In one of the largest settlements involving credit card fraud, the owners of Playgirl.com and several other adult sites agreed to pay $30 million in refunds to settle charges they billed visitors for a supposedly free online peep show.
New York-based Crescent Publishing Group Inc. also agreed to post a $2-million bond before it could continue to operate the Web sites, according to its settlement with the Federal Trade Commission and New York’s attorney general.
The principals of the company, Bruce A. Chew and David Bernstein, were barred from operating adult entertainment Web sites unless they post bonds of $500,000 each.
Any of the $30 million in refund money not claimed will be divided equally between the U.S. Treasury and the state of New York, the FTC said.
According to a government complaint against Crescent, visitors who disclosed their credit card numbers as proof they were of legal age to view adult content at Playgirl.com, Highsociety.com and other Crescent Web sites later found their cards billed for recurring monthly charges of up to $90. The billing scam generated $188 million from 1997 to 1999, officials said.
“It was a company that took advantage of the fact that many people were not willing to fight adult content charges on their credit card” out of embarrassment, said Ken Dreifach, who oversees the New York attorney general’s Internet bureau.
Caroline Landau, a lawyer for Crescent, declined to comment on the settlement. Besides its Web sites, Crescent publishes several adult magazines, including Playgirl and High Society.
State and federal investigators say complaints about fraudulent credit card charges involving Internet businesses have ballooned in recent years.
The problem appears to be especially acute with porn and gambling sites.
Since the Children’s Online Privacy Protection Act took effect in April 2000, many adult sites ask for credit card information to ensure that their customers are of legal age. But some Web site operators then bill visitors without their consent.
Earlier this year, for example, Malibu businessman Kenneth Taves pleaded guilty to bilking credit card holders around the world out of more than $37 million by falsely billing them for access to pornographic Web sites he operated.
Crescent first came under government scrutiny two years ago.
In January, U.S. District Judge Lewis Kaplan issued a temporary order barring Chew and Bernstein from deceiving customers or transferring money out of the companies.
Crescent modified its Web sites after the FTC opened its civil investigation two years ago, but Kaplan found the sites still lacking in candor.
“All in all, these defendants give every indication of seeking to profit from disclosing a minimum of accurate information,” Kaplan wrote.