COURT BANS SLOVAKIA-BASED ONLINE DIRECTORY SCAMMERS FROM ONLINE DIRECTORY BUSINESS

FROM:  FEDERAL TRADE COMMISSION 
FTC Action Leads to Ban Against Internet Directory Scammers
Overseas Defendants Targeted Small Businesses, Non-Profits in U.S.

In an action brought by the Federal Trade Commission, a federal court has banned a Slovakia-based operation from the online directory business and entered a $9 million judgment against them.

“The last thing small business owners need is someone trying to trick them out of their hard-earned money,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “The FTC is committed to taking action against this kind of deceptive scheme.”

In March 2013, the FTC charged Wolfgang Valvoda, Susanne Anhorn, and Construct Data Publishers a.s., also doing business as Fair Guide, with tricking small businesses and non-profits into paying millions of dollars to be listed in an online directory they did not want to be listed in, and for which they did not realize they would be charged.

As the FTC alleged in its complaint, the defendants sent mailings to small retailers, home-based businesses, local associations, and others who host exhibits at trade shows. The mailings were falsely linked to a trade show the recipients had attended or planned to attend, to trick them into thinking they had a preexisting business relationship with the defendants. The enclosed cover letter and form falsely suggested that the recipients needed to confirm or update their contact information for the trade show. Many did not notice a statement, buried in fine print at the bottom of the form, that by signing and returning the form they were agreeing to pay $1,717 annually to Construct Data Publishers, a company with no connection to trade shows, for a listing on its website, fairguide.com.

The defendants disguised their true location in Slovakia by hiring a company in Naperville, Illinois, to print and mail the cover letters and forms. The mailings included a pre-paid return envelope addressed to a Chicago-area P.O. Box. After delivery to the P.O. Box, the mail was forwarded to the defendants in Slovakia. The defendants then sent out invoices demanding payment of $1,717 or more from each business or non-profit that had returned a signed form. The invoices instructed recipients to wire payment to a Slovakian bank account. Those who refused to pay were threatened with extra charges, damage to their credit, and lawsuits. Many paid just to end the harassment.

The FTC filed its complaint in the U.S. District Court for the Northern District of Illinois, Eastern Division, charging that the defendants’ deceptive conduct violated the FTC Act. The court issued a temporary restraining order followed by a preliminary injunction prohibiting the fraud and freezing the defendants’ assets pending litigation. On February 11, 2014, the court entered a default judgment and permanent injunction against the defendants.

In addition to banning the defendants from selling online directories and directory listings, the court order announced today prohibits them from misrepresenting material facts about any products and services, selling or otherwise benefitting from customers’ personal information, failing to properly dispose of customer information, and collecting money from customers. The court also entered a $9.1 million judgment against defendants based on the consumer losses caused by the scheme.

The court’s order is the latest in a series of actions taken against Construct Data/Fair Guide. Courts in Germany and Italy also have entered orders against the company for its deceptive practices. In 2007, to settle a lawsuit filed by an Austrian trade association, Construct Data agreed to cease its deceptive solicitations in Europe. The following year, however, Construct Data moved from Austria to Slovakia and continued its scheme, targeting businesses and non-profits in the United States and other countries.

The FTC appreciates the assistance of the Ministry of Justice of the Republic of Slovakia, the Slovak Police Attache, and the Ministry of Justice of Austria in bringing this case.

U.S. SIGNS MEMORANDUM OF UNDERSTANDING WITH NIGERIA IN ATTEMPT TO ELIMINATE CROSS-BORDER FRAUD

FROM:  FEDERAL TRADE COMMISSION 
FTC Signs Memorandum of Understanding with Nigerian Consumer Protection and Criminal Enforcement Authorities

Memorandum Provides for Strong Cooperation on Cross-Border Fraud
The Federal Trade Commission signed a memorandum of understanding (MOU) with two Nigerian agencies to increase cooperation and communication in their joint efforts to stamp out cross-border fraud.  Nigeria’s Ambassador to the United States, Ambassador Adebowale Adefuye, provided opening remarks for the MOU signing ceremony.

The MOU was signed by FTC Chairwoman Edith Ramirez; Director General Dupe Atoki, of Nigeria’s Consumer Protection Council (CPC); and Executive Chairman Ibrahim Lamorde, of Nigeria’s Economic and Financial Crimes Commission (EFCC).   It is the first FTC MOU of this kind to include a foreign criminal enforcement authority. The CPC addresses consumer complaints through investigations and enforcement; the EFCC is a criminal enforcement agency with authority to address consumer fraud and other financial crimes.

Cross-border scammers use fraudulent e-mails and other scams to bilk consumers all over the world, while undermining confidence in legitimate businesses,” said FTC Chairwoman Ramirez.  “This MOU will help our agencies better protect consumers in both the U.S. and Nigeria.”

Director Atoki stated that “We fully support this collaboration on consumer and fraud matters, and have already detailed a senior CPC official to the FTC for a six-month staff exchange.”  And Executive Chairman Lamorde noted that he “welcomes this partnership, which builds on our existing collaboration with the FTC and with U.S. criminal enforcement authorities.”
The MOU provides for a Joint Implementation Committee to identify concrete areas of collaboration, establish joint training programs and workshops, and provide assistance regarding specific cases and investigations.  The MOU is a framework for voluntary cooperation and will not change existing laws in either country.        

The FTC has already worked with the two Nigerian agencies on policy and enforcement matters in various fora, including the African Consumer Protection Dialogue, the International Mass Marketing Fraud Working Group, the London Action Plan (LAP, an anti-spam network), and the International Consumer Protection and Enforcement Network.

The Commission vote authorizing Chairwoman Ramirez to sign the MOU on behalf of the agency was 4-0.

As more U.S. companies and consumers do business overseas, more FTC work involves international cooperation.  The Office of International Affairs serves both as an internal resource to Commission staff on international aspects of their work and as an official representative to numerous international organizations.  In addition, the FTC cooperates with foreign authorities through formal and informal agreements.  The FTC works with more than 100 foreign competition and consumer protection authorities around the world to promote sound policy approaches.  For questions about the Office of International Affairs, send an e-mail to oia@ftc.gov.  Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases and the FTC International Monthly for the latest FTC news and resources.