Verizon Wireless Chases Phantom Billers

PHOENIX (CN) - Verizon Wireless sued 26 people and companies, claiming they use fake addresses to charge Verizon customers for so-called "premium text messaging services," and "cloaking software" so that Verizon cannot tell who the defendants are charging, for what.

Verizon calls Jason Hope, of Arizona, CEO of co-defendant Cylon LLC, "the mastermind behind defendants' fraudulent and deceptive practices." It claims Wayne DeStefano, also of Arizona, "works with Hope in Arizona to further the fraud."

In its federal complaint, Verizon says it "offers customers the opportunity to purchase PSMS from third-party vendors such as defendants ('content providers') and to pay for such services through their Verizon Wireless bill."

The premium text messaging services (PSMS) are delivered to customers' cell phones "through text messages conveyed by specially assigned five or six-digit numbers, known as 'short codes,' rather than normal 10-digit phone numbers," and often consist of ring tones, news alerts or similar content advertised through websites operated by the content provider, according to the complaint.

Verizon says the defendants conspired to defraud it and "deceptively market their PSMS to Verizon Wireless customers by, among other activities: activating dozens of separate short code campaigns with Verizon Wireless using straw names and false addresses so as to create the false impression that the campaigns were unrelated to each other and to defendant Cylon LLC and its principals; using deceptive and noncompliant marketing practices, including unapproved web pages, that are different from the ones that defendants represented they would use when they sought Verizon Wireless' approval to activate the short code campaigns; and deploying sophisticated methods to prevent Verizon Wireless and its auditors from discovering their deceptive and noncompliant marketing practices."

Content providers such as the defendants are required to submit an application to Verizon that includes the content provider's name, a contact person and phone number, the marketing program, including any website used to market the text messaging services, "the content that will be offered, any charges associated with the content, and the manner in which pricing disclosures will be made to the consumer," according to the complaint.

Verizon claims that defendants Jason Hope and Wayne DeStefano devised an enterprise to conceal their and defendant Cylon LLC's "affiliation with short code campaigns activated on the Verizon Wireless network, so they could perpetrate noncompliant and unapproved marketing practices in a manner that reduced the risks and consequences of detection by Verizon Wireless."

Cylon's access to Verizon's network was suspended in 2009 after Verizon learned that Cylon was bypassing a requirement to send a PIN number to the customers' cell phones, allowing customers to sign up "a mobile number for content without the knowledge of the person with possession of the handset," according to the complaint.

Verizon says that Hope and DeStefano created single-purpose-vehicle limited liability companies (SPVs) "to lease short codes and activate short code campaigns on the Verizon Wireless network without disclosing to Verizon Wireless the SPVs' connection to each other and to the Cylon Enterprise," and designated employees as the company contacts.

Hope and DeStefano also used UPS store addresses on their content provider applications with Verizon, and concealed "noncompliant and deceptive marketing practices through sophisticated software programs that blocked Verizon Wireless' auditors from accessing the noncompliant websites," the complaint states.

Verizon says the cloaking software recognized the Internet protocol address of Verizon Wireless auditors and directed them away from the noncompliant websites. When an auditor clicked on an advertisement for the defendants' premium text messaging services, content "that otherwise would lead to a noncompliant URL, the auditor is directed away to a compliant sign-up page or redirected to a completely different webpage where defendants' PSMS products are not offered," Verizon claims.

Verizon says that because it does not know what customers have been charged for the defendants' text messages "based on its noncompliant web pages, and which customers who purchased content from these web pages were not aware of the charges associated with that content, Verizon Wireless is instituting a process whereby its customers may claim a refund for any charges associated with defendants' PSMS content."

Verizon seeks an injunction to stop defendants from providing false addresses to get access to its network, from selling their text messaging services to Verizon customers, and requiring them to account for all short codes and to remove all cloaking software so that their websites may be audited.

Named as defendants are Jason Hope, Wayne P. DeStefano; Christa Stephens; Quinn McCullough; Steve Uhrman; Janet O'Meara; Eye Level Holdings; New Economic Order; Saguaro Media; New Ein; Ink Sign Holdings; Yellow Ball Holdings; Message Plan; Fyisms.Com; Mytxtsms.Com; Standard Plan; Standard Message; SMS City; Hot-Hot-News.Com; City-O-Games.Com; Worldtxts.Com; Topictext.Com; Text Charge; All-Game-Cheats.Org; and News Alerts.

Verizon Wireless is represented by Paul Charlton with Gallagher & Kennedy.

Follow @jamierossCNS

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