FTC slams shut telephone cramming scam

FTC case shuts cramming business, says scammers must return $37 million

The Federal Trade Commission today said it had a U.S. district court permanently shut the doors of a company it says placed $37 million worth of bogus charges on the telephone bills of thousands of small businesses and consumers for Internet-related services they never agreed to buy.

The FTC had sued Inc21, charging that the company hired offshore telemarketers to call prospective clients to sell its Web-based services. The defendants then used LECs to place charges, usually between $12.95 and $39.95 per month, a practice known as cramming.

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The court also ordered third parties through which cramming charges were placed, including local exchange telephone companies, or LECs, to return money in escrow to consumers.  The shut down order states the defendants must return $37 million in ill-gotten gains, but as in many of these cases it remains to be seen if any money is actually returned.

"The FTC has produced overwhelming evidence that defendants' practice of billing tens of thousands of businesses and consumers via their telephone bills - a fraud-friendly practice called 'LEC billing'- was both deceptive and unfair," stated judge William Alsup.  "The most compelling proof of these violations is a comprehensive expert survey of 1,087 of defendants' so-called 'customers.' This survey revealed that nearly 97% of defendants' 'customers' had not agreed to purchase defendants' products. Even more egregious, only five percent of them were even aware that they had been billed."

"Indeed, over a five-year span from 2004 through 2009, defendants successfully extracted over $37 million in unauthorized payments from the telephone bills of unsuspecting businesses and consumers," Alsup wrote.

According to the FTC, the defendants in the case included Inc21.Com Corporation; Jumpage Solutions, Inc.; GST U.S.A., Inc.; Roy Yu Lin and John Yu Lin.  Another person, Sheng Lin, did not participate in the scheme, but who profited from it, was named as a relief defendant and ordered to give up $434,000 in financial benefits he received from the defendants' unlawful practices. 

Follow Michael Cooney on Twitter: nwwlayer8   

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