9 Firms Charged With Fraudulent Ads on Internet
In the government’s first crackdown on fraudulent advertising on the Internet, the Federal Trade Commission has charged nine firms with making false claims on the global computer network, officials said Thursday.
Eight of the companies, including DCM Publishing Group in Mission Viejo, have settled the charges and agreed to stop the alleged fraud or face fines of up to $10,000 per violation, FTC officials said.
The agency has filed suit against a ninth company in U.S. District Court in Illinois.
DCM was one of four companies charged with making false claims about lucrative earnings consumers could purportedly collect by setting up businesses at home.
In advertisements on the Internet, the companies said consumers could earn thousands of dollars a month after buying work-at-home programs priced between $9.95 and $147. FTC officials alleged that the companies could not substantiate those rosy income projections.
Four companies were accused of making false claims about repairing consumers’ credit records, including a Santa Barbara-based firm that was also charged with work-at-home fraud. The firms urged consumers to send fees ranging from $19.95 to $750 for help in removing bankruptcy reports and other negative items from their credit records. These claims were also unsubstantiated, officials said.
“Cyberspace is a new frontier for advertising and marketing,” said Jodie Bernstein, director of the FTC’s Bureau of Consumer Protection. “But the Internet will not achieve its commercial potential if this new frontier becomes the Wild West of fraudulent schemes.”
Bernstein said the cases stem from the agency’s first efforts to police the rapidly expanding electronic marketplace known as the Internet. As part of a routine review of the agency’s monitoring efforts last May, FTC officials realized the Internet was expanding quickly and seemed ripe for fraud. As a result, the agency established an Internet fraud detection effort based at the FTC’s offices in Chicago, Bernstein said.
“We had to set them up just so they could get onto the Internet,” Bernstein said. “They had computers but didn’t have the modems and Internet connections. That’s how rudimentary it was.”
DMC was among the suspicious advertisements officials encountered during their early forays onto the Net, said C. Steven Baker, director of the FTC’s regional office in Chicago.
The company’s advertisement promised consumers they could “earn up to $4,000 or more each month” and that most participants “are earning well over $75,000 [a year] by their third year,” Baker said.
The FTC sent a letter to Timothy R. Bean, chief executive of DMC, asking him to substantiate his advertisement’s claims, Baker said. But “there was absolutely nothing to support” the claims, Baker said. “As far as I know, he made them up out of thin air.”
Neither Bean nor any other representative of DMC could be reached for comment.
A separate FTC complaint targeted Randolf D. Albertson of Wolverine Capital in Plainwell, Mich., an advertiser who said he could match consumers with private foundations with “billions of dollars” to give away, officials said.
The final FTC case accused an online advertiser of computer memory products, Robert A. Brandzel of U.S. Telemedia in Arlington, Texas, of failing to deliver chips on time, even after consumers had paid for them.
The case against Brandzel has not been settled, but a federal judge has issued an injunction barring him from publishing deceptive information on the Internet and has frozen his company’s assets, Baker said.
The executives and companies that settled fraud charges related to at-home businesses include Bean and DCM Publishing; Bryan Coryat and Enterprising Solutions of Santa Barbara; Robert Serviss and Excel Communications of Stamford, Conn.; and Sherman Smith and Starr Communications of Salt Lake City.
Those settling fraud charges related to credit repair include Martha Clark and Simplex Services of Niverville, N.Y.; Coryat and Enterprising Solutions; Lyle Larson and Momentum of Bellevue, Wash.; and Rick Rahim and NBDC Credit Resource Publishing of Springfield, Va.
The FTC said its only previous Internet-related action was a 1994 case targeting a Sacramento man accused of making false credit card repair claims on an online computer service.
Officials said the National Fraud Information Center, an industry-funded antifraud group, recently began accepting complaints from consumers who say they have been victims of Internet-related fraud. The center, which shares the complaints it receives with the FTC, can be reached at (800) 876-7060, or on the Internet at https://www.fraud.org.
