Two companies face CAN-SPAM, other charges

WASHINGTON - Two alleged "saturation" spammers, one based in Michigan and the other operating out of Australia and New Zealand, face a variety of legal charges, including the first charges under a new U.S. antispam law, the U.S. Federal Trade Commission (FTC) announced Thursday.

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The two companies, Phoenix Avatar LLC, based in the Detroit area, and Global Web Promotions Pty. Ltd., have allegedly violated the Controlling the Assault of Non-Solicited Pornography and Marketing (CAN-SPAM) Act, which went into effect in January. They also face charges of marketing fraudulent products under the FTC Act. Spam allegedly sent by the two companies was responsible for more than 889,000 consumer complaints to the FTC between Jan. 1 and April 24, the largest numbers of complaints about any alleged spammers.

Representatives of neither company were available for comment Thursday.

"Inboxes are brimming with unwanted e-mail messages, even though consumers are using filters and following the advice of tech columnists and government agencies like ours," Howard Beales, director of the FTC's Bureau of Consumer Protection, said during a press conference. "Still, consumers say they're losing the battle for their inbox to unwanted and often offensive spam."

While these were the first criminal cases filed under CAN-SPAM, FTC and other federal law enforcement officials said the two companies violated other laws as well. The operators of Phoenix Avatar, which was doing business as Avatar Nutrition, face jail time of up to 20 years for mail fraud, and five years for CAN-SPAM violations, said Jeffrey Collins, U.S. Attorney for the Eastern District of Michigan.

CAN-SPAM may add penalties to spammers prosecuted, but most spammers will face other charges, including advertising fraudulent products, Beales said. "My expectation is most of them will be multiple law breakers," he said. "I would think that's going to continue."

Two officials of Phoenix Avatar were arrested Wednesday near Detroit and were released on unsecured bonds, Collins said. The two remaining company officials were expected to turn themselves into law enforcement authorities this week, he said.

The FTC charged Phoenix Avatar's officials with sending illegal spam to sell bogus diet patches. Consumers were directed to one of several Web sites selling the diet patches for $59.95, but Beales said no scientific evidence exists that the patches actually work. Phoenix Avatar violated CAN-SPAM by not including an opt-out mechanism or a valid postal address in their e-mails, according to the FTC.

The company also used spoofed e-mail addresses in the "from" fields of its spam, the FTC said. At the FTC's request, U.S. District Judge James Holderman of the Northern District of Illinois has frozen the defendants' assets and ordered them to stop sending spam and advertising deceptive products, according to the FTC.

The Phoenix Avatar operators also face federal mail fraud charges.

In the Global Web Promotions case, the FTC accused the company of marketing bogus human growth hormone and diet patch products using unsolicited e-mail. The diet patch sold for $80.90, and the human growth hormone product sold for $74.95. Operators of the company face charges of violations of the FTC Act and CAN-SPAM, and the FTC has filed a motion requesting the Illinois court issue a temporary restraining order barring further spam and stopping the sales and shipment of the company's products in the U.S. The cases were filed in Illinois because the FTC investigation initiated out of its Chicago office.

The FTC is also working with Australian and New Zealand authorities on other charges, Beales said.

The FTC, U.S. Department of Justice and U.S. Postal Inspection Service tracked the spammers by ordering their products and tracing the money back to the source, Beales said. "Rather than try to trace the e-mail, we tried to trace the money," he added. "It's virtually impossible to trace the spam itself."