Consumers Billed For Calls to Madagascar

"Adult" Web Site Operators
Settle FTC Charges

WASHINGTON, Aug. 29, 2001 -- Two Internet adult entertainment operations that billed some consumers by rerouting their Internet connection through Madagascar have agreed to settle Federal Trade Commission charges that the billing scheme was unfair and deceptive and violated federal law.

Investigators said the rerouting cost many unwitting consumers hundreds of dollars in international long-distance fees.

The companies settling with the FTC to avoid prosecution were Charlo Barbosa, B.C. Ltd., which operated Virtualynx, and Hillary Shenkin who operated as Witchy's Web, Honeybun, Inc. and Free Sugar, Inc.

The settlement will bar the defendants from billing consumers without express, verifiable authorization in the future. Barbosa will be required to pay more than $26,000 and Shenkin about $10,000 in consumer redress.

Barbosa
On October 27, 2000 the FTC filed suit in U. S. District Court naming Charlo Barbosa, B.C. Ltd., and Virtualynx. The FTC charged that the defendants operated adult Web sites which offered memberships for costs ranging from $34.95 to $49.95 and allowed consumers to pay using credit or debit cards, or through 900 number charges that would appear on consumers' phone bills. These costs were clearly disclosed.

But the FTC alleged that the defendants offered another payment option involving dialer software. Using banners that said, "No credit card? No check? No problem!" they encouraged computer users to download "Sex Software" for immediate access to the adult material. When users downloaded the software, a lengthy licensing agreement appeared on the screen adjacent to a box that allowed them to click on "I agree." Consumers' modems were then disconnected from their regular Internet Service Provider and reconnected to the defendants' server via an international phone line.

The FTC charged that in many cases, the computer user was not the telephone line subscriber and many consumers first learned of the defendants' dialer software when they opened their phone bills and found charges of up to $7.39 a minute for calls supposedly made to Madagascar. The FTC alleged that billing and attempting to collect from line subscribers who may not have accessed or authorized access to the defendants' Web sites and claiming that line subscribers were obligated to pay because their lines may have been used to gain such access was unfair and deceptive and violated the FTC Act.

Shenkin
On November 18, 2000, the FTC filed suit in U. S. District Court for the District of South Carolina, Charleston Divison, alleging that Hillary Sheinkin operated adult Web sites that advertised themselves as free and claimed "no credit cards needed" but also used a dialer to redirect their connection to an international number.

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