WWW – Two companies and their principals committed unfair trade practices by billing unsuspecting telephone subscribers for access to pornographic Web sites that they never used, a federal judge has ruled.
Southern District Judge Lewis A. Kaplan ordered two Bahamian corporations and two executives who he said are “at large” to pay the Federal Trade Commission almost $18 million for the false billings and for making false or deceptive statements to telephone subscribers who called to complain about charges wrongly billed to them.
“In all the circumstances . . . ” Judge Kaplan said, “the Court finds that defendants represented that line subscribers were legally obligated to pay these charges irrespective of whether they used or authorized use of the services of defendants’ web sites.”
The facts confronting the judge in Federal Trade Commission v. Verity International Ltd., 00 Civ. 7422, concerned the use of a billing method designed for customers who visited pornography sites but did not want to pay with their credit cards.
The defendants were Verity International Ltd. and Automatic Communications Ltd., and the founders and former principals of both companies, Robert Green and Marilyn Shein. They have since become minority owners.
Judge Kaplan said they offered pornography Web site operators a billing service that used legitimate phone companies to charge customers for access “by including the charges on the telephone bills for the telephone lines over which customers accessed the Internet and describing the charges as being for telephone calls to Madagascar.”
At least some of the bills were probably for computer connections to porn sites that were never made, Judge Kaplan concluded.
When customers called to complain about what were sometimes large bills for calls to Madagascar, they were met with stern demands for payment.
The judge, in addition to ordering a “broad, permanent injunction” directed Automatic Communications, Mr. Green and Ms. Shein to pay $16.3 million for payments made during the AT&T period, and Automatic Communications, Verity, Mr. Green and Ms. Shein to pay $1.6 million for the Sprint period.
Lawrence Hodapp and David M. Torok represented the Federal Trade Commission.
John J.D. McFerrin-Clancy and Jeffrey M. Eilender of Schlam Stone & Dolan represented the defendants.