More than 38,000 consumers will get full credits totaling over $2.74 million for telephone charges they unknowingly incurred when their computer modems allegedly were hijacked and re-routed to expensive, international numbers, the Federal Trade Commission announced today. The refunds are included in settlements the FTC has reached with several firms and individuals charged by the agency with running the high-tech Internet scam, which used a purported "viewer" software program to disconnect consumers from their local Internet service providers and reconnect them to international numbers assigned to the country of Moldova.
The FTC alleged that the defendants enticed consumers who visited their websites on the Internet to download the “viewer” software in order to access computer-stored images for free. Once the consumer downloaded and activated this software, the FTC alleged, it automatically disconnected consumers’ modems from their local Internet service providers, turned off the speakers on the consumers’ modems, and silently dialed international telephone numbers to reconnect consumers to the Internet through an expensive long distance telephone call. Once hijacked in this fashion, consumers’ modems remained connected to those international tele phone numbers even when consumers left the defendants’ websites or left the Internet entirely to do word processing, spreadsheet or other computer work. As a result, many consumers received phone bills with international call charges totaling several hundred or several thousand dollars. The FTC received valuable assistance from AT&T’s office of Network Security in spotting and investigating this alleged scam.
The settlements are with defendants named in the case at the time it was filed in February 1997, as well as additional responsible parties the FTC has identified in its continuing investiga tion since that time. The first settlement, which requires the court’s approval to become binding, is with original defendants Audiotex Connection, Inc., of Rockville Centre, New York; Promo Line, Inc., of Dix Hills, New York; William Gannon, an officer and owner of Audiotex Con nection and Promo Line, Inc.; and David Zeng, a computer programmer; as well as newly-named defendant Internet Girls, Inc., another corporation of William Gannon located in Rockville Centre, New York. All of these defendants, except David Zeng, did business as Electronic Forms Management. David Zeng did business as DaveZ@aol.com. The FTC asked the court to dismiss charges against Anna M. Grella, an original defendant, following the further investigation.
The second settlement, being announced today for a public comment period before the Commission determines whether to make it final and binding, is with other newly-named respondents: Beylen Telecom, Ltd., of Grand Cayman in the Cayman Islands; NiteLine Media, Inc., of Brooklyn New York; and Ron Tan (also known as Roeun Tan), an officer of NiteLine Media.
According to the FTC’s complaints detailing the charges against the defendants and the respondents, consumers who were surfing the Internet and stopped to visit one of the defendants’ or respondents’ websites for "free" computer images -- including sites named www.beavisbutthead.com, www.sexygirls.com, www.1adult.com, and www.erotic2000.com -- first had to download a special "viewer" program called "david.exe." Before allowing consumers to visit a selected site, this program surreptitiously disconnected them from the local telephone number of their chosen Internet service provider and reconnected their computer modems to the Internet through an international telephone call, all without their knowledge because the program also turned off their modem speakers so that they could not hear the disconnect or the dialing of the international number. Moreover, the FTC alleged, the calls never were connected to Moldova, but rather terminated in Canada, even though consumers still received telephone bills for higher- priced Moldovan calls.
Initially, the FTC alleged, although the defendants advertised their websites as free, consumers racked up international calling charges of more than $2 per minute until they turned off their computers. Later in the life of the scheme, the defendants added some disclosures to their websites, but still failed to disclose that the calls would terminate in Canada or that consumers would continue to incur the Moldovan rates even after they exited the relevant websites, the FTC charged.
The proposed settlements would require the defendants to redress consumer victims by paying funds to AT&T and MCI, which will issue credits to their customers who were billed for the calls, and to the FTC, which will issue refunds to customers of other long-distance carriers who were billed for the calls.
In addition, the settlements would prohibit the defendants from:
- misrepresenting that consumers can use a software program to view computer images for free when there are costs associated with downloading, installing, activating or using the program;
- using any download program to generate modem calls on the Internet without clearly and conspicuously disclosing: 1) that the program will terminate the consumer’s local Internet connection; 2) that the program will dial an international telephone number and connect them to a location outside the United States; 3) that the international call will cost a stated amount per minute; and 4) that the consumer’s computer will remain connected to the international number for a certain period of time or until the consumer takes some action;
- causing consumers to be charged for destinations that their calls never actually reach; and
- distributing any program similar to "david.exe" to third parties.
The settlements also would require the defendants to obtain written assurances from any billing entity that telephone bills consumers receive for the defendants’ services reflect where the international calls actually go.
The settlements also contain various record keeping and reporting provisions that would assist the FTC in monitoring the defendants’ compliance.
The Commission vote to accept the settlements was 4-0. The settlement with Audiotex Connection, Promo Line, Internet Girls, Gannon and Zeng was filed in U.S. District Court for the Eastern District of New York, in Uniondale, this morning. A summary of the settlement with Beylen Telecom, NiteLine Media and Tan is being published in today’s Federal Register and will be subject to public comment for 60 days, after which the Commission will determine whether to make it final and binding. Comments should be addressed to the FTC, Office of the Secretary, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580.
NOTE: These agreements are for settlement purposes only and do not constitute an admission of law violations by the defendants. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000. Court-filed consent decrees also have the force of law when signed by the judge.
Copies of the settlements and complaints in these cases are available from the FTC’s web site at http://www.ftc.gov and also from the FTC’s Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. Consent agreements subject to public comment also are available by calling 202-326-3627. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.
Audiotex: FTC File No. X970021; Civil Action No. CV-97-0726 (DRH)
Beylen: FTC File No. 972 3128
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