Regulators go after junk e-mail operation that lured consumers to adult Web site


Wednesday, April 24th 2002, 12:00 am
By: News On 6


WASHINGTON (AP) _ A federal court has ordered an e-mail operation shut down because it allegedly used deceptive offers of free video game systems to lure consumers to a pornographic Web site and then charged them hidden fees.

The Federal Trade Commission said Wednesday that the scheme cost consumers about $11 million in telephone charges between May and December last year.

``There are a lot of deceptive spams,'' said Howard Beales, the FTC's director of consumer protection. ``This is one of the worst we've seen.''

The government complaint names three companies and three individuals, including Nick Loader, president of National Communications Team Inc., based in Reno, Nev.

Loader said his company only provided the toll phone numbers used by the scam and shut them down last fall when it became aware of the fraud. He also disputed the FTC's complaint, saying that the scam was created by a teen-ager with a home computer and had cost consumers less than $20,000.

``It only takes one person to create the problem,'' he said. ``The FTC is on a fishing trip against the whole industry.''

The complaint also named BTV Industries; Rik Covell and Adam Lewis, who worked with BTV; and LO/AD Communications Inc. They could not immediately be reached for comment Wednesday.

The complaint, filed under seal on March 27 with the U.S. District Court for the District of Nevada, was announced Wednesday.

At the FTC's request, the court issued a temporary restraining order and froze the assets the companies involved. The court has scheduled a hearing for April 29.

Beales said the spam operation misled consumers with e-mail telling them they had won a Sony PlayStation 2 or other prizes in a sweepstakes sponsored by Yahoo Inc.

When consumers tried to claim their prize, they were directed to an imitation Yahoo site to download a ``dialer'' program, he said. The program connected their computers to the pornographic site using phone numbers described as ``toll-free'' that actually charged up to $3.99 for each minute.

That billing continued until consumers disconnected from the Internet, Beales said.

AT&T, which provided billing services for the numbers, canceled the charges for many consumers who complained, the FTC said. The agency is seeking refunds for the remaining victims.

After promoting a free call, the operation did disclose that it would charge consumers, but only in fine print buried in a series of Web pages, Beales said.