Offers of a Free Giveaway Turned Out to be a Fraud

Jeon, a 28-year-old office worker, received a phone call from a young woman last December who introduced herself as a telemarketer from an internet shopping mall DMD21.

Saying to Jeon that he was selected in her company`s free giveaway event, the telemarketer encouraged Jeon to gain membership of her company by paying annual membership fee. Members will have the opportunity to enjoy a free overseas trip and get a 30 percent discount in their car insurance fees, mobile phone fees and oil prices for their cars, said the telemarketer.

Jeon hesitated at first. But the telemarketer said that he could withdraw from the membership if he didn`t like contracting terms. She also said that members would have all of their membership fee back after one year of membership as the money was a kind of investment to the company. Believing the telemarketer, Jeon told his credit card number and expiration date to the telemarketer.

Two days later, Jeon received guidelines for the membership and one box of health supplementary food. But having questions about the quality of the food and contracting terms for his membership, he decided to return the food and withdraw from the membership. The company`s telephone line, however, was busy all the day. Even after he succeeded in making a phone call to the company after dozens of try, the company dragged their feet by saying that withdrawing procedure would take two to three days due to the computing network problems or that the person in charge of the work was not in the office. Because of the company`s deliberate delaying tactics, seven days during which he can withdraw his membership without paying a fine passed. He had to remain as a member not to pay the fine. But he could not even get his annual membership fee back, let alone enjoying all the promised benefits of a membership.

This kind of fraud is rampant these days. Telemarketers call to people randomly and encourage people to gain membership of their company promising free giveaways or special discounts. But the company usually ran away with membership fees.

The cyber agency of the Seoul Police Agency arrested the president of the internet shopping mall DMD21. By mobilizing 500 telemarketers, he received 495 thousand won from 50.000 people as an annual membership fee. Then he ran away with the total of 2.4 billion won. Five people including the financial director of the company was also prosecuted without detention on charges of fraud. Two people including the chief of business planning unit was put on the police`s wanted list.

The police said that after setting up a fake Internet shopping mall and establishing 201 branches nationwide, the president and others mobilized 500 telemarketers to make a phone call to homes and offices at random. They attracted members by promising unrealistic benefits such as a free overseas trip, a 50 percent discount for an accommodation in a famous hotel, a 30 percent discount for a car insurance fee and a mobile phone fee and returning of an annual membership fee to members after one year of membership.

The police found out that they signed contracts with eight credit card companies in advance so that the purchase of their goods can be authorized only with credit card numbers and their expiration dates.

One victim said that the company employed delaying tactics by not answering customers` calls exploiting the fact that members have to pay 70,000 won in fine if they want to return a product bought by a credit card seven days after the purchase. He also said that some victims also paid the fine.

According to the police, they made phone calls at random to offices and homes, signing up one out of 10,000 people as a member of their company. The police said that the large increase of victims were largely attributable to the victims` passive response to the fraud as the membership fee they lost was not a big money.

Meanwhile, the police is investigating five to six multilevel marketing companies which are alleged to be engaged in the similar kind of fraud. 270 victims of the DMD21`s fraud opened “anti-DMD21” site on the portal site Daum and are preparing for a compensation lawsuit against the company.

Hoon Lee dreamland@donga.com