It's All Perfectly Illegal

WASHINGTON, D.C. — Paul K. Boiven — aka Paul Bowen, aka Paul Boevein, aka Paul Bowvein, aka Paul Brown — promised users up to an easy $46,000 in 60 days to participate in an email chain letter. The email advised readers to send $5 in cash to each of the four or five participants at the top of the list. It then told new recruits to place their own names at the top of the list and remove the name at the bottom.

In return for the $5, recruits received “reports” providing instructions about how to start their own chain letter schemes and recruit tens of thousands of others via spam.

It was all perfectly legal, Boiven contended. In the email, he even urged readers with doubts to contact Eileen Harrington, Associate Director of the Federal Trade Commission’s (FTC) Division of Marketing Practices.

In fact, many readers did just that. On Tuesday, the FTC said it had caught Boiven and six others in a sting operation. The seven werpetrators agreed to settle charges that they were spamming consumers with deceptive chain letters. Financial terms of the settlements were not disclosed.

In addition to Boiven, the Commission reached settlements with Chad and Megan Estenson of Warwick, N.D.; Fernando Pacheco of North Providence, R.I.; Arnold Larsen of Sarasota, Fla.; John Lutheran of San Diego, Calif.; and Dario Va of Weson, Fla. The FTC filed its case and the settlement in the federal court of each defendant’s district.

The roundup is part of the Commission’s renewed focus on stamping out fraudulent email advertisers. Earlier this month, during the annual Privacy and Data Security Summit in Washington, D.C., FTC chiefs gave notice that the federal agency would begin brining suspected deceptive or fraudulent advertisers to task.

In September 2000, the FTC sent letters to 1,000 promoters of an email Ponzi scheme, warning them that their activities were illegal and instructing them to cease, to return any money they had received by participating in the program, and to forward a copy of the FTC’s warning letter to everyone they had emailed.

Thirteen months later, the FTC went back and searched online newsgroups and within the agency’s junk email database looking for the chain letter scam. The search found more than 2,000 participants in the chain letter, from almost 60 countries around the world. Working undercover, FTC investigators and paralegals contacted the scheme’s promoters — who they confirmed were continuing the scam, despite earlier warnings.

“This chain letter deceptively claims the program is legal and urges recruits who question its legitimacy to contact the FTC’s Associate Director for Marketing Practices,” Harrington said. “Well, I am the Associate Director for Marketing Practices, and these chain letters are illegal.”

The FTC’s settlement with the seven defendants included a permanent injunction barring them from promoting, selling or participating in any Ponzi scheme, in addition to forbidding misrepresentations about the potential earnings or rewards from any marketing scheme.

The injunction also bars misrepresentations about the legality of any program, and from providing others with the tools — in this case, an email template — to make false or misleading statements. The defendants are also barred from selling or sharing lists of their recruits and making money from the scheme in the future.

Additionally, the settlements all contain record-keeping requirements to allow the Commission to monitor compliance.

In addition to the settlements, the FTC announced it would mail warning letters to more than 2,000 individuals still involved in the chain letter, using addresses culled from the FTC’s unsolicited commercial email database.

Consumers currently send unsolicited email to the agency at a rate of approximately 15,000 emails a day, it said. (The FTC has a specific email address, [email protected], that it asks consumers to use in reporting and forwarding unwanted email.) The FTC has collected more than eight million unsolicited commercial email messages since 1998, it said.

“Almost everyone with an email account gets spam,” said FTC Chairman Timothy J. Muris. “It’s intrusive, unwelcome, and annoying. Deceptive junk email is also illegal. We want to send a message today: we’re going after deceptive spam and the people who send it. We want it off the Net.”

In addition cracking down on fraudulent email advertisers, the agency also reiterated its plans for a public/private education effort, which it intends to launch in conjunction with Internet Service Provider trade associations, including the Washington Association of ISPs and the Texas ISP Association.

The Texas Association’s 250 members and Washington Association’s 30 members will publicize and disseminate consumer education materials developed by the FTC to warn consumers about illegal chain mail schemes, it said.

For ISPs, which shoulder much of the costs for delivering unwanted email, the government’s crackdown comes as good news.

Additionally, the same is true for legitimate email marketers, who have to contend with the eroding effect that junk-filled inboxes have on consumers’ willingness to open commercial email. Several online marketing groups — such as the Direct Marketing Association and the Responsible Electronic Communications Alliance — have proposed guidelines to restrict email marketing to companies that have tacit permission to send mail, or else have prior business relationships with their recipients.

Still, consumer advocates and not-for-profits like Mail Abuse Prevention Systems (MAPS) want to see the standard taken further: to an explicitly “opt-in” policy by marketers, rather than the “opt-out” policy now favored by the industry’s major players.

InternetNews.com senior editor Christopher Saunders contributed to this story.