For Release: July 30, 2002
Federal, State, Local Netforce
Targets Cyberscams
Consumers Allegedly
Fleeced Out of Millions of Dollars
The Federal Trade Commission,
Federal Bureau of Investigation, U.S. Postal Inspection Service,
Securities and Exchange Commission, and the Commodity Futures
Trading Commission, have joined 10 state attorneys general and
11other state and local law enforcement agencies to target
cyberscams plaguing the Internet. Today they announced 19 civil
and criminal law enforcement actions against scammers who have
bilked tens of thousands of consumers out of millions of
dollars.
"Scams on the Internet spread
very quickly," said J. Howard Beales, III, Director of the FTC's
Bureau of Consumer Protection. "That's why the FTC and our
partners are moving aggressively to shut these schemes down."
The FTC asked a U.S. district
court judge to shut down an operation that used spam and
Internet Web sites to advertise an envelope stuffing
work-at-home "opportunity." According to the FTC, in exchange
for $40, the defendants promised to provide consumers with sales
letters and pre-stamped, pre-addressed envelopes and consumers
would earn two dollars for every envelope they stuffed.
Consumers who sent their money didn't receive envelopes. If they
received anything - and many didn't - they got materials urging
them to solicit self-addressed envelopes from third parties and
forward them to the defendants. The FTC told the court that the
"Stuffing for Cash" defendants likely cheated tens of thousands
of consumers out of more than $2 million in the last year. At
the request of the FTC, a U.S. district court judge prohibited
the defendants from engaging in further deceptive practices and
froze their assets, pending trial.
In another FTC case, an operator
used the Internet to advertise his "discount" Web hosting
services - such as domain name registry, Web page design, and
technical support - for monthly service fees of $10 to $15.
Consumers provided credit card numbers so they could be billed.
The FTC alleged that the defendant, Brian Kruchten, doing
business as Page Creators, crammed additional unauthorized
charges onto consumers' credit cards for supposed "excess
bandwidth" use. At the FTC's request, a district court froze the
defendant's assets and appointed a receiver, pending trial. The
defendant and the receiver later agreed to shut down the
defendant's Web hosting business. The defendant has now agreed
to settle the FTC charges. The settlement bars him and his
companies from billing consumers without their authorization and
from representing that consumers are obligated to pay for any
Internet service they did not authorize. The settlement also
bars Kruchten, for five years, from owning or controlling any
business that handles consumer credit or debit card
transactions, unless he first obtains a performance bond of
$100,000. Based on financial declarations of the defendant, the
settlement requires consumer redress in the amount of $6,000.
Should the financial statements be found to be inaccurate,
$100,000 will be due. The settlement also bars the resale of
customer lists and contains record-keeping requirements to allow
the FTC to monitor compliance with the provisions of the order.
Law enforcement actions by the
FTC's law enforcement partners range from Internet auction fraud
to securities fraud and targeted scammers based in the Midwest.
The Midwest Netforce law
enforcement partners include: Federal Bureau of Investigation,
Cook County State's Attorney's Office, Illinois Attorney
General's Office, Indiana Attorney General's Office, Lake County
State's Attorney's Office, Kansas Attorney General's Office,
Kansas Securities Commission, Kentucky Attorney General's
Office, Kentucky Department of Financial Institutions, Kentucky
Department of Insurance, Minnesota Attorney General's Office,
Missouri Attorney General's Office, Missouri Department of
Insurance, North Dakota Attorney General's Office, North Dakota
Department of Banking and Financial Institutions, North Dakota
Securities Commission, Ogle County State's Attorney's Office,
South Dakota Attorney General's Office, U.S. Commodity Futures
Trading Commission, U.S. Postal Inspection Service, U.S.
Securities and Exchange Commission, Wichita District Attorney's
Office, Wisconsin Department of Justice, and the Wisconsin
Department of Agriculture, Trade & Consumer Protection.
The FTC has free publications,
"Work-At-Home Schemes," and "Internet Auctions: A Guide for
Buyers and Sellers," that are available at
www.ftc.gov. It also has
special Web sites,
www.ftc.gov/makingabuck and
www.ftc.gov/spam, designed
to help consumers spot and avoid fraud.
The Commission votes to file the
complaint and the stipulated final judgment and order were 5-0.
The StuffingforCash complaint was
filed in U S. District Court for the Northern District of
Illinois, Eastern Division, in Chicago, with the invaluable
assistance of the Chicago office of the U.S. Postal Inspection
Service.
The stipulated final judgment was
filed in the U.S. District Court for the District of Minnesota
with the assistance of the Minnesota Attorney General's Office
and the Civil Division of the U.S. Attorney's Office in the
District of Minnesota. |