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Washington State Hits Secure Computer with $1 Million Penalty

Purchasers of Spyware Cleaner, Popup Padlock May Get Refunds

December 4, 2006

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Washington Attorney General Rob McKenna has reached a $1 million settlement with New York-based Secure Computer that resolves Washington's first lawsuit under the state's computer spyware law.

An estimated 1,145 Washington residents who purchased the company's Spyware Cleaner software and, in some cases, Popup Padlock are eligible for refunds under the agreement filed in federal court.

"This settlement with Secure Computer is a significant victory for the Attorney General's Consumer Protection High-Tech Unit, Washington consumers and the online marketplace," McKenna said. "It sends a strong message to Internet businesses that they must promote their products ethically and legally. We won't tolerate deceptive marketing such as 'scareware' that preys on consumers' fears about spyware and online threats.

"Internet businesses are responsible for ensuring that third-party advertisers and affiliate marketers, as well as their own staff, do not boost sales through misleading pop-up ads, phony results of so-called 'free scans,' bogus hyperlinks or other online trickery," McKenna continued.

The Attorney General's Office sued Secure Computer LLC, of White Plains, NY, in January, accusing the company and associates of marketing software that falsely claimed computers were infected with spyware, then enticing consumers to pay for a program that claimed to remove it. The suit alleged violations under Washington's 2005 Computer Spyware Act, federal and state spam laws, and the state Consumer Protection Act.

Secure Computer stopped selling Spyware Cleaner when the state filed its lawsuit, and the Attorney General's Office reached settlements with three other defendants in the case earlier this year.

Under the consent decree signed last week in Seattle by U.S. District Court Judge Ricardo Martinez, Secure Computer and company president Paul E. Burke agreed to pay $200,000 in civil penalties, $75,000 in restitution for consumers, and $725,000 in state attorneys' fees and costs. The agreement does not include an admission or finding of wrongdoing.

Secure Computer must send an e-mail to all prior Washington customers who purchased Spyware Cleaner informing them of their right to receive refunds under the settlement. Consumers who bought Popup Padlock in addition to Spyware Cleaner are eligible for a refund for the added cost of that program.

Secure Computer marketed and sold Spyware Cleaner on several company-owned Web sites including myspywarecleaner.com and checkforspyware.com. The Attorney General's Office accused the company and its affiliates of advertising Spyware Cleaner with spam and pop-up ads that displayed warnings indicating a consumer's personal computer may be infected with harmful spyware.

Secure Computer offered consumers a free computer scan. If a user chose to have the free scan performed, a software program downloaded, installed, and immediately executed.

"Our investigation found that this so-called free scan always detected spyware, even on a clean computer," said Senior Counsel Paula Selis, who helped lead the state's investigation and settlement negotiations. "In order to remove this falsely detected spyware, users were instructed to pay $49.95 for the full version of Spyware Cleaner. Washington's spyware law makes it illegal to induce a computer user to download software by falsely claiming the software is necessary for security purposes."

Yet, when tested on a computer that was deliberately infected with spyware, the state's investigation showed Spyware Cleaner failed to detect some types of spyware. During the free scan, the software also surreptitiously erased a computer's Hosts file, which can be used to store Web addresses that a user wants to block.

"By erasing the computer's Hosts file during the scan," Selis said, "it left the machine even more vulnerable to attacks from viruses, spyware or other malicious programs."

The state's suit alleged that Secure Computer promoted Popup Padlock as an upgrade or enhancement utility to consumers who bought Spyware Cleaner, and that, in fact, Popup Padlock was a duplicative program.

The settlement contains a long list of injunctions. Secure Computer is prohibited from using advertisements to misrepresent that a computer may be infected with spyware; misrepresenting a software program's ability to detect, prevent or remove spyware; or using the "X" button or other images typically associated with closing a window to perform an unexpected operation.

The company also must not market software through e-mail containing deceptive subject lines or failing to include an opt-out mechanism. Nor can it suggest that a product is 'discounted' or available for a 'limited time' if it can actually be purchased at the price anytime.

If Secure Computer uses affiliates to market its products in the future, the company must obtain and review copies of promotional advertising to ensure they comply with the settlement terms and existing laws.

The state's lawsuit also brought charges against four other individuals.

Gary T. Preston, of New York, allegedly allowed his name to be used as an alias in business dealings by Secure Computer. He settled through a consent decree in May and agreed to pay $7,200 in legal costs and attorneys' fees. The settlement does not include any admission or finding of wrongdoing, but prohibits him from assisting any person or organization in disguising its identity from the public or law enforcement.

Zhijian Chen, of Portland, Ore.; Seth Traub, of Portsmouth, N.H., and Manoj Kumar, of Maharashtra, India, were charged with in connection with advertising Spyware Cleaner for Secure Computer. The Attorney General's Office alleged they were paid commissions equal to 75 percent of the $49.95 purchase price of Spyware Cleaner each time someone purchased the product.

Chen was accused of sending Net Send messages simulating system warnings sent to personal computers throughout the United States. He admitted violating Washington's Computer Spyware Act and Consumer Protection Act as part of a stipulated judgment reached in April and agreed to pay $16,000 in restitution, $24,000 in civil penalties and nearly $44,000 in attorneys' fees and costs.

Traub was accused of advertising Spyware Cleaner using Google AdWords that deceptively represented that Spyware Cleaner was a Microsoft product or sanctioned by Microsoft. He settled through a consent decree in June and agreed to pay $2,000 in legal costs and attorneys' fees. The settlement did not include any admission or finding of wrongdoing, but prohibited him from illegally using trademarks, making unsubstantiated claims, or otherwise deceiving consumers in the context of any advertisement for products or services.

The state has been unable to locate Kumar, who is accused of promoting Spyware Cleaner through illegal spam.

Washington residents who believe they are eligible for a refund should monitor their e-mail for a message from "Secure Computer, LCC Refund Program." By clicking on the reply button, they will submit their request and receive a check from the defendants within 60 days.

Important note for consumers: The defendants already have contact information for consumers who are eligible for refunds. Unless you have recently moved and need to submit a new address, there is no reason to provide personal information in order to receive your refund. As a reminder, most requests for personal information are fraudulent and you should never provide personal information such as Social Security number, bank account or credit card number, or account access codes when replying to an e-mail.

Consumers who believe they are eligible for refunds may file a complaint with the Attorney General's Office online at www.atg.wa.gov or call 1-800-551-4636 to request a form or additional information.

The settlement does not provide restitution to consumers in other states.

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