Feds Bust Massive Magazine-Subscription Scam Targeting Older Consumers

Many of the accused ran or worked for businesses operating in 14 states: Arkansas, Arizona, California, Colorado, Florida, Illinois, Iowa, Georgia, Kansas, Minnesota, Mississippi, Missouri, New Mexico and North Carolina. Other telemarketers were in Canada.

How the subscription scams worked

According to documents filed in U.S. District Court in Minneapolis, the alleged schemes worked like this: Victims with one or more magazine subscriptions were offered renewals, often at a reduced cost. In reality, the defendants were not calling to renew or reduce the price of existing subscriptions. Instead, the accused “tricked their victims into signing up for entirely new magazines, which they did not want and often could not afford,” documents show.

Sometimes the defendants, some working in or operating call centers, pretended to be canceling victims’ magazine subscriptions — but instead signed them up for many magazines.

Because the defendants traded “lead lists” of potential victims’ names, some consumers received repeated calls and were fraudulently billed by up to 10 companies at a time, court documents say. The names on the lists were sold for as much as $10 or $15 per name.

One 78-year-old woman's son complained in a handwritten note to the FBI that his mother had been spending $1,402.91 on magazines annually.

"My mom has stopped several credit cards, only to have these predators crawl back onto the next card she gets,” the son, not named in court documents, wrote. “Think about it, my mother has been battling (and paying) these God-awful predators for nearly ALL OF HER RETIREMENT YEARS!!!"

A criminal case against allegedly fraudulent magazine sellers features a son’s letter to the FBI complaining about predatory telemarketers.

U.S. District Court for the District of Minnesota

Betty M., 69, of Texas, was the victim of a payment-reduction scam, one of the variations used by fraudsters. In a wiretapped call in May 2019, she heard from an unidentified man who purported to be calling from a large international law firm in Chicago. He said she owed $1,100 to the “Family Readers Club” and said she could pay off her account for a one-time payment of $499. After she said she needed time to think about it and asked to call back, he became aggressive and threatened to pursue legal action and renew her subscription for three years. Two minutes later, he called back and left this voice message:

"Yeah, Betty, it's not smart hanging up on attorneys who have your credit score right in front of them … If you don't want to make a payment or settle this, we are going to pursue legal action for the full $1,100 on your account, and in the meantime this contract will renew for another three years. So you're going to receive magazines probably until the day you die."

Defendants face multiple charges

The defendants are named in three indictments, the largest of them filed against Russell Jason Rahm, known as “Rusty Rahm,” and 42 other people. Their scheme allegedly lasted 20 years, documents show. He was owner and CEO of several Kansas-based firms involved in fraudulent magazine sales, including Subscription Ink Co. and Millennium Marketing.

The defendants, some targets of earlier enforcement actions by state officials, now face charges including conspiracy, mail fraud, wire fraud and violating a 1994 law called the Senior Citizens Against Marketing Scams Act, also called the SCAMS Act.

The announcement in Minneapolis was led by MacDonald, who said the case was the largest elder fraud scheme prosecuted in her state. She said officials are working to get restitution for victims and thanked law enforcement officer for “their grit and dedication in tackling, at the systemic level, this widespread fraud."

She was joined by Paul, the FBI's special agent in charge, as well as officials from the U.S. Postal Inspection Service, the law enforcement arm of the U.S. Postal Service.

Officials said there may be more victims of the alleged schemes and urged people to report suspected fraudulent activity to magazinevictims@fbi.gov or visit fbi.gov/magazinevictim.