Web Site To Pay $37M for Scam
Friday, September 8th 2000, 12:00 am
By: News On 6
WASHINGTON (AP) â€” A California-based adult Web site operation will pay $37.5 million for operating an illegal billing scam, charging the credit cards of consumers who had not visited the Web sites and thousands who didn't own a computer at all, federal regulators said Thursday.
The Federal Trade Commission brought the suit against Dennis Rappaport and Kenneth and Teresa Taves, all of Malibu, Calif, as well as their businesses, J.K. Publications, Inc., MJD Service Corp., Herbal Care, Inc., and Discreet Bill, Inc.
The complaint was filed in January 1999, alleging that the defendants billed consumers without authorization, and the businesses were shut down by a court order days later.
The FTC argued that the defendants bought access to a database of credit card numbers provided by a California bank, amounting to over 3 million card holders. The defendants then used those account numbers to place charges on the holders' accounts, the commission said, ringing up over $43 million in bogus sales â€” over 90 percent of their total sales for the year.
The defendants used at least five merchant accounts and four fake business names to cloak their scheme from the Visa credit card company. Each time Visa noticed an excessive number of ``chargebacks,'' charges disputed by customers, and put the account on a list of suspicious merchants, the defendants would open a new account.
The FTC said consumers saw charges on their credit card bills under the names ``Netfill,'' ``N-Bill,'' ``MJD Service Corp'' and ``Webtel.''
``A shocking 40 percent to 50 percent of the calls received by the defendants were from people who said they did not have a computer and had not given their cards to anyone,'' said U.S. District Judge Audrey B. Collins, who handed down the ruling.
The defendants could not be reached for comment.
The FTC says the companies have over $20 million in assets, but it isn't clear that the full amount of the penalty will be available to pay back consumers. Consumer who want to make a claim can contact the FTC on its Web site at www.ftc.gov or at 877-382-4357.