In the latest in a series of law enforcement initiatives targeting Internet fraud, the Federal Trade Commission, United States Department of Justice, United States Secret Service, Federal Bureau of Investigation, and United States Postal Inspection Service, have filed more than 285 criminal and civil law enforcement actions targeting Internet scams and deceptive spam.
"By coordinating our law enforcement efforts with other federal, state and local law enforcers, we leverage our efforts and maximize our impact," said Timothy J. Muris, Chairman of the FTC. "We intend to send a strong message to those who use the Internet to break the law: Cyberspace is not outer space and we will trace you, track you, and stop you."
The FTC announced federal court orders against 10 individuals and five corporations. They represent an array of deceptive schemes and illegal scams including Internet auction fraud, bogus business opportunities, deceptive money-making scams, and phony credit offers.
The FTC charged that GM Funding and individual defendants used deceptive spam, including the unauthorized use of logos of well-known financial institutions such as Radian Bank, Prudential, and Fannie Mae, to induce victims to disclose sensitive financial information such as income, mortgage balances, and home values. According to the FTC, 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 them. The FTC also alleged that the defendants deceptively claimed that consumers who received their solicitations could opt out of future offers. The FTC charged 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.
The settlement with GM Funding, Inc., Global Mortgage Funding, Inc., and Robert D. and Damian R. Kutzner permanently bans them from sending spam and requires them to give up $60,500 in ill-gotten gains. The settlement with Universal IT Solutions, Inc. and Anthony Tamras bars them from making misrepresentations, or assisting and facilitating others in making misrepresentations, and contains a suspended judgment of $60,500.
The FTC charged that five individual defendants used a variety of fictitious names to promote a fraudulent envelope-stuffing, work-at-home scheme. The defendants used deceptive spam and Web sites that claimed that for a $50 fee consumers would receive envelopes and pamphlets. The promoters claimed that they would pay consumers $1 apiece for stuffing the envelopes and claimed that consumers could make $500 to $1,500 a week doing so. Some of the spam promised that consumers' payments were fully refundable.
Instead of receiving envelopes and pamphlets, consumers received a booklet containing instructions on how to market the defendants' deceptive credit repair manual to other consumers. No consumers made the promised earnings, and consumers did not receive refunds.
The settlements with David and Irene Herrera and James and Vincent Zezula permanently bar them from sending spam, from making deceptive representations, and from providing others with the means and instrumentalities to commit deception. Based on financial statements provided by the defendants, $7,000 will be provided for consumer redress. Should the financial representations be found to be inaccurate, $536,412, the total of their ill-gotten gains, will be due.
"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. According to the FTC, for their $47.77 investment, consumers received the right to reproduce the defendants' Web site and the right to try to resell its contents to other consumers. The FTC alleged that 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.
The stipulated final judgment and order with Instant Internet Empires and Irwin F. Kern, IV, also known as Frank Kern, bars them from making false or misleading income claims, from participating in chain marketing schemes, and from providing others with the means and instrumentalities to violate federal laws. Based on financial statements provided by the defendants, $247,000 will be provided for consumer redress. Should the financial representations be found to be inaccurate, the total of their ill-gotten gains, $634,222, will become due.
The FTC charged that Stetzel offered computers, computer-related equipment, and other merchandise for sale on Internet auction Web sites. Consumers who "bought" the merchandise never received it. The FTC charged Stetzel with violating the FTC Act and the Mail Order Rule. A default judgment bars violations of FTC Act and the Mail Order Rule and orders restitution in the amount of $9,723.66.
Copies of the legal documents associated with this case 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.
Claudia Bourne Farrell
Office of Public Affairs
Bureau of Consumer Protection
(Civil Action No. SACV 02-1026 DOC (MLGx) GM Funding)
(Civil Action No. CV 03-3202 GAF (SHSx) Easy Money)
(Civil Action No. CV-S-030396-kjd (LRL) Stetzel)
(Civil Action No. 5:03-CV-0140-3-CAR Instant Internet Empires)