A telemarketing company yesterday agreed to a $1.5 million settlement with the Federal Trade Commission after being charged with fraudulent sales practices.

Datacom Marketing Inc., a Canadian telemarketer, fooled thousands of U.S. companies into paying for a $399 business directory that they didn't order or want, according to the FTC filing.

The telemarketing operation used what it called an "assumptive sales approach" to trick businesses into believing that someone at the company had placed an order for a business directory or directory listing, the FTC said.

"The defendants made an initial telephone call and led businesses to assume that a purchase had already been authorized," the FTC said. "During a second, recorded call, the defendants asked a series of leading questions to make it appear the directory had been ordered. A directory was then sent to the business -- along with an invoice for $399."

Under the settlement, the telemarketer's two owners, Judy Neinstein and her brother, Stanley Fromstein, will pay $455,000 to be returned to consumers. Paul Barnard, a former president of the companies, will pay $50,000. In addition, the FTC will return checks worth about $470,000 that were sent to the telemarketers and seized as part of the law enforcement action. Also, the telemarketers will not be able to collect on invoices worth about $560,000 that they had already sent before their operations were halted by the FTC.

A third owner and sibling, Bernard Fromstein, also faces charges, along with the most recent president of the company, Charles Farrugia. Neinstein, Bernard Fromstein, and Barnard also face charges from Canadian law enforcement.

Businesses should be wary of social engineering attacks by phone or email in which the caller purports to have a prior relationship with the company, authorities said.

"Everyone is a potential target of deceptive telemarketing," said Raymond Pierce, deputy commissioner of Canada's Competition Bureau, during the investigation of Datacom Marketing last year. "We encourage businesses and consumers alike to recognize fraud, report it, and stop it."

The Datacom scam was ongoing for nearly ten years, authorities said. The Competition Bureau alleges that at the height of its operation in 2002, Datacom scammed over 50,000 Canadian and American businesses out of more than $23 million. According to Bureau estimates, Datacom's volume of commerce during the investigation period was over $150 million.

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