Fraud case could set precedent for Net

The state of Massachusetts is taking on a landmark fraud case that could set a precedent for the Internet.

3 min read
In a landmark Internet fraud case, the Massachusetts attorney general has obtained a temporary restraining order against a woman who allegedly posted an advertisement on her Web site claiming that she will provide a cure for AIDS to those who purchase a $24 book.

The ad--which read, "In six weeks you are HIV negative!"--stated that a "Dr. Clark" has "discovered the true cause of HIV/AIDS" and was offering her $24 book to callers who also listened to a nine-minute recording on a 900 number that cost $17.91 to hear in its entirety. For another $12, consumers could send email to receive the full details "explaining the exact cause and cure for HIV/AIDS."

The Web site, which was up for about a month, was taken down Tuesday after the Massachusetts Consumer Protection and Antitrust Division received complaints about the ad. Prosecutors say the ad was placed by a woman named Marjorie Phillips, who operates a 900-number service.

The case, which marks the first time that Massachusetts has taken action over potentially criminal activity online, could set a legal precedent for the handling of fraud on the Internet.

"This is our first Internet fraud case, so when we got the lead we conducted the investigation with no rules," state Assistant Attorney General Kevin Nasca said. "We alleged that the claims that were made in the ad were in violation of our Consumer Protections Act."

But the degree of the case's impact on law regarding the Internet was unclear. Central to the arguments on both sides will be the question of whether existing regulations that govern broadcast media also apply to the Net--an issue at the heart of the challenge to the Communications Decency Act now in federal court.

"I don't think that cyberspace should be a space where fraud is permitted, but the crucial thing for us to remember is that cyberspace is very different from TV," said Chris Hansen, an attorney with the American Civil Liberties Union, which is leading the case against the CDA. "The ads on the Internet aren't thrust in your face like they are on TV, and importing any TV or radio rules on the Internet is a big mistake because it represents a very fundamental misunderstanding of the medium."

Nasca disagrees. "This is a new medium for advertising, but the same rules that apply to other mediums should apply to the Internet," he said. "We're talking about someone who's trying to take advantage of a vulnerable population in order to induce them to basically go with this miracle cure instead of using a more medical treatment."

Although it is impossible to "surf" all sites for Internet fraud, Nasca said, taking action in this case is the first step. "The Internet may be a new medium, but people are going to pull the same old money making scams," he said. "We're hoping that through this case a message will be sent out there that these types of things aren't allowed on television or in magazines, and they won't be allowed on the Internet."

Phillips is scheduled to appear in court on April 11. She could not be reached for comment.