Judge Halts $19 Million ‘Cramming’ Operation

(CN) - A federal judge in San Francisco barred Inc21 and its affiliates from cramming unauthorized charges onto the telephone bills of thousands of consumers and small businesses in a scam that took in $19 million over five years.

According to the Federal Trade Commission, Inc21 hires offshore telemarketers to sell Internet services, including Web site design and search engine advertising services, to prospective customers.

Inc21 claimed it had several safeguards and procedures in place that would protect customers from being billed for unauthorized services.

"The evidence, however, tells a different story - namely, that the vast majority of 'customers' never authorized any charges or bought any services, and yet are being 'ripped off' by surreptitious add-ons to their phone bills by (local exchange carriers), which is then funneled to Inc21," U.S. District Judge William Alsup wrote.

After mailing more than 10,000 customer verification forms, only 27 customers responded that they didn't want their services canceled, Alsup noted.

"Indeed, despite being warned twice in the letter that their 'service may be discontinued' if they did not sign and return the form, only 27 out of nearly 10,000 customers have thus far come forward to prevent their services from being canceled," Alsup wrote (original emphasis). "The silence of the remaining thousands - given this express warning - indicates these customers to not wish to subscribe. This silence speaks volumes."

He issued an injunction barring Inc21 from billing for unauthorized services and forcing it to disgorge all ill-gotten gains.

By bringing in foreign telemarketers and third-party verification services, "Inc21 set in motion a process that perpetuated a massive fraud," the judge added. "Even if some of the defendants' sales are real, most are undoubtedly phony."

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