$37.5 Million Judgment Against Porn Site

Sept. 8, 2000
The operators of an X-rated Web site have been ordered to pay $37.5 million dollars for fraudulently billing credit cards of consumers who had never even visited their site.

It's one of the largest credit-card scam judgments ever but it's not likely the defendants will be able to pay. One is already in jail, one has fled the country and the third claims to be "just a housewife."

U.S. District Court Judge Audrey Collins ruled that the Federal Trade Commission had proven that 90.8% of the "sales" charged to credit cards by the trio were phony. She ordered the three to repay MasterCard and Visa the $37.5 million that they have already written off after consumer complaints.

The defendants -- Kenneth and Teresa Taves and Dennis Rappaport -- used business names including "Webtel" and "Netfill" to charge 900,000 consumers more than $43 million, supposedly for visits to obscene Web sites. They apparently assumed that most consumers would be too embarrassed to contest the charges when they learned they were from an adult-oriented site.

And where did the defendants, all of Malibu, CA, get the names and credit card numbers of their victims, many of whom the FTC said do not even own computers?

They bought them from a bank.

Charter Pacific Bank of Agoura Hills, CA, says it has since stopped selling credit card data. And the Federal Deposit Insurance Corporation (FDIC) reports that it has taken unspecified "enforcement action" against the bank.

As for the defendants ...

  • Kenneth Taves has been in jail for more than a year for failing to disclose his assets, including offshore bank accounts and a luxurious home in Malibu. Besides the jail time and the monetary damages, Taves is barred for 10 years from operating any business that handles credit-card accounts.
  • Rappaport reportedly fled to Jamaica shortly after being served with the complaint.
  • Teresa Taves claims she was an innocent bystander whose only involvement was ordering pizza for her husband and his associate. Besides being obligated to pay her share of the damages, she will be required to post a $500,000 bond before handling any credit accounts in the future.
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