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FTC: Web scam artists pilfered $24.7m from American businesses

'But we'll settle things up for $1.2m'

Internet Security Threat Report 2014

After allegedly pilfering more than $24.7m from small businesses and non-profits across the country, a gaggle of web scam artists - sorry, alleged web scam artists - will fork over a measly $1.2m to settle a court case brought by the federal government.

For several months starting in 2002, according to a suit from the Federal Trade Commission (FTC), the case's 11 defendants forced unauthorized web charges onto hundreds of thousands of American companies, nabbing nearly $25m. Five years on, the FTC has announced that 10 of the 11 have agreed to settle, each promising not to pull the same trick again. The lone hold-out, Steven L. Kennedy, looks set for a December trial.

Filed in June of 2006, the FTC suit claims that the 11 made countless cold calls to small businesses and non-profits, offering a free 15-day trial of a web site design service. But it looks like the free trial was less than free. Though operators insisted that the service would automatically cancel after 15-days if it wasn't approved by the customer, the FTC says, the defendants pushed charges onto customer phone bills whether they had approval or not.

Then, when customers called to complain, operators insisted they had "verification recordings" authorizing the charges. At least, that's the word from the FTC. We have to be careful about these things. In settling, the defendants haven't admitted they're guilty.

But they have agreed to pay over $1.2m in settlement costs. The court would ask for the full $24.7m, but the defendants have official papers proving they can't afford that much.

Speaking with The Reg, James Elliott, the FTC lawyer overseeing the case, said that the money will go into a temporary FTC fund that should eventually be distributed among the victims of the alleged scam. "Hopefully, there will be a redress procedure," he said, "and somewhere down the line, consumers will be able to assert a claim against the redress fund." Some business have already received refunds from the defendants and various phone carriers.

The hold-out, Stephen Kennedy, may yet get off, but if the U.S. District Court in Houston, Texas orders him to pay damages, those will go into the same FTC fund.

If you're interested, the other defendants include WebSource Media, BizSitePro, Eversites, Telsource Solutions, Telsource International, Marc R. Smith, Kathleen A. Smalley, Keith Hendrick, John O. Ring, and James E. McCubbin, Jr. ®

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