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Unauthorized-Charge Scammers Fined $28.2 Million

'Wal-Mart Shopping Spree' offers were bogus, feds charge

April 24, 2008

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One of the largest and most widespread unauthorized billing scams in the U.S. has been shut down, according to the U.S. Federal Trade Commission. The agency says it has secured final court orders effectively ending the so-called "Wal-Mart Shopping Spree" scam and other schemes.

All the schemes offered consumers either free merchandise or some savings benefit, for which they were charged a monthly fee. Many consumers have longed complained that they never agreed to these "purchases" and were surprised when they showed up on their credit cards.

The FTC action bans Brian K. MacGregor, identified as the architect of the scheme, from engaging in any aspect of telemarketing or the selling of program memberships.

He and Membership Services Direct, Inc., also known as Continuity Partners, Inc., have been ordered to pay $28.2 million to the FTC, representing the net profits generated through the scheme.

The court has also barred MacGregor and Membership Services Direct, Inc. from making material misrepresentations in connection with the sale of any goods or services, engaging in unauthorized billing, and violating any provision of the FTC's Telemarketing Sales Rule.

The other companies involved in the telemarketing scam – Universal Premium Services, Inc. (aka Premier Benefits, Inc. ), Consumer Reward Network, Inc., Star Communications LLC, All Star Access, Inc., Prime Time Ventures, Inc., Connect2USA, Inc., Merchant Risk Management, Inc., and Pantel One Corporation – are barred from making material misrepresentations in connection with the sale of any goods or services, engaging in unauthorized billing, and violating any provision of the TSR.

They have been shut down by a permanent receiver appointed by the court, the FTC said.

The FTC filed suit in California, charging the defendants with violations of the FTC Act and TSR. The complaint alleged that the defendants cold-called consumers with the goal of tricking them into disclosing their bank account information, falsely promising them valuable incentives such as gift cards and "shopping sprees" to retailers such as Wal-Mart and Macy's, movie passes, and gas vouchers.

All of these items were supposedly free with the payment of a nominal shipping-and-handling fee. In many instances, the defendants misrepresented that they were affiliated with well-known retailers, government entities, or the consumers' financial institutions.

The defendants also harassed consumers by making repeated telemarketing calls to them, ignoring consumers' requests not to call again, and using profane and abusive language during the telemarketing calls.

Finally, the defendants made unauthorized debits from consumers' bank accounts after tricking them into disclosing their account information.

This week, the court entered a final monetary judgment against Brian MacGregor and Membership Services Direct, Inc. totaling $28.2 million, which represents the net profits generated through their fraudulent telemarketing scheme between January 1, 2003 and February 22, 2006.

In bringing the case to conclusion, the FTC said it worked with the attorneys general for the states of Arkansas, Connecticut, Florida, Illinois, Iowa, Michigan, Nevada, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, South Dakota, Vermont, Washington, West Virginia, and Wisconsin, as well as the United States Postal Inspection Service.

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