448 F.Supp.3d 257
E.D.N.Y2020Background
- Defendants Nicholas and Natasha Palumbo operate two Arizona-based intermediary VoIP carriers, Ecommerce National (TollFreeDeals) and SIP Retail, that route large volumes of international-origin robocalls into the U.S. and sell U.S. call-back (DID and toll-free) numbers to customers.
- The government alleged Defendants knowingly carried and facilitated widespread fraud (SSA, IRS, U.S. Marshals and tech-support impostor scams, loan scams) that induced victims to remit substantial sums; the court found multiple victims and traceback data tying fraudulent calls to the Defendants’ network.
- Since 2017, Defendants received over 100 fraud notifications from carriers, USTelecom, and state attorneys general; they typically responded only by blocking specific spoofed numbers or passing complaints upstream rather than terminating abusive clients.
- The Court’s earlier consent TRO blocked sixteen named entities; subsequent evidence showed Yodel (a major client) routed massive volumes of imposter calls through Defendants’ system, supported by samples of SIPNav call data and robo-blocker vendor analyses.
- The government moved for a preliminary injunction under 18 U.S.C. § 1345 to halt Defendants’ call-termination and call-back services to prevent continuing wire fraud; the court concluded probable cause that Defendants knowingly participated in or were recklessly indifferent to a widespread scheme.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Probable cause to enjoin under 18 U.S.C. § 1345 (wire fraud) | Evidence (tracebacks, victim statements, SIPNav samples, vendor call content, repeated notices) shows Defendants knowingly facilitated a scheme to defraud or were recklessly indifferent. | Defendants dispute breadth of allegations and claim inability to fully monitor carried traffic; assert they responded to complaints and lack intent. | Court: Probable cause established; Defendants knew or were recklessly indifferent; §1345 injunction appropriate. |
| Scope of relief—whether broad shutdown of call termination and call-back services is necessary | A full ban on U.S. call-termination and selling call-back numbers is necessary because intermediary structure lets fraudsters rotate numbers and evade narrower measures. | Broad injunction is disproportionate; court should permit narrower measures, allow best practices, or restrict only identified bad actors. | Court: Narrow measures ineffective; nationwide ban on providing call termination and selling call-back numbers to U.S. traffic (and related record-preservation) granted. |
| Need for evidentiary hearing or additional electronic surveillance (e.g., wiretap) before injunction | Government: existing affidavits, tracebacks, call recordings, and call-data sampling suffice; hearing not required where record resolves disputed facts. | Defendants: demand evidentiary hearing and argue government should obtain wiretaps or sample a larger fraction of calls. | Court: No hearing required; paper record and admissible hearsay suffice; wiretap unnecessary for §1345 injunction. |
| Equity arguments re: large-client Yodel (economic hardship and fairness) | Government: abundant, high-quality evidence ties Yodel to fraudulent traffic; shutting down relationship is necessary and equitable. | Defendants: Yodel represents core of business; shutting it down would effectively shut defendants’ operations; government did not sue Yodel. | Court: Yodel evidence persuasive (SIPNav sample, vendor analyses, related TCPA findings); equities favor injunction despite business harm. |
Key Cases Cited
- United States v. William Savran & Assocs., Inc., 755 F. Supp. 1165 (E.D.N.Y. 1991) (courts may issue preliminary injunctions under §1345 for ongoing wire fraud)
- Williams v. Affinion Grp., LLC, 889 F.3d 116 (2d Cir. 2018) (definition of a scheme to defraud)
- New York State Catholic Health Plan, Inc. v. Acad. O & P Assocs., 312 F.R.D. 278 (E.D.N.Y. 2015) (intent may be shown by knowing participation or reckless indifference)
- Sunward Elecs., Inc. v. McDonald, 362 F.3d 17 (2d Cir. 2004) (injunction scope must be tailored to case facts and balanced equities)
- Mullins v. City of New York, 626 F.3d 47 (2d Cir. 2010) (preliminary injunction determinations may rely on less formal procedures and incomplete evidence)
- Charette v. Town of Oyster Bay, 159 F.3d 749 (2d Cir. 1998) (evidentiary hearing not required when facts are resolvable on paper record)
- United States v. Narco Freedom, Inc., 95 F. Supp. 3d 747 (S.D.N.Y. 2015) (where probable cause of fraud exists, balance of hardships favors government enforcement)
- United States v. Diapulse Corp. of America, 457 F.2d 25 (2d Cir. 1972) (no vested interest in continuing illegal business activity)