The U.S. Federal Trade Commission has filed a lawsuit asking a court to stop a "far-reaching" Internet enterprise that allegedly made millions of dollars by luring customers into trial memberships for bogus government grants and money-making schemes, then repeatedly charging them monthly fees for memberships they never ordered.
The FTC announced Wednesday that it has filed a lawsuit in U.S. District Court for the District of Nevada against the Utah-based company I Works, owner Jeremy Johnson, nine other people, nine other companies and 51 shell companies. The FTC filed the lawsuit, asking the court to halt the business practices and refund customer fees, on Tuesday.
"No consumer should be sucker-punched into making payments for products they don't know about and don't want," FTC Chairman Jon Leibowitz said in a statement.
I Works did not immediately return a phone message seeking comment on the FTC allegations.
The defendants, through a series of websites, offer consumers bogus money-making and government-grant opportunities, saying the offers are free or risk free, the FTC said in a news release. The companies promise to charge customers only a small shipping and handling fee of US$1.99 to $2.99, the FTC said.
After customers provide their billing information, I Works then charges them one-time fees of up to $129.95 and monthly recurring fees of up to $59.95, the FTC said.
Hundreds of thousands of consumers have sought chargebacks on their credit-card accounts, the FTC said. Credit card vendors Visa and MasterCard have fined the defendants and barred them from getting credit card billing systems under their own names, the agency said.
The defendants tricked banks into giving them continued access to credit-card billing systems by creating 51 shell companies with figurehead officers, and by providing the banks with phony "clean" versions of their websites, the FTC said.
The defendants threatened to report customers who asked for chargebacks to the website BadCustomer.com, which would result in member companies blocking the customers from making future purchases online, the FTC said in its complaint. BadCustomer.com is operated by a shell company of I Works, the FTC alleged.
In addition, the defendants posed as consumers and posted deceptive positive reviews and used deceptive testimonials that misrepresented the benefits of their services, the FTC alleged.
The FTC charged the defendants with violating the FTC Act by misrepresenting that government grants are available for paying personal expenses, that consumers are likely to obtain grants by using the defendants' program, that users of their money-making products will earn substantial income and that their offers are free or risk free.
The complaint also alleges that defendants failed to disclose that consumers who pay a nominal shipping and handling fee will be enrolled in expensive plans that charge consumers fees until they cancel, and that the defendants charged consumers' credit cards and debited their bank accounts without their consent.
Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is firstname.lastname@example.org.