FTC opens all-out assault on economic cyber-scammers

FTC goes after Google Money Tree, Mentoring of America and others in Operation Short Change

The Federal Trade Commission today announced a wide-ranging attack on cyber-vultures looking to feast on the current moribund economic situation.

 Dubbed "Operation Short Change," the law enforcement sweep announced today includes 15 FTC cases, 44 law enforcement actions by the Department of Justice, and actions by at least 13 states against those looking to bilk consumers through a variety of schemes, such as promising non-existent jobs; promoting overhyped get-rich-quick plans, bogus government grants, and phony debt-reduction services; or putting unauthorized charges on consumers' credit or debit cards.

"Thousands of people have been swindled out of millions of dollars by scammers who are exploiting the economic downturn," said  David Vladeck, Director of the FTC's Bureau of Consumer Protection during a press conference today. "Their scams may promise job placement, access to free government grant money, or the chance to work at home. In fact, the scams have one thing in common--they raise people's hopes and then drive them deeper into a hole."

At the heart of Operation Short Change, are new FTC cases against companies the agency says have conned consumers out of millions of dollars. In each case, the FTC alleged that the defendants' practices were deceptive or unfair and/or made illegal electronic funds transfers or violating the Telemarketing Sales Rule.

The law enforcement actions include:

-John Beck/Mentoring of America, two principals, and three purported "inventors" marketed three get-rich-quick schemes, duping hundreds of thousands of consumers into paying approximately $300 million. The defendants marketed "John Beck's Free & Clear Real Estate System," "John Alexander's Real Estate Riches in 14 Days," and "Jeff Paul's Shortcuts to Internet Millions." The defendants allegedly made false and unsubstantiated claims about potential earnings for users of these systems. They used frequently aired infomercials to sell the systems for $39.95 and then contacted the purchasers via telemarketing to offer "personal coaching services," which cost several thousand dollars and purportedly would enhance their ability to earn money quickly and easily using the systems.  Some consumers also continued receiving unwanted sales calls after they told the defendants' telemarketers to stop calling.

-Wagner Ramos Borges, through a host of front companies, including "Job Safety USA," allegedly systematically targeted people seeking maintenance and cleaning work. Luring job seekers with print and online classified advertisements in newspapers throughout the country, Borges allegedly tricked them into paying $98 for a worthless and needless credential called a "certificate registration number" supposedly so that the consumers could get maintenance or cleaning jobs-jobs that Borges did not provide.

-Grants For You Now and its affiliates and principals operated Web sites such as grantsforyounow.com, grantoneday.org, and easygrantaccess.com that deceived consumers by promising them free government grant money to use for personal expenses or to pay off debt. According to the FTC complaint, after obtaining consumers' credit or debit account information to process a $1.99 fee for grant information, the defendants failed to adequately disclose that consumers would be enrolled in a membership program that cost as much as $94.89 a month. Some consumers also were charged a one-time fee of $19.12 for a third-party "Google Profit" program. All the defendants' Web sites falsely offered a "100% No Hassle Money Back Guarantee

-Cash Grant Institute and its principals allegedly waged an automated robocall campaign promoting bogus claims that consumers were qualified for grant money from the government, private foundations, and wealthy individuals that they could use to overcome their financial problems. They made similar misleading claims about "free grant money" on their Web sites, cashgrantsearch.com and requestagrant.com.

-Mutual Consolidated Savings, its affiliates, and principals used telemarketing robocalls and the Internet to push a phony "Rapid Debt Reduction" program to consumers in the United States and Canada, according to the FTC complaint. The defendants allegedly convinced consumers to pay them $690 to $899 for the program by misrepresenting that the program would reduce credit card interest rates, save thousands of dollars and enable consumers to pay off their debt three to five times faster than they could under their current payment schedule. The defendants also failed to make good on promises that they would refund the fees paid if consumers' credit card interest rates were not reduced.

-Google Money Tree, its principals, and related entities allegedly misrepresented that they were affiliated with Google and lured consumers into divulging their financial account information by advertising a low-cost kit that they said would enable consumers to earn $100,000 in six months. They then failed to adequately disclose that the fee for the kit would trigger monthly charges of $72.21, the FTC complaint states.

-Penbrook Productions, run by Michael Allen Brooks, promoted a work-at-home scheme online that used spokesperson "Angela Penbrook," and charged $197 for the opportunity to become a "certified" rebate processor, earning as much as $225 per hour. According to the FTC complaint, after purchasing, consumers discovered that the work-at-home "opportunity" had nothing to do with processing rebates, but merely instructed the consumers about becoming an affiliate marketer. Despite Penbrook's "100% Ironclad, 3-month 'Make Money Or It's Free,' Triple Satisfaction Guarantee," consumers then found that they could not get a refund. The defendants thus misrepresented that consumers would be hired as rebate processors, made false earnings claims, and misrepresented the refund guarantee.

-Classic Closeouts, illegally made unauthorized charges and debits to the consumers' accounts months or years after they bought low-cost clothing or household goods from classiccloseouts.com, the FTC charged. The charges usually ranged from $59.99 to $79.99, and Classic Closeouts charged some consumers' accounts multiple times. Consumers' efforts to contact the defendants to contest the charges were unsuccessful. Many consumers also disputed the charges with their financial institutions. After the financial institutions reversed the unauthorized charges, the defendants contested these disputes, falsely claiming that consumers had chosen to join the Classic Closeouts "frequent shopper club."

The FTC recently issued a warning that economic-oriented phishing activities were growing.

Specifically the FTC said it was urging user caution regarding e-mails that look as if they come from a financial institution that recently acquired a consumer's bank, savings and loan, or mortgage. In many case such emails are only looking to obtain personal information - account numbers, passwords, Social Security numbers - to run up bills or commit other crimes in a consumer's name, the FTC stated.

The FBI Cyber Crime Task Force added it had arrested the first person under a new computer fraud law that makes it a federal crime to commit extortion relating to unauthorized access of, or damage to, a protected computer system or to impair the confidentiality of information obtained from that computer. In this case the person was trying to exploit customers of flailing insurance giant AIG.

In addition, ScanSafe and other Web security watchers are reporting a big uptick in the number of hackers using the Bank of America brand in a phishing attack that uses the bad economy as a lure.

Perhaps the concern is unfounded as this PC World article notes. The article states that more than half of us are deleting messages from banks and financial institutions without even thinking twice. Experts say recipients who receive these e-mails believe that all the messages are part of phishing e-mail scams.

While the Federal Trade Commission does a lot of posturing about how it help consumers protect their valuable personal information, through laws and education,  the agency has for the second time in less than a year delayed enforcement of its key identity theft rules until August.

The reasons for the delays are an old tune by now; banks and financial institutions can't get ready for the program which was originally set to go into effect Nov. 1, 2008. Other groups such as hospitals and physicians offices have complained about the Red Flag requirements saying they will cost too much to implement.  A survey done by the MedPage today of 100 hospitals found that they would have to spend over $10,000 to comply with the Red Flag Rule.

The FTC delay follows a scathing report by  the Government Accountability Office last year that took issue with which Social Security Numbers and other personal identification is available in public records across the country. Among other things the study noted that  85% of large counties and 41% of small counties in the US make records that may contain SSNs generally available in bulk or online.  On top of that, many record keepers do not or cannot restrict the types of entities that can obtain public records and may not know how records are being used. Finish that observation off with the notion that some businesses are sending records with SSNs offshore, primarily to India and the Philippines, even though not much is known about how such data are protected overseas.

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