Ex-Employees of Data Firm Found Guilty in Plot to Sell Client Lists to Scammers

Former employees from Epsilon, a data management company that works with both nonprofit and for-profit clients, were found guilty of federal fraud charges last month.

Robert Reger, a former senior vice president at Epsilon, and David Lytle, a former sales manager at Epsilon, were convicted of conspiracy to commit mail and wire fraud and numerous counts of mail and wire fraud in a scheme to defraud millions of people.

During the two-week trial, evidence revealed Reger and Lytle sold targeted lists of names and addresses to fraudsters who sent false and deceptive mail over the course of a decade. At the time of the crime, the Irving, Texas-based company, which has a sales office in Westminster, Colorado, had a database of 100 million households via transactional data from its marketing clients, which included nonprofits.

With that data, Reger and Lytle used Epsilon’s data modeling to predict new lists of people who were most likely to respond to fraudsters. This scheme included dozens of clients who would scam people in two ways:

Sweepstakes. “The solicitations claimed that, to collect the promised prize, a recipient consumer needed to remit a small processing fee,” according to a 2021 indictment against the company. “In reality, victims who paid the fee received nothing of value and were subjected to a barrage of additional solicitations making similar false promises.”

Astrology. “The mail solicitations sent by these schemes promised that a ‘psychic’ had an individualized vision about each mail recipient and offered purportedly personalized astrological services or unique, supernatural objects in exchange for a fee,” according to a 2021 indictment against the company. “In reality, the mailings were mass-produced and victims submitting money in response to the mailings received nothing of material value in return.”

Furthermore, the scheme disproportionately targeted elderly and other vulnerable people. In total, the scheme sold the data of more than 30 million people.

Reger, who worked at the company, from 2005 to 2017, built and led the direct to consumer sales unit engaged in fraud. Meanwhile Lytle served as Epsilon’s business development manager from 2012 to 2018. In that role, he recruited clients for the direct to consumer unit and signed up many of the fraudulent clients.

Reger and Lytle were found guilty of seven counts of mail fraud. In addition, Reger was convicted of six counts of wire fraud, and Lytle was found guilty of 12 counts of wire fraud as a result of emails exchanged, including those that contained individuals’ names and addresses, and carried out other objectives of the scheme. Their sentencing is scheduled for Sept. 30. They face a maximum penalty of 20 years in prison for each count.

The U.S. Postal Inspection Service Transnational Elder Fraud Strike Force investigated this case.

“The U.S. Postal Inspection Service (USPIS) sees the conviction of these individuals as a significant victory in our ongoing efforts to protect older adults from fraud and exploitation,” Eric Shen, the inspector in charge of the USPIS’ criminal investigations group, said in a statement. “These criminals preyed on some of the most vulnerable members of our community, and today's verdict sends a clear message that such predatory behavior will not be tolerated. We will continue to work tirelessly to ensure justice is served, and to prevent these crimes from happening in the future.”

In 2021, Epsilon settled one count of conspiracy to commit mail and wire fraud via a deferred prosecution agreement with the Consumer Protection Branch of the Justice Department’s Civil Division and the U.S. Attorney’s Office for the District of Colorado, thereby resolving its criminal liability. As part of the agreement, Epsilon agreed to pay $150 million, which included $127.5 million in victim compensation. The company also agreed to implement compliance measures to safeguard data and prevent further fraudulent marketing campaigns, as well as allow consumers to request the company not sell their information.

As part of the agreement, Epsilon admitted its employees in the direct to consumer sales unknowingly sold modeled lists of consumers to clients engaged in fraud. In 2018, Steven Fritz Kessler, former vice president of Epsilon, pleaded guilty to conspiracy to commit mail fraud in this case.