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The U.S. Federal Trade Commission (FTC) said Thursday it has charged an overseas company and its principals with billing consumers and attempting to collect payment for Internet-based adult entertainment services and international phone calls that were never purchased or authorized.
According to the commission, Verity International Ltd. and the other defendants also misrepresented that consumers were legally obligated to pay, regardless of whether the user actually accessed the services.
The consumers were also told that that they owed money for a remote Internet connection through Madagascar, when in fact the connection was made through a cheaper location, according to the commission.
Thousands of consumers were billed an average of $250 (US$) apiece, the FTC said.
Influx of Complaints
In addition to Verity, the FTC charged Integretel, Inc. of San Jose, California, and its eBillit subsidiary, along with Robert Green and Marilyn Shein of the United Kingdom.
The FTC said it received almost 600 consumer complaints in "a matter of days," beginning September 18th.
"When so many consumers call about one issue in such a short period of time, we not only take notice, we take action," said Jodie Bernstein, director of the FTC's Bureau of Consumer Protection.
Many consumers who complained to the FTC said they had no idea why they received the bills. Others said a minor in the household, or someone else who did not have the subscriber's authorization, accessed the adult Web sites and downloaded the Verity dialer software, according to the commission.
Statements from the Accused
Verity issued a statement through its lawyer, Joel Dichtler, asserting that its services "comply fully with all FTC and FCC guidelines" and that all charges, according to the company, are "clearly disclosed" before the dialing software can be downloaded.
The company added that it "desires to work with the FTC" to resolve the matter.
For its part, Integretel, as the company that forwarded the bills on Verity's behalf, was "caught in the middle" of the problem, said chief executive officer Joe Lynam. The company, he said, is talking to the FTC and expects to be removed from the case.
"It was Verity's product, Verity's service" that the bills covered, he said.
Dialing Without Authorization
The Web sites contained a dialer program that provided users with access to the adult site without verifying whether the user was the line subscriber, and the calls were made without asking the user to authorize charges for so-called "videotext" services, the FTC said.
Once the dialer software was downloaded, it disconnected the computer's modem from the user's Internet service provider and reconnected the consumer's modem to the Internet from some overseas location, opening at an adult Web site, according to the FTC complaint.
Consumers, the FTC said, were then charged $3.99 per minute for the remote Internet connection.
Thousands of Bills
Integretel, a service bureau and billing aggregator, sent more than 67,000 invoices through its eBillit subsidiary to consumers during the second week of September and 44,000 bills the following week, the FTC said.
Telephone customers who called Verity's toll-free number "found that it was nearly impossible to reach a customer service representative," the FTC said. Those who did get through were told that they were responsible for the charges, the commission said.
Court Freezes Assets
The U.S. District Court for the Southern District of New York issued a temporary restraining order against the defendants, freezing their assets, the FTC said.
The commission voted 5-0 to file the complaint, which seeks restitution for the consumers, as well as "disgorgement of ill-gotten gains, along with any additional relief a court deems proper."
The UK's Office of Fair Trading, Ireland's Office of the Director of Consumer Affairs and the Australian Competition and Consumer Commission helped with the investigation, the FTC said.
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