New York, Microsoft Sue OptInRealBig Owner Over SPAM

The New York attorney general and Microsoft announced civil lawsuits yesterday accusing controversial e-mail marketer and its owner, Scott Richter, of being at the center of a spam network responsible for billions of deceptive e-mail messages.

The lawsuits allege that an affiliate partner of OptInRealBig, Delta7 Communications, illegally tapped into more than 500 compromised computers worldwide to send commercial e-mails. The messages marketed items like teeth-whitening treatments and diamond earrings on behalf of OptInRealBig client Synergy6, an online marketing company in New York.

State officials say e-mail messages in seven spam campaigns broke both New York and Washington state consumer protection laws by using false sender names, subject lines, server names and transmission paths. All three companies and their principals are named in the suits.

New York's suit, filed in state Supreme Court in Manhattan, seeks $20 million in damages; Microsoft's suit, in Superior Court in King County, WA, requests $18.8 million.

New York attorney general Eliot Spitzer and Microsoft general counsel Brad Smith said the lawsuits would serve notice that marketers could not hide behind networks of partnerships to avoid prosecution for spam tactics.

“We will pierce those relationships and prove without a doubt that those including Richter and the corporations themselves are as responsible as those that physically push the button to send the e-mail,” Spitzer said.

Microsoft assisted in the six-month investigation by setting up dummy Hotmail e-mail accounts to attract spam. In May and June, the accounts drew 8,000 spam messages traced to the defendants. The suit alleges the e-mails contained 40,000 falsifications intended to fool spam filters by disguising the origin of the message and that the messages were routed through 514 compromised servers worldwide, including the Kuwait ministry of finance and hospitals and schools in South Korea.

Richter has been a public face in the spam debate. His Westminster, CO, company claims to have e-mail lists with 45 million addresses, letting it send offers to about half of all North American Internet users. OptInRealBig markets products like cut-rate mortgages, inkjet cartridges and Iraqi playing cards. Richter has said the company is legitimate and never uses illegal methods like spoofing or false headers.

“OptIn and Scott Richter vigorously deny any violations of New York law and ask that their clients and friends make no decision regarding any liability on their part until they have the opportunity to respond to any allegations made against them,” a statement on OptInRealBig's Web site said.

Richter, whose attorney was unavailable for comment, told The New York Times that his company had strict anti-spam policies for its affiliate network that it enforced against Delta7.

“We take any abuse by an affiliate very seriously and if alerted to anything wrong or illegal we terminate it immediately,” he said.

The suits leave open the possibility of more action against affiliate programs and their advertisers, which pay commissions in exchange for referrals. The size of such programs and the diversity of their participants make policing a difficult but critical task for advertisers, said Ray Everett-Church, chief privacy officer at ePrivacy Group, Philadelphia.

“There are some who take a see-no-evil, hear-no-evil approach,” he said. “There are some who are not very sophisticated and get roped into these situations without understanding the negative consequences.”

Richter is ranked as the No. 3 spammer in the world by anti-spam organization Spamhaus. His prominent defense of his business has garnered him an invitation to this spring's Federal Trade Commission spam forum as well as a place on Details magazine's list of the 50 most powerful men under 38. He recently told Newsweek that OptInRealBig does $2 million in sales monthly, enough to finance a $500,000 house, luxury cars and Caribbean vacations.

Spitzer said Richter was responsible for sending an estimated 250 million spam messages daily and cleared “several million dollars” monthly from the operation. New York is seeking an injunction against the companies from sending further fraudulent messages and $500 for each of the 40,000 falsifications found in the e-mails.

The damages sought are intended to send a message to spammers, Spitzer said. “The penalty that will be imposed upon you will make it financially unviable,” he said. “We will drive them into bankruptcy.”

A representative for Synergy6, New York, declined comment. Representatives for Delta7, Plano, TX, and Bothell, WA, were unavailable.

Microsoft filed an additional five lawsuits against companies and individuals it alleges sent illegal spam messages through the same compromised computers. The messages advertised things such as enlargement products, pornography and weight-loss soap and used deceptive subject lines and fake sender names.

“These were intentional deceptive attempts to induce consumers to open e-mail they would otherwise discard,” Smith said.

ISPs have joined with governments to assist in investigations against spammers. Microsoft filed 15 lawsuits against alleged spammers in June. AOL and MCI this month aided an investigation by Virginia that led to felony charges against a North Carolina man ranked No. 8 on the Spamhaus list.

Spitzer, who targeted Wall Street for its ethical lapses, has taken other actions involving spam. In May 2002, he filed a deceptive-business-practices lawsuit against Monsterhut, alleging the e-mail marketer misrepresented its lists. A New York court ruled in Spitzer's favor this past January, ordering Monsterhut to change its practices. In May, EarthLink assisted Spitzer in his investigation resulting in misdemeanor charges against Howard Carmack, another reputedly prolific spammer.

Spitzer said the new federal spam law would give other states more power to bring suits against the most egregious spammers because many use fraudulent methods. Critics of the bill, however, say that it will legitimize e-mailers like Richter, letting them bombard e-mail users with the protection of the law until they are asked to stop.

“CAN-SPAM gives a green light to sending spam as long as you're truthful,” Everett-Church said.

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