Attorney General Lockyer Goes To Court To Shut Down Major California-Based Spam Operation
Action Comes In First-Ever Enforcement Collaboration With Federal Trade Commission
(SAN FRANCISCO) – Attorney General Bill Lockyer today will ask a federal court to shut down a major California-based spam operation that has bombarded people across the country with illegal email ads pitching mortgage services, car warranties, travel deals, prescription drugs and college degrees.
"Spam ranks as one of the major consumer and business protection problems of our generation," said Lockyer. "It clogs our email boxes, invades our privacy, serves as a gateway to consumer fraud and costs our businesses billions of dollars. California has been a national leader in fighting spam, and stopping this operation is in keeping with that tradition. My office will continue to aggressively prosecute those who flout our anti-spam laws."
U.S. District Court Judge Samuel Conti, Northern District of California, today will hear a request that he issue a temporary restraining order (TRO) in a 13-count lawsuit against the spammers filed jointly yesterday by Lockyer and the Federal Trade Commission (FTC). The TRO requested by Lockyer and the FTC would stop the defendants from continuing to send illegal spam, freeze their assets and require them to turn over to Lockyer's office and the FTC computer records related to their operation. The defendants include Los Angeles residents Rick Yang and Peonie Pui Ting Chen, and the spam operation they run under the corporate names of Optin Global, Inc. and Vision Media Limited Corp. Judge Conti could rule on the TRO request as early as today.
Lockyer's action makes California the first state in the country to bring a lawsuit jointly with the FTC under a federal anti-spam law that took effect January 1, 2004. The federal statute is known as the CAN-SPAM Act (Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003). The lawsuit also is the first filed by Lockyer under the recently-revised California anti-spam law, which was amended in 2004 after much of it was preempted by the CAN-SPAM Act.
For violations of the CAN-SPAM Act, Lockyer and the FTC seek damages, disgorgement of ill-gotten profits, and immediate and permanent injunctive relief to prohibit further violations of the law. For violations of California law, Lockyer seeks civil penalties of $2,500 per violation, actual damages, and liquidated damages of $1,000 per illegal email, up to $1 million per incident.
"Since at least January 1, 2004, and continuing to the present (the) defendants have initiated the transmission of hundreds of thousands of commercial email messages," the complaint alleges.
Lockyer and the FTC allege the defendants violated provisions of the CAN-SPAM Act that require senders of unsolicited email ads to provide recipients the ability to request not to receive further emails, prohibit senders from transmitting messages to recipients who make such requests, require senders to include a valid postal address and require senders to identify commercial emails as ads. The defendants also violated federal and state laws that prohibit commercial emails from containing false or deceptive header information and subject lines, according to the complaint.
The defendants' spam advertises such products as auto warranties, pharmaceutical products, online college degree programs and mortgage services, the complaint alleges. The emails typically contain hyperlinks to defendant-operated web sites that promote the products and services, according to the complaint. The defendants used mailing addresses in several countries, including China and Canada, and Internet domains registered in Switzerland.
Since March 2004, the court papers allege, consumers across the country have forwarded to the FTC more than 1,870,000 spam messages that advertise web sites linked to the defendants. In California, Lockyer's office has received from consumers more than 4,000 such emails since January 2004.
Many of the defendants' spam messages, according to the complaint, market mortgage services. When directed by hyperlinks to the defendants' mortgage services web sites, consumers are asked to provide personal information, ostensibly to be shared with mortgage brokers or banks.
In fact, the complaint alleges, the defendants sell the personal information to "lead" companies, which then sell the information to other "lead" companies. Ultimately, the information winds up in the hands of mortgage lenders and brokers, such as Ameriquest Mortgage Company, Indy Mac Bank, BLS Funding and Mortgage South. The lenders and brokers then contact consumers and offer mortgage services, according to the complaint. Mortgage lead companies that bought the personal information directly from the defendants include Abacus Enterprises and Infinite Leads Marketing. Abacus Enterprises, based in El Cerrito, purchased about 69,000 leads from the defendants in 2004, the complaint alleges.
Internet service providers (ISPs), including Microsoft, cooperated with Lockyer's office and the FTC in the investigation. In March 2004, Microsoft, Yahoo, America Online and Earthlink filed CAN-SPAM lawsuits of their own against major spammers. And the FTC has brought several enforcement actions under the CAN-SPAM law since April 2004.
Despite the best efforts of law enforcement, regulators and ISPs, spam has become a substantial, persistent and costly problem. In 2001, spam accounted for eight percent of all email. By March 2004, the number had reached 62 percent. In 2002, experts estimated spam cost U.S. businesses about $9 billion in lost productivity, and screening and other expenses.
Lockyer encouraged Californians who believe they have received illegal spam to file complaints with the Attorney General's Office. Complaints can be filed by writing to the Public Inquiry Unit at P.O. Box 944255, Sacramento, CA 94244-2550. Californians who receive spam at their email addresses also can send examples to the Attorney General's Office at email@example.com . Consumers can find out how to file a spam complaint with the FTC, or send spam to the FTC, at www.ftc.gov .