First complaint filed under Can-Spam

The U.S. Department of Justice has filed a criminal complaint against four Detroit-area men under the federal Can-Spam Act, in the first case sparked by the legislation.

In a filing Wednesday in the U.S. District Court of Michigan, federal attorneys contend that Daniel J. Lin, James J. Lin, Mark M. Sadek and Christopher Chung violated the terms of the Can-Spam Act by creating massive e-mail campaigns that marketed fraudulent weight loss products. The Can-Spam Act takes aim at individuals who create and dispense unsolicited and fraudulent e-mail.

Gina Balaya, a spokeswoman for the U.S. Attorney's Office of Detroit, said Chung and Sadek were arrested and appeared in court on Wednesday. The men were subsequently released on unsecured bonds of $10,000.

The two Lins have not yet been reached by authorities, she said. The criminal complaints are good for a period of 30 days, during which Assistant U.S. Attorney Terry Berg will decide whether to seek an indictment.

According to court documents, the four men are accused of generating hundreds of thousands of different e-mails that hid their identities and advertised a weight loss patch. The e-mails were sent out under a variety of company names, including AIT Herbal, Avatar Nutrition and Phoenix Avatar, identified collectively as the Avatar Companies. The e-mails were allegedly sent to millions of e-mail accounts over the course of several years.

The Federal Trade Commission is also involved in investigating the operation, and it said in the filing that it had received more than 10,000 complaints regarding the Avatar operation and had discovered 97 different Web site domain names purportedly being used by the involved individuals to advertise the diet patches. Investigators then followed a paper trail via the U.S. Postal Service, which led them to the four men.

In order to prove the apparently fraudulent nature of the e-mail campaigns and the product being marketed, the investigators relied on the expertise of Dr. Michael Jensen, a professor at the Mayo Medical School. Judging from the ingredients used to create the product, Jensen confirmed for the government that the so-called diet patch would not work.

In April, the U.S. Sentencing Commission sent Congress sentencing guidelines for the Can-Spam Act, adding penalties for people convicted of sending spam via someone else's computer without permission or obscuring the message's origin. In that proposal, the commission retained a controversial proposal to compare spam offenses to theft, fraud and property destruction for the purposes of sentencing.

Spam still warming up
Despite the existence of Can-Spam, companies that monitor the volume of junk e-mail believe that the legislation has done little to discourage the distribution of spam. E-mail service company MessageLabs reported that more than 67 percent of all e-mail sent in April 2004 was considered spam, up from 59.9 percent in February and 52.8 percent in March, when volume temporarily dipped.

"The Feds bringing the heat against these spammers and their clients is a great victory for everyone who's been victimized by spam," said Mark Sunner, chief technology officer for New York-based MessageLabs. "At the same time, with spam volumes increasing 30 percent since the Can-Spam law went into effect, there is a whole new contingent of spammers in operation. These contemporary spammers are now dressing up their messages so they appear to be legitimate. In spite of effective lawsuits, complaints and arrests, spammers are still finding ways to beat the system."

Sunner said a number of forces will be necessary to truly make inroads into the fight against spam, and he called for a "perfect storm" of legal, social and technological efforts in the name of eliminating the problem.

At least one industry expert questioned whether law enforcement agencies will be capable of making the law stick. Jonathan Gaw, an analyst at Framingham, Mass.-based IDC, said he wasn't surprised to hear of the Detroit arrests but that he doesn't think that there will be a landslide of similar criminal complaints filed across the country.

"I don't think we'll see a long-term, continued engagement in pursuit of spammers based on Can-Spam," Gaw said. "It clearly takes a lot of time and energy, and I'd imagine there are other kinds of crimes that will ultimately take precedence with federal law enforcement. If you're a federal agency, are you going to be more concerned with terrorists or spammers? They only have so many resources."

Gaw believes that the government may pursue the largest sources of spam, but he pointed out that there will always be less prolific e-mail marketers that manage to fly under the radar. He said the only way to reduce the volume of spam would be to change the way consumers and marketers use e-mail. But that won't happen anytime soon, he added. Another route could involve appealing to Web advertisers, who often profit from Web traffic created by spam, to change the way they do business.

The fight will continue
In an afternoon conference call hosted by the FTC, members from each of the federal agencies involved in bringing the criminal complaint in Detroit voiced their continued dedication to the antispam effort. Howard Beales, director of the FTC's Bureau of Consumer Protection, called the case a "spam dunk" but admitted that the problem continues to grow.

"During the last two years, the volume of spam has increased exponentially, despite the development of filters and other technology meant to discourage it," he said. "Consumers are still losing the battle against spam."

Beales said the FTC, along with other agencies, will target the nation's largest distributors of spam with the hope of discouraging more people from plying the trade. The FTC said it had received 490,000 spam messages from the Avatar group alone, since beginning to track the individuals in January.

Jeffrey Collins, U.S. Attorney for the Eastern District of Michigan, echoed Beales' sentiments and issued a sharp warning to individuals engaged in the spam business.

"The message that we're sending is clear: Law enforcement has the tools to track down and prosecute spammers, and we have every intention of doing so," Collins said.