FTC Shuts Down Porn Spammers

  |  April 24, 2002   |  Comments

UPDATE: Calling the e-mail campaign a 'bait and switch of the worstkind,' the federal agency freezes the assets of a well-known 900-numberoperator and gets ready for an injunction.

The Federal Trade Commission put the clamps on a deceptive spam campaign Wednesday that promised a chance to win a Playstation 2 console but in reality led to a porn site.

Lo/Ad Communications Corp. Co-Founder Nicholas Loader was the principal defendant named in the porn fraud complaint, a serious blow to a company that provides pay-per-call services to a blue ribbon client roster including Paramount, Turner News Network, Hewlett-Packard and AT&T .

The FTC has frozen the assets of the corporation (as well as the other defendants), pending a preliminary injunction hearing.

Loader calls the charges "grandstanding" and an attempt by the FTC to prove it is looking to protect consumers from the big, bad Internet. He said operations, which were shut down as a result of the complaint, will resume in 14 days.

"I have every confidence my company will prevail," he said. "We don't deny what happened. We shut down (the scam) within 12 hours after hearing about it; the FTC spent eight months investigating us, looking for other scams, and they found nothing."

The $11 million recompense the FTC is looking for can be attributed to a 17-year-old child, he said, who escaped charges and mention in the complaint so far because he is a minor.

"He's going to get charged in the next couple days, though" he added.

E-mails peppered inboxes around the world with the supposedly Yahoo-sponsored contest catered to entice children, which instructed them to download a program that would connect them to the contest Web site. Instead, it routed users to a 900 number charging $3.99 a minute to visit a porn site.

Calling it a 'bait and switch' of the worst kind, J. Howard Beales III, FTC bureau of consumer protection director, pressed for an injunction and temporary restraining order against three companies: BTV Industries, Lo/Ad and National Communications Team, Inc.

"The spammers promised a product that's particularly attractive to kids," he said. "They delivered a product that's offensive to many adults, and totally inappropriate for kids. Consumers were told it was free, but they were charged minute-by- minute. The FTC has put a stop to it."

The FTC complaint calls for a permanent injunction against the three companies and the principals involved in the spam campaign, as well as compensation to the consumer's duped by the fraud. The case was unsealed by the U.S. District Court for the District of Nevada after the original filing March 27.

While a victory for anti-spam organizations looking to put a stop to the flood of unsolicited commercial emails (UCE), the FTC is charging the parties involved with violating the Telephone Disclosure and Dispute Resolution Act of 1992, which requires 900 operators to announce the price of the phone call.

But the end result is a victory for the organizations that know well the practices of one of the indicted members.

Rik Covell, owner of BTV Industries (the domain name WHOIS shows it is headquartered in Spain), has been on "spammer" lists for years now, and advocates have continually warned consumers against the company's practices. The Web site is essentially closed now, picturing only the company's logo.

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ABOUT THE AUTHOR

Zachary Rodgers

Until March 2012, Zach Rodgers was managing editor of ClickZ's award-winning coverage of news and trends in digital marketing. He reported on the rise of web companies, data markets, ad technologies, and government Internet policy, among other subjects. 

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