FTC Unleashes Internet Sweep, Urges 'Open Relay' Closure

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The Federal Trade Commission urged operators of e-mail servers to close "open relays" in an effort to cut down on spam as the agency unveiled an Internet sweep yesterday involving 45 legal actions in the southwestern United States.


Included in the sweep were a diverse set of allegations, such as charges of deceptive spam and Internet pop-up advertising, unauthorized billing and prescription drug fraud.


Though regulators have pursued fraud charges against Internet schemes in the past, the FTC has taken the unusual further step of asking e-mail providers to make their servers more secure to reduce the volume of unwanted commercial e-mail.


In the effort, the FTC gathered 50 members of law enforcement from 17 agencies worldwide. Delegates hailed from the United States, Canada, Chile, Australia and Japan.


Participants identified more than 1,000 open relays, or unsecured mail servers that can act as unwitting go-betweens for spam. Spammers bounce their outbound e-mails off the relays, which pass them along to their destination e-mail box, in an effort to conceal the origin of the spam and evade spam filter systems.


A letter, translated into 11 languages, went to the operators of the open relays. The FTC said it has no way to take legal action against maintainers of open relays but hoped to motivate the server operators to act on their own.


"This is an educational action," said Marc Gorman of the FTC's bureau of consumer protection, speaking at a news conference at the commission's Southwest regional office in Dallas. "Law enforcement is only a piece of the spam puzzle."


Nevertheless, the FTC and its partner agencies in the sweep had legal actions aplenty for those it accused of deception in their Internet marketing. Of the 45 actions in the sweep, 37 were filed by the FTC's 11 partner agencies: the attorneys general of Arkansas, Louisiana, Texas and Oklahoma; U.S. attorneys for New Mexico, western Louisiana and northern Texas; the U.S. Postal Inspection Service; the Securities and Exchange Commission; the Texas state Board of Pharmacy; and the Texas Department of Health.


In one case notable for the number of consumer complaints its drew -- more than 1,200 -- the FTC sued Secaucus, NJ-based Alyon Technologies on charges that the company issued unauthorized bills for use of its online adult-content service. Alyon used a dialing program, which sometimes downloaded onto consumer computers without authorization, to reroute consumer dial-up connections to its service, the FTC said.


Alyon automatically detected the consumer's telephone number and compared it with a database of phone bill information for billing purposes, the FTC said. However, in many cases Alyon's database was faulty, leading the company to issue charges to the phone bills of consumers who hadn't used the service, according to the FTC.


Highlights of other companies and individuals receiving complaints in the sweep include:


· Clickformail.com, Austin, TX, accused by the FTC of charging consumers $49.95 for access to credit card offers they could have obtained for free by using an Internet search engine.


· The Pill Box Pharmacy and William Adams Stallknecht, whose pharmaceutical license was revoked by the Texas Board of Pharmacy, on charges of dispensing prescription drugs over the Internet using invalid prescriptions.


· Cyco.net, charged by the Texas attorney general with selling cigarettes online without taking proper precautions to avoid sales to minors despite claims by the company to the contrary.


· Bassem and Virginia Mazboudi, who face criminal indictments on six counts of mail fraud and aiding and abetting mail fraud by the U.S. attorney's office on charges that they committed auction fraud on eBay. If convicted on all counts, the two face up to 30 years in prison, said Jane Boyle, the U.S. attorney for the northern district of Texas.


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