Federal Trade Commission's Cyber Sleuths Bust Cyber Swindlers

By Lily Whiteman

Type into a search engine the key words, "This is not a scam", and you will likely be linked to scores of web pages shouting empty promises, such as:

• Earn a 50 percent return on your money!
• Burn more calories while you're just standing or sitting around doing nothing -- even while you're sleeping!
• Money to loan...regardless of credit history!

Highway Robbery on the Information Highway

Such false claims have long been the stock-in-trade of fast-talking cold-calling con artists hawking pyramid schemes, bogus business opportunities, phony credit repair kits, and various forms of snake oil. But these types of traditional scammers, known for crowding into rented "boiler rooms", are quickly becoming as anachronistic as the rotary phones they once did business from.

Taking their place is a new breed of cyber crook -- often a plugged-in shut-in who beams fraudulent offers around the world with nothing more than a computer and modem. These hi-tech swindlers are also working new scams, such as page jacking, mouse trapping, modem hijacking, and e-mail marketing, that are unique to the Internet. Drawn to the anonymity and low cost of web pages and e-mails, the ranks of cyber swindlers are steadily growing.

Indeed, the Federal Trade Commission (FTC) received 18,600 consumer complaints of Internet fraud in 1999 -- up from fewer than 1,000 complaints just two years ago. Such reports now account for about one fourth of all fraud complaints. According to the National Consumers League in Washington, cyber scammers duped each of their victims out of an average of $580.00 last year.

Cyber Sleuths

But thanks to federal investigators, the tables are rapidly turning on Internet con artists. Jodie Bernstein, Director for the FTC's Bureau of Consumer Protection assures that "if these bad actors can use this new technology to deceive consumers, we can use it to catch them."

How is the FTC catching cyber scammers? The Agency's Consumer Sentinel Database currently contains 265,000 complaints that were phoned, mailed or e-mailed to the Agency by the public and 250 law enforcement agencies that were specially recruited to help the FTC fight fraud. By adding special analytical tools to the Consumer Sentinel Database, the FTC boosted its ability to identify emerging trends in cyber crimes and target its law enforcement activities.

In addition, FTC investigators regularly search for questionable claims by trolling the Internet with computers that are equipped to conceal their federal addresses. Such cover enables these investigators to access offensive sites that are routinely hidden from law enforcers whose government addresses give away their surveillance efforts. FTC investigators' computers are also specially outfitted to copy suspicious pages for use as potential evidence. The Agency gets additional tips of suspicious sites from its 250 crime fighting partners, which similarly patrol the Internet.

Web site operators whose promises do not pass muster from FTC lawyers are sent what an Agency spokesperson calls "a strongly worded e-mail" warning them of the FTC's concerns. Typically, that's enough to compel them to either change their site's content or shut it down altogether. Those that ignore FTC warnings are subject to further investigations or enforcement actions.

So far, the FTC has brought more than 140 law enforcement actions against over 400 fraudulent Internet merchants. Among the Agency's recent victories was a court decision that closed Five Star Auto Club, which had advertised on the Internet a pyramid operation based upon car leases. The company was also forced to pay back $2.9 million to 8,200 consumers, some of whom had paid thousands of dollars to participate in the scheme.

Teaser Sites

To educate consumers about the Internet's too-good-to-be true offerings, the FTC maintains various teaser web sites. With deceptively tantalizing claims, colorful come-ons and convincing but fictional testimonials, these sites invite unsuspecting surfers to click through their pages until they reach a warning: "If you responded to an advertisement like this, YOU COULD GET SCAMMED!" The site's hyper-link back to www.ftc.gov offers these consumers additional educational information.

Protect Yourself

Here are some tips for avoiding cyber scammers:

• Avoid Internet merchants who don't have a street address and phone number. If necessary, call and ask them for their location, or check their location with the telephone book.
• Never give your bank account or Social Security number to Internet merchants who you don't know or who don't tell you why they need such information.
• Favor auction sites that post references from past customers and that allow you to place money in escrow until goods arrive.
• Avoid credit and loan offers that require you to make up-front payments before you have the credit or loan in-hand.
• To report suspicious claims and get more tips on safe Internet shopping, visit the FTC's web site.

Good Housekeeping Award

For her work in protecting online consumers, Joan Bernstein was one of nine runners-up for this year's Good Housekeeping Award for Women in Government.

About the Author

Lily Whiteman is a writer with the National Partnership for Reinventing Government. You may reach her at lily.whiteman@npr.gov.