New York attorney general Eliot Spitzer announced a settlement this week with e-mail marketer Scott Richter, who agreed to pay the state $50,000 and let Spitzer's office monitor his business practices for three years.
Under the consent decree, Richter agreed not to send commercial e-mail with misleading header information or using deception. His company, OptInRealBig.com, also is required to share its business records, including copies of consumer complaints and the marketing messages it sends, with the attorney general's office for three years. Richter also agreed to pay a civil penalty of $40,000 and another $10,000 to cover investigative costs. He did not admit wrongdoing as part of the consent order.
The deal represents a sharp setback for Spitzer, who had vowed to drive Richter into bankruptcy when he filed the suit in December. Spitzer requested $20 million in damages in the suit, which alleged Richter led a spam ring that used compromised computers to bombard consumers with billions of unsolicited e-mails.
“This settlement holds Richter and his company to a new standard of accountability in their delivery of e-mails,” Spitzer said in a statement. “If he does not fulfill these standards, he will find himself back in court, facing greater penalties.”
Spitzer said the settlement's oversight provisions will give his office “a measure of transparency into the practices of one of the biggest distributors of commercial e-mails in the world.”
Yet the settlement falls far short of the attorney general's original goals. At a news conference to announce the suit, Spitzer said the case would send a warning to companies that use affiliates to engage in unethical marketing.
Anne Mitchell, CEO/president of the Institute for Spam and Internet Public Privacy, said that on the surface the settlement was “a terrible miscarriage of justice,” yet the oversight provisions could prove important.
“If the DA's office follows through on that, they basically gave [Richter] enough rope to hang himself,” she said.
Spitzer worked with Microsoft for six months last year to pursue the case against Richter. The suit he filed alleged that OptInRealBig operated at the center of a spam ring involving Delta Seven Communications, a Plano, TX, affiliate partner of OptInRealBig, and Synergy6, a New York online marketing company. The suit said Delta illegally tapped into more than 500 compromised computers worldwide to send e-mails touting items like teeth-whitening treatments and diamond earrings on behalf of Synergy6.
Spitzer said OptInRealBig cleared “several million dollars” monthly from the operation. The suit was filed under New York consumer protection laws involving the use of false sender names, subject lines, server names and transmission paths.
Spitzer said his office will continue its cases against Delta and Synergy6.
Richter, who called Spitzer's legal action “a PR stunt,” has denied any wrongdoing in the matter, blaming any wrongdoing on a rogue affiliate. He said that OptInRealBig acted only as a broker between Delta and Synergy6 and that it never profited from the e-mail or sent any messages. Richter said his e-mail practices are within the guidelines set by the federal CAN-SPAM Act, and OptInRealBig promptly removes any consumer from its lists when requested.
“Marketers as a whole need to stand up for our rights,” he said. “The government gave us CAN-SPAM for a reason.”
Richter has been a public face in the spam debate, speaking at the Federal Trade Commission's spam forum last year and appearing on Details magazine's list of the 50 most powerful men under 38. His Westminster, CO, company claims to have e-mail lists with 45 million addresses, allowing it to send offers to half of all North American Internet users.
Richter still faces a suit in Washington brought by Microsoft as part of its investigation with Spitzer. Microsoft is requesting $18.8 million in damages. He also is suing IronPort over its Spamcop service blacklisting OptInRealBig e-mail messages without providing it copies of customer complaints.