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Wachovia to pay up to $144M over telemarketers

Wachovia Corp. will pay $144-million to settle charges that it allowed telemarketers to use its accounts to help them take millions of dollars from elderly people across the country.

The federal Office of the Comptroller of the Currency said Friday that Wachovia failed to act against the telemarketers even after the victims and their banks complained they were being defrauded.

The government said the telemarketers, including a large operation based in Largo, got bank account information from victims while selling vouchers for discount travel and groceries, identity theft certificates and other questionable products and services. The information was then used to draft money out of the victims' accounts and deposit it in the Wachovia accounts of the telemarketers and payment processors.

Wachovia benefited from the $3.9-million in fees it earned on the accounts, which were active from June 2003 through December 2006. Most of the victims were not Wachovia customers.

The settlement document cites a Largo telemarketing company, FTN Promotions Inc., which did business under multiple names, including Suntasia Inc., Strategia Marketing LLC and Guardian Marketing Services Corp.

The Federal Trade Commission sued FTN and eight related companies last year in federal court in Tampa, saying they scammed tens of thousands of customers out of millions of dollars. The case is pending.

One of the victims, Gayla Scott of Fort Myers, said last year that she lost nearly $300 after getting a call saying she qualified for a free vacation in Orlando. Three companies took money out of her bank account and it took the assistance of the Better Business Bureau to get it back.

Wachovia is the largest bank in Florida, with 19 percent of the market. It passed Bank of America with the acquisition of World Savings Bank. The bank has not admitted any wrongdoing but will pay up to $125-million in restitution, $8.9-million toward consumer education programs and a $10-million fine.

"This situation was unacceptable and we regret it happened," said Wachovia spokeswoman Christy Phillips-Brown. "We will work diligently to provide restitution to consumers affected by the situation and to educate consumers." She said Wachovia no longer accepts accounts from companies that are strictly telemarketers.

Wachovia's restitution will be distributed in three ways. Payments to those who lost money to FTN Promotions and its related companies will go through the court-appointed receiver in the Tampa case. A receiver in a separate Pennsylvania case will handle restitution to those whose money went through Payment Processing LLC.

Helen Huntley can be reached at hhuntley@sptimes.com.

Wachovia Q&A

Q. How did the scam work?

A. Telemarketers tricked people into giving their bank account information by offering discounted travel and services, gifts and free trial memberships. The telemarketers then prepared unsigned checks against the victims' accounts and deposited them into Wachovia accounts belonging to the telemarketers or payment processors. The signature block on the checks said "authorized by your depositor, no signature required." Most victims were not Wachovia customers.

Q. What did Wachovia do wrong?

A. It failed to take timely action against the telemarketers and payment processors who were its customers. The government says many victims and their banks complained to Wachovia that the drafts were unauthorized.

Q. What happens next?

A. Wachovia will set aside the $125-million restitution money and develop a payment plan, which will be publicized on its Web site. If money is left over after all those eligible are paid, Wachovia gets it back. The bank has 45 days to come up with a plan for spending $8.9-million on consumer education, then 24 months to spend it.

Wachovia to pay up to $144M over telemarketers 04/25/08 [Last modified: Wednesday, April 30, 2008 4:14pm]

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