FTC sues Internet companies for credit card, debit card scam
Scam led to hundreds of thousands of customers to seek chargebacks, suit alleges
The Federal Trade Commission sued scores of interrelated Internet companies operating mainly out St. George, Utah, and Las Vegas on Tuesday saying they victimized hundreds of thousands of consumers by charging their credit cards and debit cards without authorization.

The suit, filed in U.S. District Court in Las Vegas, says the network of companies — including dozens of shell companies around the county — was organized by defendant Jeremy Johnson of St. George, Utah. A message for comment was left for Johnson.

"The defendants in this case operate a far-reaching Internet enterprise that deceptively enrolls unwitting consumers into memberships for products or services and then repeatedly charges their credit cards or debits funds from their checking accounts without consumers’ knowledge or authorization for memberships the consumers never agreed to accept," the government agency charged in the suit. "This scam has caused hundreds of thousands of consumers to seek chargebacks — reversals of charges to their credit cards or debits to their banks accounts.

"The high number of chargebacks has landed the defendants in VISA's and MasterCard's chargeback monitoring programs, resulted in millions of dollars in fines for excessive chargebacks, and led to the termination of numerous of defendants' merchant accounts through which they had been billing their victims.

"Yet, rather than curing their deceptions, defendants have employed a variety of stratagems to continue and expand their scam, thereby causing unreimbursed consumer injury to mount" to millions of dollars since 2006, the lawsuit says.

For instance, in 2009 the defendants incorporated more than 50 shell companies using maildrop addresses and straw-figures as owners and officers because they knew that it was unlikely they could obtain additional merchant accounts using existing companies, due to these companies' negative chargeback histories, the suit says.

The defendants then applied through intermediary payment processors for new merchant accounts in the names of the front companies in order to continue processing the credit and debit card charges for the online memberships the defendants sell, the government alleged.

"They have also attempted to drive down their chargeback rates by threatening to report consumers who seek chargebacks to an Internet consumer blacklist they operate called 'BadCustomer.com' that will 'result in member merchants blocking [the consumer] from making future purchases online!' And they have attempted to counter the large number of complaints about their conduct by flooding the Internet with supposedly independent positive articles and other web pages," the FTC complaint says.

The websites operated by the defendants claim to offer free or risk-free information about what the government says are dubious products and services such as government grants to pay personal expenses and Internet-based money-making opportunities.

The defendants, who have not yet answered the allegations, include several Johnson companies:
  • Cloud Nine Marketing Inc., Internet Economy Inc. and Network Agenda LLC of Las Vegas

  • Market Funding Solutions Inc. of Reno

  • I Works Inc., Elite Debit Inc. and Success Marketing Inc. of St. George, Utah

  • CPA Upsell Inc. of Santa Monica, Calif.
Also sued were:
  • Anthon Holdings Corp. of St. George, Utah

  • Duane Fielding, owner of Anthon and co-owner of Network Agenda
Other defendants, some alleged to be shell companies, are based in California, Delaware, Nevada, New York, Oklahoma and Utah. They include: Employee Plus Inc., Big Bucks Pro Inc., Blue Net Progress Inc., Blue Streak Processing Inc., Bolt Marketing Inc. and Bottom Dollar Inc.

Also, Bumble Marketing Inc., Business First Inc., Business Loan Success Inc., Cold Bay Media Inc., Costnet Discounts Inc., CS Processing Inc., Cutting Edge Processing Inc., Diamond J Media Inc., EBusiness First Inc., EBusiness Success Inc., eCom Success Inc. and Excess Net Success Inc.

Also, Fiscal Fidelity Inc., Fitness Processing Inc., Funding Search Success Inc., Funding Success Inc., GG Processing Inc., GGL Rewards Inc., Highlight Marketing Inc., Hooper Processing Inc., Internet Business Source Inc., Internet Fitness Inc., Jet Processing Inc., JRB Media Inc., Lifestyles For Fitness Inc., Mist Marketing Inc., Money Harvest Inc., Monroe Processing Inc. and Net Business Success Inc.

Also, Net Commerce Inc., Net Discounts Inc., Net Fit Trends Inc., Optimum Assistance Inc., Power Processing Inc., Premier Performance Inc., Pro Internet Services Inc., Razor Processing Inc., Rebate Deals Inc., Revive Marketing Inc., Simcor Marketing Inc., The Net Success Inc., TranFirst Inc., Tran Voyage Inc., Unlimited Processing Inc., Xcel Processing Inc. and Summit Processing Inc.

Besides Johnson and Fielding, individuals sued were: Andy Johnson, Jeremy Johnson's brother and alleged owner of some of the defendant companies; Lloyd Johnston, an I Works manager; Scott Leavitt, an I Works manager; Scott Muir, uncle to Jeremy and Andy Johnson and owner of some of the defendant companies; Bryce Payne, an I Works manager; Kevin Pilon, an I Works employee and alleged owner of companies I Works works with; Ryan Riddle, formerly general manager at I Works; and Terrason Spinks; described as a business associate of Jeremy Johnson.

The FTC in its lawsuit asks the court for an injunction barring future violations of the Federal Trade Commission act as well as unspecified redress for consumers harmed by the alleged scams.
Originally published Tuesday, Dec. 21, 2010