Web Site to Pay Millions for Scam

By
D. Ian Hopper
January 7, 2006, 7:29 AM ET
2 min read

W A S H I N G T O N, Sept. 7, 2000 -- A California-based adult Web site operation will pay $37.5 million for operating an illegal billing scam, charging the credit cards of consumers who had not visited the Web sites and thousands who didn’t even own a computer, federal regulators said today.

The Federal Trade Commission brought the suit against DennisRappaport and Kenneth and Teresa Taves, all of Malibu, Calif, aswell as their businesses, J.K. Publications, Inc., MJD ServiceCorp., Herbal Care, Inc., and Discreet Bill, Inc.

The complaint was filed in January 1999, alleging that thedefendants billed consumers without authorization. Thebusinesses were shut down by a court order days later.

Information Bought and Sold

The FTC argued that the defendants bought access to a databaseof credit card numbers provided by a California bank, amounting toover 3 million card holders. The defendants then used those accountnumbers to place charges on the holders’ accounts, the commissionsaid, ringing up over $43 million in bogus sales — over 90 percentof their total sales for the year.

The defendants used at least five merchant accounts and fourfake business names to cloak their scheme from the Visa credit cardcompany. Each time Visa noticed an excessive number of“chargebacks,” charges disputed by customers, and put the accounton a list of suspicious merchants, the defendants would open a newaccount.

The FTC said consumers saw charges on their credit card billsunder the names “Netfill,” “N-Bill,” “MJD Service Corp” and“Webtel.”

“A shocking 40 percent to 50 percent of the calls received bythe defendants were from people who said they did not have acomputer and had not given their cards to anyone,” said U.S.District Judge Audrey B. Collins, who handed down the ruling.

The defendants could not be reached for comment.

The FTC says the companies have over $20 million in assets, butit isn’t clear that the full amount of the penalty will beavailable to pay back consumers. Consumer who want to make a claimcan contact the FTC on its Web site (see link at right) or at877-382-4357.