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Tag: Lisa Madigan

  • FTC: Acai-Berry Scammers Created ‘Fake’ News Sites And Traded On Famous Name Of ‘Consumer Reports’ To Fleece The Masess; Letters ‘CNN’ Were Used In Web Domains In Illinois, State AG Says

    This "fake" news site is now known as "Exhibit A" in the FTC's case against alleged acai-berry scammers.

    EDITOR’S NOTE: If this federal and state action doesn’t get the attention of the out-of-control, direct-sales crowd that divines itself the right to plant the seed that an “offer” is endorsed by famous companies and people, well, perhaps nothing will. Even as this story is being written, affiliates of Club Asteria, a purported “passive” investment company, are planting the seed that the firm is endorsed by Google, Yahoo, MSN and America Online. Club Asteria promoters also routinely trade on the name of the World Bank. Club Asteria is being pitched on forums populated by serial Ponzi scheme promoters.

    UPDATED 2:23 P.M. EDT (U.S.A.) One of the most cherished brand names in the United States — “Consumer Reports” — was appropriated by acai-berry hucksters to confuse the marketplace and rip off customers, the FTC charged today.

    As the PP Blog reported Friday in advance of the FTC’s formal news conference this morning, “fake” news websites also were used in the alleged scam. The FTC announced today that it was seeking an asset freeze against 10 acai-berry operations. The actions were brought in federal courts in Washington state, Illinois, Michigan, New Jersey, New York and Georgia.

    Illinois brought its own action at the state level against an alleged acai huckster in Sauk Village, near Chicago.

    “Almost everything about these sites is fake,” said David Vladeck, director of the FTC’s Bureau of Consumer Protection. “The weight loss results, the so-called investigations, the reporters, the consumer testimonials, and the attempt to portray an objective, journalistic endeavor.”

    Lisa Madigan, the attorney general of Illinois, said the scheme also masked a continuity-billing fraud while confusing the public about what is real and what is not.

    “Consumers across the country visit these fake marketing sites that are carefully — and illegally — disguised to represent professional news organizations, only to wind up unknowingly debited for extra diet products,” Madigan said. “These Internet con artists are profiting from their purposely deceptive marketing ploys.”

    Consumer Reports itself was affected in the brazen scheme, according to court filings. The publication, which is published by Consumers Union of Yonker’s, N.Y., is an American treasure that readers rely on for unbiased news and reviews.

    The magazine filed an affidavit in the FTC case that advised a federal judge about the unauthorized trading on its name.

    The website consumerproductsdaily.com, which has no tie to Consumer Reports or any of its websites, used language such as “As seen on . . .” followed by the logos for Consumer Reports and other news outlets, Consumer Reports said.

    “Consumers Union has no affiliation with consumerproductsdaily.com or with any other website using the Consumer Reports logo in a similar fashion,” Consumer Reports said. “Consumers Union has never licensed or in any way authorized the use of the Consumer Reports trademark in connection with the website consumerproductsdaily.com or with any website employing a similar format.”

    Injury to the Consumer Reports brand and confusion about perceived ties to acai-berry companies were not just limited to the consumerproductsdaily.com site, according to the affidavit.

    “Additionally, Consumers Union has received numerous complaints and inquiries from consumers regarding web sites with a format similar to consumerproductsdaily.com, including consumerdigestweekly.com, weeklyhealthnow.com, healthnews10.com, and health9news.com,” Consumer Reports said. “Many of the complaints voiced concern that these web sites were infringing the Consumer Reports trademark, while other complaints questioned Consumer Reports’ affiliation with these web sites.”

    For its part, the FTC said the “fake news sites” also used titles such as “News 6 News Alerts,” “Health News Health Alerts” and “Health 5 Beat Health News.”

    “The sites often include the names and logos of major media outlets — such as ABC, Fox News, CBS, CNN, USA Today, and Consumer Reports — and falsely represent that the reports on the sites have been seen on these networks,” the agency said.

    How slow were some affiliate marketers to take the clue that this form of marketing had come on federal radar screens? Even as marketers were using the name of Consumer Reports to hawk the alleged acai scam, the magazine was warning readers about  fake news sites pitching acai products.

    Even after today’s actions, some affiliates are continuing to use the very template the government now describes as “Exhibit A” in a fraud case.

    Charged by the FTC were Beony International LLC, Mario Milanovic and Cody Adams; Zachary S. Graham, Ambervine Marketing LLC and Encastle Inc.; Intermark Communications Inc. also doing business as Copeac and IMM Interactive; Ricardo Jose Labra; Thou Lee, also doing business as TL Advertising; Circa Direct LLC and Andrew Davidson; Coulomb Media Inc. and Cody Low, also known as Joe Brooks; DLXM LLC, and Michael Volozin, also known as Mikhail Volozin; Charles Dunlevy; Tanner Garrett Vaughn, also doing business as Lead Expose Inc., and Uptown Media Inc.

    Named in Madigan’s complaint in Illinois was Ishmael Lopez Jr. Investigators there said at least two sites linked to Lopez used the letters CNN in their domain names, according to the complaint.

    View government “Exhibit B,” which the FTC says outlines how the scheme was designed to work.

  • 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.”

  • BULLETIN: KABOOM x 1,215! Feds Announce ‘Operation Stolen Dreams’ Mortgage-Fraud Sweep; 1,215 Defendants Charged In Largest Mortgage Scammer Takedown In U.S. History

    Attorney General Eric Holder announced the creation of the Financial Fraud Enforcement Task Force last year.

    BULLETIN: UPDATED 1:10 P.M. EDT (U.S.A.) At least 1,215 criminal defendants have been named in “Operation Stolen Dreams,” which U.S. Attorney General Eric Holder described as a “three and a half month takedown of mortgage fraud schemes throughout the country.”

    The mortgage-fraud operation began March 1 and is the largest-such undertaking in U.S. history, Holder said.

    “The staggering totals from this sweep highlight the mortgage fraud trends we are seeing around the country,” Holder said. “We have seen mortgage fraud take on all shapes and sizes — from schemes that ensnared the elderly to fraudsters who targeted immigrant communities. We have seen cases that have resulted in dozens of foreclosures and millions in losses, as well as fraudsters who have bankrupted entire companies and national lenders who were not playing by the rules.

    Holder said the defendants caused more than $2.3 billion in losses. “Operation Stolen Dreams” was brought as part of President Obama’s interagency Financial Fraud Enforcement Task Force. The attorney general was joined in the announcement by Sallie Cooper, deputy director of the IRS Criminal Investigation Unit;  Ken Jenkins, special agent in charge of the U.S. Secret Service Criminal Investigative Division;  FTC Commissioner Edith Ramirez; Ken Donohue, inspector general of the U.S. Department of Housing and Urban Development; FBI Director Bob Mueller;  Illinois Attorney General Lisa Madigan;  Chief Postal Inspector Bill Gilligan; and Jim Freis, director of the Treasury Department’s Financial Crimes Enforcement Network.

    Investigators did not limit the operation to criminal cases.

    “[T]he operation involved 191 civil enforcement actions through which more than $147 million has been ordered recovered, with still millions more pending court approval,” Holder said.

    “This represents the largest collective enforcement effort ever brought to bear in confronting mortgage fraud,” he noted. “The success of this operation is a direct result of our unprecedented focus not just on federal criminal cases, but also on civil enforcement, recovering funds for victims and increasing cooperation with state and local partners.”

    Mueller said the FBI was “tracking” fraudsters aggressively.

    “From home buyers to lenders, mortgage fraud has had a resounding impact on the nation’s economy,” Mueller said. “Those who prey on the housing market should know that hundreds of FBI agents on task forces and their law enforcement partners are tracking down your schemes and you will be brought to justice.”

    Fraudsters lining their pockets at the expense of others have plenty to worry about, said Donohue.

    “The last several years have seen enormous and damaging developments in the mortgage and housing markets, and the government has stepped in to bolster unstable marketplaces and devastated communities,” Donohue said. “The HUD-OIG, in partnership with other agencies, is deeply committed to ensuring that scarce resources are not diverted to those who seek to enrich themselves at the expense of those who so desperately need assistance today.”

    Holder, who ventured to Florida in January and warned fraudsters that they were writing their own tickets to jail, also noted that law-enforcement had broken up yet another Ponzi- and affinity-fraud scheme in the state.

    Suspects were arrested in the case yesterday, which targeted Haitian-Americans in South Florida.

    Arrested were Maxo Francois, also known as “Max Francois,” Jean Fritz Montinard, Aiby Pierre-Louis and Maguy Nereus, also known as “Maguy Jean-Louis.”

    The scheme involved businesses known as Focus Development Center Inc. and Focus Financial Group Inc., also known as Focus Financial Associates Inc.

    Investors were promised annual returns of 15 percent, but it was a Ponzi scheme, authorities said.

    The fraudsters used church presentations to pitch the scheme, prosecutors said.

  • FTC Charges Founder, CEO Of LifeLock In Deceptive Claims And Privacy Case; Company Agrees To $12 Million Settlement With Agency, 35 State Attorneys General

    Screen shot: From Exhibit 1 in FTC case against LifeLock, whose CEO, Todd Davis, appeared in ads that published his Social Security number to demonstrate his confidence in the company's services. (The PP Blog added the red highlight. Court filings obscure the number, which LifeLock published openly while prompting customers of its $10-a-month service to "Always protect your social security number. Do not share it unless necessary.")

    LifeLock Inc. and its principals have been barred from making deceptive claims and required to take more stringent measures to safeguard the personal information collected from customers, the FTC said.

    The FTC charged LifeLock and its co-founders — CEO Richard Todd Davis and former COO Robert J. Maynard Jr. — in the civil case. The case, which has been settled in U.S. District Court for the District of Arizona, alleged that LifeLock “used false claims to promote its identity theft protection services” and “made claims about its own data security that were not true.”

    LifeLock agreed to pay $12 million to settle the case, which the FTC described as “one of the largest FTC-state coordinated settlements on record.” The company, Davis and Maynard settled without admitting the allegations were true.

    “While LifeLock promised consumers complete protection against all types of identity theft, in truth, the protection it actually provided left enough holes that you could drive a truck through it,” said FTC Chairman Jon Leibowitz.

    LifeLock said it welcomed the settlement.

    “LifeLock is pleased with this agreement, which, for the very first time, works to set advertising guidelines for the entire industry,” said LifeLock Chairman and CEO Todd Davis. “We welcome federal and state efforts to regulate our industry, because doing so helps to protect consumers from the risks of identity theft.”

    In court filings, the FTC said LifeLock did not take adequate steps to protect data it collected from customers — even though Davis appeared in ads that published his own Social Security number to demonstrate his confidence in the company’s ability to prevent identity theft.

    “I’m Todd Davis, CEO of LifeLock, and yes, that’s my real social security number,” the ad read.

    Illinois Attorney General Lisa Madigan said there is no foolproof way to protect against identity theft.

    “This agreement effectively prevents LifeLock from misrepresenting that its services offer absolute prevention against identity theft because there is unfortunately no foolproof way to avoid ID theft,” Madigan said. “Consumers can take definitive steps to minimize the chances of having their personal information stolen, and this settlement will help them make more informed decisions about whether to enroll in ID theft protection services.”

    The FTC said LifeLook “routinely collected sensitive information from its customers, including their social security numbers and credit card numbers,” but did not adequately protect the data.

    Among the LifeLock claims, according to FTC court filings:

    • “Only authorized employees of LifeLock will have access to the data that you provide to us, and that access is granted only on a ‘need to know’ basis.”
    • “All stored personal data is electronically encrypted.”
    • “LifeLock uses highly secure physical, electronic, and managerial procedures to safeguard the confidentiality and security of the data you provide to us.”

    But the FTC alleged that “LifeLock’s data was not encrypted, and sensitive consumer information was not shared only on a ‘need to know’ basis. In fact, the agency charged, the company’s data system was vulnerable and could have been exploited by those seeking access to customer information.”

    Employees and vendors “working from their homes or other locations beyond the Defendants’ headquarters could access the network remotely,” the FTC alleged.

    “[U]ntil at least September 2007, Defendants engaged in a number of practices that, taken together, failed to provide reasonable and appropriate security to prevent unauthorized access to personal information stored on its corporate network, in transit through its corporate network or over the internet, or maintained in Defendants’ offices,” the FTC alleged.