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    NY Sues Alleged Spyware Distributor

    April 28, 2005
    New York Attorney General Eliot Spitzer has sued one of the nation's leading internet marketing companies, alleging that the firm was the source of "spyware" and "adware" that has been secretly installed on millions of home computers.

    The suit against Los Angeles-based Intermix Media, Inc. is the most sweeping case to date involving programs that redirect web addresses, add toolbars and deliver pop-up ads.

    "Spyware and adware are more than an annoyance," Spitzer said. "These fraudulent programs foul machines, undermine productivity and in many cases frustrate consumers' efforts to remove them from their computers. These issues can serve to be a hindrance to the growth of e-commerce."

    Ari Schwartz, the Associate Director of the Center for Democracy and Technology in Washington D.C. said, "One of Internet users' biggest frustrations today is unwanted software that sneaks onto computers without their owner's consent and cannot be uninstalled."

    "Companies have gotten away with unethical and illegal software download practices for too long. The practices alleged in this case are widespread on the Internet and we hope that both federal and state authorities follow Attorney General Spitzer's lead in making this a priority," Schwartz said.

    The suit follows a six-month investigation in which the Attorney General's office found that the company had installed a wide range of advertising software on home computers without giving consumers proper notice.

    Intermix owns and operates a wide range of web sites, including mycoolscreen.com, cursorzone.com and flowgo.com, which advertised "free" software available for download, including screensavers, screen cursors and games.

    The Attorney General found that along with these programs, Intermix secretly downloaded a number of ad-delivery programs. One such program was called "KeenValue" and it delivered pop-up ads to its unsuspecting users. Another program, "IncrediFind," redirected web addresses to Intermix's proprietary search engine. Other programs placed advertising "toolbars" on users' screens.

    The Attorney General documented at least ten separate web sites from which Intermix or its agents were downloading spyware, providing either no warning or other misleading disclosures. In this way, Intermix and its agents downloaded more than 3.7 million programs to New Yorkers alone, and tens of millions more to users across the nation.

    Intermix also went to great lengths to protect the spyware and adware it secretly installed. The programs were hidden in unlikely locations on the computer and could not be removed through a computer's "Add/Remove" function. In addition, the programs omitted "un-install" applications, and even reinstalled themselves after being deleted.

    The Attorney General's suit seeks a court order enjoining Intermix from secretly installing spyware, an accounting of all revenues made on these products, and payment of penalties.

    The lawsuit arises under the State's General Business Law, which prohibits false advertising and deceptive business practices, and New York's common law prohibitions against trespass. Legislation specifically directed at "spyware" and "adware," including bills applying or strengthening criminal sanctions for its distribution, has been proposed both in Congress and in the New York legislature, as well as legislatures across the country.

    NY Sues Alleged Spyware Distributor...
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    Consumer Drug Ads May Influence Doctors' Rx Decisions

    Doctors tend to give patients what they ask for

    Patients requesting specific medications can have a profound effect on physicians prescribing medications for major depression, according to a new study in the April 27 issue of the Journal of the American Medical Association.

    Critics charge that direct-to-consumer (DTC) advertisements lead to overprescribing of unnecessary, expensive, and potentially harmful medications. Proponents counter that they can serve a useful educational function and encourage patients to treat conditions that may be poorly recognized or highly stigmatized.

    The study noted that antidepressant medications consistently rank among the top DTC advertising categories -- with $3.2 billion spent on consumer ads for antidepressants in 2003.

    Richard L. Kravitz, M.D., M.S.P.H., from the University of California, Davis, and colleagues conducted a randomized trial using trained actors as standardized patients to determine the effects of patients' DTC-related requests on physicians' initial treatment decisions in patients with depressive symptoms. The patients were middle-aged, white, non-obese women, most with professional acting experience.

    They were trained to portray six roles and represented two clinical conditions: symptoms consistent with major depression or adjustment disorder, and three request types: a brand-specific drug request, a general drug request, or no request (control condition).

    The scenarios included patients telling their doctor that they had seen an advertisement for Paxil on TV and asked for that drug by name; or patients saying they had watched a program on TV about depression and asking the physician if medication might help them.

    The researchers chose Paxil because at the time of the study, it was widely promoted, priced higher than the generic fluoxetine, and available through the participating health care organizations in all three cities. In the control scenario, the patients reported the same symptoms but made no request for medication.

    "Antidepressant prescribing rates were highest for visits in which standardized patients made general requests for medication (76 percent), lowest for visits in which standardized patients made no requests for medication (31 percent), and intermediate for visits in which standardized patients made brand-specific requests linked to DTC advertising (53 percent)," the authors found.

    "Among standardized patients portraying major depression, paroxetine was rarely prescribed (approximately 3 percent) unless the standardized patient specifically requested Paxil; if Paxil was requested by name, 14 (27 percent) of 51 received Paxil/paroxetine, 13 (26 percent) received an alternative antidepressant, and 24 (47 percent) received no antidepressant," they said.

    For standardized patients portraying adjustment disorder, physicians were less likely to prescribe antidepressants.

    "These results underscore the idea that patients have substantial influence on physicians and can be active agents in the production of quality," the authors write. "The results also suggest that DTC advertising may have competing effects on quality, potentially averting underuse, while also promoting overuse."

    "The results of this trial sound a cautionary note for DTC advertising but also highlight opportunities for improving care of depression (and perhaps other chronic conditions) by using public media channels to expand patient involvement in care," the study's authors said. "Furthermore, physicians may require additional training to respond appropriately to patients' requests in clinically ambiguous circumstances."

    In an accompanying editorial, Matthew F. Hollon, M.D., M.P.H., from the University of Washington, Seattle, writes, "Relying on emotional appeals, most advertisements provide a minimal amount of health information, describe the benefits in vague, qualitative terms, and rarely offer evidence to support claims."

    More than 80 percent of physicians believe that DTCA does not provide balanced information, he added.

    Consumer Drug Ads May Influence Doctors' Rx Decisions...
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      U.S. Automakers Lag in Hybrid Sales

      Although hybrid vehicle sales are off and running, American manufacturers are being left at the starting line

      Although hybrid vehicle sales are off and running, American manufacturers are being left at the starting line, with Japanese manufacturers capturing more than 96 percent of hybrid sales in the U.S.

      New hybrid vehicle registrations totaled 83,153 in 2004, an 81 percent increase over the year before. The huge increase occurred before the latest dramatic run-up in gasoline prices. Nevertheless sales nearly doubled as a wider variety of models attracted consumers.

      Hybrids still represented less than 1 percent of the 17 million new vehicles sold in 2004. But the U.S. hybrid market has grown by 960 percent since 2000, when 7,781 were sold, according to the Polk data, and major automakers plan to introduce about a dozen new hybrids during the next three years.

      Despite the arrival of Ford Motor Co.'s Ford Escape hybrid in showrooms last year, Japanese automakers continued to control the vast majority of the U.S. market, Polk said. Japanese brands accounted for more than 96 percent of the hybrid vehicles registered.

      Toyota Motor Corp., which was the first automaker to mass produce and sell hybrid cars, dominates the market. The Toyota Prius, which went on sale in the United States in 2000, occupied 64 percent of the U.S. hybrid market last year, with 53,761 new Priuses registered, Polk said.

      Toyota is on track to double Prius sales again this year. The company sold 22,880 Prius cars in the first three months of the year, more than double the number it sold in the first three months of 2004. Toyota has announced it plans to produce 100,000 Priuses for the North American market this year.

      The Honda Civic hybrid was second, with a 31-percent market share. Honda Motor Co. also sold several hundred Accord and Insight hybrids, which each commanded 1 percent of the market. Ford sold 2,566 Escape hybrid SUVs, or about 3 percent of the market, Polk said.

      Automakers are introducing hybrid versions of several models this year, including the Lexus RX400h, Mercury Mariner and Toyota Highlander SUVs. General Motors Corp. and DaimlerChrysler AG already sell hybrid pickups, but the system they use is less fuel-efficient.

      U.S. Automakers Lag in Hybrid Sales...
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      AIG Faces Workers' Comp Audit

      The New York Insurance Department will appoint a consultant to audit years of alleged improper booking of workers' compensation premiums at American International Group (AIG).

      According to Attorney General Eliot Spitzer and Insurance Superintendent Howard Mills, the practice to be audited, now apparently discontinued, involved booking premiums for workers' compensation coverage as premiums for general liability coverage.

      The conduct appears to have taken place for over a decade, and continued even after AIG insiders repeatedly challenged its legality.

      By booking the income as something other than workers' compensation premiums, AIG avoided paying its true share into various workers' compensations funds. One AIG document dating from the early 1990s roughly estimated unlawful benefit to AIG at tens of millions of dollars annually.

      A purpose of the consultant is to determine what of this money, if any, is owed to the State of New York or others.

      In 1992, an internal AIG legal memorandum to top management reported that the practice was illegal. This followed similar warnings made years earlier. It remains unclear when the practice stopped. AIG, which has recently been cooperating with the Attorney General and Insurance Department's inquiries on this subject, has uncovered no evidence that AIG disclosed the practice to regulators or made restitution.

      The assessment funds at issue are designed to pay for the operations of the workers' compensation board and provide certain other claim benefits for injured workers.

      A broad investigation of the company by the Attorney General's Office and the Insurance Department is continuing.

      The New York Insurance Department will appoint a consultant to audit years of alleged improper booking of workers' compensation premiums at American Intern...
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      Graco Toddler Beds

      March 22, 2005
      Graco is recalling 1.2 million toddler beds. A childs arm, leg or foot can become entrapped between the slats in the guard rails or footboard. This can result in broken bones, sprains and other injuries to young children.

      Graco has received reports of 77 entrapments. This resulted in 13 broken arms and legs, 1 broken foot, a sprained ankle, and 54 other injuries including bruised, scratched, and swollen limbs.

      The recalled Graco toddler beds are white plastic and steel with openings between the slats in the guard rails and footboard. The beds were sold under the names Cozy Toddler Bed, Glow-in-the-Dark Toddler Bed, and Classic Toddler Bed. There is a label on the guard rail or leg containing one of the following model numbers: 8801, 8801WR, 8821, 8824, 8828, 8833, 30066, 34434 and 11030, a serial number, and the manufacturers address. Model 8828s headboard has a blue sky with a yellow moon and stars. Model 8801WR has red legs. Graco is printed on all of the beds footboards.

      The beds were sold at discount, department and juvenile product stores nationwide from February 1994 through March 2001 for between $50 and $70.

      Consumers should remove the guard rails from the recalled Graco toddler beds immediately and call the firm to receive a free retrofit kit. The kit includes custom designed mesh coverings that must be attached to the guard rails and footboard to prevent entrapment. The mesh coverings will be available in 6 to 8 weeks.

      Consumer Contact: Graco at (800) 837-4404 between 8 a.m. and 5 p.m. ET Monday through Friday or log on to the firms Web site at www.gracobaby.com.

      The recall is being conducted in cooperation with the U.S. Consumer Product Safety Commission (CPSC).

      Graco Toddler Beds...
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      North Dakota Limits Use of Black Boxes By Insurers

      April 21, 2005
      North Dakota has put some limits on insurance companies making your car testify against you. The legislature decided that insurance companies will be barred from using data from a vehicle's "black box" to set drivers' premiums.

      After the vote, insurance industry groups said they believe North Dakota is the first state bar the use of the "black box" information to set rates. Of course, the insurance group says it never uses the data for that purpose anyway.

      At least eight other states are considering black-box regulation this year, according to the National Conference of State Legislatures.

      The North Dakota bill also requires cars and trucks, starting with the 2007 model year, to include information about the recorders in their owner's manuals, and says dealers must notify their customers about the presence of a recorder.

      The state still allows data to be retrieved without the owner's consent for use in medical research, or for improving motor vehicle safety, as long as the driver's identity is not disclosed. The courts can also order disclosure of the information.

      GM Leads the Way

      When you think about leadership in the automobile industry, General Motors does not often come to mind but the aging giant does lead the way installing the "black box" technology in automotive products.

      GM began installing the devices in vehicles as early as 1996. "Black boxes" are really computer chips used to activate airbags and other safety apparatus but they also store information that can be used to investigate an accident. These chips are common in newer vehicles and are sometime called Event Data Recorders or EDRs.

      The chips record a car's speed, braking and steering efficiency, and whether the driver was wearing a seat belt.

      Whether or not General Motors has sided with government regulators and investigators who are proponents of "black box" technology is not longer an issue. "Black boxes" are now installed in every GM car in the company line since the 2004 model year. The units are also in a number of Ford Models.

      That means that roughly 15 percent of all the vehicles on the road in the U.S. today now carry some sort of "black box" device that could eventually be turned against the driver.

      Proponents of the technology include the National Transportation Safety Board and the National Highway Traffic Safety Administration (NHTSA). NHTSA has proposed standards for the data collected by "black boxes" and EDRs. The agency emphasized in a recent notice that it is not mandating "black boxes" despite growing pressure.

      Highway safety advocates say the data is valuable for studying how accidents happen and how to make roads and cars safer and the NTSB lists the "black box" as one of its "most wanted" measures.

      Rental car companies routinely use global positioning systems (GPS) to track renters driving habits, where they go and how fast they drive. GPS will also allow the rental car companies to shut off the engine of a car and lock a renter out.

      This is the same technology used by OnStar, which promises to be a guardian angel for car owners who are locked out or report a vehicle stolen.

      Parents with teenage drivers are turning to technology in growing numbers to deal with never ending problems of young drivers. A parent can now place a "black box" under the hood or seat of the family sedan and keep up with any teenager.

      North Dakota Limits Use of Black Boxes By Insurers...
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      Your Next Car: Made in China?

      Will Chrysler soon carry the "Made in China" label?

      Will Chrysler soon carry the "Made in China" label? The world's fifth-biggest carmaker is trying to work out an agreement to build cars in China and export them to the United States. According to a company executive, DaimlerChrysler is holding the discussion with one of its Chinese partners. The decision on whether to go ahead is due in the second half of 2005.

      If Daimler and the unspecified partner decide to proceed, the automaker would be the first Western player to consider export-oriented factories in China. Japan's Honda Motor Co. is already building cars for export in China.

      "We would like to establish here in China an export joint venture for Chrysler products," Ruediger Grube, head of the carmaker's Chinese business told reporters on the sidelines of the Shanghai auto show. "Today we are not talking about Europe. We are talking about North America."

      Car manufacturers worry that cheap made-in-China cars will someday swamp the automobile markets, especially with vehicle sales growth declining.

      The United States and other developed economies have complained that cheap Chinese goods are threatening U.S. industry and millions of manufacturing jobs.

      Will Chrysler soon carry the "Made in China" label? The world's fifth-biggest carmaker is trying to work out an agreement to build cars in China and export...
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      Verizon Will Offer Stand-Alone DSL Service

      Verizon says it will phase in a policy of allowing customers to buy stand-alone high-speed Internet service

      Verizon says it will phase in a policy of allowing customers to buy stand-alone high-speed Internet service. Qwest is currently the only major local telephone company that will sell DSL service to customers who do not have a local telephone number at the same location.

      Verizon said current customers in 13 Northeastern states will be allowed to drop telephone service but continue to receive DSL service. However, the company said customers would have to transfer their number to a wireless carrier, to a VOIP provider like Vonage or to a cable company -- not to a competing local phone company that uses Verizon's lines.

      Verizon said it will expand the stand-alone option to all of the states in which it operates. Eventually, the company said, it will offer stand-alone DSL to new customers as well as exissting customers but said a timetable has not been established.

      Not everyone was pleased. Gene Kimmelman of Consumers Union said Verizon's new policy was "less than what consumeres need to have a vibrant, competitive marketplace."

      With the growing popularity of Internet telephone service, many consumers would be expected to get rid of their regular telephone service and rely solely on VOIP, which is not only cheaper in most instances but also offers many features not available with regular telephone service.

      Verizon's move leaves SBC and BellSouth as the hold-outs. Neither company currently provides DSL-only service.

      Verizon Will Offer Stand-Alone DSL Service...
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      Ameritrade Loses 200,000 Client Files

      April 20, 2005
      It's one thing when cyber-thieves break into computer systems and steal sensitive personal information. It's quite another when the information simply gets lost in the mail. But that's what's happened with 200,000 present and former clients of the online brokerage service, Ameritrade.

      Ameritrade has sent emails to the former and current clients in question, explaining that a backup tape containing their names, Social Security numbers, account numbers and other sensitive personal data, is unaccounted for.

      The company said four backup tapes, full of information from 2000-2003, were lost during shipping earlier this year. Three of the tapes have turned up. The fourth remains missing.

      The mishap occurred in February, but an Ameritrade spokeswoman said the company waited to announce it until they had determined exactly which current and former clients were on the missing tape. Those clients have received emails, notifying them of the problem.

      The announcement comes against the backdrop of recent security breaches at data collection firms like ChoicePoint and LexisNexis, but Ameritrade said this situation is very different. No security system was breached, and the information on the missing tape is compressed, requiring special equipment to read it. Ameritrade said it is confident no customer accounts have been compromised or misused.

      "We sincerely apologize for this unusual event, and any discomfort it may cause you," Ameritrade said in the e-mail to affected clients. "That's why we wanted to notify you as quickly as possible, and let you know what actions we are taking."

      Ameritrade Loses 200,000 Client Files...
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      Don Pedro's Sausage

      April 19, 2005
      Don Pedro's Meat, a La Puente, Calif., firm, is voluntarily recalling approximately 40 pounds of sausage products that may be contaminated with Listeria monocytogenes, the U.S. Department of Agriculture's Food Safety and Inspection Service (FSIS) announced today.

      Products subject to recall include: 2- and 10-pound packages of "DON PEDRO'S MEAT, RELLENA, COOKED PORK BLOOD SAUSAGE." The establishment code "EST. 20946" appears inside the USDA mark of inspection.

      The sausage was produced on April 8 and was distributed to retail establishments in Los Angeles, Calif. The problem was discovered through routine FSIS regulatory sampling. FSIS has received no reports of illnesses associated with consumption of these products.

      Consumption of food contaminated with Listeria monocytogenes can cause listeriosis, an uncommon but potentially fatal disease. Healthy people rarely contract listeriosis. However, listeriosis can cause high fever, severe headache, neck stiffness and nausea. Listeriosis can also cause miscarriages and stillbirths, as well as serious and sometimes fatal infections in those with weakened immune systems including infants, the elderly and persons with chronic disease, such as HIV infection or undergoing chemotherapy.

      Media with questions about the recall should contact company HACCP coordinator Miguel Jimenez at (626) 336-8900. Consumers with questions about the recall should contact company Sales Director Karla Hernandez at (626) 336-8900.

      Consumers with food safety questions can phone the toll-free USDA Meat and Poultry Hotline at 1-888-MPHotline (1-888-674-6854). The hotline is available in English and Spanish and can be reached from l0 a.m. to 4 p.m. (Eastern Time) Monday through Friday. Recorded food safety messages are available 24 hours a day.

      The recall is being conducted in cooperation with the U.S. Consumer Product Safety Commission (CPSC).

      Don Pedro's Sausage...
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      Maytag Settles Neptune Washer Lawsuit

      Maytag Settles Class Action Law Suit

      Maytag has settled a consumer class action suit alleging odor, mold and mildew problems withMaytag Neptune Washers. More than two million consumers are.....

      New York Eyes Identity Theft Prevention

      representatives of consumer advocacy and crime victims organizations are urging the State Legislature to protect consumers from identity theft and the unauthorized use of personal data.

      New York Eyes Identity Theft Prevention..

      Loans Secured by Car Titles Trap Borrowers in Cycle of Debt

      Cash-strapped families risk losing their cars in the latest form of high-cost small lending

      Cash-strapped families risk losing their cars in the latest form of high-cost small lending spreading across America, according to a new report from the Center for Responsible Lending (CRL) and Consumer Federation of America (CFA).

      Consumers who put their cars on the line to borrow a few hundred dollars for one month become trapped in a cycle of repeated loans with interest rates often around 300 percent.

      Borrowers often find themselves "rolling over" these loans repeatedly -- paying huge amounts in interest and fees while barely touching the principal. In many cases, the lender repossesses the car after the borrower has made substantial payments. That can be devastating because a car is often the borrower's largest asset and his or her only way to get to work.

      "Car title lenders are taking a page out of the payday lender playbook by making very short-term loans without considering the borrower's ability to repay the loan," said Mark Pearce, CRL's President. "Emergency loans should help families out of trouble, not keep them in it."

      CRL and CFA have issued a first report on the car title pawn/loan industry, titled "Car Title Lending: Driving Borrowers to Financial Ruin," which describes the title loan product and industry, illustrates predatory aspects of these over-secured small loans, and makes recommendations for stronger protections for borrowers.

      To get a title loan, borrowers sign over the title to a paid-for car and, in some states, provide the lender with a spare set of keys. The loan is usually due within a month in a lump-sum payment, making it difficult for families to repay the loan.

      Since car title loans are typically made for a fraction of the value of the car, the lender is well-protected if the borrower fails to make the full payment at the end of the month. In some states, title lenders are allowed to keep the surplus from the sale of the car, allowing title lenders to reap a windfall from the borrower's default.

      "Some title lenders claim their secured loans are "pawns," "sale leasebacks," or open end credit to evade state usury and small loan protections," stated Jean Ann Fox, CFA's director of consumer protection. "State legislatures should close loopholes and protect consumers' assets from unfair lender terms and practices."

      While CRL and CFA do not encourage states to legalize small loans based on titles to vehicles, the report spells out an extensive set of legal protections that should apply to car title loans.

      • Establish Fair and Affordable Loan Terms. Title-secured loans should be repayable in affordable installments rather than a lump sum. Rates should be limited, and lenders should be required to consider the borrower's ability to repay. Borrowers should have a right to cancel loans within a reasonable time and to prepay without penalty at any time.

      • Protect Borrowers After a Default. States should bar abusive practices such as seizing cars without notice, pocketing the difference between the sales price and what the borrower owes or pursuing the borrower for even more money after repossessing the car.

      • Close Loopholes to Ensure Consistent Regulation. States that permit title lending should close loopholes that exempt some loans from the law and ensure that laws apply to all lenders, including those operating across state lines.

      • Monitor Lenders Better. States should closely monitor lenders through strong licensing, bonding, reporting and examination requirements.

      • Ensure Borrowers Can Exercise Their Rights. Borrowers should be able to sue title lenders and void contracts that violate the law. Binding mandatory arbitration clauses that deny borrowers a fair chance to challenge abuses in court should be eradicated.

      Loans Secured by Car Titles Trap Borrowers in Cycle of Debt...
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      Parents: Be Wary of Supposed Model Searches

      An "open call" for young models and actors is on its way to upstate cities in New York, but this so-called "free evaluation" is only a prelude to the actual evaluation which costs at least $525 to attend, the New York State Consumer Protection Board ("CPB") warned.

      Aquarian Associates of Pittsburgh is conducting "open calls" in Rochester on April 21, Schenectady on April 22 and Buffalo on April 24 as part of its "Great American Model Search."

      But the CPB said many parents complain that nothing happens at the "free evaluation" because the true evaluation (attended by casting agents and other talent scouts) only takes place in Pittsburgh. That event -- the Great American Model Search -- costs at least $525 to attend plus lodging, transportation and other costs.

      CPB Chairwoman and Executive Director Teresa A. Santiago said, "Aquarian claims to select only the most-promising models and actors at these 'open calls.' But parents say virtually everyone is 'selected' and they are then given the option of spending money to attend the Pittsburgh event. When parents think their child has been selected for a special privilege, they're more willing to open their checkbooks."

      Even if they attend the Great American Model Search, chances are slim that they will get work as a model or actor are slim, according to agents who are paid to attend the Great American Model Search. The agents also noted that many of these young people won't get work because they live too far away from the big cities where models and actors are hired.

      "Parents have to ask themselves: who's profiting from this process -- the kids or this so-called talent company? Talent agencies that charge advance fees, without promising to find work for their clients, have a talent for making money but only for themselves," said Santiago.

      On its website, Aquarian says, "We bring together aspiring models, commercial and film talent of all ages and present them in person to industry personnel such as casting directors, film directors, film producers, talent scouts, model agents, and advertising agencies."

      The website continues, "Over the past 18 years this concept has provided many infants, toddlers, children, teenagers and adults the opportunity to succeed in our industry. At our presentations we will provide numerous success stories and specific examples of commercials, TV shows, movies, music videos and modeling printwork."

      But Santiago said it's all about money.

      "Advance-fee operations continue to make money because young people and their parents don't know enough about how the modeling and talent industries work," said Santiago. "We want to warn consumers about companies that hang on the fringes of the New York fashion and entertainment worlds; charging hundreds -- and sometimes thousands -- of dollars in advance fees for photographs, websites and other services that do little to help find jobs for aspiring models, singers and actors."

      An "open call" for young models and actors is on its way to upstate cities in New York, but this so-called "free evaluation" is only a prelude to the actua...
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      Health Discount Card Plan Makes Fraudulent Claims, Illinois Charges

      Illinois Attorney General Lisa Madigan filed suit against a Texas company for allegedly marketing health care discount cards that misled consumers into believing they were buying health insurance instead of mere discounted fees on health care services - discounts often not even accepted by providers.

      Madigan said her office has received more than 120 complaints from Illinois consumers since January 2002 about companies that masquerade as health care. The number of complaints doubled from 2003 to 2004. The discount health care card companies aggressively market their products through radio ads, blast faxes and circulars.

      Madigan, noting that more than a million Illinoisans lack health care insurance, said she is also working with lawmkers to craft legislation designed to end deception by companies falsely parading as actual health insurance providers.

      "If you see or hear ads that trumpet such terms as 'Affordable Healthcare,' 'Health care for the entire family for only $89.95 a month' or 'All Medical Conditions Accepted,' a reasonable person will probably assume this ad is for a health care plan," Madigan said.

      "Illinois consumers are being deceived into thinking that they are finally able to achieve health care security when in fact all they may receive is a few dollars off of a service, and thats only if a provider agrees to accept their health care discount card. What these consumers are truly gaining access to is deception, disappointment, and very often, massive debt."

      Madigans complaint charges a Washington, D.C.-based non-profit organization, International Association of Benefits, formerly International Association of Businesses, and a Texas corporation, HealthCorp International, Inc., all doing business as IAB, 701 Highlander Dr., Arlington, Texas, with violations of the Illinois Consumer Fraud and Deceptive Business Practices Act.

      The company markets its health care-related cash discount cards at www.iabbenefits.com.

      According to one of the nine complaints lodged with Madigans Health Care Bureau against IAB, a consumer reported to Madigans office that he signed up with IAB after hearing a radio ad allegedly stating that IAB was an insurance company.

      The man alleges the company quoted the savings he would realize when pre-certifying a planned hospitalization. When he submitted his hospital bills to IAB, the consumer allegedly discovered it was merely a health care discount card. While the Attorney Generals office was able to get his premiums refunded, the south suburban consumer now owes more than $7,000 to a south suburban Chicago hospital.

      Another consumer received a flyer stating IABs coverage was a nationwide PPO and would provide reimbursements for office visits and access to PPO hospitals, doctors, dentists and other medical services.

      The consumer paid a $100 enrollment fee and a monthly premium of $89.95 for the services, and allegedly was told he could cancel the plan within 30 days of purchase. However, he and other consumers reported that IAB refused to refund their money once the consumers realized that IABs product was not insurance. In one case, IAB finally returned the payment only after Madigans Health Care Bureau intervened.

      Madigans suit also alleges IAB misled consumers by fraudulently displaying a Better Business Bureau seal on its Web site and listing health care providers as participating in its discount program, when in fact, these providers would not honor the discount. Additionally, IAB was not legally registered with the Illinois Secretary of State or the Illinois Department of Financial and Professional Regulations Division of Insurance.

      Madigans suit seeks to permanently prohibit the company from doing business in Illinois. The suit also seeks to recover restitution for consumers, and asks the court to impose a civil penalty of $50,000 and additional penalties of $50,000 per violation committed with the intent to defraud. Madigans suit also seeks an additional civil penalty of $10,000 per violation committed against a person aged 65 and older.

      Health Discount Card Plan Makes Fraudulent Claims, Illinois Charges...
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      Feds Charge Tax Scam Targets Military Personnel

      The Justice Department has asked a federal court to bar Lou Ann Moser and Carla Newman of Hawaii from promoting an allegedly fraudulent tax scheme targeted at military personnel and from preparing tax returns for others.

      In the complaint, the government also seeks an order directing the defendants to provide the government their customers names, mail and e-mail addresses, and Social Security and telephone numbers. The government alleges that Moser and Newman operate their tax preparation service in Kailua, Hawaii.

      According to the complaint, Moser falsely advises military customers that they can claim tax deductions for non-deductible personal expenses such as haircuts, cell-phone and Internet services, and other personal items and services.

      Moser allegedly advises non-military customers to use sham corporations to improperly claim deductions for non-deductible personal expenses. Newman allegedly assists Moser and allegedly electronically files returns for customers falsely stating that the customers had prepared them when in fact Moser prepared them.

      The government alleges that the defendants have prepared and filed hundreds of returns for customers, and estimates that the defendants conduct cost the federal treasury more than $4 million for tax year 2003 alone.

      "The Department of Justice and the Internal Revenue Service (IRS) are working methodically to halt tax fraud scams and the preparation and filing of fraudulent income tax returns," said Eileen J. O'Connor, Assistant Attorney General for the Tax Division. "People who prepare returns claiming false deductions are cheating honest taxpayers and creating legal problems for their customers."

      The complaint further alleges that Moser advised customers to lie to IRS agents to obstruct investigations. Moser allegedly told one customer to delay an IRS audit until her husband was deployed to Afghanistan, and then falsely tell the IRS that the husband had receipts needed to substantiate tax deductions.

      Feds Charge Tax Scam Targets Military Personnel...
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