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					                        Asia-Pacific Economic Cooperation
                                                             Agenda Item : III d

Law Enforcement Posse Tackles Internet Scammers,
              Deceptive Practices

                         Purpose : Information
                      Submitted by : United States

                      Electronic Commerce Steering Group Meeting
                                                 Phuket, Thailand
                                               15-16 August 2003
Law Enforcement Posse Tackles Internet Scammers, Deceptive
Initiative Launched to Prevent Spammers From Concealing Identity and
Evading Detection

In the latest in a series of law enforcement initiatives targeting Internet fraud, the
Federal Trade Commission, Securities and Exchange Commission, United States
Postal Inspection Service, three United States Attorneys, four state attorneys
general, and two state regulatory agencies today announced they have filed 45
criminal and civil law enforcement actions against Internet scammers and deceptive
spammers. In addition to the law enforcement actions, the FTC and 21 U.S. and
international agencies have launched an initiative to get organizations in 59 countries
to close the open relays that allow spammers to avoid detection by spam filters and
law enforcers.

"Today's Internet is not a lawless environment," said Howard Beales, Director of the
FTC's Bureau of Consumer Protection. "In fact, the NetForce partnership
demonstrates the importance of enforcement on the Internet beat. We have the
biggest impact on deceptive spammers and online scammers when law enforcement
agencies band together to root out and prosecute fraud."

According to the FTC, the law enforcement actions announced today represent a wide
array of deceptive schemes and illegal scams including auction fraud, the illegal sale
of controlled substances, bogus business opportunities, deceptive money-making
scams, illegal advance-fee credit card offers, and identity theft.

The FTC filed eight district court lawsuits, naming 20 defendants, to halt deceptive
Web operations:

      In a case that generated more than 1,200 consumer complaints to the FTC's
       Consumer Sentinel database, the FTC asked a district court to halt the
       defendants' unauthorized billing and collection for videotext services
       purportedly accessed on the Internet. According to the FTC, the defendants
       use a modem dialing program to disconnect consumers from their own
       Internet service providers and reconnect them to the scammers' network
       without the consumers' authorization or approval. Using the dialing program,
       the defendants then capture the telephone number used by the modem, and
       match it against several databases of line subscriber information, which
       frequently contain errors. The line subscribers identified as responsible for the
       captured telephone number later receive bills charging them $4.99 a minute
       for each minute the defendants claim videotext services were purchased,
       regardless of whether the line subscribers authorized the purchase. The FTC
       alleges that many consumers never visited the defendants' sites at all, and
       were charged due to billing service errors of which the defendants were
       aware. Furthermore, according to the FTC, the defendants' dialing program
       downloads onto consumers' computers without their authorization. The FTC
       coordinated the investigation of this case with the offices of numerous state
       attorneys general, and with the invaluable assistance of the New Jersey
       Attorney General; the Georgia Attorney General; the Georgia Governor's
       Office of Consumer Affairs; the Wisconsin Department of Agriculture, Trade
       and Consumer Protection; the Illinois Attorney General; and the Idaho
       Attorney General.

      One Web-based scam targeted college-bound students and their parents. For
       a fee of $895, the defendants pledged to procure 100 percent of the funding
       students would need to attend college. In fact, they procured no money for
       the students. Instead, they provided consumers with readily available
       scholarship information that consumers could have obtained free.

      Two different cases against participants in an e-mail chain letter scheme that
       promised participants significant earnings, pledged that the scam was
       legitimate, and urged recipients to contact the FTC's Associate Director for
       Marketing Practices, who they claimed would vouch for the legality of the
       illegal schemes. The FTC stopped the illegal schemes, and settlements with
       the defendants bar them from participating in illegal chain e-mail schemes in
       the future.

      One Web-based scam claimed that consumers who paid a one-time fee of
       $49.95 were guaranteed to receive a "100% unsecured" VISA or MasterCard
       credit card with a credit limit up to $5,000.00. Consumers who clicked on the
       "Claim your card NOW," icon on the Web site and entered their checking
       account information received a confirmation page or e-mail that typically
       stated, "Approved! Congratulations! Your membership has been approved." In
       fact, according to the FTC, what consumers received was access to a Web
       page containing hyperlinks to various companies that purportedly issue credit
       cards -- a list of hyperlinks that would have been available free to consumers
       who used a search engine.

      A scheme used spam and Web sites to market a "100% Legal and Legitimate"
       work-at- home envelope stuffing opportunity. Using deceptive information in
       the "from" line of their e-mail, the defendants represented that they were
       affiliated with well-known entities, such as Hotmail and MSN. Marketing
       materials promised consumers that they would earn $1 for each envelope
       they stuffed, and could earn as much as $1,500 a week stuffing envelopes
       supplied by the defendants. What consumers received for their $50 fee was a
       set of instructions to market a deceptive credit-repair manual.

      A third work-at-home scheme, called "Instant Internet Empires," touted the
       money making potential of five pre-packaged Internet businesses, promising
       that buyers could make more than $115,000 a year using the product. The
       defendants told consumers that the product would enable them to make
       money while they sleep. What consumers received for their $47.77
       investment was the right to reproduce the defendants' advertising Web site
       and try to resell its contents to other consumers. To achieve the promised
       $115,000 in earnings, consumers each would have to sell the product to
       2,400 additional consumers, who would each need to sell to 2,400 additional
       consumers to achieve the same earnings, and so on. According to the FTC, by
       the third generation of the scheme, participants would need to make a total of
       13,829,760,000 sales, more than twice the earth's population, for each of
       them to achieve the advertised earnings. In fact, many purchasers failed to
       make even one sale after months of trying.

      Another Web-based scheme was filed under seal. The seal had not been lifted
       by press time.

In addition to the FTC cases, 11 other federal and state law enforcers brought 37 law
enforcement actions. The agencies include the Attorneys General of Louisiana, Texas,
Oklahoma, and Arkansas; the United States Attorneys for the District of New Mexico,
the Western District of Louisiana, and the Northern District of Texas; the United
States Postal Inspection Service; the Securities and Exchange Commission; Texas
State Board of Pharmacy; and the Texas Department of Health.

In addition to the law enforcement actions, the FTC and 17 other consumer
protection and law enforcement agencies initiated an effort to cut down on deceptive
spam by urging organizations to close "open relays." Open relays allow third parties
to route their e-mail through servers of other organizations, thereby disguising the
real origin of the e-mail. Spammers identify and use other organizations' open relays
to avoid detection by the spam filter systems used by internet service providers to
protect their customers from unwanted spam. Routing spam through open relays also
makes it difficult for law enforcement agencies to track down deceptive spammers.

Fifty law enforcers from 17 agencies identified 1,000 potential open relays, 90
percent of which were in 16 countries: U.S., China, Korea, Japan, Italy, Poland,
Brazil, Germany, Taiwan, Mexico, Great Britain, Chile, France, Argentina, India,
Spain, and Canada. The agencies drafted a letter which was translated into 11
languages and signed by 14 different US and international agencies, urging the
organizations to close their open relays and help reduce spam.

"Law enforcement is not the only way to tackle spam problems," said Beales.
"Through this education initiative, we hope organizations throughout the world will
shut the door on unwanted spam by securing their servers."

The FTC has a Web site at to combat spam and has developed a
publication, "Open Relays - Close the Door on Spam," to encourage businesses,
consumers, academic institutions and others to close open relays. To find out more
about the open relay project go to

Partners in the open relay project include the Attorneys General of Arkansas,
Louisiana, New Mexico, Oklahoma, and Texas; the Office of the U.S. Attorney for the
District of New Mexico; the U.S. Postal Inspection Service; the Securities and
Exchange Commission's Ft. Worth Office; Texas Department of Health; Social
Security Administration; Office of the U.S. Attorney for the Northern District of
Texas; Oklahoma Department of Securities; Lubbock, Texas Police Department;
Richardson, Texas Police Department; Arlington, Texas Police Department; Custer
County, Oklahoma District Attorney's Office. International partners include the
Australian Competition and Consumer Commission; Industry Canada; Servicio
Nacional del Consumidor (SERNAC); and the Japanese Delegation to OECD
Committee on Consumer Policy.

Ex parte temporary restraining orders with asset freezes were issued in four cases.
Two cases have been resolved with stipulated final judgments. Complaints have been
filed in the remaining two cases and the FTC is seeking preliminary relief in both

This is the fourth Netforce Project since April 2002. More than 60 state, federal and
local agencies have brought over 150 Internet-related law enforcement actions in
connection with the Netforce Sweeps.

NOTE: The Commission files a complaint when it has "reason to believe" that the law has been or is being
violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a
finding or ruling that the defendant has actually violated the law. The case will be decided by the court.

Copies of the legal documents associated with these cases and a complete case list are available from the FTC's
Web site at and also from the FTC's Consumer Response Center, Room 130, 600
Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent,
deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot,
stop, and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free,
1-877-FTC-HELP (1 877-382-4357), or use the complaint form at The FTC enters Internet,
telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online
database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.
       Claudia Bourne Farrell,
              Office of Public Affairs

       Marc Groman,
       Bureau of Consumer Protection
(FTC   File   No. 032-3108 - Jeffrey Stone Evans)
(FTC   File   No 032 3107 - Kent Benson)
(FTC   File   No 022-3305 - Alyon Technologies)
(FTC   File   No 032-3012 - Easy Money)
(FTC   File   No 032-3112 - Inc.)
(FTC   File   No 032-3081 - College Funding Center)
(FTC   File   No. 032-3047 - Instant Internet Empires)
(FTC   File   No. 032-3025 - This case is under seal)


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