States of America (for the Federal Trade Commission) v. Richard
L. Prochnow, et al.
The Federal Trade Commission announced settlements with Cross Media Marketing,
Media Outsourcing, dba Consolidated Media Services (CMS) and one individual
defendant in this matter. The complaint alleged that the defendants deceptively
telemarketed magazine subscription packages, violated a 1996 FTC order,
and deceptively upsold buying club memberships. The companies agreed
to extensive injunctive relief, and a $1 million penalty, suspended upon
payment of $350,000 because of their financial status. The separate settlement
with the individual includes injunctive relief, a $1 million bond requirement,
and a $100,000 penalty, suspended upon payment of $10,000, based on his
Alleged telemarketing scam bilks residents
By TOVIN LAPAN - Santa Cruz Sentinel Correspondent
04/25/04 - SANTA CRUZ — The District Attorney’s Office
is investigating a possible telemarketing scam originating from a
Nevada company that has more than 850 complaints lodged against it
with the Las Vegas Better Business Bureau.
The district attorney’s Consumer Affairs Office has received
six complaints pertaining to Continuity Partners Inc., which offers
pre-paid gas cards and other services.
"From the complaints we’ve received, it is possible that
this company is either misrepresenting the services they offer or
charging more than a customer agrees to on the phone, both illegal
practices," said Consumer Affairs Coordinator Robin Gysin.
The company also identifies itself to consumers as American Values,
Utalk Unlimited, Wellnet and Blitz Media, according to Gysin. Because
it uses several names, complaints may have come in during the past
few months that haven’t been connected to the parent company,
The Iowa attorney general’s office has prohibited the company
from soliciting in that state due to the high number of complaints
A telemarketer contacted Ron Williams, 62, of Boulder Creek three
times and offered him a $200 gas card for only $3.95 if he would
give them his bank account information so they could transfer the
money, Williams said. During the third call, a free seven-day calling
card was added to the deal.
"I kept telling them, ‘Send me the stuff, and I’ll
write you a check,’ but they didn’t want to do it," Williams
Felton resident Joe Shumake, 62, said he was approached with a different
offer, but by the same company under another name. He was contacted
by a telemarketer who claimed to be from Verizon, and was offered
a new cell phone and calling plan for less than $20 a month. Once
Shumake showed interest, the caller mentioned a $3.95 shipping and
handling fee and a $90 setup charge.
"In the end I agreed to pay $3.95 for a package from the company," Shumake
says. "I didn’t like it while I was agreeing to it and
then I felt bad afterward so I went and transferred money out of
the bank account I had given them. I left $35 to cover the shipping
Shumake’s bank had overdraft protection and paid the company
for two package fees of $3.95 and an additional $99 charge. In all,
he received three bills from three different company names, but all
of the charges were deposited in the same account in Sacramento.
Loyal Only to Themselves
09/06 - Customers of several popular online retailers, including
Fandango.com, Priceline.com, and Staples.com, were victims of an
alleged Internet scheme in which their credit cards were charged
a monthly fee for a ``discount club" membership they had never
requested, according to a class action lawsuit filed yesterday in
US District Court in Massachusetts.
The lawsuit accuses Webloyalty.com,
an online marketing services company in Norwalk, Conn., of engaging
in a ``coupon click fraud" scam in which credit card information
was transferred to Webloyalty by its dozens of online partners --
such as Movietickets.com, Petco.com, and FTD.com -- without consumers'
``These are huge retailers, and they are complicit in the scheme," said
Boca Raton, Fla., lawyer Stuart A. Davidson, whose San Diego law
firm, Lerach Coughlin, filed the lawsuit. ``They are reaping a percentage
of the money that Webloyalty is stealing from the nation's consumers."
Webloyalty, which is accused of violating consumers' privacy rights
and engaging in deceptive business practices that have netted the
company huge fees, denied any wrongdoing.
``The allegations are completely without merit, and the lawsuit
misrepresents the manner in which we conduct business," said
Rick Fernandes, Webloyalty's chief executive. ``It's chock full of
inaccuracies, and we intend to win the case and collect our attorney
fees in the process."
Fernandes declined to detail those alleged misrepresentations or
inaccuracies, saying, ``I'd rather not talk about that at this time."
Los Angeles-based Fandango, a codefendant in the case, did not return
a call for comment.
The alleged scheme worked this way, according to the suit: After
consumers made online purchases from various Web retailers, a pop-up
window appeared on their computer screens promising a $10 coupon
on their next purchase. If consumers entered their e-mail addresses
to redeem that coupon, their personal information, including credit
or debit card number, was automatically transferred to Webloyalty.
Webloyalty then automatically billed the consumer's credit or debit
card a $9 or $10 monthly fee for a membership in its ``Reservations
Rewards" discount club.
If consumers did not cancel the membership by contacting Webloyalty
within 30 days, they were charged a recurring monthly fee.
E-mails notifying consumers of the cancellation policy were typically
disregarded by consumers as spam, or automatically screened out as
spam by e-mail systems, according to the suit.
Furthermore, the Reservations Rewards program offered no benefit
to consumers, according to the suit; instead, Webloyalty kept the
monthly fees and paid its Web retailer clients a ``per-customer" fee
for each consumer who "signed up" for the club.
``In our mind, this company was run just like a securities fraud
boiler room, and just like those companies they earned millions of
dollars off the backs of consumers," said Davidson, who added
that ``tens or hundreds of thousands" of consumers have been
victims of the alleged scheme.