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Tag: Federal Trade Commission

  • BULLETIN: FTC, Canadian Competition Bureau Take Down Alleged ‘Yellow Pages’ Scam; Case Reminiscent Of Failed 2009 Bid By AdViewGlobal Autosurf To Launch New Website With Purported ‘Listing Service’

    BULLETIN: The U.S. Federal Trade Commission and the Canadian Competition Bureau have taken down an alleged ‘Yellow Pages” scam in which businesses in the United States and Canada were deceived into paying for unwanted listings in online business directories.

    The scam was centered in Europe, authorities from both countries said. The Competition Bureau said it is seeking $11.55 million in penalties.

    U.S. targets received unsolicited faxes that included “a name such as YellowPage-Illinois.com, depending upon the location of the organization, and a ‘walking fingers’ logo similar to the one commonly associated with local yellow pages,” the FTC said.

    In May 2009, the PP Blog reported that AdViewGlobal (AVG), an autosurf with close ties to Florida-based AdSurfDaily, sought to launch a new website. The launch ultimately failed, but not before it published a “Walking Fingers” logo and advertised the availability of a purported Yellow Pages directory service.

    Whether AdViewGlobal was offering the purported service independently or through a vendor never was clear. What was clear is that regulators long have warned the public about Yellow Pages scams, which appear in various forms.

    After AVG scrubbed its website launch and launched yet-another new site in the days following the failed launch, the Walking Fingers logo disappeared and the purported listing program that had existed only days earlier never again was referenced. Instead, AVG linked itself to a purported suite of new products and services and a purported bid to save the rain forest.

    The appearance of the Walking Fingers logo on the AVG website and the purported directory program led to questions about whether AVG was immersing itself in yet another new scam.

    U.S. officials said today that the most recent variant of the Yellow Pages scam operated from from Palma de Mallorca, Spain, and used “corporations based in England and the Netherlands.”

    Named defendants in the case were Jan Marks; Yellow Page Marketing B.V., also doing business as Yellow Page B.V. and Yellow Page (Netherlands) B.V.; Yellow Publishing Ltd.; and Yellow Data Services Ltd., the FTC said.

    “The FTC is committed to working with its law enforcement colleagues in Canada and around the world to stamp out international schemes that target U.S. consumers,” said David C. Vladeck, director of the FTC’s Bureau of Consumer Protection. “We applaud our friends in Canada for helping to coordinate this international effort.”

    A top Canadian official called the alleged Yellow Pages scheme a “cross-border scam.”

    “The [Competion] Bureau is pleased that the FTC has joined us in targeting the individuals and companies involved in this cross-border scam,” said Melanie Aitken, Commissioner of Competition. “International collaboration is key to cracking down on multi-jurisdictional scams.”

    Churches, nonprofits, doctors’ offices and retailers were targeted in the scam, the FTC said.

    The scam was designed to make fax recipients believe they had a preexisting relationship with the defendants and to dupe them into entering purported contracts and paying for listings. The Australian Competition and Consumer Commission also brought an action, the FTC said.

    When AVG was claiming in 2009 that it had a listing service, promoters also were pumping purported “matching bonuses” of 200 percent and even 250 percent for autosurf enrollees and their sponsors.

    AVG suspended cashouts about a month after displaying a Walking Fingers logo to which the acronym “AVGA” had been added.

     

  • FTC: California Internet Marketer Duped Brits By Making Them Believe He Was Operating In United Kingdom; $500,000 Judgment Entered Against Jaivin Karnani And ‘Balls of Kryptonite’

    UPDATED 12:15 P.M. ET (U.S.A., FEB. 6, 2012) An Internet Marketer based in Calfornia used domains with “co.uk” extensions and duped British customers into believing they were doing business with a firm based in the United Kingdom, the Federal Trade Commison said.

    The actions of Jaivin Karnani and his associated firms, including a company known as “Balls of Kryptonite,” led to Brits being charged “unexpected import duties” while leaving them with worthless warranties.

    When customers tried to cancel their orders, they were hit with “draconian” cancellation and refund fees, the FTC charged.

    Karnani and his firms, which sold cameras, video games and other electronics, have been bit with a $500,000 court judgment. Under the terms of a settlement with the FTC in which the defendants neither admitted nor denied the allegations, the judgment was waived because of the defendants’ professed inability to pay.

    The settlement prohibits Karnani and the companies from engaging in deceptive business practices and from violating the Mail Order Rule. The FTC was assisted in its investigation by the U.K. Office of Fair Trading.

    U.S. investigators brought the action under provisions added to the FTC Act by the U.S. SAFE WEB Act of 2006, the FTC said.

    “SAFE WEB confirmed the agency’s authority to sue U.S.-based wrongdoers who harm consumers abroad, as part of a strategy to prevent the United States from becoming a haven for fraud,” the agency said.

    Read the FTC’s amended complaint. The complaint alleges Karnani also operated a Belize company known as Intrigue Inc., which also did business from California.

    As part of the overall fraud, the FTC said, British customers often did not receive what they ordered — instead receiving undisclosed “substitutions” unintended for sale outside the United States and perhaps even inoperable in the United Kingdom, along with an explanation that the ordered merchandise was out of stock.

    The defendants, though operating from California, used pricing schemes and the name of the Royal Mail as pretexts to advance the scheme, the FTC charged.

  • BREAKING NEWS: FLORIDA — AGAIN: CFTC Says Sammy J. Goldman, Harry Robert Tanner Jr. And Their Firm Ran $23 Million ‘Precious Metals’ Scam; Case Is Third Such Action In 7 Weeks

    BULLETIN: In the third such action in the United States since March 30, the CFTC has gone to federal court in Florida to block what it described as a “precious metals” scam that incorporated fictitious trading.

    Charged with fraud in the case were Sammy J. Goldman of Delray Beach, Fla., and Harry Robert Tanner Jr. of Lake Worth, Fla. Their Florida-based firm — American Precious Metals LLC (APM) — also was charged.

    Tanner was the subject of two previous actions by the National Futures Association for misconduct and was permanently barred by NFA in 2006, the CFTC said.

    Goldman, also has been the subject of regulatory actions, according to records.

    The CFTC case was filed under seal May 10. Investigators today described APM’s operations it as a “massive fraudulent scheme” that purportedly gathered more than $23 million since July 2007 as part of a “boiler room”telemarketing scam.

    APM’s website has been seized by the court-appointed receiver, David R. Chase. U.S. District Judge William Zloch is presiding over the case and issued a Temporary restraining Order after the CFTC filed an emergency petition.

    The CFTC’s allegations read like an impossible work of fiction.

    APM purported to offer a “Leveraged Precious Metals Investment Program” through which the firm sold metal to customers and arranged financing through a firm known as Global Asset Management (GAM), which purportedly received “interest,” the CFTC said.

    The metal purportedly was stored in “independent depository,” the CFTC said.

    Along the troubles with the claims was APM did “not purchase or sell physical precious metals on behalf of its leverage program customers,” the agency charged.

    “Further, APM does not arrange for or provide loans for the purchase of physical precious metals by its customers,” the agency continued. “APM customers have no physical precious metals stored in any independent depository, and since no loan has been disbursed, no interest accrues on any loan.”

    Here is what actually happens through the boiler room, the CFTC charged.

    “[A]fter charging commissions of approximately 40% of customers’ funds, APM sends customer funds to GAM, which also does not purchase or sell physical precious metals on behalf of APM leverage program customers.

    “Instead,” the agency alleged, “GAM pools the funds received from APM with funds received from similar boiler room telemarketing firms, takes a portion of the funds as its own profit, and deposits the rest in margin accounts held in GAM’s name with various United Kingdom-based firms where GAM trades over-the-counter (‘OTC’) precious metals derivatives. APM discloses none of GAM’s actual activity to its customers.”

    Customers further get ripped off through “enormous commissions” APM takes off the top, along with a “3-5% mark-up on the price of the physical precious metals purportedly sold to the customer, account opening fees and the monthly ‘interest’ GAM charges on the financing purportedly provided to the customers,” the CFTC charged.

    How corrupt was the scheme?

    “[A]s of January 7, 2010, APM’s approximately 396 then-existing leverage program customers purportedly owned gold, silver, platinum, and palladium with a total value of $23,834, 108,” the agency said.

    However, “neither APM, GAM nor any secure depository held any physical precious metals for those customers,” the CFTC charged.

    “When a customer makes an order to purchase precious metal, APM simply records the transaction on paper and deducts an ‘administrative fee’ equal to 15% of the total value of the metal being purchased, which is equivalent to approximately 40% of the customer’s total cash outlay,” the CFTC charged. “APM divides the administrative fee among the firm’s management personnel and the employees responsible for soliciting the customer. APM pools the remaining customer funds in APM’s own bank accounts with funds received from other customers and sends a portion of its pooled customer funds to GAM on a weekly basis.”

    Separately, the Federal Trade Commission has charged Tanner and his wife, Andrea Tanner, with telemarketing fraud.

  • BULLETIN: FLORIDA — AGAIN: FTC Seeks Contempt Sanction Against Firm That Allegedly Hawks Deceptive ‘Food Stamp’ Guide And Credit-Repair Services; Bizarre Website Linked To Defendants Rails Against ‘Greedy Politicians’

    BULLETIN: The Federal Trade Commission has gone to federal court in Fort Myers to seek contempt sanctions against Florida companies accused of encouraging prospects to misrepresent information on applications to receive Food Stamp benefits.

    Prospects who followed the advice could be charged with a crime, the FTC said.

    The companies and their principal also are accused of violating a March 2010 court order that prohibited them from marketing credit-repair and debt-elimination programs deceptively. Named in the contempt petition are Sam Tarad Sky, Allrepco LLC, Credit Restoration Brokers LLC (CRB), and Debt Negotiations Associates LLC.

    “In violation of the Stipulated Settlement Order, Contempt Defendants Sam Sky and
    his companies have launched a scheme to defraud economically distressed consumers who
    may be interested in receiving food stamps,” the FTC charged. “Specifically, taking cynical advantage of the recent economic downturn, Sky and his companies deceptively market a ‘Food Stamp Eligibility Tool Kit’ . . . to consumers seeking financial help. Sky and his companies market the product as an ‘automatic,’ ‘hassle free’ method by which ‘virtually
    everyone’ can receive food stamps ‘without any risk.’

    “In fact,” the FTC continued, “eligibility for food stamps remains strictly limited and the vast majority of Americans do not qualify. To side-step these longstanding limitations, Sky’s ‘guide’ encourages consumers to provide so-called ‘ideal’ information on their food stamp applications thereby misrepresenting their income and expenses. Following such advice is hardly ‘without any risk.’ Rather, it puts consumers at considerable risk of criminal prosecution for public benefits fraud. Finally, Contempt Defendants also violate the Stipulated Settlement Order by unlawfully requiring payment before performance for credit repair services and refusing to make required disclosures about the timing and risk of debt negotiation.”

    Today’s filing is rich with coincidences. For one, one of the accused firms — Debt Negotiations Associates — uses the acronym DNA. The DNA acronym also has been used by a separate, unrelated company known as Data Network Affiliates, which also operates in Florida. Data Network Affiliates offered a purported debt-reduction program tied to purported mortgage re-writes, while at once advising prospects it was in the business of gathering data to help the AMBER Alert program rescue abducted children.

    Data Network Affiliates, which is associated with Internet Marketer Phil Piccolo, later appears to have morphed into a company known as OWOW, which offered purported cancer cures and a “magnetic” product purported to have prevented a leg amputation. The purported “magnetic” product also was positioned as a device that could help tomatoes grow to twice their ordinary size and dairy cows produce more milk.

    In another rich coincidence, promoters of a Florida company known as MPB Today targeted Food Stamp recipients last year in promos that implied Food Stamp money could be used to join the MPB Today MLM program and that a $200, one-time purchase could result in free groceries for life.

    One promo for MPB Today even advised prospects to sell $200 worth of Food Stamps to a family member to raise the cash to join the MPB Today program. The promo, which appeared in the form of a news release, purported to be the byproduct of a thought that had popped into the promoter’s head on a drive home from “church” on a “beautiful Sunday afternoon.”

    The U.S. Department of Agriculture said last year that it was investigating certain claims about the MPB Today program.

    Read the extraordinary allegations outlined in the FTC’s contempt petition against Sam Tarad Sky, Allrepco LLC, Credit Restoration Brokers LLC (CRB), and Debt Negotiations Associates LLC.

    Among the allegations was that Sky had started a “new ficitious business” known as “Florida Consumer Assistance” to hawk the purported Food Stamp guide. The new scheme also featured the creation of a website known as MyFoodStampCard.com, according to the FTC.

    The website, which is still active, appears to make a series of political statements. Under a subhead of “THE SICKENING STIGMA,” for instance, the site says this:

    “The sickening stigma – most all of us grew up in a time where our parents and grandparents – worked hard – never took a hand out and wouldn’t ever let their credit go bad, or even miss a house payment! This is not the same America – ‘Political Greed is destroying our children’s future’ and our retirement opportunities.

    “If you 100% disagree with the previous sentence – then leave this website now.” the site barks.

    “Good people need to wake up!” the site continues. “Good people have lost their homes and lost their savings trying to do the ‘right thing’ – but what they didn’t understand is the ‘right thing’ is really now the wrong thing. Back in the day, doing the ‘right thing’ would’ve NEVER put good people in the positions that they’re in today.”

    The site eventually asks for “1 Easy Payment Of $99.95,”  instructing prospects that “You do not have to pay a private social worker $599 to give you assistance.”

  • FEDS: Man Ran Theft Scheme From FTC Headquarters, Stealing More Than $218,000 From Consumer Watchdog Agency; Harold Hughes Faces Up To 10 Years In Prison After Guilty Plea

    Two weeks after an employee of the U.S. Food and Drug Administration was accused of stealing confidential information from a government database to profit from illicit stock trades, another government employee accused in a separate case of taking advantage of his position to commit a crime has pleaded guilty.

    Harold Hughes, 58, of Arlington, Va., was a supply clerk for the Federal Trade Commission. In April 2009, just two months after he began his stint as an FTC clerk, Hughes “began using FTC money to make unauthorized purchases,” federal prosecutors said.

    By the time the scheme was discovered, Hughes had used FTC money to acquire computers, TVs and DVD players illicitly, eventually draining $218,636 from the agency’s coffers, prosecutors said.

    Part of his gambit, prosecutors said, was to order the items and then sell them for cash at a discount.

    Some of the items were delivered to FTC headquarters, and Hughes “used his proximity to the mailroom and his familiarity with its employees to avoid detection,” prosecutors said.

    In some cases, he removed the illicitly purchased items from the FTC building and shipped “other items via Federal Express using FTC funds,” prosecutors said.

    “As the scheme continued, Hughes arranged for items to be shipped directly to his residence in Virginia and to the residences of people to whom he had arranged to sell the items,” prosecutors said.

    Prosecutors did not say who his customers were.

    The FTC discovered the thefts in December 2010, about 22 months after Hughes became an agency shipping clerk, prosecutors said. Hughes was “removed” from his job, and an investigation was launched.

    “Before the FTC discovered the theft and removed Hughes from his position as supply
    clerk in December 2010, Hughes made unauthorized purchases from vendors totaling $217,372.11, and he accrued $1,264.10 in unauthorized shipping charges, causing a total loss to the FTC of $218,636.21,” prosecutors said.

    Hughes faces a maximum prison term of 10 years. He has agreed to make restitution and to an order of forfeiture, prosecutors said. He is scheduled to be sentenced July 13.

    On March 29, federal agents arrested Cheng Yi Liang, 56, of Gaithersburg, Md. Liang worked at the FDA as a chemist, and prosecutors said he mined information from the agency to make illicit stock trades and rack up $3.6 million in illegal profits and avoided losses.

    Liang, 56, also was sued by the SEC.

    Officials have cautioned the public against painting with too wide a brush when a government employee gets in trouble.

    Multiple agencies became part of the probes into both the conduct of Liang and Hughes, according to records.

  • BULLETIN (UPDATE): Now, A Web-Based ‘Immigration’ Scam Tied To A Telemarketing Scam, FTC Charges; Fraudsters Posed As U.S. Government, Agency Says; 3 People Arrested

    BULLETIN: (UPDATED 3 P.M. ET (U.S.A.) The first experience some people seeking to become U.S. citizens had was to be duped by Americans, the Federal Trade Commission has alleged. After a probe involving multiple government agencies, the FTC has gone to federal court in Nevada to block what it described as an “immigration scam.”

    3 P.M. UPDATE: The alleged scheme also resulted in three arrests on criminal charges of Obtaining Money Under False Pretenses in the Course of a Technological Crime, six counts of Conspiracy and two counts of Criminal Racketeering.

    Charged criminally by the office of Nevada Attorney General Catherine Cortez Masto were Charles Doucette, Deborah Stilson and Cybil Duran Berti, authorities said.

    The scammers posed as government agencies, used the symbols and language of government, used websites that mimicked government sites, used the American flag, the Statue of Liberty and answered phones by using the acronym of the U.S. Citizenship and Immigration Service (USCIS), a division of the Department of Homeland Security, the FTC alleged.

    Charged in the case were companies known as “Immigration Center,”  a nonprofit based in Colorado, and “Immigration Forms and Publications” of Missouri.

    A federal judge has frozen the assets of the companies and co-defendants, including Charles Doucette;  Deborah Stilson, also known as Deborah Malmstrom; Alfred Boyce; Thomas Strawbridge;  Robin Meredith; Thomas Laurence; and Elizabeth Meredith.

    Domains used by the fraudsters included www.uscis-ins.us and www.usgovernmenthelpline.com, the FTC said. The phrase “uscis-helpline” also was used in a domain name, the agency added.

    “The sites directed consumers to call a toll-free number that an automated voice answered, ‘Immigration Center,’” the FTC charged. “Consumers were then transferred to a live person who answered, ‘USCIS’ or ‘U.S. Immigration Center,’ and identified him or herself as an ‘agent,’ ‘immigration officer,’ or ‘caseworker.’”

    Consumers were duped into paying fees of up to $2,500, the FTC said, alleging that telemarketers were illegally conducting business by posing as immigration counselors.

    “[T]he defendants charged fees for application forms that were the same amount as the government processing fees, leading [customers] to believe the fees covered the cost of USCIS processing,” the FTC said. “Some consumers who applied for the forms were told to send checks by overnight mail to cover the costs. Others paid with checks or money orders on delivery.

    “Consumers ended up paying for applications that were never processed by the USCIS for failure to pay the official processing fee, or, in some cases, they were charged twice, once by the defendants and once by the government after the defendant forwarded their bank account information to USCIS,” the FTC said.

    Assisting in the case were the U.S. Department of Homeland Security; the U.S. Customs and Immigration Services; Immigration and Customs Enforcement; the Office of the Attorney General of Colorado; the Office of the Attorney General of Missouri; the Office of the Attorney General of Nevada; the Pettis County, Mo., Sheriff’s Office; the Department of Justice and Executive Office for Immigration Review; and the U.S. Postal Inspection Service.

    “These egregious actions by scammers who impersonate Federal employees and prey on innocent people who are trying to work within the system to achieve citizenship is particularly distressing,” said Cortez Masto.

  • BULLETIN: FTC Charges Central Coast Nutraceuticals In Acai-Berry Fraud Case That Alleges Overbilling And ‘Fake Endorsements’ From Oprah, Rachel Ray

    This website was part of a $30 million acai-berry scam that offered purported "free trials," overbilled customers repeatedly and fraudulently traded on the names of Oprah Winfrey, Rachel Ray and other celebrities and well-known brands, the FTC alleged.

    UPDATED 4:56 P.M. EDT (U.S.A.) Calling the operations of Arizona-based Central Coast Nutraceuticals Inc. (CCN) and affiliated companies a “$30 million” scam in 2009 alone, the Federal Trade Commission has obtained a court-ordered asset freeze in an acai-berry fraud case.

    Charged along with CCN were Graham D. Gibson, Michael A. McKenzy and four companies that shared the same Phoenix street address : iLife Health and Wellness LLC; Simply Naturals LLC; Health and Beauty Solutions LLC; and Fit for Life LLC.

    The FTC’s case file includes statements from Oprah Winfrey’s Harpo Inc. and author and TV personality Rachel Ray that they never endorsed acai-berry products as the alleged scammers claimed and that their intellectual property was being abused.

    The FTC’s action may send shockwaves across Internet Marketing slime pits, which routinely trade on celebrity names to sanitize “business opportunities” that imply famous people and entities endorse offers that appear online.

    At the same time, the FTC action may have a chilling effect on online hucksters who make misleading or unproven claims that their products cure anything from cancer to obesity.

    A big part of the scheme centered on bogus “free trial” offers and corrupt billing practices in which “numerous unauthorized charges” were made to customers’ credit-cards and debit cards, the FTC alleged.

    Another part of the scheme centered on false claims that using a product known as AcaiPure “could lead to rapid and substantial weight loss,” the FTC charged.

    “Too many ‘free’ offers come with strings attached,” said David Vladeck, director of the FTC’s Bureau of Consumer Protection. “In this case, the defendants promised buyers a ‘risk free’ trial and then illegally billed their credit cards again and again — and again.”

    Vladeck said the FTC estimated “that about a million people have fallen victim to this scam,” with the scheme spreading in part owing to the fraudsters’ use of “fake endorsements” from Winfrey and Ray.

    “Ms. Oprah Winfrey has never endorsed or approved AcaiPure,” said Douglas J. Pattison, chief executive officer of Harpo Inc.

    In fact, Pattison said in court filings, Winfrey “has never endorsed any acai berry supplement or acai berry related product by name” and “has never approved or agreed to have her image or name used in conjunction with the sale and marketing of any acai berry related product.”

    Winfrey sued more than 40 companies for trademark infringement last year, amid claims scammers were using her image and brand to fleece the public.

    For her part, Ray said in court filings that she, too, had been victimized by Internet Marketers who used her image and brand to pull off fraud schemes.

    “I did not approve or agree to the use of my name or my image on this website. . . . I have never used, endorsed or approved AcaiPure. I am not associated with nor do I endorse or approve any acai berry product, company or online solicitation of such products, including AcaiPure,” Ray said.

    In another move that may cause great unease in the part of the Internet Marketing landscape that entitles itself to divine testimonials and plant the seed that famous people endorse their fraudulent offers, the FTC included photos of the websites and shared a video that allegedly made fraudulent claims.

    Visit the FTC website to view the video.

  • DEVELOPING STORY: Online Claims About Acai Berry On FTC’s Radar Screen; Agency To Announce Action Against ‘Internet Marketers’ Next Week In Chicago (Oprah’s City)

    In this YouTube promo for Data Network Affiliates (DNA), the images of Donald Trump and Oprah Winfrey streamed for 10 continuous minutes. There is no evidence that either celebrity endorsed the company. Claims also were made on YouTube that Apple Inc. had a special "branding" relationship with DNA. No evidence to support the claim has surfaced.

    In 2009, Oprah Winfrey sued more than 40 companies for trademark infringement amid claims they were fleecing the public by implying she endorsed their Acai berry products.

    Winfrey, an American television and business icon, is based in Chicago. Harpo Productions, which produces The Oprah Winfrey Show and The Dr. Oz Show, filed the infringement lawsuit on behalf of Winfrey and Dr. Mehmet Oz, a heart surgeon.

    “Neither Ms. Winfrey nor Dr. Oz has ever sponsored or endorsed any acai, resveratrol or dietary supplement product and cannot vouch for their safety or effectiveness,” Harpo said on the Oprah website last year. “It is our intention to put an end to these companies’ false claims and increasingly deceptive practices.”

    Oz issued a statement last year on the Oprah site, saying scammers were using his name to swindle the public.

    “The companies that are using my name to hawk these products are duping the public,” Oz said. “I do not endorse any of these products. By falsely presenting products as ‘scientifically proven’ and endorsed by well-known figures, these companies do a gross disservice to the public health and could even pose a danger to those who believe their false and unproven claims. I am taking this step in the interest of public safety. I feel compelled to stand up against these companies and their deceitful practices.”

    The Federal Trade Commission announced today that its Chicago office will announce an “action against Internet Marketers of Acai berry weight-loss pills and ‘colon cleansers.’” The FTC announcement is expected Monday.

    It was not immediately clear if the agency’s decision to announce the news in Chicago was a coincidence. What is clear is that Winfrey’s name often is appropriated by scammers or purveyors of questionable “business opportunities” and products and services in a bid to leech off her brand  and drive sales.

    It also is clear that Illinois Attorney General Lisa Madigan is taking action against firms that falsely state or imply their products are endorsed by celebrities. The names of Winfrey and Oz are mentioned in three lawsuits Madigan filed last year.

    Other celebrity names mentioned in the Illinois lawsuits, which alleged deceptive trade practices for the manner in which products were marketed and customers were approached and billed, include Rachel Ray, Gweneth Paltrow, Courtney Love and Eva Longoria-Parker.

    Madigan said scammers linked the names of celebrities to purported deals that involved free trials and claims of weight loss.

    “For thousands of dieters, the quest for a miracle product has become a nightmare,” Madigan said last year. “Far too often, consumers end up losing their money — not  weight — in these deals.”

    The attorney general did not mince words when describing bogus marketing practices.

    “We must hold these Internet scammers accountable for their role in a seedy marketing game that steers unsuspecting consumers to online schemes,” Madigan said. “We also need to send a clear message to other marketers and networks in the business of designing misleading, traffic-enticing schemes.”

    Earlier this year, Winfrey’s image appeared for 10 consecutive minutes in a YouTube video pitch for Data Network Affiliates (DNA), which purports to assist law enforcement in locating abducted children. The image of Donald Trump, another American business and entertainment icon, appeared in the same pitch.

    Other YouTube pitches for DNA implied that the company had a special, cell-phone branding deal with Apple Inc., which brought the world the iPhone.

    Neither the Winfrey organization nor the Trump organization returned calls from the PP Blog earlier this year. Apple also did not return calls.

    It is common for multilevel-marketing (MLM) participants to make fantastic claims about products, including false claims they are endorsed by celebrities and captains of industry.

    The ad for DNA that included Winfrey’s image appeared months after she filed the lawsuit in the Acai berry cases last year. One DNA pitchman said in a conference call earlier this year that the company  had “certain people on speed dial that’s incredible.”

  • DNA Now Says It Is Selling ‘Protective Spray’ To Block ‘Wrongful Ticketing’ From Red-Light Cameras; Simultaneously Announces ‘Alert Button’ To Protect Abducted Children

    A Florida multilevel marketing (MLM) company that says its license-plate data system can help law enforcement and the AMBER Alert program locate abducted children now says it is working against cities “worldwide” in their efforts to enforce traffic laws.

    Data Network Affiliates (DNA) announced that it was offering “DNA Protective Spray” by the case to distributors. The spray is applied to license plates to obscure the view of cameras that take photographs of cars that run red lights. DNA said the spray protected against “wrongful ticketing by city cameras worldwide.”

    DNA did not explain the incongruity of saying it supported law enforcement in its efforts to locate abducted children while at once working against law enforcement in its efforts to enforce traffic laws.

    Even as DNA was announcing the availability of its purported “Protective Spray,” the company announced it soon would adopt a browser-based “DNA World Wide Alert Button” to let members know when a “child is reported missing in your immediate area.”

    DNA purports also to be in the mortgage-reduction business, claiming it is the “MORAL OBLIGATION” of churches to spread the word about the money-making program and perhaps use it to raise church funds.

    This morning the Federal Trade Commission announced three settlements in cases that banned “deceptive marketers” from selling mortgage-relief services. In one of the cases, a judgment of $11.5 million was entered against one of the marketers. A judgment of $6.2 million was entered in the second case, and a judgment of nearly $5.3 million was entered in the third case.

    DNA said distributors would be able to order its protective spray “very soon.”

    “This product has sold millions for $29.95 a can which is good for up to 3 or 4 applications when done properly,” DNA said.

    The product falls under the umbrella of a series of products that purportedly can help DNA members “RETIRE BY CHRISTMAS 2010,” the company said.

    DNA also said it soon would offer “The New DNA Phone & Fax Module,” which purportedly “will make MAGIC JACK & SKYPE OBSOLETE.”

    In April, DNA announced that it was offering an “unlimited” cell-phone plan with a free phone for $10 a month. The company later withdrew the offer, acknowledging it had not studied cell-phone pricing before announcing it had become the world’s low-price leader.

    Some DNA members have implied the company was backed by Oprah Winfrey, Donald Trump and Apple Inc. No evidence to support the claims has emerged.

    DNA has compared itself favorably to Walmart, Google, Facebook and Amway. Curiously, the company once claimed it offered a Business Benefit Package, which it dubbed the BBP. The company now appears to be referring to the package as the BBB, using the acronym associated with the Better Business Bureau.

  • SCAMMER’S GAMBLE BACKFIRES: Fraudster Who Chilled Customer With Lawsuit Threat Pleads Guilty To Mail Fraud; Philip Pestrichello Faces Up To 20 Years In Prison After Plea In ‘Work-At-Home’ Caper

    Source: FBI.Â

    UPDATED 4:51 P.M. EDT (U.S.A.) A convicted felon who emerged from prison and almost immediately launched a $1 million fraud scheme known as PPSN threatened to prosecute and sue a consumer who had filed an online complaint, federal prosecutors said.

    Although the threat caused the consumer to withdraw the complaint against Philip Pestrichello, Pestrichello’s bid to rattle the consumer’s nerves ultimately backfired because he included a “fake lawsuit number” in a letter to the consumer. Prosecutors used the letter and Pestrichello’s checkered past to persuade a federal judge to deny him bail. He has been jailed since his February arrest, and now faces up to 20 years behind bars after entering a guilty plea in the case.

    In the threatening letter, Pestrichello advised the complainant that “we will proceed by filing a lawsuit against you in The State of New York and you will be subject to prosecution, fines and penalties including monetary damages,” prosecutors said.

    Pestrichello also threatened “victim-consumers who lodged on-line complaints warning others that PPSN was a scam,” prosecutors said.

    The Federal Trade Commission and the U.S. Postal Inspection Service worked together in the Pestrichello case, which was brought in February as one of the undertakings of President Obama’s Financial Fraud Enforcement Task Force.

    Pestrichello was running a scam enterprise known variously as “Preferred Platinum Services Network LLC” ; “PPSN LLC”; “Home Based Associate Program”;  and the “Postcard Processing Program,” prosecutors said. They added that he had been running scams since the early 1990s and had been sentenced to three years in prison in 2003 after being convicted of mail fraud in a work-at-home scheme known as “IMXT & Co.”

    His most recent scam began in 2007 while Pestrichello was on federal probation after serving his time for the 2003 mail-fraud conviction, prosecutors said.

    “For nearly 20 years, Philip Pestrichello has preyed on the especially vulnerable — the economically disadvantaged, the unemployed, the disabled, or elderly individuals — who are trying to supplement their income by working from home,” said U.S. Attorney Preet Bharara. “Pestrichello even began committing his work-at-home scam within one year from his release from prison for a prior scam. If Pestrichello thought he was unstoppable, he was wrong.”

    Pestrichello, 38, of Bayville, N.J., now has pleaded guilty to mail fraud in the PPSN case. He faces up to 20 years in prison when sentenced by U.S. District Judge Kimba Wood on Oct. 26. A fraud case against Pestrichello’s wife, Rosalie Florie, is pending, prosecutors said.

    It is common for fraudsters to threaten to sue customers, critics and journalists. Such threats were present in the $1.2 billion Ponzi scheme case of disgraced Florida attorney Scott Rothstein, who eventually was disbarred. He repeatedly threatened to sue a reporter who questioned his business practices in the weeks leading up the the exposure of the scheme.

    Threats against customers and journalists also were part of the alleged AdSurfDaily Ponzi scheme case. ASD President Andy Bowdoin, according to August 2008 court filings, told customers that he had set aside $750,000 to sue critics.

    “These people that are making these slanderous remarks, they are going to continue these slanderous remarks in a court of law defending about a 30 to 40 million dollar slander lawsuit,” Bowdoin said, according to federal prosecutors. “Now, we’re ready to do battle with anybody. We have a legal fund set up. Right now we have about $750,000 in that legal fund. So we’re ready to get everything started and get the ball rolling.”

    Less than a month after Bowdoin allegedly issued the threat in July 2008, the U.S. Secret Service raided ASD’s Florida headquarters. Prosecutors said the company was operating a $100 million Ponzi scheme and engaging in wire fraud and money-laundering.

    Even after the raid, some ASD members continued to threaten Bowdoin’s detractors. One ASD member suggested Bowdoin’s critics would be dragged off in handcuffs for speaking out against the autosurf firm, publishing his version of lyrics from the television program “COPS” to put a chill on the purported slanderers.

    “Bad Boys, Bad Boys, Whatcha Gonna Do?” he chanted on the now-defunct AdSurfZone forum, a predecessor site to the Pro-ASD Surf’s Up forum. “Whatcha Gonna Do>WHEN<THEY COME FOR YOU ?!!!”

    In June 2009, while the AdViewGlobal (AVG) autosurf was failing, members were threatened with lawsuits for sharing information that purportedly was “copyrighted.” Members also were told that they risked losing their Internet service for questioning the firm in public. Journalists who published information about AVG were threatened with lawsuits.

    When the Pathway To Prosperity HYIP scheme was collapsing in 2008, members were threatened with “expulsion,” according to court filings.

    “When complaints were made externally to service providers or supposed payment agents,
    scathing rebukes were made to the ‘members,’” according to court filings.

    In February 2010, Hospitalera.com Blogger Sybille Yates announced she had been threatened with a lawsuit for calling the INetGlobal autosurf a “scam” in September 2009.

    On Feb. 23, the U.S. Secret Service raided INetGlobal’s Minneapolis offices. An affidavit by the U.S. Secret Service described the company as operating an international Ponzi scheme. A federal probe into INetGlobal’s business practices is ongoing.

  • FTC Issues Warning On Oil-Spill Schemers; Be On The Look Out For Insurance, Contracting, Jobs And Charity Scammers

    As the attention of the United States and much of the world is riveted on the oil gusher in the Gulf of Mexico, the Federal Trade Commission is warning consumers that schemers will try to take advantage of the environmental disaster to lines their own pockets.

    “It’s no secret that scam artists follow the headlines, and the daily news of the oil spill in the Gulf of Mexico is no exception,” the FTC said today. “[I]t’s likely that scammers will use e-mails, websites, door-to-door collections, flyers, mailings and telephone calls to make contact and solicit money.

    “Some may claim they’re raising money for environmental causes or offer fraudulent services like remediation services related to the oil spill,” the FTC warned. “Others may claim they can expedite loss claims for a fee. Still others may knock on your door and talk about placing booms or checking for oil on your property. Chances are they’re trying to gain your trust to get inside your home or get access to your personal information.”

    Many scams cropped up after Hurricane Katrina in August 2005, the agency said.

    Oil-spill-related scams could included solicitations for donations to bogus charities that use “copy-cat names to cash in on the reputations of older, more established charities,” the FTC said.

    Use the Better Business Bureau’s website to check out a charity and do other research, the FTC advised.

    “Rather than clicking on a link to a purported website, verify the legitimacy of a nonprofit organization by using search engines and other online resources to confirm the group’s existence, history, mission and nonprofit status,” the FTC advised. “To ensure your contributions are received and used for the purposes you intend, contribute directly to organizations you know rather than relying on other people to make a donation on your behalf. If you get pressure to make a contribution, look for another charity. Reputable charities don’t use those kinds of tactics.”

    Job-scammers also could surface in the Gulf region or elsewhere, the FTC cautioned.

    “Avoid any job or volunteer opportunities that require you to pay a fee before the job begins,” the agency said.

    Because of frauds associated with Hurricane Katrina, the U.S. government formed the National Center for Disaster Fraud (NCDF).

    “The NCDF was originally established by the Department of Justice to investigate, prosecute, and deter fraud in the wake of Hurricane Katrina, when billions of dollars in federal disaster relief poured into the Gulf Coast region,” the FTC said. “Its mission has expanded to include suspected fraud from any natural or man-made disaster.”

    If you suspect someone is trying to pull off a scam related to the oil spill, the FTC recommends that you contact NCDF by phone at 1-866-720-5721; by email at email: disaster@leo.gov; or by fax at 225-334-4707.

    Read the FTC’s full warning.

    NOTE: This story has been republished at a URL that is different than its original URL. Although this post reflects a date of June 13, it is not the original publication date. Click here to read why.