A firm that placed charges on the telephone bills of thousands of small businesses and consumers for Internet-related services they never agreed to buy has been ordered permanently shut down by the U.S. District Court for the Northern District of California.
The defendants in the case - Inc21.Com Corp., Jumpage Solutions Inc., GST U.S.A. Inc., Roy Yu Lin and John Yu Lin - were further ordered to pay nearly $38 million in restitution for consumers. The court barred them from charging consumers’ telephone bills and from telemarketing unless they receive prior approval from the Federal Trade Commission and the court. The FTC charged that the defendants violated the FTC Act and the Telemarketing Sales Rule.
Sheng Lin, who did not participate in the scheme, but who profited from it, was named as a relief defendant and ordered to give up $434,000 in financial benefits he received from the defendants’ unlawful practices.
The FTC sued Inc21 in January 2010, charging that the company hired offshore telemarketers to call prospective clients to sell its Web-based services. The defendants then used local exchange telephone companies (LECs) to place charges, usually between $12.95 and $39.95 per month, for those services on the phone bills of consumers and businesses that either:
* were told by telemarketers that the call was only to verify business information;
* declined Inc21's offer of Internet services; or
* were told they would receive a free trial offer, but were not informed that they would be charged if they did not cancel.
In his opinion, Judge William Alsup stated: “The FTC has produced overwhelming evidence that defendants’ practice of billing tens of thousands of businesses and consumers via their telephone bills – a fraud-friendly practice called ‘LEC billing’– was both deceptive and unfair. The most compelling proof of these violations is a comprehensive expert survey of 1,087 of defendants’ so-called ‘customers.’ This survey revealed that nearly 97% of defendants’ ‘customers’ had not agreed to purchase defendants’ products. Even more egregious, only 5% of them were even aware that they had been billed.”
