Net Firm Wazzu Accused of ‘Cramming’
A Fountain Valley Internet company that attracted money from a prestigious investor group and recently won an award at a venture-capital conference was charged by the Federal Trade Commission on Thursday with sneaking illegitimate charges onto consumers’ phone bills.
The FTC complaint against Wazzu Corp. accuses telemarketers working for the company of telling some consumers that Wazzu would design and maintain a Web site for them for a free 30-day trial period, but instead charged them during that period, a tactic known as “cramming.”
Some consumers who declined the offer found charges on their phone bills, the FTC said.
The agency, which received “several dozen complaints” about the company, raided Wazzu’s offices on June 9, seizing company records. FTC officials spent two days combing through the company’s computers and files looking for evidence of wrongdoing.
The complaint was one of three announced Thursday by the FTC, which said that thousands of small businesses have lost millions of dollars in the last two years because of such scams.
“Internet cramming has focused on small business like a laser beam,” said Jodie Bernstein, director of the FTC Bureau of Consumer Protection. “Thousands of small businesses have been ambushed by Internet crammers.”
The FTC is expected to bring cramming charges against additional companies within the next six weeks, agency officials said. Cramming was the fourth-largest source of consumer complaints in the FTC’s annual report on fraud to Congress.
Small businesses are especially vulnerable to cramming because they often lack the rigorous internal auditing process found at larger firms.
Wazzu, a builder of Web sites and online stores for small companies, denies any wrongdoing. “We are a model for the industry in the way we process new customers and handle orders,” said Kirk Waldfogel, the company’s chief operating officer. “The charges are absolutely baseless. I’m shocked this is happening.”
Wazzu has raised $800,000 of its $1.5 million in funding from the Tech Coast Angels, a group of wealthy Orange County executives and investors who sink money into start-up companies. Wazzu had hoped to raise $10 million in venture capital by the end of July, but might have to put that off until the brouhaha blows over.
Wazzu won “Best Show” honors at VentureNet 99, the annual software and Internet venture-capital conference that matches venture capitalists with fast-growing entrepreneurial firms.
The company has been cooperating with the FTC, and a settlement is expected. “I want this thing to be over and done with in a very short amount of time,” Wazzu’s Waldfogel said.
Also named in complaints Thursday were Shared Network Services, which does business as 1stPage, of Lodi; and WebViper, which does business as Yellow Web Services, of Montgomery, Ala.
