A Kansas City-area man pleaded guilty Thursday to helping lead a massive telemarketing scheme that Minnesota federal prosecutors have called the nation's largest elder fraud conspiracy, with victims spanning the country.
Russell "Rusty" Rahm, 52, of Olathe, Kan., admitted to his role in a scheme involving 60 co-conspirators from across the United States and Canada that bilked about 183,000 victims —many of whom were elderly or otherwise vulnerable — out of $335 million.
The case, first charged in 2020, grew out of a 2016 Minnesota Attorney General's Office lawsuit against a Fridley man whose magazine subscription company was later ordered by a judge to pay $20 million.
Rahm — who also owns a medical device company and at one point raced speedboats during his leisure time — entered his guilty plea to one count of conspiracy to commit mail fraud before U.S. District Judge John Tunheim via videoconference from his suburban Kansas City home.
According to Rahm's guilty plea, the conspiracy lasted roughly two decades, dating back to 2000 and continuing until February 2020. Rahm managed two magazine subscription companies in Shawnee, Kan., another suburb of Kansas City. Rahm admitted that those, and other companies linked to the conspiracy, used fraudulent sales scripts and pitches to defraud victims into paying for expensive, at times duplicative, subscriptions through a "series of lies or misrepresentations."
Co-conspirators traded "lead lists" of potential victims to contact, Rahm said, and callers were instructed to falsely tell victims that they were calling about an existing magazine subscription that was set to auto-renew.
In reality, the companies had no relationship to the victim and were instead defrauding them into buying an unwanted additional magazine subscription package. Prosecutors have said that some of the victims were billed by as many as 10 phony companies at once and would incur up to $1,000 in monthly credit card charges,
Rahm helped manage sales leads and billing in exchange for a percentage of the total revenue taken from victims. He also tried to insulate himself from the conspiracy by relying on call centers based in Florida. Rahm said he tried to hide the fraud scheme by setting up virtual offices for his companies.
"I should have known what scripts they were using and I chose to look the other way," Rahm said when asked why he was pleading guilty Thursday.
"You knew this was fraud, correct?" Assistant U.S. Attorney Joseph Thompson asked in response.
"That is correct, yes," Rahm answered.
According to the plea agreement, Rahm's potential sentence could range from 24 to 30 years in federal prison. He has agreed to help pay more than $103 million in restitution alongside several related defendants. Prosecutors have meanwhile seized money from multiple bank accounts controlled by Rahm, and have taken possession of three properties.
Aggravating factors that led to his proposed sentence include being a leader in the conspiracy, the number of senior citizen victims and the monetary losses he was responsible for.
Rahm was scheduled to stand trial alongside four others on conspiracy and other charges next month in Minneapolis. A February trial is meanwhile scheduled for another 10 defendants in the case, including David Moulder, a Minnesota man also singled out by prosecutors as a key leader in the scheme for running several Burnsville-based magazine companies.
Tunheim said Thursday that he would schedule a sentencing date for Rahm at a later time.
The case became the first charged by Minnesota federal prosecutors under the Senior Citizens Against Marketing Scams Act of 1994, which is designed to protect seniors against predatory scams.