Federal, state, local netforce targets cyberscams

| 7/31/2002

Five federal agencies have joined 10 state attorneys general and 11 other state and local law enforcement agencies to target cyberscams plaguing the Internet.Led by the Federal Trade Commission, Federal Bureau of Investigation, U.S. Postal Inspection Service, Securities and Exchange Commission and the Commodity Futures Trading Commission, the Midwest NetForce announced July 30, at least 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 federal district court judge to shut down an operation that used spam (unsolicited e-mail) 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 $2 for every envelope 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 the "Stuffing for Cash" defendants likely cheated tens of thousands of consumers out of more than $2 million in the past year. The 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 the defendant, Brian Kruchten, doing business as Page Creators, crammed additional unauthorized charges onto consumers' credit cards for supposed "excess bandwidth" use.

The 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 now has agreed to settle the FTC charges. The settlement 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 recordkeeping requirements to allow the FTC to monitor compliance with the provisions of the order.Copies of the complaints, judgments and orders, and the consumer publications are available from the FTC's Web site at www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, NW, Washington, DC 20580. To file a complaint, call toll-free 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at www.ftc.gov.
By René Tankersley