Markets Wired

At the request of the Federal Trade Commission, a federal judge has ordered the mastermind of a vast international spam network to pay $15.15 million in a default judgment for his role in what was identified by the anti-spam organization Spamhaus as the largest “spam gang” in the world. The spam gang deceptively marketed products such as male-enhancement pills, prescription drugs, and weight-loss pills. Ringleader Lance Atkinson, a New Zealand citizen and Australian resident, last December admitted his involvement in the spam network to New Zealand authorities and has already paid more than $80,000 (nearly $108,000 New Zealand dollars). Atkinson’s accomplice, U.S. resident Jody Smith, agreed to an order requiring him to turn over nearly all of his assets to the FTC, to settle FTC charges.

Atkinson and Smith recruited spammers from around the world, according to the FTC’s complaint filed last year. The spammers sent billions of e-mail messages directing consumers to Web sites operated by an affiliate program called “Affking,” according to the complaint. By using false header information to hide the origin of the messages, and by failing to provide an opt-out link or list a physical postal address, the defendants are alleged to have violated the CAN-SPAM Act of 2003.

The FTC charged that, using the “Canadian Healthcare” brand name and other labels, the defendants’ spam messages deceptively marketed a male-enhancement pill, prescription drugs, and a weight-loss pill in violation of federal law. They falsely claimed that the medications came from a U.S.-licensed pharmacy that dispenses FDA-approved generic versions of drugs such as Levitra, Avodart, Cialis, Propecia, Viagra, Lipitor, Celebrex, and Zoloft. In fact, the defendants do not operate a U.S.-licensed pharmacy, and the drugs they sold were shipped from India, had not been approved by the FDA, and were potentially unsafe.

The FTC also alleged that Atkinson and Smith made false claims about the security of consumers’ credit card information and other personal data consumers provided when they bought goods. In operating the online pharmacy, which was called “Target Pharmacy” and later “Canadian Healthcare,” the defendants’ Web site assured potential consumers that “TARGET PHARMACY treats your personal information (including credit card data) with the highest level of security.” The Web site went on to describe its encryption process, which supposedly involved “Secure Socket Layer (SSL) technology.” However, there was no indication that consumers’ information was encrypted using SSL technology.

A U.S. district court last fall ordered an asset freeze and a halt to the spam gang’s operation, which was responsible for sending potentially billions of illegal spam messages, and has accounted for more than three million complaints.

The court has since issued a default judgment against Atkinson, his company, and three companies affiliated with Smith. In addition to the $15.15 million that Atkinson and his company have been ordered to pay, the three companies affiliated with Smith are liable for $3.77 million. All five defendants are prohibited from making unlawful claims about male enhancement products, hoodia products, and any dietary supplement, food, drug, or service purported to provide health-related benefits; from misrepresenting that they can lawfully sell prescription drugs or pharmacy services over the Internet; from misrepresenting the data security measures they provide on their Web sites; and from violating the CAN-SPAM Act.

To settle FTC charges that he helped illegally send spam e-mails to millions of consumers as part of a campaign to peddle prescription drugs and supplements that were phony and potentially dangerous, Smith will turn over nearly all his assets. Under the terms of the settlement, Smith will pay approximately $212,000. He also will assign any rights he has to $91,000 frozen in the name of one of his co-defendants, and $547,000 that may be held for his benefit in an Israeli bank.

The settlement order also prohibits Smith from violating the CAN-SPAM Act and from making deceptive claims related to either the sale of prescription drugs or pharmacy services over the Internet or the security of Web sites that sell any product or service. Smith is required to substantiate any claims about the benefits or safety of any dietary supplement, food, or health-related service.

Smith pled guilty in August 2009 to the criminal charge of conspiracy to traffic counterfeit goods, and faces up to five years in prison. He is scheduled to be sentenced in December in U.S. District Court for the Eastern District of Missouri.

In a related development, New Zealand authorities announced earlier this month that Atkinson’s brother, Shane Atkinson, and another New Zealander will pay nearly $112,000 ($150,000 New Zealand dollars) collectively for sending spam e-mails as part of the scam.

The Commission vote authorizing the filing of a stipulated permanent injunction settling the case against defendant Jody Smith was 4-0. A $15.15 default judgment against Atkinson and his company, Inet Ventures Pty Ltd.; a $3.77 million default judgment against the remaining three corporate defendants, Tango Pay, Click Fusion, and Two Bucks Trading; and the stipulated permanent injunction against Smith were entered by the U.S. District Court for the Northern District of Illinois on November 4, 2009.

The FTC would like to thank the following groups for their collaboration in bringing this case: the New Zealand Department of Internal Affairs; the Australian Communications and Media Authority; the U.S. Food and Drug Administration’s Office of Generic Drugs and Division of Pharmaceutical Analysis; the Chicago-based National Association of Boards of Pharmacy; and Marshall Software (NZ) Ltd.

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 1,700 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.

(Herbal Kings Settlement NR.wpd)
(FTC File No. X090001)

WHAT: The Federal Trade Commission will hold a two-day workshop to explore how the Internet has affected journalism, with representatives from print, online, broadcast, and cable news organizations; academics; consumer advocates; bloggers; and others involved in new media. Participants include the Honorable Henry A. Waxman, Chairman, House Energy and Commerce Committee, Rupert Murdoch, Chairman and CEO of News Corp., Arianna Huffington, Co-Founder and Editor-in-Chief of The Huffington Post, and Aneesh Chopra, Assistant to the President, Associate Director and Chief Technology Officer for the Office of Science and Technology of the Executive Office of the President of the United States. More information on the event, including the agenda, past news releases, public comments, a Federal Register notice, and updates after the event, can be found on this Web page: http://www.ftc.gov/opp/workshops/news/index.shtml

WHERE: FTC Conference Center
601 New Jersey Avenue, N.W.
Washington, DC 20001

and

FTC Headquarters, Room 532
600 Pennsylvania Avenue, N.W.
Washington, DC 20580

The workshop will be webcast live and can be viewed at this link: http://htc-01.media.globix.net/COMP008760MOD1/ftc_web/FTCindex.html. The webcast will also be archived for viewing later.

Due to the large number of pre-registrants, we anticipate that the FTC’s Conference Center will reach full capacity. Pre-registration does not guarantee seating, and attendees will be admitted on a first-come, first-served basis with a photo ID starting at 8 a.m. each day.

Once the Conference Center is full, attendees will be directed to Room 532 located in the FTC Headquarters building at 600 Pennsylvania Avenue, N.W., Washington, DC, 20580.

This workshop can be discussed with others on Twitter at: http://twitter.com/ftcnews

Federal Trade Commission Chairman Jon Leibowitz, joined by U.S. Senator Harry Reid, Nevada Attorney General Catherine Cortez Masto, and Assistant Attorney General Tony West of the Civil Division of the U.S. Department of Justice, today announced Operation Stolen Hope as part of a continuing federal-state crackdown on mortgage foreclosure rescue and loan modification scams. The operation involves 118 actions by 26 federal and state agencies. The FTC actions were announced in Nevada, where one in every 23 homes is facing foreclosure.

“These operators targeted consumers who were on the brink of financial disaster, and instead of holding them back, they pushed them over,” FTC Chairman Jon Leibowitz said. “If you’re worried about keeping your home, avoid any company that asks for a large fee in advance, guarantees that they’ll stop a foreclosure or modify a loan, or tells you to stop paying your mortgage company and to pay them instead.”

The FTC announced six lawsuits, bringing to 28 the number of mortgage relief cases the Commission has brought since the housing crisis began. Twenty-five state attorneys general and other state and local agencies announced 112 similar actions.

In today’s announced FTC actions, the defendants falsely claimed that they would obtain mortgage modifications that would make consumers’ monthly mortgage payments substantially more affordable. After charging large up-front fees, they often did little or nothing to help homeowners renegotiate their mortgages. According to the FTC’s complaints, some of the defendants falsely claimed a high success rate and promised to give consumers refunds if they failed to modify their mortgages, and others misrepresented that they were affiliated with the federal government or consumers’ mortgage lenders or servicers. Each of the cases allege violations of the FTC Act. In addition, several cases allege violations of the Telemarketing Sales Rule (TSR) or the Credit Repair Organizations Act (CROA). In each case, the FTC is asking the court to stop the defendants’ deceptive claims and make them forfeit their ill-gotten gains. In five of the cases, the court already issued a temporary restraining order and froze the defendants’ assets.

Crossland Credit Consulting Corp. and its co-defendants allegedly operated deceptive mortgage refinancing, credit repair, and loan modification schemes. According to the FTC complaint, they falsely promised to use proceeds from mortgage refinances to promptly pay off consumers’ original loans, but often pocketed the money instead. They misrepresented that they would repair consumers’ credit records by removing truthful negative items from their credit reports so they could obtain mortgage loans, and charged advance fees for those services in violation of both the CROA and the TSR. They also falsely claimed that they would modify consumers’ mortgages to obtain substantially lower interest rates and monthly payments. The court immediately barred the practices and froze the defendants’ assets pending a hearing.

The Commission vote to authorize staff to file the complaint was 4-0. The complaint was filed in the U.S. District Court for the Southern District of Florida. At the FTC’s request, the court ordered a halt to the unlawful operations, pending resolution of the case.

Crowder Law Group and its co-defendants allegedly misrepresented themselves as a federal government agency or affiliate. Their personalized postcards to consumers stated, “You may qualify under the new government bailout to refinance your current mortgage . . . ” Some postcards described the defendants’ programs as federal programs and were signed by an attorney in the consumer’s state. The defendants charged a $2,000 fee. The court immediately barred the practices and froze the defendants’ assets pending a hearing. Some of the defendants have stipulated to a preliminary injunction with an asset freeze.

The Commission vote to file the complaint was 4-0. The complaint was filed in the U.S. District Court for the Middle District of Florida.

The Debt Advocacy Center charged consumers $1,500 in advance and promised a refund of $1,500 or more if they failed to successfully obtain a loan modification, according to the FTC complaint. The Commission alleged that when consumers did not get a loan modification, The Debt Advocacy Center told them that the $1,500 was only for advice and educational materials and refused to return payments from consumers. The Debt Advocacy Center also claimed a 90 percent success rate and allegedly debited consumers’ bank accounts and charged their credit cards without authorization. In April 2009, The Debt Advocacy Center received a letter from the FTC warning that its ads may violate federal law, but it did little to change its practices. At the FTC’s request, the court ordered a halt to the unlawful operations and froze the defendants’ assets, pending resolution of the case.

The Commission vote to file the complaint was 4-0. The complaint was filed in the U.S. District Court for the Northern District of Ohio, Eastern Division.

On its Web site and in unsolicited telephone calls to distressed homeowners, First Universal Lending and its principals allegedly said they would negotiate mortgage modifications that would reduce homeowners’ monthly mortgage payments. The FTC complaint alleged that they charged consumers huge up-front fees, sometimes as much as $7,000, and told them if they stopped paying their mortgages it would help them in negotiations with lenders. In many cases, they failed to obtain loan modifications for consumers. At the FTC’s request, the court ordered a halt to the unlawful operations and froze the defendants’ assets, pending resolution of the case.

The Commission vote to file the complaint was 4-0. The complaint was filed in the U.S. District Court for the District of Florida, West Palm Beach Division.

Kirkland Young and its manager allegedly misrepresented themselves as consumers’ mortgage lenders or servicers or their affiliate. The company left telephone messages for consumers stating that they wanted to approve the consumers for a loan modification. By telephone, they discussed specific interest rates and monthly payments and promised that they would stop foreclosure. The complaint alleges that they failed to keep their promises to obtain loan modifications to make payments more affordable. At the FTC’s request, the court ordered a halt to the unlawful operations and froze the defendants’ assets, pending resolution of the case.

The Commission vote to file the complaint was 4-0. The complaint was filed in the U.S. District Court for the Southern District of Florida.

Truman Foreclosure Assistance and its co-defendants charged fees ranging from $1,500 to $3,000, a substantial portion of which was due up-front. According to the FTC complaint, they falsely claimed a 99 percent success rate and stated that hiring them entailed little risk because their services were backed with a “100% Money Back Guarantee,” which they allegedly refused to honor in several instances.

The Commission vote to file the complaint was 4-0. The complaint was filed in the U.S. District Court for the Southern District of Florida.

The FTC also announced an amended complaint charging additional defendants in a previously filed mortgage relief services case:

The FTC filed a proposed amended complaint in its action pending against Dinamica Financiera, LLC, adding as defendants Oficinas Legales de Eric-Douglas Johnson, Inc. and former attorney Eric Douglas Johnson, which continued the defendants’ operations after the court entered a preliminary injunction on June 3, 2009. At the time defendant Eric Douglas Johnson joined the operation, California law permitted attorneys to accept up-front fees for mortgage modification services. The original complaint, filed in May 2009, alleged that the defendants falsely promised Spanish-speaking consumers who were behind in their mortgage payments that they would stop foreclosure. (See May 27, 2009 press release http://www.ftc.gov/opa/2009/05/mortgagerescue.shtm).

The Commission vote authorizing the staff to file the proposed amended complaint was 4-0. The complaint and proposed amended complaint were filed in the U.S. District Court for the Central District of California.

In addition to these cases, the FTC has reached settlements in three previously-filed cases against mortgage relief scams and a partial settlement in another case.

First, the Commission has obtained an agreed upon federal court order barring deceptive practices by Peter J. Porcelli, Safe Harbour Foundation of Florida, Inc., Silverstone Lending, LLC, and Silverstone Financial, LLC, who allegedly lured homeowners into high-cost, short-term loans secured by an additional mortgage on their homes, in violation of federal law and a previous court order against them. (see February 28, 2008 press release http://www.ftc.gov/opa/2008/02/rescue.shtm). The settlement also resolves a contempt action against those defendants.

The settlement order bars the settling defendants from engaging in specific lending practices in violation of the Home Ownership and Equity Protection Act (HOEPA), including making a HOEPA loan without regard to a consumer’s repayment ability. In addition, they are barred from lending practices in violation of HOEPA and Regulation Z’s disclosure and misrepresentation provisions. The order imposes a $2.79 million judgment that will be suspended based on the defendants’ inability to pay. The full judgments against them will become due immediately if they are found to have misrepresented their financial condition. A separate settlement order against co-defendant Southeast Advertising, Inc. applies the same prohibitions and bars the company from accepting the assignment of a loan with any of the characteristics described in the orders. The Commission vote to authorize staff to file each of the stipulated final orders was 4-0. The orders were filed in the U.S. District Court for the Northern District of Illinois, Eastern Division.

Second, the FTC has obtained a stipulated order that bans Thomas Ryan from offering mortgage relief services. The FTC alleged that his Web sites – bailout.hud-gov.us and bailout.dohgov.us, which featured an official looking seal and the names of federal homeowner relief plans – misled homeowners that he was the U.S. government. (See April 6, 2009 press release http://www.ftc.gov/opa/2009/04/hud.shtm). The settlement order also bars Ryan from making misrepresentations about financial related or any other goods and services. The Commission vote to authorize staff to file the stipulated final order was 4-0. The order was entered in the U.S. District Court for the District of Columbia.

Third, the Commission has agreed to settlements in its case against Freedom Foreclosure Prevention Services, LLC that, pending court approval, would ban Jeffrey Segal and Michael Workman from working in the loan modification industry and bar them from misrepresenting material facts in selling any goods or services. The settlements also would impose suspended judgments of $5,462,432, based on the defendants’ inability to pay. Segal and Workman allegedly ran a bogus mortgage foreclosure relief operation that misrepresented both the “loss mitigation” services it offered and the earnings potential of the business opportunity it sold. (See June 22, 2009 press release http://www.ftc.gov/opa/2009/06/freedom.shtm). The Commission vote to authorize staff to file each of the stipulated final orders was 4-0, with Commissioner J. Thomas Rosch concurring in part and dissenting in part. A copy of his statement is available at [http://www.ftc.gov/os/2009/11/091124roschstmt.pdf]. The orders were filed in the U.S. District Court for the District of Arizona.

Fourth, the FTC has obtained a partial settlement that, pending court approval, will prohibit the allegedly deceptive practices of Brian Blanchard, sole owner of B Home Associates, LLC d/b/a Expert Foreclosure, and Michael Grieco, both of whom are part owners of Home Assure, LLC. The settlement orders prohibit Blanchard and Grieco from misrepresenting material facts about any goods or services and selling or otherwise disclosing personal information about anyone who paid them. The orders impose suspended judgments of $3,849,919.84 and $3,721,807.84 on Blanchard and Grieco. They falsely promised consumers that they could stop foreclosures, regardless of how much money consumers owed, charged up to $2,500 in advance, and promised a full refund if they failed. The action continues against other defendants who have not settled. (See April 6, 2009 press release http://www.ftc.gov/opa/2009/04/hud.shtm). The Commission vote to authorize staff to file each of the stipulated final orders was 4-0. The orders were filed in the U.S. District Court for the Middle District of Florida.

The FTC asks people to report foreclosure rescue and mortgage modification scams to FTC.gov or by calling 1-877-FTC-HELP. The FTC makes those complaints available to federal, state, and local law enforcement through the Consumer Sentinel Network.

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. A complaint is not a finding or ruling that the defendants have actually violated the law. Stipulated court orders are for settlement purposes only and do not necessarily constitute an admission by the defendants of a law violation. Stipulated orders have the full force of law when signed by the judge.

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 1,700 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.

(Project Stolen Hope)
(FTC File Nos. 0923169, 0923192, 0923130, 0923143, 0923173, 0923162, X090050, X080022, X020103, X090030, X090055, X090036, X090026)

The Federal Trade Commission announced the agenda and speakers for its December 15, 2009 public forum titled “Sizing Up Food Marketing and Childhood Obesity.”

The forum participants will present new research on the impact of various food advertising techniques on children and discuss the statutory and constitutional issues surrounding governmental regulation of food marketing. Panelists also will address the food and entertainment industries’ self-regulatory efforts and implementation of the recommendations in the FTC’s 2008 report, “Marketing Food to Children and Adolescents: A Review of Industry Expenditures, Activities, and Self-Regulation.” http://www.ftc.gov/os/2008/07/P064504foodmktingreport.pdf In addition, the Interagency Working Group on Food Marketed to Children – comprised of representatives from the FTC, Food and Drug Administration, Centers for Disease Control and Prevention, and U.S. Department of Agriculture – will report on the status of recommended nutritional standards for foods marketed to children, followed by a Town Hall discussion.

An agenda for the forum is available here http://ftc.gov/bcp/workshops/sizingup/Agenda.pdf. Updated information will be posted as it becomes available.

Pre-registration:

The forum is free and open to the public. It takes place at the FTC’s Satellite Building Conference Center, 601 New Jersey Avenue, N.W. Washington, DC. Pre-registration is not necessary, but is encouraged so the FTC may better plan this event. Please note that pre-registration will not guarantee a seat at the event; seating will be available on a first-come, first-served basis. Those pre-registering should send their name, affiliation, and e-mail address to [email protected]. The FTC will use pre-registration information to estimate the likely audience for the forum, and may use the e-mail address to contact registrants with information about the forum.

Note: When you pre-register, the FTC collects your name, affiliation, and e-mail address. We will use this information for administrative purposes related to the forum only and will dispose of it after the forum ends. Under the Freedom of Information Act (FOIA) or other laws, we may be required to disclose the information you provide to outside organizations. For additional information, including routine uses permitted by the Privacy Act, see the FTC Privacy Policy. The FTC Act and other laws the FTC enforces allow this information to be collected for the purposes described above.

Reasonable accommodations for people with disabilities are available upon request. Requests should be submitted via e-mail to [email protected] or by calling Carrie McGlothlin at 202-326-3388. Requests should be made in advance. Please include a detailed description of the accommodation needed, and provide contact information.

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 1,700 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.

The Federal Trade Commission has filed a civil contempt action charging an Internet-based check creation and delivery service and its operators with violating a 2009 court order. The FTC is asking the court to impose a daily fine or imprisonment if the allegedly unlawful conduct is not stopped, and to make the defendants compensate affected consumers and give up their ill-gotten gains.

According to papers the FTC filed with the court, the contempt defendants violated the court order by enabling consumers to create and e-mail checks via the Internet without any verification of users’ identities or their authority to draw funds on the financial accounts they use, leaving unsuspecting consumers’ financial accounts vulnerable to fraud. They also failed to provide contact information for their Web site, FreeQuickWire.com, and failed to investigate and respond to complaints of unauthorized use of financial account information.

In the case that led to the 2009 order, three of the contempt defendants, Thomas Villwock, James M. Danforth, and G7 Productivity Systems, Inc., operated a similar Web site, Qchex.com, that created and delivered checks without verifying that users had authority to access the accounts referenced on the checks. As a result, fraudsters worldwide drew checks on the accounts of unwitting third parties and used the checks mainly for wire transfer schemes. [see Consumer Alert, “Money Transfers Can Be Risky Business,” – http://ftc.gov/bcp/edu/pubs/consumer/alerts/alt034.shtm] The court found the defendants’ operation an unfair practice under the FTC Act and ordered them to pay $535,358, which represented all of their profits from the illegal operation. The court also ordered the defendants to implement specific fraud-prevention safeguards for any check creation and delivery service they offer.

In the current contempt action, the FTC alleges that the contempt defendants are continuing to “ring the dinner bell for fraudsters,” as the court stated in 2009, by failing to perform any of the authentication procedures required by the 2009 court order. The other contempt defendants are iProlog Corporation and FreeQuick Wire Corporation, which Villwock and Danforth control. The court has ordered the contempt defendants to appear in court on February 16, 2010, to explain why the court should not hold them in contempt for violating the 2009 order. The contempt action was filed in the U.S. District Court for the Southern District of California.

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 1,700 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. X060057)
(Neovi)