Scammers Claim The FTC Will Confirm Legality of Illegal Scheme
They arrive unexpectedly by e-mail: chances to earn easy money in a short period of time by following a simple program. They're intriguing. They're inviting. They're illegal. Now, the Federal Trade Commission is launching a three-point program to crack down on deceptive spam.
"Almost everyone with an e-mail account gets spam," said Timothy J. Muris, Chairman of the FTC. "It's intrusive, unwelcome, and annoying. Deceptive junk e-mail is also illegal. We want to send a message today: we're going after deceptive spam and the people who send it. We want it off the Net."
Seven defendants caught in an FTC sting operation have agreed to settle charges that they were spamming consumers with deceptive chain letters. The letters were slightly changed variations on the same message. They promised "$46,000 or more in the next 90 days," or similar extravagant amounts to recipients who were to send $5.00 in cash to each of four or five participants at the top of the list. The letters instructed new recruits to place their own name and address at the top of the list and remove the name on the bottom. In return for the $5.00 payment, recruits received "reports" providing instructions about how to start their own chain letter schemes and recruit tens of thousands of others via spam.
"This chain letter deceptively claims the program is legal and urges recruits who question its legitimacy to contact the FTC's Associate Director for Marketing Practices. Well, I am the Associate Director for Marketing Practices," said Eileen Harrington, "and these chain letters are illegal."
In September 2000, the FTC sent letters to 1,000 spammers, warning them that their chain letter spam scheme was illegal and instructing them to stop promoting their chain letters, to return any money they had received by participating in the program, and to forward a copy of the FTC's warning letter to everyone they had spammed. In October 2001, the FTC searched online newsgroups and the agency's junk e-mail database looking for the chain letter scam. They found more than 2,000 participants in the chain letter from almost 60 countries around the world. Using undercover post office boxes and e-mail accounts, FTC investigators and paralegals sent the requisite $5.00 fee to individuals who had previously been warned, but who appeared to be continuing in the scheme. Those who responded by sending the undercover FTC employees the "report" demonstrated that despite the FTC warning letter, they continued to participate in the illegal chain letter spam.
The stipulated final judgments and orders for permanent injunction bar all the defendants from promoting, marketing, advertising, offering for sale, selling, or assisting others in any Ponzi scheme, chain marketing scheme, or other prohibited marketing schemes. They bar misrepresentations about the potential earnings, income, benefits, amount of sales, incentives, profits, or rewards derived from any marketing scheme. They also bar misrepresentations about the legality of any program. The settlements bar the defendants from providing others with the means and instrumentalities to make false or misleading statements and bar them from selling or sharing lists of their recruits. In addition, the defendants must return any money they receive in the future from this scheme. The settlements all contain record-keeping requirements to allow the Commission to monitor compliance.
In addition to the settlements, the FTC announced that today it will mail warning letters to more than 2,000 individuals who are still running this chain letter scheme. The addresses were culled from the FTC's unsolicited commercial e-mail (UCE) database. Consumers currently send spam to the agency at a rate of approximately 15,000 e-mails a day using the agency's database address, firstname.lastname@example.org. The FTC has collected more than eight million spam messages since 1998.
Finally, the agency will launch a public/private education effort in conjunction with various Internet Service Provider (ISP) associations, including the Washington Association of ISPs, (www.waisp.org ) and the Texas ISP Association, ( www.tispa.org ). The Texas Association's 250 members and Washington Association's 30 members will publicize and disseminate consumer education materials developed by the FTC to warn consumers about illegal chain mail schemes. Two brochures, "What You Need to Know About Chain E-Mails and Letters," and "The Lowdown on Chain Letters," are located on a special FTC Web site at www.ftc.gov/chainmail. The FTC materials tell consumers
- Chain letters that involve money or valuable items and promise big returns are illegal. If you start a chain e-mail or letter or send one on, you are breaking the law.
- Chances are you will receive little or no money back on your "investment." Despite the claims, a chain letter will never make you rich.
- Some chain letters try to win your confidence by claiming that they're legal, or even that they're endorsed by the government. Nothing is further from the truth.
- If you've been a target of a chain e-mail scam, contact your ISP and forward the e-mail to the FTC at: email@example.com
Defendants in the FTC cases are:
Paul K. Boivin, also known as Paul Bowen, Paul Boevien, Paul Bowvien, and Paul Brown; doing business as (DBA) Destiny 1999, Destiny 2000, and Destiny 2001. The defendant is based in Clearwater, Florida and the case was filed in the U.S. District Court for the Middle District of Florida, Tampa Division.
Chad Estenson and Megan Estenson, DBA CMJ Enterprises and Rockin' E Marketing. The defendants are based in Warwick, North Dakota, and the case was filed in U.S. District Court for the District of North Dakota.
Fernando Pacheco, also known as Frank Pacheco, DBA E-Solutions and E-Solutions 101. The defendant is based in North Providence, Rhode Island and the case was filed in U.S. District Court for the District of Rhode Island.
Arnold W. Larsen, also known as Arnold Larson. The defendant is based in Sarasota, Florida, and the case was filed in U.S. District Court for the Middle District of Florida, Tampa Division.
John Lutheran. The defendant is based in San Diego, California. The case was filed in U.S. District Court for the Southern District of California.
Dario Va. The defendant is based in Weston, Florida. The case was filed in U.S. District Court for the Southern District of Florida.
The FTC vote to approve the complaints and stipulated final judgments and orders was 5-0.
NOTE: Stipulated final judgments and orders are for settlement purposes only and do not constitute an admission of a law violation. A stipulated order has the force of law when signed by the judge.
Copies of the complaints and stipulated final judgments and orders 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. Consumers can forward unwanted spam to the FTC at firstname.lastname@example.org.
- Media Contact:
- Claudia Bourne Farrell,
Office of Public Affairs
- Staff Contact:
- Jennifer Mandigo or David Torok,
Bureau of Consumer Protection
202-326-3125 or 202-326-3075
(FTC File Nos. 022 3020 (Estenson), 022 3021 (Boivin), 022 3023 (Larsen), 022 3024 (Lutheran), 022 3025 (Pacheco), 022 3027 (Va)