Defendants Allegedly Created 51 Shell Companies to Carry Out Deception
The Federal Trade Commission is taking legal action against a far-reaching Internet enterprise that allegedly has made millions of dollars by luring consumers into “trial” memberships for bogus government-grant and money-making schemes, and then repeatedly charging them monthly fees for these and other memberships that they never signed up for. The FTC seeks to stop the illegal practices and make the defendants pay redress to consumers and give up their ill-gotten gains.
“No consumer should be sucker-punched into making payments for products they don’t know about and don’t want,” said FTC Chairman Jon Leibowitz.
The FTC’s complaint alleges that the defendants offer consumers bogus money-making and government-grant opportunities. They claim that the offers are “free” or “risk-free,” and that they will charge customers only a small shipping and handling fee.
According to the FTC’s complaint, the operation, doing business under the name I Works and controlled by Jeremy Johnson and nine other individuals, uses websites that tout the availability of government grants to pay personal expenses or pitch various money-making programs. The websites offer “free” information at no risk and ask consumers to provide their credit or debit card numbers to pay for a small shipping and handling fee such as $1.99. When consumers provide their billing information, though, I Works proceeds to charge them hefty one-time fees of up to $129.95 and monthly recurring fees of up to $59.95 for the grant or money-making programs. I Works charges them additional monthly fees for one or more unrelated programs that consumers did not agree to.
The FTC’s complaint alleges that this scheme has caused hundreds of thousands of consumers to seek chargebacks – reversals of charges to their credit cards or debits to their banks accounts. The high number of chargebacks has landed the defendants in VISA’s and MasterCard’s chargeback monitoring programs, resulted in millions of dollars in fines for excessive chargebacks, and prevented the defendants from getting access to the credit card and debit card billing systems using their own names. To keep the scam going, the defendants tricked banks into giving them continued access to these billing systems by creating 51shell companies with figurehead officers, and by providing the banks with phony “clean” versions of their websites.
The FTC has charged the defendants with violating the FTC Act by misrepresenting that government grants are available for paying personal expenses, that consumers are likely to obtain grants by using the defendants’ program, that users of their money-making products will earn substantial income, and that their offers are free or risk-free. The complaint also alleges that defendants failed to disclose that consumers who pay a nominal shipping and handling fee will be enrolled in expensive plans that charge consumers fees until they cancel, and that the defendants charged consumers’ credit cards and debited their bank accounts without their consent.
In addition, the FTC alleges that defendants posted deceptive positive reviews and used deceptive testimonials that misrepresented the benefits of their grant services. Finally, the FTC has charged the defendants with violating the Electronic Fund Transfer Act and Regulation E by debiting consumers’ bank accounts without their signed written consent and without providing consumers with a copy of the written authorization.
As alleged in the complaint, the defendants gained access to the Visa and MasterCard systems through many entities. The banks included Wells Fargo, N.A., HSBC Bank USA, First Regional Bank, Harris National Association, and Columbus Bank and Trust Company. The payment processors the defendants used included First Data, ECHO, Global Payment Systems, Litle & Co., Moneris, Payment Tech, Trident, and Vital, as well as independent sales organizations, including CardFlex, RDK Inc., Merchant eSolutions, Pivotal Payments, PowerPay, and Swipe Merchant Solutions.
The FTC complaint names 10 individuals, 10 corporations, and 51 shell companies as defendants. As alleged in the complaint, the lynchpin of the enterprise is Jeremy Johnson, the sole owner and officer of I Works Inc., which has done business under numerous names. The FTC’s complaint names Johnson and nine other individual defendants: Duane Fielding; Andy Johnson; Loyd Johnston; Scott Leavitt; Scott Muir; Bryce Payne; Kevin Pilon; Ryan Riddle; and Terrason Spinks. In addition, the 10 corporate defendants are: I Works Inc.; Anthon Holdings Corp.; Cloud Nine Marketing Inc.; CPA Upsell Inc.; Elite Debit Inc.; Employee Plus Inc.; Internet Economy Inc.; Market Funding Solutions Inc.; Network Agenda LLC; and Success Marketing Inc.
The 51 shell companies named in the complaint are Big Bucks Pro Inc., Blue Net Progress Inc., Blue Streak Processing Inc., Bolt Marketing Inc., Bottom Dollar Inc., doing business as BadCustomer.com, Bumble Marketing Inc., Business First Inc., Business Loan Success Inc., Cold Bay Media Inc., Costnet Discounts Inc., CS Processing Inc., Cutting Edge Processing Inc., Diamond J. Media Inc., Ebusiness First Inc., Ebusiness Success Inc., Ecom Success Inc., Excess Net Success Inc., Fiscal Fidelity Inc., Fitness Processing Inc., Funding Search Success Inc., Funding Success Inc., GG Processing Inc., GGL Rewards Inc., Highlight Marketing Inc., Hooper Processing Inc., Internet Business Source Inc., Internet Fitness Inc., Jet Processing Inc., JRB Media Inc., Lifestyles For Fitness Inc., Mist Marketing Inc., Money Harvest Inc., Monroe Processing Inc., Net Business Success Inc., Net Commerce Inc., Net Discounts Inc., Net Fit Trends Inc., Optimum Assistance Inc., Power Processing Inc., Premier Performance Inc., Pro Internet Services Inc., Razor Processing Inc., Rebate Deals Inc., Revive Marketing Inc., Simcor Marketing Inc., Summit Processing Inc., The Net Success Inc., Tranfirst Inc., Tran Voyage Inc., Unlimited Processing Inc., and Xcel Processing Inc.
The Commission vote to file the complaint was 5-0. The complaint was filed in the U.S. District Court for the District of Nevada.
NOTE: The Commission authorizes the filing of 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 defendants have actually violated the law.
The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,800 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.
(FTC File No. 1023015)
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