Verizon on Wednesday said that it filed a lawsuit this week against a group of people and related companies that it alleges duped people into signing up and getting charged for premium short message services.
Filed in the U.S. District Court for the District of Arizona, the suit names Jason Hope, Wayne DeStefano, three of their employees and their related companies, including Cylon LLC and Jawa. Verizon also said that the Texas attorney general filed a similar suit against the same defendants.
Because some of the short message programs the defendants set up complied with Verizon's rules, Verizon says it is unable to identify which customers didn't know about the charges for the services. As a result it has set up a Web page where customers can file a claim form and get reimbursed if they were wrongly charged for the services.
Verizon describes a plan enacted by the defendants over more than a year to evade detection by Verizon for text message campaigns that hid the cost of the services from consumers. The operator first approached Cylon in 2009 when it discovered that Cylon wasn't complying with Verizon's terms for offering premium text services. Verizon suspended Cylon as a result, but Hope and DeStefano came up with ways around the suspension, the operator says.
For instance, the defendants began setting up new companies each time they leased a short code and activated a campaign so that the operator didn't know the campaign was affiliated with Hope and DeStefano, Verizon alleges.
Short codes are short phone numbers the users can text in order to sign up for premium services. The CTIA mobile trade group administers short codes so that they'll work across operators. The campaigns promised to send text messages to subscribers regarding news, recipes and movie times, among other topics.
The defendants also instructed employees to lease short codes under their own names and used addresses at UPS stores in multiple states. "By using these multiple addresses, defendants made it more difficult to connect the [single-purpose-vehicle LLCs] and the short code campaigns to each other and to a single enterprise," Verizon claims in the suit.
The defendants then devised campaigns that complied with Verizon's rules and ran those campaigns as well as others that used the same short codes but didn't comply with Verizon's rules.
One example of an unauthorized campaign was an ad that appeared when users searched in Yahoo for "food network recipe." If Web users clicked on that advertisement, they were directed to what appears to be a cooking website. A pop-up ad on the site invites visitors to enter their mobile numbers in order to get the recipes.
However, the terms and conditions of the service are grayed out and users would have to scroll down on the page to see them, violating the operator's instructions for informing customers of costs, Verizon said. If users entered their mobile number, they received a PIN that let them opt into the service. However, the PIN entry page did not disclose subscription information as required by the operator's terms, Verizon said.
The operator also claims that the defendants redirected IP addresses they knew were used by Verizon auditors away from the noncompliant sites. That meant when a Verizon auditor tried to click on an advertisement for one of the noncompliant offers, they were redirected to other pages including Google.com or one of the compliant offers. The auditors began using IP masking software in order to view the sites presented to consumers.
In a statement, Hope said he is "disappointed and distressed that the Texas Attorney General and Verizon Wireless have filed these two lawsuits which are designed to significantly harm our business and stifle our right to speak freely with our customers." He said neither the Texas attorney general nor Verizon contacted Jawa before filing the suits. He also said the company is unaware of any customer complaints in Texas. He called the lawsuits "misinformed" and said others that might follow suit would be "misguided."
The Better Business Bureau does not list any complaints against Jawa. However, Hope's company Cylon, which Verizon names as a defendant, has 37 complaints registered against it with the bureau over the past three years. The bureau has processed and closed all of the complaints.
Verizon is asking for a jury trial and seeks damages for harm to its reputation, expenses incurred in handling thousands of customer complaints and expenses required to reimburse customers for the unauthorized charges.
On the site customers can use to file claims, Verizon lists 120 short codes and campaign names that it is offering refunds for.
Jawa seems to be doing well with its premium message business. In a local news station's profile of the company, Jawa boasts that it offers employees catered meals, a Ping-Pong table, and a tropical-themed nap room, complete with sleeping pod that "comes from England and has a James Bond, Dr. Evil feel," according to one employee.