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Phone Pretexters Get Off Cheap

FTC settles with company that sold consumer calling records

By Martin H. Bosworth
ConsumerAffairs.com

December 17, 2007 

The FTC filed a complaint against CEO Group Inc., doing business as Check 'Em Out, in May 2006 for violating the 1996 Telecommunications Act's prohibition against disclosing customer records without written permission.

In the terms of the settlement, CEO Group and its principal Scott Joseph are barred "from obtaining, causing others to obtain, marketing or selling consumer phone records or other consumer personal information except where allowed by law, regulation, or court order."

The FTC also imposed damages of $222,381 on Joseph and his company, the amount deemed to have been made from the sale of consumer phone records, but the defendants claimed to only be able to pay $25,000.

The FTC imposed bookkeeping and auditing requirements to ensure that CEO Group could comply with the settlement and was not hiding the true extent of its finances. The defendants agreed to the settlement without admitting fault.

Obtaining customer phone records from third party companies and selling them to third parties, also known as "pretexting," became a major issue in 2006 after the Chicago Sun-Times broke the story of how easy it was for private investigators, law enforcement agencies, and ordinary citizens to buy phone records off the Internet.

Blogger and commentator John Aravosis brought the issue to national attention when he bought the phone records of retired general and former presidential candidate Wesley Clark.

The major wireless carriers and many government agencies, including the FTC, teamed up to investigate and prosecute companies engaged in the sale of cellphone and landline calling records, or the use of pretexting to obtain customer call logs. The FTC pledged "vigorous pursuit" of companies engaged in the practice.

Numerous states, including Illinois and Florida, also sued companies for breaching state laws protecting consumer information and calling records.

After several false starts, Congress passed legislation criminalizing pretexting late in 2006, which President Bush signed into law. Bills that outlawed pretexting had been sidetracked due to revelations that pretexting was a regular tool of law enforcement agencies from local police departments to Homeland Security.

But the scandal involving a private investigator hired by former Hewlett-Packard chairwoman Patricia Dunn reignited concerns about pretexting.

The investigator had posed as other individuals to gain access to the calling records of individuals such as a journalist working for CNet's news bureau. Dunn stepped down from her position, but avoided jail time, and the company paid a sizable settlement to the state of California.

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