotel activity at call centres in St. John's, Toronto and Montreal from 1999 to 2004, Tasse said.

Infotel becomes the second government-supported call centre to face criminal charges.

In 1999, the province and feds teamed up to offer tax breaks and financial support to another Montreal-based telemarketing firm, the Mouyal Corporate Group.

In December 2000 - following a series of critical newspaper reports and hundreds of consumer complaints - federal agents and members of the Royal Newfoundland Constabulary raided Mouyal call centres in St. John's, Toronto and Montreal.

Two years later, six Mouyal executives and six companies under its corporate umbrella were charged with scores of counts of deceptive telemarketing and conspiracy to commit deceptive telemarketing.

Five senior Mouyal officials were initially convicted of deceptive telemarketing. One received 18 months in prison for his role in the scam.

The fraud's mastermind, businessman Michael Mouyal, eventually pleaded guilty. He was fined $1 million, but escaped jail time.

The Mouyal case was believed to be one of the largest telemarketing swindles in Canadian history.

Both operations - Infotel and Mouyal - landed in the province during the former Liberal administration's term.

After both call centres were raided, the new Conservative government initially insisted the government's screening processes for its EDGE program were stringent enough.

But by 2006, government officials - in the wake of Michael Mouyal's guilty plea - announced they would focus on inbound telemarketing operations, not outbound ones.

"It's a lot easier to justify doing business with a company that has contracts with somebody like General Electric than it is to do business with somebody who's going to pick up the phone and start calling people to try to do business," then-innovation minister Trevor Taylor said Nov. 22, 2006.

On Friday, the Department of Innovation said in a statement that the government "co-operated fully" with the Competition Bureau's investigation.

rantle@thetelegram.com