FTC Charges Three Spammers, Settles With Four Others

Nov 14, 2002

Roy Mark

The Federal Trade Commission (FTC) has filed three more complaints against e-mail spammers, including one selling spam filters that actually increases junk mail, settled with four others, and sent warning letters to approximately 100 spammers warning them that their e-mail appeared to be illegal and that law enforcers could take action against them if they continued their fraudulent scams.

Under current law, sending spam is not illegal, but the FTC monitors spammers who appear to be running scams such as pyramid schemes, chain letters and offering non-existent products and services.

In addition to the complaints and settlements, The FTC and ten other federal, state, and local law enforcement and consumer protection agencies participated in the FTC's "Spam Harvest," an initiative designed to test which actions consumers take online that put them most at risk for receiving spam.

The operation also developed consumer education material, including a publication, "E-mail Address Harvesting: How Spammers Reap What You Sow," that uses the lessons learned from the Spam Harvest to provide tips to consumers who want to minimize their risk of receiving spam.

"We're committed to pursuing law enforcement actions against deceptive or fraudulent spammers," said J. Howard Beales, III, Director of the FTC's Bureau of Consumer Protection. "But we also want to inform consumers about how they might reduce the amount of unwanted spam in their in-box. The lessons we learned from the spam harvest research project suggest some approaches for consumers who want to keep their e-mail address out of the hands of spammers."

In one of the complaints, The FTC alleges that NetSource One and James R. Haddaway, operating as WorldRemove, used spam and the Internet to sell a service they claimed would reduce or eliminate spam from consumers' e-mail. Using an undercover account to test the claims, the FTC found it received more spam after signing up for the service. The agency charged the defendants with violations of the FTC Act.

In another case, The FTC charges the defendants with using deceptive spam, including unauthorized use of logos of well-known financial institutions including Radian Bank, Prudential, and Fannie Mae, to induce victims to disclose sensitive financial information such as income, mortgage balances, and home values. The spammers purported to offer consumers competitive financing and refinancing loans.

The defendants also allegedly forged e-mail headers - a technique known as "spoofing," - so that any undeliverable messages went to e-mail addresses unaffiliated with the defendants. One unaffiliated third party was swamped with more than 30,000 bounce-back and angry "do not spam me" e-mails intended for the defendants.

The FTC also alleges that the defendants deceptively claimed that consumers who received their solicitations could opt out of future offers. The FTC is charging the defendants with unfair and deceptive practices, violations of the FTC Act, and with "pretexting," -- posing as an entity it was not in order to get sensitive financial information -- a violation of the Gramm-Leach-Bliley Act.

In the third case, the FTC claims Brian Silverman, doing business as BES Systems, Electro Depot, Dallas Tech Surplus, and New York Tech Surplus offered laptop computers for sale via Internet auction houses, including eBay. The FTC alleges that Silverman accepted only cash, checks, or money orders for payment from winning bidders.

In many instances, the FTC alleges, Silverman failed to provide the computers or provide refunds to his victims. The FTC charged him with violating the FTC Act and the Mail or Telephone Order Merchandise Rule.

The settlements announced by the FTC involve four individuals who were caught in a sting action by the agency. In February, the FTC sent warning letters to more than 2,000 spammers whose chain-letter spam also contained deceptive claims.

The agency used its spam database, which contains more than 20 million unsolicited commercial e-mails, to identify individuals who had received warnings and who continued to send the messages.

Undercover investigators sent money to Jessica Drees, Heidi Freitas, Rosaline Leahy, and Nancy Merrill, who accepted the payments. The settlements will bar their participation in illegal chain letter schemes in the future.

In the Spam Harvest campaign to determine what online activities place consumers at risk for receiving spam, and FTC task force known as Northeast Netforce "seeded" 175 different locations on the Internet with 250 new, undercover e-mail addresses and monitored the addresses for six weeks.

The sites included chat rooms, newsgroups, Web pages, free personal Web-page services, message boards and e-mail service directories. One hundred percent of the e-mail addresses posted in chat rooms received spam; the first received spam only eight minutes after the address was posted.

Eighty-six percent of the e-mail addresses posted at newsgroups and Web pages received spam; as did 50 percent of addresses at free personal Web page services; 27 percent from message board postings; and nine percent of e-mail service directories.

Spam Harvest also found that the type of spam received was not related to the sites where the e-mail addresses were posted. For example, e-mail addresses posted to children's newsgroups received a large amount of adult content and work-at-home spam.


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