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FTC, California Attorney General seek halt to illegal spam operation

April 13, 2005

Since March 2004 consumers across the country have forwarded to the FTC more than 1,870,000 spam messages that advertise Web sites linked to the defendants.

Attorney General Bill Lockyer today will ask a federal court to shut down a major California-based spam operation that has bombarded people across the country with illegal email ads pitching mortgage services, car warranties, travel deals, prescription drugs and college degrees.

Defendants named by the law enforcement agencies are Optin Global, Inc., also doing business as Vision Media Limited Corp.; USA Lenders Network, USA Lenders, and USA Debt Consolidation Service; Vision Media Limited Corp.; Rick Yang, also known as Qing Kuang Yang; and Peonie Pui Ting Chen.

According to papers filed with the court, the defendants use third-party affiliates or "button pushers" to send spam hawking mortgage loans and other products and services. Hyperlinks in the spam take consumers to Web sites operated by the defendants. Consumers fill in data and the information is passed along to lead companies and by them to lenders. One mortgage broker sought, and was given assurances by the defendants that they were complying with provisions of the CAN-SPAM Act. In fact, most of the 1.8 million e-mail messages sent to the FTC by the public demonstrate that they were violating almost every provision of the Act, the law enforcers allege.

The agencies charged that the defendants:

-- used false or misleading header information in the "from" or "reply to" lines;

-- used deceptive subject headings;

-- failed to notify consumers that they had a right to opt out of receiving the e-mail;

-- did not provide an opt-out mechanism;

-- failed to honor opt-out requests by consumers;

-- failed to identify e-mail as an advertisement; and

-- did not provide a valid physical postal address.

Each is a violation of the CAN-SPAM Act.

U.S. District Court Judge Samuel Conti, Northern District of California, today will hear a request that he issue a temporary restraining order (TRO) in a 13-count lawsuit against the spammers filed jointly yesterday by Lockyer and the Federal Trade Commission (FTC). The TRO requested by Lockyer and the FTC would stop the defendants from continuing to send illegal spam, freeze their assets and require them to turn over to Lockyer's office and the FTC computer records related to their operation. Judge Conti could rule on the TRO request as early as today.

Lockyer's action makes California the first state in the country to bring a lawsuit jointly with the FTC under a federal anti-spam law that took effect January 1, 2004. The federal statute is known as the CAN-SPAM Act (Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003). The lawsuit also is the first filed by Lockyer under the recently-revised California anti-spam law, which was amended in 2004 after much of it was preempted by the CAN-SPAM Act.

For violations of the CAN-SPAM Act, Lockyer and the FTC seek damages, disgorgement of ill-gotten profits, and immediate and permanent injunctive relief to prohibit further violations of the law. For violations of California law, Lockyer seeks civil penalties of $2,500 per violation, actual damages, and liquidated damages of $1,000 per illegal email, up to $1 million per incident.

"Since at least January 1, 2004, and continuing to the present (the) defendants have initiated the transmission of hundreds of thousands of commercial email messages," the complaint alleges.

The defendants' spam advertises such products as auto warranties, pharmaceutical products, online college degree programs and mortgage services, the complaint alleges. The emails typically contain hyperlinks to defendant-operated web sites that promote the products and services, according to the complaint. The defendants used mailing addresses in several countries, including China and Canada, and Internet domains registered in Switzerland.

Since March 2004, the court papers allege, consumers across the country have forwarded to the FTC more than 1,870,000 spam messages that advertise Web sites linked to the defendants. In California, Lockyer's office has received from consumers more than 4,000 such emails since January 2004.

Many of the defendants' spam messages, according to the complaint, market mortgage services. When directed by hyperlinks to the defendants' mortgage services web sites, consumers are asked to provide personal information, ostensibly to be shared with mortgage brokers or banks.

In fact, the complaint alleges, the defendants sell the personal information to "lead" companies, which then sell the information to other "lead" companies. Ultimately, the information winds up in the hands of mortgage lenders and brokers, such as Ameriquest Mortgage Company, Indy Mac Bank, BLS Funding and Mortgage South. The lenders and brokers then contact consumers and offer mortgage services, according to the complaint. Mortgage lead companies that bought the personal information directly from the defendants include Abacus Enterprises and Infinite Leads Marketing. Abacus Enterprises, based in El Cerrito, purchased about 69,000 leads from the defendants in 2004, the complaint alleges.

Internet service providers (ISPs) and Microsoft cooperated with Lockyer's office and the FTC in the investigation. In March 2004, Microsoft, Yahoo, America Online and Earthlink filed CAN-SPAM lawsuits of their own against major spammers. And the FTC has brought several enforcement actions under the CAN-SPAM law since April 2004.

Microsoft's Internet Safety Enforcement Team began investigating the defendants more than a year ago, and directly supported the lawsuit by providing evidence of illegal spam e-mails and other investigative materials to the Consumer Law Section of the State of California Office of the Attorney General, as well as by submitting an affidavit detailing MSN Hotmail policies to the FTC.

"The strong collaboration between state and federal government enforcers, as well as private industry, demonstrated in this case is critical in the battle against spam," said Microsoft Internet Safety Enforcement Attorney Aaron Kornblum.

Microsoft has supported actions against alleged spammers in Florida, Massachusetts, New York, Pennsylvania, Texas, and Washington state. Last Monday, Florida attorney general Charlie Crist sued two Tampa-based spammers following a six-month collaborative investigation with Microsoft.

On March 31, Microsoft announced the filing of 117 civil suits against alleged phishers. Separately, Microsoft also has filed 97 civil lawsuits to date against alleged spammers in the United States.

Microsoft's MSN Hotmail is the world's largest Web-based e-mail service, with more than 200 million active accounts.





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