FTC Continues Campaign Vs Scammers, Spammers

May 15, 2003

Roy Mark

In its latest crackdown on Internet fraud, the Federal Trade Commission (FTC) said Thursday 45 criminal and civil law enforcement actions have been taken against Web scammers and deceptive spammers in a coordinated campaign with the Securities and Exchange Commission (SEC), U.S. Postal Inspection Service, three United States Attorneys, four state attorneys general, and two state regulatory agencies.

In addition to the law enforcement actions, the FTC and 21 U.S. and international agencies have launched an initiative to get organizations in 59 countries to close the open relays that allow spammers to avoid detection. Open relays allow third parties to route their e-mail through servers of other organizations in order to disguise the real origin of the e-mail.

The agencies drafted a letter which was translated into 11 languages and signed by 14 different U.S. and international agencies, urging the organizations to close their open relays and help reduce spam.

According to the FTC, the law enforcement actions announced Thursday represent a wide array of deceptive schemes and illegal scams including auction fraud, the illegal sale of controlled substances, bogus business opportunities, deceptive money-making scams, illegal advance-fee credit card offers, and identity theft.

In previous actions this month alone the FTC has been involved in actions against Web scam artists involving investment schemes, SARS prevention products, a bogus site purporting to pre-register consumers for the National Do Not Call registry, and a Web marketer who sold cell phone radiation protection patches through television, radio and Internet advertising.

"Today's Internet is not a lawless environment," said Howard Beales, director of the FTC's Bureau of Consumer Protection. "In fact, the NetForce partnership demonstrates the importance of enforcement on the Internet beat. We have the biggest impact on deceptive spammers and online scammers when law enforcement agencies band together to root out and prosecute fraud."

As part of the fraud sweep, The FTC filed eight district court lawsuits, naming 20 defendants, to halt deceptive Web operations.

In the Thursday press conference, the FTC particularly pointed out its actions against Alycon Technologies, which generated more than 1,200 complaints to the FTC's Consumer Sentinel database. The FTC asked a district court to halt Alycon Technologies' unauthorized billing and collection for videotext services purportedly accessed on the Internet.

According to the FTC, the defendants use a modem dialing program to disconnect consumers from their own Internet service providers (ISPs) and reconnect them to the scammers' network without the consumers' authorization or approval. Using the dialing program, the defendants then capture the telephone number used by the modem, and match it against several databases of line subscriber information, which frequently contain errors.

The line subscribers identified as responsible for the captured telephone number later receive bills charging them $4.99 a minute for each minute the defendants claim videotext services were purchased, regardless of whether the line subscribers authorized the purchase.

The FTC claims that many consumers never visited the Alycon sites at all, and were charged due to billing service errors of which the defendants were aware. Furthermore, according to the FTC, the defendants' dialing program downloads onto consumers' computers without their authorization.

Other actions included:

* A Web-based scam targeting college-bound students and their parents guaranteeing for a fee of $895 to procure 100 percent of the funding needed to send a student to college. In fact, the FCC says, the defendants procured no money for the fee and, instead, provided consumers with readily available scholarship information that consumers could have obtained for no fee;

* Two different cases against participants in an e-mail chain letter scheme that promised participants significant earnings, pledged that the scam was legitimate, and urged recipients to contact the FTC's Associate Director for Marketing Practices, who they claimed would vouch for the legality of the illegal schemes. The FTC stopped the illegal schemes, and settlements with the defendants bar them from participating in illegal chain e-mail schemes in the future; and

* One Web-based scam claimed that consumers who paid a one-time fee of $49.95 were guaranteed to receive a "100 percent unsecured" VISA or MasterCard credit card with a credit limit up to $5,000. What a consumer actually received was access to a Web site containing links to various companies that claim to issue credit cards.

In addition to the FTC cases, 11 other federal and state law enforcers brought 37 law enforcement actions. The agencies include the Attorneys General of Louisiana, Texas, Oklahoma, and Arkansas; the United States Attorneys for the District of New Mexico, the Western District of Louisiana, and the Northern District of Texas; the United States Postal Inspection Service; the Securities and Exchange Commission; Texas State Board of Pharmacy; and the Texas Department of Health.


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