The U.S. Federal Trade Commission and its law enforcement partners announced settlements with 10 people and five corporations the FTC had accused of Internet-related scams, the agency announced Thursday.
Those court settlements include a variety of "deceptive schemes and illegal scams," according to the FTC, including Internet auction fraud, bogus business opportunities, deceptive money-making scams, and phony credit offers.
Since October 1, the FTC and its law enforcement partners have taken action on more than 285 criminal and civil indictments, convictions, and searches targeting Internet scams and deceptive spam, not including the settlements announced Thursday.
Following is a list of some of the court settlements reached through the FTC and its partners, including the U.S. Federal Bureau of Investigation and the U.S. Postal Inspection Service.
The FTC announced a settlement with GM Funding, of Irvine, California, Global Mortgage Funding, and Robert D. and Damian R. Kutzner. The settlement bans them from sending spam and requires them to pay a fine of $60,500 for what the FTC called "ill-gotten gains."
A related settlement, with Universal IT Solutions and Anthony Tamras, bars them from making spam-related misrepresentations, or assisting and facilitating others in making misrepresentations, and contains a suspended judgment of $60,500.
The FTC accused GM Funding and the other defendants of using deceptive spam, including the unauthorized use of logos of well-known financial institutions, to induce victims to disclose sensitive financial information such as income, mortgage balances, and home values. According to the FTC, the spammers purported to offer consumers competitive financing and refinancing loans.
The FTC charged the defendants with unfair and deceptive practices, violations of the FTC Act, and with posing as an entity they were not in order to get sensitive financial information--a violation of the Gramm-Leach-Bliley Act.
Envelope Stuffing Scheme
The FTC charged that five defendants used fictitious names to promote a fraudulent envelope-stuffing, work-at-home scheme. The defendants used deceptive spam and Web sites that claimed that for a $50 fee, consumers would receive envelopes and pamphlets. The promoters claimed that they would pay consumers $1 apiece for stuffing the envelopes and claimed that consumers could make $500 to $1500 a week. Some of the unsolicited e-mail promised that consumers' payments were fully refundable.
Instead of receiving envelopes and pamphlets, consumers received a booklet containing instructions on how to market the defendants' deceptive credit repair manual to other consumers. No consumers made the promised earnings, and consumers did not receive refunds.
The settlements with David and Irene Herrera and James and Vincent Zezula permanently bar them from sending spam, from making deceptive representations, and from providing others with the means to commit deception. Based on their financial statements, the defendants will be required to pay $7000 back to victims. The FTC estimated that the group had a total of $536,412 in ill-gotten gains, but only $7000 was left in their bank accounts. Their operations were based in Los Angeles.
"On the blood and turnip theory, we settled for the $7000," said FTC spokesperson Claudia Bourne Farrell. "But should we find out they were lying, we'll demand the entire amount."
Instant Internet Empires
Instant Internet Empires, based in Macon, Georgia, touted the money-making potential of five pre-packaged Internet businesses, promising that buyers could make more than $115,000 a year using the product. For their $47.77 investment, consumers received the right to reproduce the defendants' Web site and the right to try to resell its contents to other consumers, according to the FTC.
To achieve the promised $115,000 in earnings, consumers each would have to sell the product to 2400 additional consumers, who would each need to sell to 2400 additional consumers to achieve the same earnings, according to the FTC. By the third generation of the scheme, participants would need to make more than 13.8 billion sales, more than twice the earth's population, for each of them to achieve the advertised earnings.
The stipulated final judgment and order with Instant Internet Empires and Irwin F. Kern IV, also known as Frank Kern, bars them from making false or misleading income claims, from participating in chain marketing schemes, and from providing others with the means and instrumentalities to violate federal laws. Based on their financial statements, defendants will have to pay back $247,000 to the victims. Should the defendant's financial reports be found to be inaccurate, the total of their ill-gotten gains, $634,222, will become due.
The FTC charged that Eric Stetzel, a resident of Nevada, offered computers, computer-related equipment, and other merchandise for sale on Internet auction sites. Consumers who tried to buy the merchandise never received it. The FTC charged Stetzel with violating the FTC Act and the Mail Order Rule. A default judgment prohibits violations of FTC Act and the Mail Order Rule and orders restitution in the amount of $9723.66.