International Law Enforcement Effort Targets Internet Fraud

In a related news story from 2003, the Federal Trade Commission joined 12 state law enforcers in the United States and six Canadian agencies in an initiative targeting deceptive spam and Internet fraud. The agencies have brought over 128 law enforcement actions against Web-based scams ranging from auction fraud to bogus cancer cure sites, illegal fuel additives, and have sent more than 1,500 letters warning people that sending deceptive spam is illegal.

In addition, Netforce partners tested whether "remove me" or "unsubscribe" options in spam were being honored.

"Illegal Internet schemes and deceptive spam don't stop at state lines or international borders," said J. Howard Beales III, Director of the FTC's Bureau of Consumer Protection. "The FTC and its law enforcement partners are sending a signal to scammers:

" We're out there surfing the Net, reading and working together to stop Internet scams."

"Cyberspace is a wondrous place, but we are quickly learning that it can also be a dangerous place for the unwary. Con artists who once relied on telephone boiler rooms and mass mailings can now rip people off through websites and e-mail," said the Washington Attorney General.

"While the scams are often very familiar, use of the Internet creates some major new challenges for consumer protection organizations. That's why it's so important that those of us who enforce state, provincial and national consumer protection laws work together to meet these new challenges."

The FTC targeted four operations using the Net to scam consumers:

• An FTC complaint named Universal Direct and its principals, Linda Jean Lightfoot and Charles F. Childs. Their spam promotes "a MLM (multi-level marketing) Gifting Programthat CAN'T FAIL" and promises participants $10,000 in cash gifts within a few months of joining. The FTC alleges the scheme is illegal in which most participants will fail to make any money. The FTC has asked the court to halt the illegal scheme and freeze the defendants' assets pending trial. The agency will seek a court order requiring the defendants to give up their ill-gotten gains.

The FTC alleges David L. Walker is using an Internet site to market products he claims cure cancer, including his "CWAT -Treatment: BioResonance Therapy and Molecular Enhancer." The site claims his treatments, for which he charges between $2,400 and $5,200, make surgery, chemotherapy, and other conventional cancer treatments:

• Unnecessary

The FTC alleges the claims are unsubstantiated and a declaration from a distinguished oncologist suggests the therapies are potentially harmful to cancer patients. The agency has asked the court to bar the unsubstantiated claims permanently, and order consumer redress.

• In a third case, Sound City 2000, Inc. and Linda M. Simmons have agreed to settle charges that they violated the FTC's Mail Order Rule. The Sound City Web site advertised and sold compact discs. The FTC alleged that Sound City delivered discs late or not at all and failed to make prompt refunds. The settlement bars the defendants from violating the Rule and requires them to pay consumer redress.

A new case filed in August,2007 alleging use of deceptive spam to sell and distribute fuel additives on a global scale is under seal by order of a U.S. District Court. The seal will be lifted shortly and details of the case will be released in 2008 to also decide if the term, " contributional marketing " is deceptive.

In addition to the law enforcement actions, the FTC, state agencies, and Canada's Competition Bureausent warning letters to more than 1,500 spammers based in Alaska, Idaho, Montana, Oregon, Washington, Wyoming, and Canada who allegedly are running illegal chain letter schemes. The spammers promised quick money to recipients who send $5.00 in cash to each of four or five participants at the top of the list. In return for the $5.00 payment, recruits received "reports" providing instructions about how to start their own chain letter schemes and recruit tens of thousands of others via spam. The chain letter deceptively claimed the program is legal and urged recruits who question its legitimacy to contact the FTC. The FTC maintains a database of unsolicited commercial e-mail (UCE). Consumers currently send unwanted spam to the agency at a rate of approximately 25,000 e-mails a day using the agency's database address, uce@ftc.gov. The FTC has collected more than 15 million unwanted spam messages since 1998.

In another initiative, Netforce partners tested whether "remove me" or "unsubscribe" options in spam were being honored. From e-mail forwarded to the FTC's database, the agencies culled more than 500 e-mails that purported to allow recipients to remove their name from a spam list. The agencies set up dummy e-mail accounts to test the pledges, but discovered that the vast majority of addresses to which they sent the requests were invalid. Most of the "remove me" requests did not get through. Based on information gathered by the Netforce, the FTC has sent more than 575 letters warning spammers that deceptive "removal" claims in unsolicited e-mail are illegal.

In conjunction with the law enforcement initiative, the agencies also are mounting a consumer education campaign. An FTC publication You've Got Spam: How to "Can" Unwanted Email advises consumers who want to reduce the amount of spam they receive:

• Try not to display your e-mail address in public.
• Check the privacy policy when you submit your address to a Web site.
• Read and understand the entire form before you transmit personal information through a Web site.
• Decide if you want to use two e-mail addresses - one for personal messages and one for newsgroups and chat rooms.
• Use a unique e-mail address.
• Use an e-mail filter.

Partners in the International Netforce also include the Alaska Attorney General, the Alaska State Troopers, the Alberta Government Services, the British Columbia Securities Commission, the British Columbia Solicitor General, Canada's Competition Bureau, the Federal Trade Commission, the Idaho Attorney General, the Montana Department of Administration, the Oregon Department of Justice, the Washington Attorney General, the Washington State Department of Financial Institutions, and the Wyoming Attorney General.

The Commission votes to file the complaints were 4-0 each. The FTC complaint naming Linda Jean Lightfoot, Charles F. Childs and Universal Direct was filed in U.S. District Court for the Southern District of Ohio, Western Division. The complaint naming David L. Walker and DLW Consulting, Inc., was filed in U.S. District Court for the Western District of Washington, at Tacoma. The complaint and proposed consent decree with Sound City 2000 and Linda M. Simmons was filed in U.S. District Court for the District of Oregon, by the Department of Justice on behalf of the FTC. The Commission vote to refer the matter to DOJ for filing was 5-0.

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.

NOTE: A consent decree is for settlement purposes only and does not constitute an admission of a law violation. Consent decrees are subject to the court's approval and have the force of law when signed by the judge.

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