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Porno Webmasters nailed in $43m credit scam

Bank sells CC database to trixters

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The US Federal Trade Commission (FTC) on Thursday ordered a California Web-porn outfit to pay $37.5 million in restitution for a credit-card billing scam, made possible after the defendants purchased access to a database of three million credit-card numbers from Charter Pacific Bank of Agoura Hills, California, and illegally tacked charges onto those accounts to the tune of $43 million, or over ninety per cent of their annual revenues.

Dennis Rappaport and Kenneth and Teresa Taves of Malibu, California, as well as their businesses, J.K. Publications, Inc., MJD Service Corp., Herbal Care, Inc., and Discreet Bill, Inc., were all named in the suit.

The original complaint had been filed in January 1999, alleging that the defendants billed consumers without authorization. The businesses were promptly shut down by court order and placed in receivership.

The defendants used five separate merchant accounts and four fake business names to evade detection. Each time a card issuer noticed an excessive number of charge-backs and added the account to a list of suspicious merchants, the defendants would close the suspected account and open a fresh one.

The trio operated a group of porno Web sites including AsianHQ, Erosisland.com and Restricted.com. Victims' accounts were billed under the names Netfill, N-Bill, MJD Service Corp., and Webtel.

US District Court Judge Audrey Collins barred the defendants from owning or managing any business that handles credit cards. "The only reasonable inference the court can draw from the corporate defendants' access to the Charter Pacific Positive Database and the timing of the defendants' fraudulent billing practices is that the defendants stole and processed Visa and MasterCard numbers from the database," the Court stated.

The Register is at a loss to explain why the three are not presently on their way to the slammer. Equally puzzling is the Court's disinterest in the irresponsible way that Charter Pacific Bank handed over access to a credit database without first investigating the legitimacy of the buyer. (When teenage cracker 'Curador' made credit card account details available on the Net back in February in a similar act of irresponsibility, we recall, he was treated to the full force of an FBI criminal investigation.)

Not surprisingly, millions of dollars obtained in the Rappaport/Taves scam have been transferred to accounts in the Cayman Islands and Vanuatu. The FTC reckons the companies now possess roughly $20 million in available assets. Consumers who wish to stake a claim may contact the FTC on its Web site, or by phone at 1-877-382-4357.

This is not a unique case. As we reported here, the FTC filed suit last month against the operators of Playgirl.com and Highsociety.com, who stand accused of charging surfers for visiting free portions of their Web sites. ®

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