If you follow this blog, you know we try to catch readers’ eye with a turn of phrase in the title. But when one of the defendant companies is named Bullroarer – and the FTC’s complaint alleges a massive mobile cramming scam – sometimes these posts just write themselves. The settlement with Lin Miao, who ran the operation, is worth the attention of tech entrepreneurs who may not be familiar with the breadth of remedies available to protect consumers.
According to the lawsuit, Miao and the corporate defendants placed unauthorized charges on consumers’ cell phone bills for text message services – “love tips,” “fun facts,” celebrity gossip alerts, and the like – a practice known as mobile cramming. The FTC says they also used deceptive websites to collect phone numbers that would then be billed for the services.
For example, one site run by the defendants told visitors they’d won Justin Bieber tickets, which they could claim by taking an online quiz. As part of the process, they had to give their phone numbers. Tickets to see The Biebs never materialized, but oh “Baby, Baby, Baby,” the unauthorized charges sure showed up – with inexplicable descriptions like 77050IQ12CALL8663611606 or 25184USBFIQMIG. Lots of people just paid the total, but when consumers got riled and tried to get their money back, Miao and his affiliates set up roadblocks. Some people were promised refunds that never showed up. Others got only partial refunds from their phone company.
Litigation again Bullroarer, Inc., remains pending, but the settlement with Lin Miao makes an important point for entrepreneurs. Business owners, including some in the tech sector, may be under the mistaken impression that when the FTC alleges violations of the law, it’s only the corporate entity that takes the hit. Not so. In appropriate cases, the real live people who ran the operation will be held financially responsible for wrongdoing, which is what happened in this case.
The settlement includes a monetary judgment of more than $150 million, which will be partially suspended based on Miao’s inability to pay the full amount. But he’ll have to turn over nearly all of his assets and the assets of the corporate defendants that are settling with the FTC, including:
- 14 bank accounts and one life insurance policy, less $5,000
- the Mercedes, Range Rover, Audi, and Bentley
- five pieces of real estate, including one in Beverly Hills
- the two Tiffany rings weighing in at 10 carats and 8 carats
- the 6-carat Tiffany earrings
- a Tiffany necklace and two bracelets.
And don’t ask the defendants what time it is because the 3 Patek Philippe watches are part of the deal, too.
To make sure this doesn’t happen again, Lin Miao and the settling corporate defendants – Tatto, Shaboom Media, Bune, Mobile Media Products, Chairman Ventures, Galactic Media, and Virtus Media – are banned from placing charges on consumers’ phone bills. For how long? For pretty much ever.
What can entrepreneurs glean from the outcome of this case? When illegal practices hit consumers in the wallet, the FTC will do what’s necessary to see that the responsible parties don’t personally profit. And that’s no Bull-roarer.