SoCal Credit Scam Took Millions, FTC Says
LOS ANGELES (CN) - Process America, a Canoga Park payment processor, helped scam artists defraud consumers of more than $15 million through Visa and MasterCard merchant accounts, the FTC claims in Federal Court.
The Federal Trade Commission sued Process America and its three owner-operators, Craig S. Rickard, Kim Ricketts and Keith Phillips, alleging violations of the FTC Act. All the individual defendants live in California. Process America is a Nevada corporation that operates out of a Topanga Canyon address in Canoga Park, in the San Fernando Valley.
Process America did $15 million in damage "by arranging for a group of interrelated merchants engaged in fraud to obtain and maintain merchant accounts that enabled them to process unauthorized credit and debit card payments through the Visa and MasterCard payment networks," according to the lawsuit.
Process America, an independent sales organization, solicited merchants who needed payment processing services and signed them up for merchant accounts through Cynergy Data, a payment processor banks use to transmit credit and debit card transaction data, according to the complaint.
Payment processors and independent sales organizations such as Process America and Cynergy, which is not a party to the complaint, get paid for each payment a merchant processes.
From 2008 to 2009, Process America serviced merchant accounts for Infusion Media, which operated work-at-home scams, the FTC claims.
"The enterprise's operation involved duping consumers into purchasing bogus business coaching products by misrepresenting an affiliation with Google, Inc. and stating that consumers could make $100,000 in six months. Infusion Media's various websites prominently displayed the low cost of the kit (typically $1.97 or $3.88), but failed to disclose adequately that purchase of the kit would trigger automatic recurring monthly charges (typically $72.21) for a website membership or other program that would continue until the consumer took affirmative steps to cancel it," according to the FTC complaint.
Under the direction of its owners, Jonathan Eborn and Michael McClain Miller, Infusion Media ran the online scam by using product names such as "Google Money Tree," "Google Pro," "Google Treasure Chest," "Internet Initiative," and "Internet Income Pro," according to the complaint.
The scam ended in 2009 when the FTC sued Eborn, Miller, Infusion Media and others, charging them with violations of the FTC Act for engaging in widespread deception in the work-at-home schemes. The court granted the FTC's request for a temporary restraining order stopping the scheme.
Infusion Media and its owners settled with the FTC and were banned from selling products through transactions in which the seller interprets the consumer's inaction as permission to charge them. Infusion Media had to cough up cash and other assets, which the FTC used to refund consumers $2.3 million in September 2012, according to a FTC press release.
Process America's opening and managing at least 131 merchant accounts for Infusion Media and its affiliates allowed the companies "to maintain largely unfettered access to the credit card payment system and to use their merchant accounts to initiate millions of dollars in unauthorized charges to consumers' credit and debit card accounts," the FTC says in the complaint.
Process America knew or should have known it was processing charges that consumers had not authorized, the FTC says. Evidence included numerous consumer disputes challenging unauthorized charges, chronically excessive chargeback rates, and notices that merchants should be placed in Visa and MasterCard chargeback monitoring programs, according to the FTC.
Process America advised Infusion Media to use certain tactics to evade Visa's and MasterCard's fraud-monitoring programs, for instance, through "load balancing," in which sales volume is distributed across multiple merchant accounts to avoid triggering the thresholds for chargeback monitoring programs, according to the FTC.
"These practices enabled Infusion Media to continue charging consumer credit card accounts and to avoid or delay detection by chargeback monitoring programs over the course of nearly one year, and at the cost of millions of consumer dollars," the FTC says.
The FTC seeks a permanent injunction, rescission of contracts and restitution.