The Federal Trade Commission has brought a legal action against an online operation that allegedly scammed more than $450 million from consumers in five countries.
Jesse Willms and several companies he controls obtained consumers’ credit or debit card account numbers by enticing them with bogus “free” or “risk-free” trial offers that supposedly required only small shipping and handling fees - and also promised “bonus” offers just for signing up, according to the FTC's complaint.
The FTC charges Willms and his companies used deceptive tactics in offering various products online - including acai berry weight-loss pills, teeth whiteners and health supplements containing resveratrol (the supposedly healthful ingredient in red wine) - as well as for a work-at-home scheme, access to government grants and free credit reports. The FTC seeks to stop the operation’s practices and make the defendants repay fraud, injured consumers.
Consumers lured into the scam were located in the U.S., Canada, the United Kingdom, Australia and New Zealand.
The defendants allegedly contracted with affiliate marketers whose banner ads, pop-ups, sponsored search terms and unsolicited e-mail led consumers to the defendants’ Web sites, and the defendants paid the affiliates for each consumer whose credit or debit card was charged.
The defendants allegedly made false claims about the total cost of products, recurring charges and the availability of refunds. They also buried important terms and conditions in fine print, the FTC alleged.
The defendants named in the complaint are Willms, Peter Graver, Adam Sechrist, Brett Callister, Carey L. Milne, 1021018 Alberta Ltd., also doing business as Just Think Media, Credit Report America, eDirect Software, WuLongsource, Wuyi Source, 1016363 Alberta Ltd. - also doing business as eDirect Software, 1524948 Alberta Ltd. - also doing business as Terra Marketing Group, SwipeBids.com, SwipeAuctions.com, Circle Media Bids Limited - also doing business as SwipeBids.com, SwipeAuctions.com, and Selloffauctions.com, Coastwest Holdings Ltd., Farend Services Ltd., JDW Media LLC, Net Soft Media LLC - also doing business as SwipeBids.com, Sphere Media LLC - also doing business as SwipeBids.com and SwipeAuctions.com, and True Net LLC - also doing business as Selloffauctions.com.
Willms could not be immediately reached for contact.
Consumers had no reason to believe they would be charged for the trial product or the extra bonus products, but they were often charged for the trial plus a monthly recurring fee, typically $79.95. Consumers also were charged monthly recurring fees for the so-called bonus offers.
Although the defendants offered a money-back guarantee, consumers were often unsuccessful in canceling the charges or obtaining refunds, and the process involved time-consuming phone calls and other steps that made the deals far from risk-free, the FTC complaint alleged.
“The defendants used the lure of a free offer to open an illegal pipeline to consumers’ credit card and bank accounts," says David C. Vladeck, director of the FTC’s Bureau of Consumer Protection. " 'Free' must really mean ‘free’ no matter where the offer is made."
The FTC worked with Canadian law enforcement, including the Alberta Partnership Against Cross Border Fraud, in investigating this international scheme. Most of the defendants are located in Alberta.
"Internet fraud is a global problem that requires an international enforcement response,” says Lisa Campbell, deputy commissioner of Competition for the Competition Bureau of Canada. "International cooperation ensures that fraudsters can’t hide behind borders."
The FTC further alleged that the defendants provided merchant banks with false or misleading information, in order to acquire and maintain credit and debit card processing services from the banks in the face of mounting chargeback rates and consumer complaints.
Willms and his companies also allegedly violated the Electronic Fund Transfer Act and Regulation E (issued by the Federal Reserve System’s Board of Governors) by debiting consumers’ bank accounts without their signed written consent and without providing consumers with a copy of the written authorization.