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Federal Court Orders Tech Support Scammers to Pay More Than $5.1 Million

A U.S. District Court has ordered the operators of several international tech support scams to pay more than $5.1 million, acting on Federal Trade Commission charges that they masqueraded as major computer companies, tricked consumers into believing their computers were riddled with malware and then charged consumers to “fix” them.

The U.S. District Court for the Southern District of New York issued default judgments against fourteen corporate defendants and fourteen individual defendants that allegedly operated the tech support scams. The operations were mostly based in India and targeted English-speaking consumers in the United States and several other countries.

The default judgments permanently ban the defendants from marketing any computer security-related technical support service. The judgments also ban them from continuing their deceptive tactics and from disclosing, selling or failing to dispose of information they obtained from victims. The judgments in each case are:

The FTC filed the complaints in September 2012 as part of an FTC crackdown on tech support scammers. According to the complaints filed by the agency, the defendants claimed they were affiliated with legitimate companies, including Dell, Microsoft, McAfee, and Norton, and told consumers they had detected malware that posed an imminent threat to their computers. The defendants then charged these consumers hundreds of dollars to remotely access and “fix” the computers.

The FTC charged the defendants with violating the FTC Act, which bars unfair and deceptive commercial practices. In five of the cases, the FTC also charged the defendants with violating the Telemarketing Sales Rule and with illegally calling numbers on the Do Not Call Registry.

On April 24, 2013 and November 12, 2013, two of the individuals in the PCCare247 case agreed to settle FTC charges and give up ill-gotten gains. On April 25, 2013, two of the defendants in the Marczak case agreed to settle FTC charges and give up ill-gotten gains. The default judgments entered by the U.S. District Court apply to the remaining defendants in the tech support cases.

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 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

TicketNetwork and Marketing Partners Ryadd and Secure Box Office Settle Charges of Deceptively Marketing Resale Tickets

Online resale ticket exchange TicketNetwork, Inc., and two of its marketing partners, Ryadd, Inc. and SecureBoxOffice, LLC, have settled Federal Trade Commission and State of Connecticut allegations that their advertisements and websites misled consumers into thinking they were buying event tickets from the original venue at face value. Instead, the complaint alleges, the defendants’ websites actually were ticket reseller sites with event tickets often priced above the venue’s original price.

Under the terms of the settlements, the defendants are prohibited from deceptively advertising their resale ticket services, and will pay $1.4 million into a Connecticut fund for consumer education and enforcement.

TicketNetwork operates an electronic exchange enabling ticket brokers and other ticket-holders to resell their tickets to consumers on the secondary market. It promotes the sale of these tickets through its own websites and through affiliate marketers and private-label marketing “partners.” The joint complaint alleges that TicketNetwork and two of its top partners, Ryadd and SBO, violated the FTC Act and the Connecticut Unfair Trade Practices Act by misrepresenting that they were the “official” site or “box office” for the actual venue where an event was being held.

“With today’s settlements, the FTC and the Connecticut Attorney General’s office send a strong message to all online ticket sellers that they must clearly disclose who they are and what they are offering,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “These are basic rules of the road for marketers of any product or service, and consumers deserve no less.”

Ryadd, for example, placed the following paid Google ad that appeared at or near the top of the search results page when consumers searched for “radio city music hall”:

Radio City Music Hall/ RadioCity MusicHall-NY.com
radiocity.musichall-ny.com
Official Ticket Source Online for Radio City Music Hall Tickets in NY

The ad conveyed the impression that it was for the official Radio City Music Hall site, according to the complaint. Consumers who clicked on the ad were taken to a website prominently titled “Radio City Music Hall” which featured photos, text, and other material designed to look like the official Radio City Music Hall website. It was actually a Ryadd site, selling resale tickets, often at a price higher than original face value.

SBO allegedly used a similar approach, mimicking actual venues by using the term “box office” in its ads and websites. For example, SBO placed the following paid Google ad that appeared at or near the top of the results page when consumers searched “Providence Performing Arts Center”:

Providence PAC Tickets / pac.providenceboxoffice.com
pac.providenceboxoffice.com
Buy Providence PAC Tickets. Official ProvidenceBoxOffice Site

Consumers who clicked on this ad landed on a website featuring a headline and text designed to look like the official website for the Providence Performing Arts Center, in Providence, Rhode Island, when, in fact, it was an SBO site selling resale tickets, often for more than their face value.

Accordingly, the complaint alleges that Ryadd and SBO routinely misrepresented their resale ticket sites as actual venue sites; failed to adequately disclose that the sites offered tickets for resale and that prices often exceeded the tickets’ face value; and that the websites were neither owned by the venue, sports team, performer, or promoter, nor authorized to sell tickets on their behalf.

The complaint further alleges that TicketNetwork participated in Ryadd’s and SBO’s misleading marketing. Ticket Network allegedly helped create the deceptive portions of certain ads, provided legal cover through inadequate disclosures, and helped to maintain the deception by defusing complaints and bad publicity, among other means. The complaint states that TicketNetwork knowingly profited from Ryadd’s and SBO’s deceptive practices.

The complaint also names Charles A. Lineberry and Ryan J. Bagley, who are officers of Ryadd, Inc., and James P. Moran, who is the owner and manager of SBO, as defendants.

Under the three proposed settlements:

All of the defendants are prohibited from misrepresenting, directly or by implication, that a resale ticket site is a venue site or is offering tickets at face value;
The defendants are prohibited from using the word “official” in any ad, URL, website, or other advertising for resale tickets, except in very narrow circumstances;
The defendants must affirmatively disclose that: their websites are resale marketplaces and not venues or box offices; the ticket price may exceed the ticket’s face value; and the website is not owned by the venue, sports team, performer, or promoter;
TicketNetwork must require all partners to sign written contracts promising to adhere to the order, and must take disciplinary action when partners violate the order and appropriately handle consumer complaints about venue confusion; and
The three defendants will pay a total of $1.4 million to the state of Connecticut, with $750,000 coming from Ticket Network, $550,000 from Ryadd, and $100,000 from SBO.

The Commission vote authorizing the staff to file the complaint and approving the three proposed settlement orders was 5-0. The FTC filed the complaint and the proposed orders in the U.S. District Court for the District of Connecticut on July 24, 2014. They are subject to court approval.

NOTE: The Commission files 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. Settlement orders have the force of law when approved and signed by the district court judge.

Federal and State Agencies Stop Phony Mortgage Relief Schemes

Note: A conference call for media with Katie Fallow, FTC Deputy Director for Consumer Protection, and CFBP Deputy Director Steve Antonakes was held on July 23, 2014.
Katie Fallow and FTC staff took questions from the media about the case.

The Federal Trade Commission has taken action against six mortgage relief operations charging that defendants preyed on distressed homeowners by misrepresenting that they typically could lower homeowners’ mortgage payments and interest rates or prevent foreclosure, and illegally charging advance fees. In each case, the FTC has sought an order stopping the illegal practices and freezing the defendants’ assets pending the outcome of the litigation.

The FTC’s actions are part of a joint federal and state enforcement sweep, Operation Mis-Modification, with the Consumer Financial Protection Bureau, which brought charges against three other mortgage relief operations, as well as 15 state attorneys general and other state agencies, which announced 32 similar actions.

“Mortgage relief schemes like these target people who are already having financial problems and, all too often, inflict even further harm on them,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “We’re determined to stop operations that illegally charge up-front mortgage relief fees or make empty mortgage relief promises.”

In today’s announced actions, the FTC has charged the defendants in each operation with violating the FTC Act and the Mortgage Assistance Relief Services (MARS) Rule, now known as Regulation O. The Rule bans mortgage foreclosure rescue and loan modification services from collecting fees until homeowners have a written offer from their lender or servicer that they deem acceptable.

Including the six cases announced today, the FTC has brought 48 actions against companies peddling fraudulent mortgage relief schemes since 2008. These law enforcement actions have helped tens of thousands of consumers who were victims of these scams, and have prevented tens of thousands more from becoming victims.

Danielson Law Group. The FTC has alleged that these Utah-based defendants touted a success rate that exceeded 90 percent and enticed consumers to pay hefty advance fees ranging from $500 to $3,900 – falsely promising that attorneys would negotiate loan modifications with substantially reduced mortgage payments using their special relationships with lenders or mortgage analysis reports produced by a proprietary software program. The defendants also urged homeowners to stop paying their lenders, and falsely promised full refunds if they did not obtain a loan modification, according to the FTC.

At the request of the FTC, a U.S. district court temporarily halted the operation, which allegedly took more than $35 million from distressed homeowners, and some of the defendants have stipulated to preliminary injunction with an asset freeze.

FMC Counseling Services, Inc. The FTC has alleged that from at least February 2011, this Fort Lauderdale, Fla.-based operation made false claims that it was affiliated with the federal government’s Making Home Affordable assistance program, and that it would renegotiate consumers’ mortgages, reducing them by several hundred dollars. Deceptively using the Federal Deposit Insurance Corporation’s logo and doing business as the “Federal Debt Commission,” the “Federal Mortgage Marketplace,” and the “Federal Assistance Program,” the defendants promised consumers their mortgage modifications would be completed quickly or that they could provide free mortgage refinancing. The defendants also told consumers to cease communications with their lenders, and to turn over their mortgage payments while refinancing was pending. Collecting more than $600,000 in payments from hundreds of consumers, the defendants did nothing for consumers and failed to apply any funds received from consumers to their existing mortgages. As a result, many consumers lost their homes as well as their mortgage payments.

At the request of the FTC, a U.S. district court temporarily halted the operation, and then entered a preliminary injunction with an asset freeze against Jonathan L. Herbert.

Lanier Law. The FTC has alleged that from at least 2011, this Jacksonville, Fla.-based operation typically told consumers that they would get a loan modification or that their chances of getting one was 85 percent to 100 percent. The defendants typically collected an upfront fee of $1,000 to $4,000, or an ongoing monthly fee of $500 or more. In some cases, according to the FTC, they also told consumers not to pay their mortgages while their supposed loan modifications were pending, and that they would conduct an audit of consumers’ mortgage documents to find errors or fraud committed by the lender.

In addition to charging the Lanier defendants with violating the FTC Act and the Mortgage Assistance Relief Services Rule, the FTC also charged them with violating the Do Not Call Rule by calling consumers who were on the Do Not Call list, and by failing to buy the Do Not Call Registry in any state where they operated.

At the request of the FTC, a U.S. district court judge ordered the Defendants to stop making misrepresentations about loan modifications and froze defendants’ assets to preserve the possibility of providing redress to consumers.

Mortgage Relief Advocates. The FTC has alleged that from at least August 2010, this California-based operation sold fraudulent mortgage assistance services on its websites and through telemarketing. The defendants tout their supposedly good relationships with lenders, and falsely claim their “forensic” loan audits will uncover violations in the Truth in Lending Act in 80 percent of the loans reviewed, and that these supposed violations can be used as leverage in modifying mortgage loans and reversing foreclosures, according to the complaint. Charging an up-front fee of $1,000 to $3,200, the defendants are alleged to have rarely provided the promised mortgage relief. The FTC has requested that the court enter a temporary restraining order.

Home Relief Foundation. The FTC has alleged that from approximately October 2010 to December 2013, this Austin, Texas-based operation preyed on financially distressed homeowners nationwide by making false promises that because of their affiliation with attorneys, their affiliation with a government program, their knowledge of the industry, and their relationships with mortgage lenders, Home Relief Foundation would be able to lower consumers’ interest rates and monthly mortgage payments. The defendants also allegedly told consumers to stop paying their mortgages – without disclosing that if they did so, consumers could face bankruptcy, risk losing their homes, or damage their credit ratings. Charging advance fees ranging from $500 to $4,000, the defendants collected more than $500,000 during the course of their operation, according to the complaint.

The defendants marketed their services mainly through websites they controlled, including homerelieffoundation.org, ghardinlaw.com, and patlonglaw.com.

At the request of the FTC, a U.S. district court judge ordered the Defendants to stop making misrepresentations about loan modifications and froze defendants’ assets.

CD Capital Investments. The FTC has alleged that from mid-2011, this Southern California-based operation often promised consumers would receive mortgage relief services within two to four months, and often claimed affiliation with the Obama Administration’s “Making Home Affordable Program,” with some other government entity, or with the consumer’s lender or servicer. They told some consumers they would receive a lower fixed-interest rate, a reduction in their mortgage payment, or a reduction in the principal balance of their mortgages, according to the complaint.

Telling consumers that lenders or servicers would not foreclose on their homes if they were in the process of obtaining a loan modification, and urging some not to pay their monthly mortgage payments or communicate with their lender or servicer, the defendants collected at over $1 million in revenues – by charging up-front fees of $495, supposedly to “process” the consumer’s application, and monthly fees that averaged about $399, for what they called “post application monitoring,” the FTC alleged.

Typically, consumers found that instead of getting mortgage relief, the defendants did not submit a loan modification application on their behalf, or the application was denied. Many consumers found themselves seriously delinquent and facing foreclosure, according to the complaint. The FTC will seek a preliminary injunction to halt defendants’ practices during the pendency of the litigation.

For consumer information about avoiding mortgage and foreclosure rescue scams, see Home Loans.

The Danielson Law Group complaint names as defendants Philip Danielson, LLC, doing business as Danielson Law Group and DLG Legal; Foundation Business Solutions, LLC, , doing business as emerchant, LLC, and Full Biz Solutions; Linden Financial Group, LLC; Acutus Law, P.C., formerly known as Danielson Silva Attorneys at Law, P.C.; Direct Results Solutions, LLC; Strata G Solutions, LLC; Philip J. Danielson; Tony D. Norton; Sean J. Coberly; Tanya Hawkins, also known as Tonya L. Hawkins; and Chad E. VanSickle. The complaint also names April D. Norton as a relief defendant. The FMC Counseling Services, Inc. complaint names as defendants Jonathan L. Herbert and the six companies he controls: FMC Counseling Services, Inc., FMC Review Corporation, FMC Consultants Group, Inc., FDC Assoc Group Inc, FDC Business, Inc., and NDR Group, Inc. The Lanier Law complaint names as defendants Michael W. Lanier and the companies he controlled: Lanier Law, LLC, Fortress Law Group, LLC, Surety Law Group, LLP, and Liberty & Trust Law Group of Florida, LLC. The Mortgage Relief Advocates complaint names as defendants Mortgage Relief Advocates, LLC, National Forensic Loan Audit Servicers, LLC, Evertree LLC, Keystone Real Estate, LLC, Pablo Rodriguez, and Michael Rodriguez. The Home Relief Foundation complaint names as defendants John DiCristofalo, his wife Amanda DiCristofalo, and the company they controlled, Home Relief Foundation, Inc. The CD Capital Investments complaint names defendants CD Capital Investments, LLC, CD Capital, LLC, GDS Information Services, Inc, Christian D. Quezada, Mireya Duenas, and Gabriel Drews Stewart.

The Commission vote authorizing the staff to file the complaints and seek additional relief against defendants in all six cases was 5-0. The FTC filed the Danielson Law Group complaint and request for a Temporary Restraining Order (“TRO”) and Preliminary Injunction in the U.S. District Court for the District of Nevada. On June 23, 2014, the court granted the FTC’s request for the TRO, and on July 3, 3014, some of the defendants stipulated to a Preliminary Injunction. The FTC filed the FMC Counseling Services, Inc. complaint and request for a TRO and a Preliminary Injunction in the U.S. District Court for the Southern District of Florida. On July 7, 2014, the court granted the FTC’s request for a TRO. On July 17, 2014, the court granted the FTC’s request for a Preliminary Injunction. The FTC filed the Lanier Law complaint and request for a TRO and a Preliminary Injunction in the U.S. District Court for the Middle District of Florida. On July 8, 2014, the court granted the FTC’s request for the TRO. The FTC filed the Mortgage Relief Advocates complaint and request for a TRO and a Preliminary Injunction in the U.S. District Court for the Central District of California. The FTC filed the Home Relief Foundation complaint and request for a Preliminary Injunction in the U.S. District Court for the Western District of Texas. On July 18, 2014, the court granted the FTC’s request for a Preliminary Injunction. The FTC filed the CD Capital Investments complaint in the U.S. District Court for the Central District of California.

NOTE: The Commission files 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 defendant has actually violated the law. The cases will be decided by the court.

Made in USA Brand, LLC Agrees to Drop Deceptive Certification Claims

A company that provides a “Made in USA” certification seal to marketers has agreed to settle Federal Trade Commission charges that it deceived consumers by allowing companies to use the seal without either independently verifying that those companies’ products were made in the United States, or disclosing that the companies had certified themselves.

The company, Made in USA Brand, LLC, is required under the proposed settlement to stop its deceptive claims.

The FTC’s Enforcement Policy Statement on U.S.-Origin Claims provides that products advertised or labeled as “Made in the USA” must be “all or virtually all” made in the United States. Made in the USA Brand, LLC charges companies to use its certification mark and to be listed in a database of “certified” companies that comply with the FTC’s standard.

The Columbus, Ohio-based Made in the USA Brand, LLC charged $250 to $2,000 for a one-year license to use the certification mark, according to the FTC. But the company did not independently evaluate the products before certifying them, and had no procedures to determine whether marketers complied with the FTC’s Made in USA standard, according to the complaint.

In fact, the FTC charged that Made in the USA Brand has never rejected a company’s application to use its Certification Mark or terminated a company’s use of the mark. Instead, Made in the USA Brand, LLC awarded licenses to any company that self-certified that it was complying with the FTC’s standard.

“Seals can be very helpful when consumers purchase products based on claims that are difficult to verify – like the Made-in-the-USA claim,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “When marketers provide seals without any verification, or without telling consumers the seal is unverified, consumers are deceived and the value of all marketers’ seals is diminished. This case makes it clear that the FTC will not let that happen.”

In a promotional flyer, Made in the USA Brand, LLC claimed:

“The Made in USA Brand Certification Mark provides a standard symbol for Made in USA product identification . . . When printed on labels by accredited manufacturers, consumers are able to identify at a glance which products are
made in the USA.”

“The Certification Mark is available to be downloaded by U.S. businesses that meet the accreditation standards based on the Federal Trade Commission’s regulations for complying with Made in USA origin claims.”

According to the complaint, Made in the USA Brand, LLC:

falsely advertised that it independently and objectively evaluated whether certified products met its accreditation standard.
made false or unsupported claims that companies listed in its database as certified marketers were in fact selling products that complied with the FTC’s Made in USA standard.
provided the companies it licensed with the means to deceive consumers into believing that the companies were marketing products that were made in the United States.

Under the proposed administrative order, respondent Made in the USA Brand, LLC, is prohibited from:

claiming that any products or companies meet its certification standard unless it either conducts an independent and objective evaluation, or discloses on its logo and all its promotional materials that companies and products are self-certified.
claiming that any product is made in the USA or in any other country unless the claim is true and supported by competent and reliable evidence, or – if the certification mark is used –unless it discloses that companies and products are self-certified.
providing the companies it certifies with the means to deceive consumers.

The Commission vote to accept the consent agreement package containing the proposed consent order for public comment was 5-0.

The FTC will publish a description of the consent agreement in the Federal Register shortly. The agreement will be subject to public comment for 30 days, beginning today and continuing through August 22, 2014, after which the Commission will decide whether to make the proposed consent order final. Interested parties can submit written comments electronically or in paper form by following the instructions in “Supplementary Information” section of the Federal Register notice. Comments should be submitted electronically using the form here.

Instructions for submitting comments in paper form are listed in the “Accessibility” portion of the form.

NOTE: The Commission issues an administrative 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. 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 up to $16,000.

Scammer Settles FTC Charges He Sent Consumers Millions of Unwanted Texts

A text message spammer and his company have agreed to settle Federal Trade Commission charges that they were responsible for sending millions of unwanted messages to consumers across the country, which contained false promises of “free” $1,000 gift cards for major retailers like Walmart, Target and Best Buy.

Under the terms of the settlement with the FTC, Rishab Verma and his company, Verma Holdings, LLC, will be permanently banned from sending unwanted or unsolicited commercial text messages or assisting others in doing so. In addition, the two will be prohibited from misrepresenting to consumers that a product is “free,” that they have won a prize or been selected for a gift, or that consumers’ personal information is needed to send free merchandise.

Verma and his company were among the defendants in the Commission’s 2013 sweep against text message spammers and affiliate marketers who used false promises of gift cards to draw consumers to websites that collected sensitive personal information. The sites also required consumers to provide credit card information to sign up for trial offers.

The settlement contains a monetary judgment of $2,863,000, which is suspended due to the defendants’ inability to pay after Verma and the company pay $26,100.

The Commission vote approving the proposed stipulated final judgment was 5-0. It is subject to court approval. The FTC filed the proposed stipulated final judgment in the U.S. District Court for the Southern District of Texas, Houston Division.

NOTE: Stipulated final judgments have the force of law when approved and signed by the District Court judge.

Court Halts Debt Collector’s Operations, Freezes Assets

At the request of the Federal Trade Commission and the New York Attorney General’s Office, a U.S. district court halted a Buffalo, NY-based debt collection operation, froze the operation’s assets, and appointed a temporary receiver to take over the defendants’ business pending trial.

In a joint complaint, the FTC and New York Attorney General charged the operation with using lies and threats against consumers in violation of federal and state law. The defendants misrepresented that consumers had committed check fraud or another criminal act; falsely threatened to arrest or imprison consumers, sue them, garnish their wages, or put a lien on their property; failed to back up their claims that consumers owed the debt; charged illegal fees; and improperly revealed consumers’ debts to third parties, according to the complaint.

Operating the scheme since February 2010, the defendants have collected at least $8.7 million dollars in payments for purported debts, according to the complaint. The joint complaint charged that the defendants’ tactics violated the Federal Trade Commission Act, the Fair Debt Collection Act and various New York state laws.

“These debt collectors continued to harass consumers and violate the law after the validity of the debt was called into question, and after the New York Attorney General’s office ordered them to stop,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “By working together with our state partners, we can leverage our resources to stop these illegal tactics.”

“All too often, innocent New Yorkers are relentlessly harassed by predatory, abusive debt collectors,” Attorney General Eric T. Schneiderman said. “My office, along with partners like the Federal Trade Commission, will keep fighting to protect hardworking consumers and put a stop to unfair financial bullying once and for all.”

Part of the FTC’s continuing crackdown on scams that target consumers in financial distress, the agencies have charged three individuals – Joseph C. Bella, III, Diane Bella, Luis A. Shaw – and 9 interrelated companies they control. Going by various names including National Check Registry, the operation began using another name – eCapital Services, LLC – to evade detection and continue its illegal behavior after signing an agreement with New York State authorities in October 2013 that prohibited it from violating federal and state debt collection laws, according to the complaint.

Also, according to the complaint, the defendants:

told one consumer in Washington State that they would have the “Washington County Police” issue a warrant for her arrest, and another serving in the military that they would bring an action against him under the Uniform Code of Military Justice;
said the only way to avoid arrest, imprisonment, lawsuits, wage garnishments, and seized assets would be to make an immediate payment over the phone;
continued to accuse consumers of check fraud and other crimes even after they produced evidence showing they didn’t owe the debt in question;
contacted friends, family members, and co-workers of consumers whom they claimed owed a debt, and in some cases, not only revealed the supposed debt but also said the consumers had committed check fraud, and would be arrested or imprisoned if the debt was not paid;
added an illegal $8 “processing fee” when consumers made payments on supposed debts over the phone;
failed to provide consumers with debt collection notices and disclosures that are required under state and federal law, making it difficult for consumers to determine whether they owed the debt, and how they could dispute its validity; and
continued trying to collect a debt from a consumer who had discharged the debt in bankruptcy.

In addition to Joseph and Diane Bella, Luis A. Shaw, National Check Registry, LLC, and eCapital Services, LLC, the complaint names as defendants Check Systems, LLC, Interchex Systems, LLC, Goldberg Maxwell, LLC, Morgan Jackson, LLC, Mullins & Kane, LLC, Buffalo Staffing, Inc., and American Mutual Holdings, Inc.

The Commission vote authorizing the staff to file the complaint was 5-0. The FTC and the New York Attorney General’s Office filed the complaint and the request for a temporary restraining order in the U.S. District Court for the Western District of New York on June 23, 2014. The court granted the plaintiffs’ request for a temporary restraining order with an asset freeze, the appointment of a receiver, immediate access to the business premises and limited discovery on June 24, 2014, and it approved a stipulated preliminary injunction on July 10, 2014.

Two Barcode Resellers Settle FTC Charges That Principals Invited Competitors to Collude

Two Internet resellers of UPC barcodes used by retailers for price scanning and inventory purposes, have settled charges that they violated the Federal Trade Commission Act by inviting competitors to join in a collusive scheme to raise the prices charged for barcodes sold online.

Universal product codes are issued by an international association that sets global supply chain standards, and many companies pay the association membership fees to receive UPC barcodes for their products. Some small businesses purchase UPC barcodes through resellers in an online secondary market in order to avoid the cost of joining the association. In the secondary UPC barcode market, competition among resellers has driven prices lower in the past few years.

In separate complaints, the FTC charged that InstantUPCCodes.com and its principal, Jacob J. Alifraghis, and 680 Digital, Inc., d/b/a Nationwide Barcode and its principal, Philip B. Peretz violated the FTC Act by inviting competitors to collude to raise prices for barcodes sold over the Internet.

The FTC complaints charge that on August 4, 2013, Alifraghis of Instant sent a message to Peretz of Nationwide proposing that the two companies, along with a third barcode seller, “Competitor A,” together raise their prices to meet the higher prices charged by another company, “Competitor B.” Instant’s Alifraghis allegedly then sent a similar email invitation to Competitor A, and the next day, Nationwide’s Peretz forwarded Instant’s message to Competitor A, asking for its thoughts on the proposal.

Without agreement from Competitor A, Nationwide and Instant did not take action to raise prices, but allegedly continued to discuss by email a possible price-fixing scheme for barcodes, conditioned on the participation of Competitor A. Competitor A never responded to any email nor did it agree to participate in the proposed scheme. The improper discussions continued through January of this year, stopping only after the FTC began its investigation into the matter.

The Commission charges Instant and Nationwide with inviting an agreement to raise prices in violation of Section 5 of the FTC Act. The FTC has not alleged, however, that the invitations to collude resulted in an agreement on price or other terms of competition. Because under some circumstances, an agreement on price or other terms or an invitation to collude could potentially constitute criminal conduct, the FTC routinely refers such cases to the Department of Justice to investigate.

The proposed orders setting the complaints against Instant and Nationwide and their respective principals are designed to remedy the anticompetitive conduct. Specifically, the proposed orders bar Instant and Nationwide from:

communicating with their competitors about barcode rates or prices;
entering into, participating in, maintaining, organizing, implementing, enforcing, inviting, offering, or soliciting an agreement with any competitor to divide markets, allocate consumers, or fix prices; and
urging any competitor to raise, fix, or maintain price or to limit or reduce the terms or levels of service they provide.

The Commission vote to accept the proposed consent order for public comment was 5-0. The FTC will publish a description of the consent agreement package in the Federal Register shortly. The agreement will be subject to public comment for 30 days, beginning today and continuing through August 18, 2014, after which the Commission will decide whether to make the proposed consent order final. Interested parties can submit written comments electronically about the Instant proposed consent order or the Nationwide consent order or in paper form by following the instructions in the “Invitation To Comment” part of the “Supplementary Information” section.

Interested parties can submit written comments electronically or in paper form by following the instructions in the “Invitation To Comment” part of the “Supplementary Information” section. If you prefer to file your comment on paper, mail your comment to the following address: Federal Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue, NW, Suite CC-5610 (Annex D), Washington, DC 20580, or deliver your comment to the following address: Federal Trade Commission, Office of the Secretary, Constitution Center, 400 7th Street, SW, 5th Floor, Suite 5610 (Annex D), Washington, DC 20024.

The FTC is requesting that any comment filed in paper form near the end of the public comment period be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions.

The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to antitrust{at}ftc{dot}gov, or write to the Office of Policy and Coordination, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave., NW, Room CC-5422, Washington, DC 20580. To learn more about the Bureau of Competition, read Competition Counts. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

FTC Publishes Official Rules for Zapping Rachel Robocall Contest

Zapping Rachel of Cardholder Services, showing a female silhouette with insect face and antennae

In its ongoing efforts to eradicate robocallers like “Rachel From Cardholder Services,” the Federal Trade Commission announced the official rules for its second robocall challenge, Zapping Rachel. The contest will be held at DEF CON 22 in Las Vegas Aug. 7-10, and offers participants $17,000 in cash prizes for open-source solutions to help build the next-generation robocall honeypot, circumvent or trick a honeypot, and analyze data from an existing honeypot.

A robocall honeypot is an information system designed to attract robocalls and gather information about them, which can help researchers and investigators combat these illegal, prerecorded messages.

Zapping Rachel will consist of three stand-alone phases. For the first “Creator” phase, contestants will build honeypots that can recognize inaccurate information in the calls they receive, such as spoofed caller IDs, and identify calls that are likely robocalls. In the second “Attacker” phase, contestants will think like robocallers and attempt to circumvent or trick a honeypot created for the contest. The third “Detective” phase asks contestants to analyze data and develop an algorithm to predict which calls from an existing honeypot are likely robocalls. Judges will score submissions based on functionality and accuracy, as well as innovation and creativity.

In order to participate, contestants must be present at DEF CON, register in person and meet the eligibility criteria. Contestants can register as an individual or a team, and can compete in one, two, or all three phases of the contest. Please see the official rules for a full description of eligibility and judging criteria.

Judges and Prizes

An expert panel will judge all submissions. The judges are Dr. Mustaque Ahamad, Dr. Matthew Blaze, and Jonathan Curtis. Ahamad is a professor of computer science at the Georgia Institute of Technology, and a global professor of engineering at New York University Abu Dhabi. Blaze is a professor of computer science at the University of Pennsylvania School of Engineering and Applied Science. Curtis is the director of Solutions and Intelligence within the Compliance and Enforcement Sector at the Canadian Radio-television and Telecommunications Commission.

The FTC will announce the top scores at the end of the conference. Official winners will be announced at a later time to permit verification of contestants’ eligibility for a prize. The top prize for each phase is $3,133.70, and the judges may also award $1,337 for each honorable mention (with up to two honorable mentions per phase).

NOTE: The FTC may limit the number of contestants who can participate in each phase to ensure judges have sufficient time to review submissions. Contestants who wish to be eligible for prizes must satisfy additional eligibility and legal requirements. Complete contest rules are available in the robocall contest Federal Register Notice.

FTC Releases its First Spanish-Language ‘Fotonovela’

The Federal Trade Commission is launching its first “fotonovela” as part of the agency’s ongoing efforts to raise awareness about scams targeting the Latino community.

Impostores del Gobierno follows the story of a young woman who responds to a call from a man who claims to be from the government — and who convinces her to send him money. The plot is based on real complaints to the FTC from Spanish speakers throughout the nation, and offers practical tips on how to tell when a phone call, text or email is from a government imposter. The tips include:

If you answer a call from someone who says they work for the government and you won money in a “grant”, lottery or contest, it’s a scam. The government doesn’t call you or send you an email or text to give you money.
If anyone tells you to wire money or use a pre-paid card to collect your “prize,” it’s a scam. If you have to pay, it’s not a prize – it’s a purchase.

The FTC received more than two million complaints from consumers in 2013. The top complaint category was identity theft; imposter scams in general ranked fourth.

Copies of Impostores del Gobierno are available free from ftc.gov/bulkorder, and it’s available as a pdf at ftc.gov/fotonovela.

FTC and Florida Halt Internet ‘Yellow Pages’ Scammers

New Federal Trade Commission actions have stopped three Montreal-based telemarketing operations that allegedly bilked millions of dollars from small businesses, churches, nonprofits and local government agencies by charging them for unwanted listings in online “yellow pages” directories. In addition, a federal court has entered a judgment and order against another Montreal-based directory scam in a case brought by the FTC last year.

“Businesses and other organizations should train their staff to hang up on cold calls about business directory services,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “Report them to the FTC. We can pursue these cases even if the scammers hide in another country.”

At the request of the FTC and the Office of the Florida Attorney General, federal judges in Florida temporarily halted and froze the assets of two operations, National Business Advertising and Your Yellow Pages. In another case brought by the FTC in Washington state, a federal judge temporarily halted the unlawful business practices of another operation, OnlineYellowPagesToday.com. In all three cases, the government seeks to permanently stop the illegal practices and make the defendants return victims’ money. In a fourth case brought by the FTC in November 2013, Online Public Yellow Pages, a federal judge entered a $15.6 million judgment against the defendants and banned them from the directory business.

The defendants in these cases allegedly sent deceptive invoices to small businesses throughout the United States for unordered business directory listings. If the recipients disputed the invoices, the defendants used a variety of collection tactics, such as playing audio recordings that purportedly proved that the businesses’ employees authorized the business directory listings. The businesses report, however, that the recordings sounded as if they were doctored or merely reflected that an employee had confirmed or verified the business’s contact information in a previous telephone call without agreeing to new services. Many consumers paid the defendants only to avoid potentially damaging collection actions and to end the harassment.

The defendants are charged with law violations for misrepresenting that they had a preexisting business relationship with consumers, that consumers had agreed to buy directory listings, and that consumers owed them money.

National Business Advertising

According to a complaint filed by the FTC and the State of Florida in the U.S. District Court for the Southern District of Florida, Miami Division, the defendants in this case – Francois Egberongbe, Robert N. Durham, Sr., and 7051620 Canada Inc., also d/b/a National Business Advertising, Nationwide Marketing Bureau Inc., National Biz Ads, and Yellow Business Ads – used a variety of deceptive tactics to represent that consumers owed money for business directory listings and advertising services they never ordered, and in many cases, never received.

These defendants also pretended to be various debt collection companies, such as TransUnion Credit Bureau, Regional Debt Recovery, and RDR Collections Inc. The defendants got some consumers to pay, in amounts ranging from $200 to more than $1,500, by promising to stop contacting them and to close the accounts, but they kept billing them afterward. In addition to the federal charges, the complaint alleges that the defendants violated the Florida Deceptive and Unfair Trade Practices Act.

Your Yellow Pages

According to a complaint filed by the FTC and the State of Florida in the U.S. District Court for the Southern District of Florida, Miami Division, the defendants in this case – Donovan B. Hinds, a/k/a Donavan B. Hinds; Ernest Baxter, a/k/a Ernest Baster and Carl Jenkins; Andrew Beitler; Your Yellow Pages Inc., also d/b/a EBS Collections; Rapid Pages Inc., also d/b/a Rapid Yellow Pages; and City Pages Inc., also d/b/a City Yellow Pages and Online City Yellow Pages – used a variety of deceptive tactics to represent that consumers owed money for business directory listings they never ordered. They often cold-called small businesses or non-profits, and often falsely claimed that the consumers owed them money for the second year of a two-year contract, and that the consumers owed amounts ranging from $400 to more than $1,800.

These defendants also pretended to be a Florida debt collection company, EBS Collections. They got some consumers to pay by promising to stop contacting them, but they kept billing them anyway. In addition to the federal charges, the complaint alleges that the defendants violated the Florida Deceptive and Unfair Trade Practices Act.

OnlineYellowPagesToday.com

According to a complaint filed by the FTC in the U.S. District Court for the Western District of Washington, the defendants – Oni Nathifa Julien; OnlineYellowPagesToday.com Inc.; USYellowPageDirectory.com Inc.; 7703236 Canada Inc., also doing business as OnlineYellowPagesToday.com, Target Marketing, and Oniks Media; and 7095333 Canada Inc., also d/b/a USYellowPageDirectory.com and Oniks Media – typically contacted consumers under the guise of confirming contact information in a directory in which the small business or other organization already appeared. Subsequently, the defendants billed consumers $479.95 or more, using the walking fingers image often associated with local yellow page directories on invoices and other correspondence.

The Commission vote authorizing the staff to file the three complaints was 5-0.

Online Public Yellow Pages

On May 8, 2014, the U.S. District Court for the Northern District of Illinois, Eastern Division, entered a default judgment of more than $15.6 million based on consumers’ losses, and a permanent injunction against the defendants behind a Canadian based directory scam operation, Mohamad Khaled Kaddoura, Derek Cessford and Aaron Kirby, and the 15 companies they ran. The FTC charged in a complaint against the operation filed in November of last year that the defendants claimed to be calling consumers about existing yellow pages listings or cancellation requests, but then billed them $499 or more for unwanted new listings, and often bullied consumers into paying by threatening to sue them or damage their credit ratings. The court subsequently halted the scheme and froze the defendants’ assets, pending litigation.

The court order announced today also prohibits the defendants from misrepresenting material facts about any products and services, selling or otherwise benefitting from customers’ personal information, failing to properly dispose of customer information, and collecting money from customers.

The defendants in the case are Kaddoura, Cessford and Kirby; Modern Technology Inc., also doing business as Online Local Yellow Pages; Strategic Advertisement Ltd., also d/b/a Local Business Yellow Pages; Dynamic Ad Corp., also d/b/a Yellow National Directory and Yellowpages Local Directory; Wisetak Inc., also d/b/a Online Public Yellow Pages and US Public Yellow Pages; Wisetak, Inc., also d/b/a Online Public Yellow Pages and US Public Yellow Pages; Internet Solutions LLC, also d/b/a Public Yellow Pages; Yellow Pages Express Inc., also d/b/a Yellow Pages Express; Yellow Pages Online Inc., also d/b/a Yellow Pages Online; CessTech Inc., also d/b/a Yellow US Pages; SEO Online Inc., also d/b/a Yellow Local Directory; SEO Online LLC; SEOOnline, also d/b/a Public Yellow Pages; SEM Pundits Inc., also d/b/a Yellow Pages Online; CC Recovery Corporation, also d/b/a CC Recovery; and M&A Recovery Inc., also d/b/a MA Recovery.

The FTC would like to thank the Office of the Florida Attorney General, the Royal Canadian Mounted Police and the Centre of Operations Linked to Telemarketing Fraud (Project COLT) for their valuable assistance. Launched in 1998, Project COLT combats telemarketing-related crime and includes members of the Royal Canadian Mounted Police, Sureté du Québec, Service de Police de la Ville de Montréal, Canada Border Services Agency, Competition Bureau of Canada, Canada Post, U.S. Department of Homeland Security (U.S. Immigration and Customs Enforcement and the U.S. Secret Service), the U.S. Postal Inspection Service, the Federal Trade Commission, and the Federal Bureau of Investigation. Since its inception, Project COLT has recovered $26 million for victims of telemarketing fraud.

To learn more about directory scams, read the FTC’s Small Business Scams.

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Judges and Prizes

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