Man Gets 11 Years for Huge Credit Card Scam

A Malibu man who defrauded hundreds of thousands of credit card holders out of $37 million by falsely billing them for access to pornographic websites was sentenced Monday to 11 1/4 years in federal prison.

Prosecutors said the scam perpetrated by Kenneth Taves is the largest Internet fraud to date that has resulted in a conviction.

U.S. District Judge J. Spencer Letts also ordered Taves to pay full restitution to the victims. Federal authorities previously seized more than $20 million from his far-flung holdings, including secret bank accounts in the Cayman Islands.

Taves, 52, operated a business called NetFill, which charged customers $19.95 a month for access to selected Internet pornography sites.

In 1997, Taves purchased access to lists of more than 3.7 million valid MasterCard and Visa credit cards from Charter Pacific Bank in Agoura, ostensibly so he could check on the credit ratings of customers.

Instead, he used his access to bill about 900,000 people for services never rendered.

Charter Pacific continued to process the bogus card transactions even as demands for refunds were skyrocketing, a Federal Trade Commission receiver later found.

The FTC filed a civil action against him in 1999 and the U.S. attorney’s office brought criminal charges the following year. Taves, who has been held without bail, pleaded guilty in 2001 to possessing credit card account numbers with intent to defraud consumers and with obtaining money through unauthorized credit card charges.

When he pleaded guilty, he agreed to provide a financial statement to the FTC listing all of his assets, but prosecutors said he failed to disclose millions of dollars in the Cayman Islands.

Federal authorities subsequently tracked down and seized $8.1 million that he allegedly laundered through banks in the Cayman Islands and the South Pacific island of Vanuatu. Litigation is pending over whether the government can keep those funds.

A court-appointed receiver in the civil case recovered an additional $12.8 million from a variety of sources, including the sale of Taves’ $3.5 million home in Malibu and other money he kept in a Cayman Islands bank account.