Current Events in August 2006

Criminals are becoming more clever in their attempts to steal consumers' identities. In New York, the Suffolk County Police Department says it has recently investigated three new variations of the identity theft scam.

In one, the scammer uses technology to display a false message on the consumers' caller ID screen, indicating the call is from a legitimate financial institution. Unwary consumers who give the caller personal information have their identity stolen.

Consumers also report calls in which they are told to call an automated voice mail system to get details on a problem with their credit card account. The automated system instructs them to enter their account number using the touch tone key pad, allowing the scammer to steal their account number.

Scammers have also reportedly called consumers posing as security personnel investigating irregular activity on their credit card. They trick the victim into revealing the three digit security on the back of the card, which an increasing number of businesses are requiring as verification.

How do you protect yourself in these situations? Police say you should never reveal any sensitive data to anyone who calls you on the phone. If you think they might be legitimate, hang up and call the institution or agency back by looking up the number.

The risks associated with using the Internet remain high according to Consumer Reports' latest "State of the Net" survey. CR projects that U.S. consumers lost more than $8 billion over the last two years to viruses, spyware, and phishing schemes.

Additionally, the "State of the Net" survey shows that consumers face a 1 in 3 chance of becoming a cybervictim, an incidence that hasn't abated in the past year.

Online consumers who fell prey to phishing schemes experienced a five-fold increase in financial losses since the 2005 survey. The median cost per phishing incident was $850 -- five times higher than the median cost of $165 in 2005. Consumer Reports projects that U.S. consumers lost $630 million over the past two years to fraudulent phishing e-mail scams.

The 2006 "State of the Net" survey was conducted by the Consumer Reports National Research Center among a nationally representative sample of more than 2,000 households with Internet access.

Based on the survey, Consumer Reports projects that Americans spent at least $7.8 billion for computer repairs, parts, and replacement over the past two years to correct problems caused by viruses and spyware.

Among CR's key 2006 "State of the Net" findings:

Twenty-nine percent of survey respondents said a virus, spyware, or phishing scam caused serious computer problems and/or financial losses in the last two years. And based on survey projections, virus infections prompted an estimated 2.6 million households to replace their computers in the past two years.

Additionally, 35% of survey respondents didn't use software to block or remove spyware. And CR projects that 2.4 million US households with broadband remain unprotected by a firewall.

• Spam: The incidence of heavy spam remains as elevated as last year. Survey results indicate that about 795,000 households continued to buy products advertised through spam. Additionally, in 8% of the households surveyed that had children under 18, a child had inadvertently seen pornographic material as a result of spam.

• Viruses: The frequency of virus-induced problems is at the same high level as last year. In the latest survey, 39% of respondents reported a virus infection in the past 2 years. Of those, 34% had to reformat their hard drives; 16% permanently lost important data; and 8% had to replace hardware.

• Spyware: In the past six months spyware prompted nearly a million U.S. households to replace their computers. Among survey respondents, two of the biggest risk factors for spyware infection were using file-sharing software (like Kazaa) and having minors at home who go online. In homes where children under 18 used the Internet, there was a 28% greater incidence of spyware infection in the past six months than in other homes.

• Phishing: Only 8% of respondents submitted personal information in response to conventional phishing e-mails. But the median cost of a phishing incident is up substantially at $850 versus $165 in 2005. New variants on phishing have emerged. "Pharming" infects a computer so that even if you type in a legitimate Web address you're redirected to a fraudulent site. "Spear phishing" targets email addresses stolen from a company.

It isn't enough for software programs to eliminate familiar viruses and spyware. To provide superior protection, a program must be able to defend against threats it has never seen. To test antivirus software, the experts at Consumer Reports employed consumer tests in which viruses that CR created were unleashed under high security on antivirus programs.

CR notes that for staying safe online, software suites have several pluses. If the suite has a consistent user interface across the components, it eliminates the need for consumers to wrestle with three programs. Suites generally cost less than the sum of individual packages, and there is only one annual fee for licensing and updates.

Among the 10 popular suites that CR tested, only Zone Labs Zone Alarm Internet Security Suite ($70) did it all well. The suite's antivirus and antispam components did an Excellent job in CR's individual tests, and its antispyware was Very Good.

For an antivirus/antispam combination, Trend Micro PC-cillin Internet Security ($50) received a high score for both performance and features; its antivirus and antispam components rated Very Good in CR's individual tests (the suite's antispam and antispyware components are not the same as the ones available individually.)

For antispyware protection, CR's suggests adding Spybot's free Search and Destroy, which scored Very Good in CR's tests.

August 8, 2006
The latest 419 scam -- the email spam scams named for section 419 of the Nigerian penal code -- is designed to hook Kennedy assassination buffs. The email landing in inboxes around the world this week purports to be from a dying KGB agent, offering to pass on secrets of the 1963 assassination of President John F. Kennedy.

The email's author, who claims to be dying, says he has a cornucopia of documents that have never been made public. He offers them to the recipient, promising they will make that person rich and famous.

"There is a conspiracy at work here, but it's not about whether someone was lurking on a grassy knoll in Dallas on 22 November 1963," said Graham Cluley, senior technology consultant for Internet security firm Sophos.

Cluley says the criminals behind the email are conspiring to steal sensitive information and raid the bank accounts of victims who fall for the scam. Once a victim has been drawn in, requests are made from the scammer for private information, which may lead to requests for money, stolen identities, and financial theft.

AOL's PR staff was working overtime this weekend, as the Internet Service Provider got some bad press in both old and new media for practices that are hardly news to those who've followed the company for years.

Forums and chat rooms were full of irate comments about AOL's release of search data on 20 million searches performed by its customers. The data reportedly appeared about ten days ago on the company's research site, but was not discovered until the weekend.

No one's identity was revealed in the data release, since user IDs were scrambled. But privacy advocates were still upset, saying it is unacceptable to show what individual users are searching for online.

AOL took the data down late Sunday evening, but critics maintain the damage had already been done. An AOL spokesman described the company as "angry and upset" by the breach.

Meanwhile, the St. Louis Post-Dispatch ran a 1,400-word article recounting the months-long ordeal of a St. Louis woman who spent seven months trying to close her dead father's AOL account.

Fifty-five year old Maxine Gauthier told the paper that AOL customer service representatives hung up on her, told her to "shut up and listen" and steadfastly refused to stop charging her deceased father's credit card to the tune of $29.95 a month for dial-up service.

Post-Dispatch "Tech-Talk" columnist David Sheets interceded on Gauthier's behalf, and contacted a customer service supervisor who agreed to close the account. However, Gauthier told Sheets that a few days ago she received a letter from AOL, addressed to her deceased father, Melvin Berkowitz.

"Dear Mr. Berkowitz," it said. "We hope you'll come back to AOL."

AOL has said it will lay off thousands of employees as it reduces or even eliminates its dial-up service and moves towards being a provider of advertising-supported content services.

Consumer groups are calling for warning labels on food packaging containing latex, saying the substance poses a potential threat to people with allergic sensitivities. They point to a recent British study revealing that one third of food packaging tested was contaminated with latex.

According to the study, the latex was transferred to food in some cases. In one unnamed chocolate biscuit, the amount of latex found was 20 times the level that instigates a reaction. A group of experts from the UK Latex Allergy Support Group Advisory Panel said that these results were significant.

"For a few people, natural rubber latex is a very potent allergen and for these individuals, there is no safe level of exposure," said LASG representative Graham Lowe.

"We would welcome an approach to the EU to consider this evidence and the issue of labeling," he said. Lowe added that latex transfer to food could account for some currently inexplicable reactions.

There is no agreement on a safe level of latex, but it has been reported that a billionth of a gram (1ng/ml) can be enough to cause a reaction. Currently manufacturers are not required to label food packaging as containing latex.

Scientists at Leatherhead Food International measured the presence of four major latex allergens in 21 types of food packaging for confectionary, fruit and vegetable produce, meat, pastry and dairy products. A third of the materials tested gave positive results for the presence of latex and in some cases, researchers say, this was transferred onto the food.

Alarmed by rising injuries and deaths, pediatricians are recommending that parents avoid placing their children in shopping carts until safer models are available.

In 2005, more than 24,000 children were treated in U.S. hospital emergency rooms for shopping cart-related injuries. Most of these injuries occurred when a child fell from a shopping cart, the cart tipped over, the child became entrapped in the cart, or the child fell while riding on the outside of the cart, according to the new policy statement issued by the American Academy of Pediatrics (AAP).

Injuries to the head and neck accounted for 74 percent of shopping cart-related injuries among children younger than 15. Of the 4 percent of children treated in an emergency room for a shopping cart injury, more than 93 percent were under age 5.

With the potential instability of some existing shopping cart designs, and because it is difficult for a parent to easily ascertain a cart's safety simply by looking at it, parents should carefully consider the potential for injury before placing a child in a shopping cart, according to the policy.

Instead of putting children in shopping carts, parents can try one of the following alternatives:
• Get another adult to come with them to watch the children while shopping.
• Put children in strollers, wagons, or frontpacks instead of in shopping carts.
• Ask older children to walk and praise them for behaving and staying nearby.
• Leave children at home with another adult.
• Shop online if local stores offer shopping on the Internet.

If a parent chooses to place a child in a shopping cart, he or she should ensure that the child is properly secured in an effective and age- and size-appropriate belt or harness.

Parents and caregivers should never:
• Leave a child alone in a shopping cart.
• Allow a child to stand up in a shopping cart.
• Place an infant carrier on top of the shopping cart.
• Allow a child to ride in the basket.
• Allow a child to ride on the outside of a cart.
• Allow an older child to climb on the cart or push the cart with another child inside.

To help parents, the AAP recommends that businesses adopt shopping cart safety strategies and offer other assistance to help prevent injury.

This may include providing a supervised in-store child-play area; a pick-up area or assistance in bringing purchases to a vehicle; cart modifications to improve child restraint and cart stability; strollers or wagons for in-store use; education and warnings about cart dangers; and/or customer incentives, such as stickers or other give-aways, to reward safe shopping cart behavior.

In addition, the AAP recommends that the current U.S. safety standards for shopping carts be revised to include "clear and effective performance criteria" for child-restraint systems and cart stability to prevent falls and injuries due to cart tip-overs.

The U.S. Consumer Product Safety Commission should monitor and enforce manufacturer compliance closely, and regularly review child shopping cart-related injuries, according to the new policy.

The AAP recommends that child health and advocacy professionals support revised manufacturer standards, and educate parents, families, the public, and the media on shopping cart risks.

The Securities and Exchange Commission has filed suit against a Waco, Texas, insurance company and its affiliates for targeting American military personnel with a deceptive sales program that misleadingly suggested that investing in the company's product would make one a millionaire.

Since 2000, approximately 57,000 members of the United States military services purchased the product. The vast majority earned little or nothing on their investment.

The complaint, filed in the United States District Court for the Southern District of California, charged affiliated entities American-Amicable Life Insurance Company of Texas, Pioneer American Insurance Company, and Pioneer Security Life Insurance Company (together, American-Amicable), all based in Waco, Texas, with securities law violations.

American-Amicable has agreed to settle the action by paying $10 million to the approximately 57,000 military personnel who invested in the product sold as an investment known as "Horizon Life."

The settlement is part of a global settlement of claims brought by the Commission, state insurance regulators led by the Georgia Department of Insurance and the Texas Department of Insurance, and the United States Attorney's Office for the Eastern District of Pennsylvania.

The settlement with the other regulators will provide additional relief, which the other regulators value at approximately $60 million. In the agreed settlement, the company has neither admitted nor denied the Commission's allegations.

Under the settlement, American-Amicable will discontinue sales of Horizon Life and will terminate the deceptive sales program, which it called the "Building Success" system.

Unlike insurance products legitimately offered to a wide range of potential buyers with a potential interest in the insurance features of those products, Horizon Life was targeted at military personnel who had little or no interest in insurance because they already were provided access to low-cost insurance sponsored by the government. Instead, American-Amicable represented Horizon Life to military personnel as a security and a wealth-creating investment.

As a material element of its marketing, American-Amicable senior staff trained its sales agents to hold themselves out as "financial advisers" or "financial coaches." Purporting to play that role, the sales agents then misled military personnel to believe they could become millionaires if they invested in Horizon Life.

At the same time, the agents denigrated other investment alternatives, claiming that mutual funds, bank savings accounts and government bonds were not sensible investments compared to Horizon Life.

Although the written materials ultimately provided to investors apparently accurately described the Horizon Life product, the company's deceptive sales pitch did not. Contrary to the representations, the overwhelming majority of military personnel who purchased Horizon Life earned little or nothing from their investment.

Linda Chatman Thomsen, Director of the Commission's Enforcement Division, said, "These defendants targeted their sales efforts at the young men and women who are putting their lives at risk serving our country. These investors deserved the honest and forthright disclosures mandated by the federal securities laws, not the deceptive sales pitch that was designed specifically for them."

The Commission's complaint charges American-Amicable with violating Sections 17(a)(2) and (3) of the Securities Act of 1933, an antifraud statute. Without admitting or denying the allegations, American-Amicable has agreed to be enjoined from further violations of these provisions, and to pay disgorgement of $10 million, which will be distributed to the affected investors.

In related matters, Georgia Insurance Commissioner John W. Oxendine and Texas Insurance Commissioner Mike Geeslin announced a multi-state settlement with American-Amicable alleging violations of state insurance and consumer protection laws, and U.S. Attorney Patrick L. Meehan of the Eastern District of Pennsylvania announced the filing of a complaint, settlement and proposed consent decree with American-Amicable alleging civil claims of wire and mail fraud.

The letter says the recipient has won $35,000 in an international promotion program. It indicates that a check will be mailed to the winner from a North American Payment Center upon payment of a "release fee" and applicable taxes.

A contact name and phone number is provided to assist with verification, processing and payment.

"Phone numbers often go back to people involved with the scam, and they will indicate that your winning notification is legitimate," the company said in a fraud alert posted on its Website.

Atlantic Lottery says that to win any of its cash prizes, you must have purchased a ticket from an authorized retailer in New Brunswick, Nova Scotia, Prince Edward Island or Newfoundland and Labrador, or on their PlaySphere website. The company said it is not authorized to operate lotteries or games of chance outside of Canada.

The attempts by Senate Commerce Committee chairman Ted Stevens (R-AK) to push his telecommunications law update to final passage may be stalling out, due to Congress' switching focus to the elections, and continued debate from all fronts on the issue of net neutrality.

Stevens told Roll Call that he was racing to get 60 votes in the Senate to pass the bill after Senate Majority Leader Bill Frist (R-TN) told Stevens not to bring the bill to the floor unless he was certain he had enough votes to ensure passage.

However, many Senators on both sides of the aisle expressed unease about voting on the bill prior to the November elections. Some stated that they were receiving heavy feedback from constituents demanding that net neutrality protections be placed in the telecom update.

A rumor that Stevens was attempting to secure a majority of votes for "cloture" on the bill, in order to shut off debate and move it to an immediate vote, was met with a furious response from bloggers who have been chronicling the net neutrality issue.

Although Stevens has not expressed outright opposition to net neutrality, he voted against an amendment to the telecom bill that would have inserted basic protections for content access into the law.

Stevens' comments that the Internet was "a series of tubes" and that net neutrality interfered with his staff's ability to "send him an Internet" were roundly mocked on the Web and in mainstream media both.

In addition to the net neutrality issue, the telecom bill contains many issues that legislators might be afraid to face before elections, including the controversial "broadcast flag," a measure favored by the motion picture and recording industries that would prevent copying of certain content by users, even if only for personal use.

Frist had gone on record as saying that he would not support passage of the bill unless the "broadcast flag" option was included. Frist's former chief of staff, Mitch Bainwol, works for the Recording Industry Association of America (RIAA), the chief lobby group for record companies.

"No Free Lunch"

Meanwhile, the telecommunications industry is pushing hard to ensure that the bill passes without any language or provisions favoring net neutrality.

GigaOM's Katie Fehrenbacher reported that AT&T head Ed Whitacre reiterated his opposition to net neutrality in no uncertain terms during a recent speech to the National Association of Regulatory Utility Commissioners.

"No one gets a free ride," Whitacre said. The American economy doesn't work that way. . . .We are not going to build this with no chance for a return. Those that want to use this will pay."

Both AT&T and Verizon are pushing hard to roll out their new high-speed broadband and TV-over-Internet services in order to shore up losses from their dwindling telephone business. Verizon reported 440,000 new broadband subscribers during its second-quarter earnings call, 25 percent of which came from its new FiOS high-speed service.

But Verizon also reported a loss of 553,000 traditional telephone line customers, as more and more users switched to only using cellphones for communication, or to Voice over Internet Protocol (VoIP) services such as Vonage.

The telecom and cable industries strongly oppose equal access to Internet content, in order to push "tiered pricing" models to customers, where people willing to pay more can receive faster connection speeds, better service, and so on.

Supporters of net neutrality believe that unless the principle of equal access to Internet content is enshrined into law, those who don't want to pay extra, or can't afford to, will be relegated to the "slow lane" of bandwith access.

The battle has taken over mainstream media, with telecom company lobbyists taking out full-page ads in newspapers and penning editorials claiming that net neutrality will stifle competition.

One column, written by Hands Off The Internet's Mike McCurry, claimed that "The 'neutral' proposal that companies like Google are touting will ensure that they never have to pay a dime no matter how much bandwidth they use, and consumers who may only use their computers to send e-mail and play Solitaire get to foot the bill."

McCurry was criticized for not disclosing that Google, like all Internet-based companies, already pays millions of dollars per year for the bandwidth it uses, and that his lobby group was funded by major telecom and cable companies.

California Attorney General Bill Lockyer has filed a $2 million-plus lawsuit against Los Angeles County-based Fast Cash for violating a state law that prohibits payday loan businesses from suing for triple the amount of the check when customers' bank accounts do not hold sufficient funds to honor post-dated checks written to secure the loan.

"Fast Cash extorted outrageous amounts of money from its customers," said Lockyer. "They threatened lawsuits, tried to squeeze settlements, and, when that did not work, they deceived the court into a rendering a judgment. Fast Cash could have made a lawful living. Instead, they chose fear and deceit. We will continue ridding this industry of similar frauds."

The complaint, filed in Los Angeles County Superior Court, asks the court to permanently enjoin the business from further violating the law, void improperly obtained judgments, order full restitution to victims, and assess a civil penalty of not less than $2 million for unlawful business practices. Fast Cash may have accumulated improper judgments in excess of $350,000.

In most cases, state law authorizes a plaintiff to seek a penalty of treble damages, or three times the amount, against a person who writes a bad check. However, California law prohibits payday loan operations from collecting such damages, instead limiting them to the amount of the check and a single $15 fee. Further damages and fees are not allowed.

payday lenders are not entitled to treble damages because, unlike checks for goods or services, at the time a payday loan is written both parties understand the borrower's bank account often will not contain sufficient funds to honor the check. Therefore, the law only allows lenders a single late fee of $15 rather than the punitive treble damages award.

The complaint contends that Fast Cash, run by defendant Christoph Hoppe, illegally sued more than 400 individuals from the Los Angeles area in Los Angeles County Small Claims Court for treble damages for checks passed on insufficient funds.

Defendants threatened borrowers with a suit in order to obtain their agreement to pay back the loan plus treble damages, according to the complaint. When the defendants could not secure an agreement, Hoppe pursued the action in court but would not reveal that each of these checks was written pursuant to a payday loan transaction, the complaint states.

The vast majority of borrowers, the complaint claims, did not attend the small claims court hearings to inform the court of the nature of the transaction. Without complete information, the court ordered borrowers to pay treble damages, according to court records.

The complaint states that Hoppe used "unfair, fraudulent, unconscionable and unlawful means to collect or attempt to collect consumer debts."

Since being investigated the company appears to have stopped making payday loans.

"Spoof" emails are spam messages that appear to be from a well known company, such as PayPal. Usually the email warns the recipient that fraudulent activity has been detected in their account and instructs them to click on a link and enter their personal account information.

PayPal is fighting back, with instructions on its Web site for spotting these phony messages, which may be professionally designed to look quite real. The first thing to look for, the company says, is a generic greeting. These bogus messages usually begin with "Dear PayPal Member" instead of your name.

Next, look for a false sense of urgency in the message. Most spoof emails try to deceive you with the threat that your account is in jeopardy if you don't update it ASAP.

Finally, a spoofed email will contain a phony link made to look like it's sending you to the company's mail Web site. But in reality, it's sending you to a dummy site where your personal data can be stolen.

"Move your mouse over the link and look at the URL in your browser or email status bar. If the link looks suspicious, don't click on it. And be aware that a fake link may even have the word "PayPal" in it," the company said.

PayPal also says you can also identify fake emails by the information they ask you to provide. PayPal says it will never ask for the following information in emails:
• Credit and debit card numbers
• Bank account numbers
• Driver's License numbers
• Email addresses
• Passwords
• Your full name

The PayPal Website also has an email link where recipients of these phony messages can report them, so the company can take action against them.