Wednesday, November 5, 1997

CONSUMERS TO GET REFUNDS IN MOLDOVA CASE

Yesterday, the Federal Trade Commission announced that the more than 38,000 consumers who lost money to a modem hijacking scheme will be receiving full refunds, amounting to over $2.74 million in telephone charges for international calls.

The FTC charged Audiotex Connection, Inc., of Rockville Centre, New York; Promo Line, Inc., of Dix Hills, New York; William Gannon, an officer and owner of Audiotex Connection and Promoline, Inc.; David Zeng, a computer programer; and Internet Girls, Inc. with operating the scheme. All of the defendants, except David Zeng, did business as Electronic Forms Management.

According to the FTC, the defendants offered consumers who visited any of several websites - including www.beavisbutthead.com, www.sexygirls.com, www.1adult.com and www.erotic2000.com - "free" access to images on those sites by downloading and using a "viewer" program. But once consumers downloaded and ran the program, it took over their modems, disconnected them from the their local Internet service providers, turned off the speakers and silently dialed an international number in Moldova to reconnect the consumers to the Internet. They remained connected to that number even after leaving the website or after moving on to other computer programs. All the while, they were being charged over $2 per minute. Unwitting victims of this program received phone bills with several hundred to several thousand dollars worth of international charges. The FTC also alleges that while the number dialed was Moldovan, the calls actually terminated in Canada and so the consumers should have been billed for calls to Canada, at a lower rate than to Moldova.

To settle these charges, the defendants have agreed to refund all of the phone charges to consumers. Victims billed by AT&T and MCI for the calls will receive their refunds through those companies. The FTC will issue refunds to all other consumers caught in the scam. The settlement also prohibits the defendants from:

• misrepresenting that consumers can use software programs to view computer images for free when there are costs associated with downloading, installing, activating or using them;

• using any download programs to generate modem calls on the Internet without clearly and conspicuously disclosing: 1) that they will terminate the consumer's local Internet connection; 2) that they will dial an international telephone number and connect users to a location outside the United States; 3) that international call will cost a stated amount per minute; and 4) that the consumers computers will remain connected to the international number for a certain period of time or until consumers take some action;

• causing consumers to be charged for destinations that their calls never actually reach; and

• distributing any programs similar to the one used in this instance to third parties.

NOTE: These agreements are for settlement purposes only and do not constitute an admission of law violations by the defendants. Court-filed consent decrees also have the force of law when signed by the judge.

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