A federal court has frozen the assets of corporations and an individual behind a vast Internet enterprise that allegedly made more than $275 million after luring consumers into “trial” memberships, and bogus government-grant and money-making schemes.
The court froze the assets of 61 corporations (collectively known as “I Works”) and their alleged leader, Jeremy Johnson. It placed assets for these defendants under the control of a court-supervised receiver to help ensure that funds are available for consumer restitution when the case is concluded.
The Federal Trade Commission (FTC) in December 2010 alleged that I Works lured consumers into trial memberships for various schemes, and then repeatedly charged monthly fees for these and other memberships that the consumers never ordered.
According to the FTC’s complaint, the operation used Web sites that pitch various money-making programs or tout the availability of government grants to pay personal expenses.
The sites offer “free information at no risk" and ask consumers to provide their credit or debit card numbers to pay a shipping and handling fee such as $1.99. But when consumers provide their billing information, I Works charges them a one-time fee of up to $129.95 and monthly recurring fees of up to $59.95 for the advertised programs, and other monthly fees for unrelated programs.
The FTC’s complaint alleges that this scheme has caused more than 500,000 consumers to seek chargebacks – reversals of charges to their credit cards or debits to their bank accounts.
The high number of chargebacks landed the defendants in VISA’s and MasterCard’s chargeback monitoring programs, resulted in millions of dollars in fines for excessive chargebacks and prevented the defendants from getting access to the credit card and debit card billing systems using their own names.
To continue the scam, the defendants tricked banks into giving them ongoing access to these billing systems by creating 51 shell companies with figurehead officers - and by providing the banks with phony “clean” versions of their Web sites.
According to the FTC, the defendants, which include the 61 corporations, Johnson, and nine other individuals, violated the FTC Act by misrepresenting that government grants are available for paying personal expenses, that consumers are likely to obtain grants by using the defendants’ program, that users of their money-making products will earn substantial income and that their offers are free or risk-free.
The complaint also alleges that they failed to disclose that consumers who pay a nominal shipping and handling fee would be enrolled in expensive plans that charge fees until consumers cancel, and that they charged consumers’ credit cards and debited their bank accounts without their consent.
The FTC further alleges that the defendants’ websites featured deceptive positive reviews and deceptive testimonials that misrepresented the benefits of their grant services. The FTC also alleges that they violated the Electronic Fund Transfer Act and Regulation E by debiting consumers’ bank accounts without their signed written consent and without providing consumers with a copy of the written authorization.
The FTC complaint names 10 individuals, including Johnson. The others are: Duane Fielding, Andy Johnson, Loyd Johnston, Scott Leavitt, Scott Muir, Bryce Payne, Kevin Pilon, Ryan Riddle and Terrason Spinks. In addition, the 10 corporate defendants are: I Works Inc., Anthon Holdings Corp., Cloud Nine Marketing Inc., CPA Upsell Inc., Elite Debit Inc., Employee Plus Inc., Internet Economy Inc., Market Funding Solutions Inc., Network Agenda LLC and Success Marketing Inc.
The 51 shell companies named in the complaint are Big Bucks Pro Inc., Blue Net Progress Inc., Blue Streak Processing Inc., Bolt Marketing Inc., Bottom Dollar Inc., doing business as BadCustomer.com, Bumble Marketing Inc., Business First Inc., Business Loan Success Inc., Cold Bay Media Inc., Costnet Discounts Inc., CS Processing Inc., Cutting Edge Processing Inc., Diamond J. Media Inc., Ebusiness First Inc., Ebusiness Success Inc., Ecom Success Inc., Excess Net Success Inc., Fiscal Fidelity Inc., Fitness Processing Inc., Funding Search Success Inc., Funding Success Inc., GG Processing Inc., GGL Rewards Inc., Highlight Marketing Inc., Hooper Processing Inc., Internet Business Source Inc., Internet Fitness Inc., Jet Processing Inc., JRB Media Inc., Lifestyles For Fitness Inc., Mist Marketing Inc., Money Harvest Inc., Monroe Processing Inc., Net Business Success Inc., Net Commerce Inc., Net Discounts Inc., Net Fit Trends Inc., Optimum Assistance Inc., Power Processing Inc., Premier Performance Inc., Pro Internet Services Inc., Razor Processing Inc., Rebate Deals Inc., Revive Marketing Inc., Simcor Marketing Inc., Summit Processing Inc., The Net Success Inc., Tranfirst Inc., Tran Voyage Inc., Unlimited Processing Inc. and Xcel Processing Inc.
