Three Ordered to Pay $37.5 Million for Web Fraud

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Source: Reuters

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(LOS ANGELES, CA) — A Federal Court judge has ordered three Los Angeles area residents to pay $37.5 million for billing 700,000 credit card holders for visits they never made to X-rated Web sites, the Federal Trade Commission said on Thursday.

The FTC said that Kenneth and Teresa Taves and Dennis Rappaport and their businesses charged cardholders for visits to various Internet sites, even though many of the victims did not own computers.

Lawyers for the Taves could not be reached for comment.

Victims of the fraudulent billings saw charges on their credit cards under the names Netfill, N-Bill, MJD Service Corp. and Webtel, according to the FTC.

The commission said the defendants’ companies purchased access to a database of credit card numbers from a Los Angeles area bank, Charter Pacific Bank of Agoura Hills, then illegally used the numbers to place charges.

The FTC said more than 90 percent of the companies’ $49 million in annual “sales” were actually unauthorized charges.

“A shocking 40 percent to 50 percent of the calls received by the defendants were from people who said they did not have a computer and had not given their card numbers to anyone,” U.S. District Court Judge Audrey Collins wrote in her verdict.

The court concluded the defendants had processed bogus charges totaling more than $43 million. The damage amount represents the illegal charges minus the amounts that consumers previously received through chargebacks and credits.