New York Attorney General Targets Internet Fraud, Deception - InformationWeek

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10/20/2005
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New York Attorney General Targets Internet Fraud, Deception

Eliot Spitzer targeted accused purveyors of charity, mortgage, and marketing scams, as well as adware.

New York State Attorney General Eliot Spitzer announced a double dose of legal action targeting both adware and Web sites accused of charity, mortgage, and marketing scams.

Spitzer announced Thursday that he shut down Web sites that duped thousands of people trying to donate to charities or pay their mortgages. He also announced a settlement with a former CEO investigated for directing employees to secretly install adware and spyware onto millions of personal computers.

Jeffrey A. Augugliaro, of Malverne, N.Y., is accused of setting up a fraudulent business called "People Helping People" to solicit donations for the "American Cancer Aid Foundation" and telling donors they would receive free airline tickets, worth up to $1,600, to fly anywhere in the world. Spitzer announced that Augugliaro must close shop under a restraining order.

A cancer patient hoping to use the tickets to fly to a hospital for treatment was among thousands of people duped through the sites, according to Spitzer. The money was pocketed and donors never received airline tickets or anything else, the Attorney General's office claims.

The lawsuit alleges that Augugliaro used www.massmarketingprogram.com and www.jamvo.com to offer businesses a way to attract new customers. It claims that consumers who visited www.brixdale.com were told that they could pay off an entire 30-year mortgage in full and easily earn $250,000 in one month by allowing the site to control electronic transfers of their mortgage payments. The suit alleges that Brixdale was an illegal and fruitless pyramid scheme.

Augugliaro, Kari Luna, who shares an address with Augugliaro, and his mother Frances Augugliaro, await a hearing in Nassau County. The state has frozen bank accounts holding about $1 million of the defendants' money, while trying to permanently shut down the businesses and collect restitution and penalties.

Spitzer is urging anyone with a complaint against the companies to contact his office or his Web site.

Attempts to reach the Augugliaros and Luna were unsuccessful. Telephone numbers listed for Brixdale and People Helping People were disconnected with no forwarding information.

In another development, Brad Greenspan, founder and former CEO of Intermix Media agreed to pay $750,000 in penalties to end an investigation into whether he ordered employees to bundle adware with free software, secretly installing it on millions of home computers.

The agreement states that Greenspan neither admits nor denies the allegations in the state investigation.

Spitzer sued Intermix in April, claiming the company downloaded intrusive software tens of millions of times nationwide and more than three million times to New Yorkers. Two months later, the company announced a tentative agreement to pay $7.5 million in fines and discontinue distribution of adware. New York Supreme Court Judge Judith Gische signed off on that agreement Monday.

An Assurance of Discontinuance alleges that Greenspan directed employees to bundle adware, disclosed only in a link to an inconspicuous "End User License Agreement." It also states that, as CEO from July 2000 until October 2003, Greenspan directed employees to make the adware programs -- Keen Value popup ads, PowerSearch toolbars, and Incredifind, which redirected users to an Intermix search engine -- difficult to uninstall. The adware reinstalled itself after removal and adware was listed in inconspicuous computer files, authorities said.

"Internet marketing companies have gotten away with unethical and illegal software downloading practices for too long," Spitzer said in a prepared statement. "This agreement sends a message that intrusive and deceptive practices will not be tolerated."

Intermix affiliate Acez Software has also resolved an Attorney General's investigation into bundling Intermix adware with free Acez screensavers without notifying consumers. Acez agreed to pay $35,000 in penalties and disgorgement and to provide fair notice and disclosure in the future.

Attempts to reach both companies and Greenspan by phone were unsuccessful. Intermix did not respond immediately to an e-mail requesting comment. The company has stated in the past that its software did not spy on consumers and blamed former executives for the practices New York State challenged.

Congress has considered laws to require disclosure of adware and spyware. The New York State Attorney General's Internet Bureau Chief Kenneth M. Dreifach, Assistant Attorney General Justin Brookman, and Investigator Vanessa Ip cited New York State General Business Law, which prohibits "deceptive practices" and "false advertising" to support their investigation.

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