The former owner of data-driven marketing giant Epsilon has been forced to cough up $150m (£110m) in an effort to avoid criminal prosecution in the US over charges that the company knowingly sold data to clients engaged in fraudulent mailing scams.
According to documents released by the US District Court for the District of Colorado, Epsilon is charged with the federal offence of conspiracy to commit mail and wire fraud.
It is alleged that over a nine-year period, from July 2008 to July 2017, employees of a unit in Epsilon’s US practice sold data to clients who they knew were engaged in fraudulent mass-mailing schemes, which aimed to con people with “falsely or unlawfully promised prizes, personalised psychic services, automobile warranties, cures and treatments, and grant opportunities”, the court papers shows.
In total, four staff were allegedly involved in the illegal activity. The court filing states: “Due to their regular interaction with the fraudulent ‘opportunistic’ clients, the employees were familiar with the clients’ practices, as well as their deceptive solicitations.
“The employees worked to develop and increase business with clients engaged in fraud despite receiving notice that those and similar clients had been arrested, charged with crimes, convicted, and otherwise were subject to law enforcement actions for engaging in misleading practices. The employees engaged in this conduct, in part, to benefit Epsilon, to enrich themselves through sales-based compensation, and to enable the fraudulent clients to solicit new consumers.”
The papers go on to say that all four staff resigned or were “separated” from Epsilon, although it is not known whether they will face legal action themselves. Individuals charged with mail and wire fraud can face fines of up to $1m (£730,000) and 20 years in prison.
The company dissolved its direct to consumer business unit as a result of that unit’s involvement in the scams.
At the time of the offence, Epsilon was owned by Alliance Data Systems, which bought the firm in 2004 for $300m (£219m). Publicis paid $4.4bn (£3.4bn) for Epsilon – and digital marketing specialist Conversant – in April 2019 in a deal which chief executive Arthur Sadoun claimed at the time was “one of the most important” in the company’s 93-year history.
Alliance Data Systems has now stumped up a so-called deferred prosecution agreement (DPA), which is still subject to court approval, that would provide $150m (£110m) in penalties and victim compensation. The majority of the funds, some $127.5m (£93m), will be used to compensate victims.
However, the court has not yet approved deferring the criminal charges, with the next hearing taking place later this week, presided over by judge the Honorable Raymond P Moore.
The documents state: “Epsilon received full credit for its extensive cooperation with the investigation conducted by the Government, including conducting a thorough and expedited internal investigation, making regular factual presentations to the Government, voluntarily making employees available for interviews, and collecting, analyzing, and organizing voluminous evidence and information for the Government.”
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