Law Enforcement Posse Tackles Internet Scammers, Deceptive Spammers

Initiative Launched to Prevent Spammers From Concealing Identity and Evading Detection

For Release

 

In the latest in a series of law enforcement initiatives targeting Internet fraud, the Federal Trade Commission, Securities and Exchange Commission, United States Postal Inspection Service, three United States Attorneys, four state attorneys general, and two state regulatory agencies today announced they have filed 45 criminal and civil law enforcement actions against Internet scammers and deceptive spammers. 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 by spam filters and law enforcers.

"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."

According to the FTC, the law enforcement actions announced today 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.

The FTC filed eight district court lawsuits, naming 20 defendants, to halt deceptive Web operations:

  • In a case that generated more than 1,200 consumer complaints to the FTC's Consumer Sentinel database, the FTC asked a district court to halt the defendants' 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 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 alleges that many consumers never visited the defendants' 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. The FTC coordinated the investigation of this case with the offices of numerous state attorneys general, and with the invaluable assistance of the New Jersey Attorney General; the Georgia Attorney General; the Georgia Governor's Office of Consumer Affairs; the Wisconsin Department of Agriculture, Trade and Consumer Protection; the Illinois Attorney General; and the Idaho Attorney General.
  • One Web-based scam targeted college-bound students and their parents. For a fee of $895, the defendants pledged to procure 100 percent of the funding students would need to attend college. In fact, they procured no money for the students. Instead, they provided consumers with readily available scholarship information that consumers could have obtained free.
  • 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.
  • One Web-based scam claimed that consumers who paid a one-time fee of $49.95 were guaranteed to receive a "100% unsecured" VISA or MasterCard credit card with a credit limit up to $5,000.00. Consumers who clicked on the "Claim your card NOW," icon on the Web site and entered their checking account information received a confirmation page or e-mail that typically stated, "Approved! Congratulations! Your membership has been approved." In fact, according to the FTC, what consumers received was access to a Web page containing hyperlinks to various companies that purportedly issue credit cards -- a list of hyperlinks that would have been available free to consumers who used a search engine.
  • A scheme used spam and Web sites to market a "100% Legal and Legitimate" work-at- home envelope stuffing opportunity. Using deceptive information in the "from" line of their e-mail, the defendants represented that they were affiliated with well-known entities, such as Hotmail and MSN. Marketing materials promised consumers that they would earn $1 for each envelope they stuffed, and could earn as much as $1,500 a week stuffing envelopes supplied by the defendants. What consumers received for their $50 fee was a set of instructions to market a deceptive credit-repair manual.
  • A third work-at-home scheme, called "Instant Internet Empires," touted the money making potential of five pre-packaged Internet businesses, promising that buyers could make more than $115,000 a year using the product. The defendants told consumers that the product would enable them to make money while they sleep. What consumers received for their $47.77 investment was the right to reproduce the defendants' advertising Web site and try to resell its contents to other consumers. To achieve the promised $115,000 in earnings, consumers each would have to sell the product to 2,400 additional consumers, who would each need to sell to 2,400 additional consumers to achieve the same earnings, and so on. According to the FTC, by the third generation of the scheme, participants would need to make a total of 13,829,760,000 sales, more than twice the earth's population, for each of them to achieve the advertised earnings. In fact, many purchasers failed to make even one sale after months of trying.
  • Another Web-based scheme was filed under seal. The seal had not been lifted by press time.
    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.

THE INTERNATIONAL EFFORT TO REDUCE DECEPTIVE SPAM

In addition to the law enforcement actions, the FTC and 17 other consumer protection and law enforcement agencies initiated an effort to cut down on deceptive spam by urging organizations to close "open relays." Open relays allow third parties to route their e-mail through servers of other organizations, thereby disguising the real origin of the e-mail. Spammers identify and use other organizations' open relays to avoid detection by the spam filter systems used by internet service providers to protect their customers from unwanted spam. Routing spam through open relays also makes it difficult for law enforcement agencies to track down deceptive spammers.

Fifty law enforcers from 17 agencies identified 1,000 potential open relays, 90 percent of which were in 16 countries: U.S., China, Korea, Japan, Italy, Poland, Brazil, Germany, Taiwan, Mexico, Great Britain, Chile, France, Argentina, India, Spain, and Canada. The agencies drafted a letter which was translated into 11 languages and signed by 14 different US and international agencies, urging the organizations to close their open relays and help reduce spam.

"Law enforcement is not the only way to tackle spam problems," said Beales. "Through this education initiative, we hope organizations throughout the world will shut the door on unwanted spam by securing their servers."

The FTC has a Web site at www.ftc.gov/spam to combat spam and has developed a publication, "Open Relays - Close the Door on Spam," to encourage businesses, consumers, academic institutions and others to close open relays. To find out more about the open relay project go to www.ftc.gov/openrelay.

Partners in the open relay project include the Attorneys General of Arkansas, Louisiana, New Mexico, Oklahoma, and Texas; the Office of the U.S. Attorney for the District of New Mexico; the U.S. Postal Inspection Service; the Securities and Exchange Commission's Ft. Worth Office; Texas Department of Health; Social Security Administration; Office of the U.S. Attorney for the Northern District of Texas; Oklahoma Department of Securities; Lubbock, Texas Police Department; Richardson, Texas Police Department; Arlington, Texas Police Department; Custer County, Oklahoma District Attorney's Office. International partners include the Australian Competition and Consumer Commission; Industry Canada; Servicio Nacional del Consumidor (SERNAC); and the Japanese Delegation to OECD Committee on Consumer Policy.

Ex parte temporary restraining orders with asset freezes were issued in four cases. Two cases have been resolved with stipulated final judgments. Complaints have been filed in the remaining two cases and the FTC is seeking preliminary relief in both actions.

This is the fourth Netforce Project since April 2002. More than 60 state, federal and local agencies have brought over 150 Internet-related law enforcement actions in connection with the Netforce Sweeps.

NOTE: The Commission files a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant has actually violated the law. The case will be decided by the court.

Copies of the legal documents associated with these cases and a complete case list are available from the FTC's Web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1 877-382-4357), or use the complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

(FTC File No. 032-3108 - Jeffrey Stone Evans)
(FTC File No 032 3107 - Kent Benson)
(FTC File No 022-3305 - Alyon Technologies)
(FTC File No 032-3012 - Easy Money)
(FTC File No 032-3112 - ClickForMail.com Inc.)
(FTC File No 032-3081 - College Funding Center)
(FTC File No. 032-3047 - Instant Internet Empires)
(FTC File No. 032-3025 - This case is under seal)

Contact Information

Media Contact:
Claudia Bourne Farrell,
Office of Public Affairs
202-326-2181
Staff Contact:
Marc Groman,
Bureau of Consumer Protection
202-326-2042