FTC settles Net phone scam
Surfers who unwittingly incurred millions of dollars in long distance bills while accessing adult Web sites will get most of their money back, the FTC says.
The sites, "sexygirls.com," "beavisbutthead.com," "erotic2000.com," and
"1adult.com," secretly disconnected the consumers from their Internet
service providers and rerouted their calls through Moldova, a republic in
the former Soviet Union. As a result, unaware consumers in the United
States and Canada were billed more than $2 per minute by their long distance
providers, as reported by CNET's NEWS.COM in February.
A few weeks later, the FTC received a court order to shut down the sites, to which AT&T also had alerted them in December. Despite the FTC's crackdown, many consumers complained to NEWS.COM that their long distance companies were still charging them in full or in part for the calls.
Today the FTC said that more than 38,000 U.S. consumers will get a total of more than $2.74 million in refunds from the companies that ran the alleged scheme. The FTC negotiated the settlements.
Although no one has been charged yet in the investigation, the scheme is reminiscent of similar efforts by "dial-a-porn" operations in the early '90s that bilked callers by failing to warn them of per-minute charges or by keeping the meter running while people sat on hold waiting for sex recordings. While the Federal Trade Commission and telephone companies cracked down on "900" and "800" number scams, many dial-a-porn operations simply switched to international phone numbers to avoid U.S. restrictions.
In this case, along with the inflated cost of international long distance charges, the expensive connections stayed live even after users left the adult entertainment sites to travel elsewhere on the Net, causing customers to be charged for more time than they actually viewed the sites.
Upon approval from the U.S. District Court for the Eastern District of New York, the first settlement will be collected from Audiotex Connection and Promo Line of New York. William Gannon, the owner of Audiotex, and a recently named defendant, Internet Girls, are also named in the suit, as well as various employees of all the companies.
A separate settlement announced today names Beylen Telecom of the Cayman Islands and NiteLine Media of New York, and is subject to public comment for the next 60 days before the commission will vote to make the deal binding.
NiteLine operated "erotica2000.com," while Audiotex ran the other sites in the case. Beylen, the FTC said, acted as the technical mastermind for both companies. "We have alleged that Beylen provided all the companies with the instruments to carry out this scheme, from the phone numbers to the download program," said Paul Luehr of the FTC's Bureau of Consumer Protection.
Consumers who were bilked through the Moldova sex-site scheme will be able to apply for credits through long distance providers such as AT&T and MCI. The FTC will dole out refunds to customers who are billed through other carriers.
Defendants in the case also agreed to stop using a program called "david.exe," a software program visitors to sites such as sexy.com were encouraged to download in order to view pornographic images for free. The "viewer" allegedly turned down the sound on users' modems, disconnected them from their local ISPs, and rerouted the calls through Moldova and then to a Web site in Dallas, Texas.
Initially, no disclaimer was posted warning consumers that their calls would be sent through the complicated long distance loop. Although some of the sites began warning users in January, the FTC charges that they still failed to disclose that consumers could rack up international long distance rates if they didn't terminate their connection after visiting the sex sites.
In the next four to eight weeks, consumers who inadvertently dialed the Moldova numbers can expect to receive credits from AT&T and MCI.
"About 95 percent of the victims were AT&T and MCI customers," Luehr said. "The companies will do a search for the numbers in their database and apply the credits automatically. If not, [customers] should call the customer-service center of their long distance company."