046

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J.K. Publications

46. FTC v. J.K. Publications, Inc., et al (aka Netfill), Docket No. CV-990004 ABC (AJWx)(C.D. Cal., filed Jan 5. 1999)

Defendants: J.K. Publications, MJD Service Corp., Kenneth H. Taves (also d/b/a Netfill, netfill.com, xbc.com, –Bill, Online Billing, Assist Online, Herbal Care, Discreet Bill, KULM Consulting Group, TAL Services), Teresa Callei Taves (also d/b/a Netfill, netfill.com –Bill, Herbal Care), Gary Neal Mittman (also d/b/a Adult Bank, netfill.com, adultbank.com), Dennis Rappaport (also d/b/a Adult Bank), Maurice O’Bannon (also d/b/a MJD Enterprises and Adult Bank), TAL Services, Inc., Discreet Bill, Inc., Adult Banc, Inc., and Herbal Care, Inc.

Type: Internet Credit Card Cramming

Defendants allegedly charged consumers for Internet services that consumers had never ordered, authorized, or even heard of. Consumers received monthly credit card or debit card statements with charges of $19.95 alongside the names N-Bill, Netfill, MJD Service Corp., and Webtel. When consumers asked their banks about these charges, consumers were told they are for "Internet services" or "adult Internet services," even though some of these consumers reported that they did not own computers. Consumers had difficulty challenging these charges, and if consumers called defendants’ toll-free number and got through at all, consumers received a voice recording telling them to input their credit card number for customer assistance. Customers who reached a real person and managed to obtain a credit often found similar charges reappearing on later statements.

On Jan. 5, 1999, the FTC filed a complaint with a motion for an ex parte TRO. On Jan. 6th, the Court granted the FTC’s motion and prohibited further unauthorized charges, froze the defendants’ assets, and appointed a receiver over J.K. Publications and MJD Service Corp. On January 20, the Commission filed an amended complaint, dismissing Net Options, Inc. and naming Dennis Rappaport, Maurice O’Bannon, TAL Services, Inc., Discreet Bill, Inc., Adult Banc, Inc., and Herbal Care, Inc. as additional defendants. The parties agreed to an initial extension of the TRO and the Court extend it again on Feb. 11, 1999.

After hearing argument, the Court issued a preliminary injunction, continuing the TRO’s conduct prohibitions, asset freeze, and receivership. The Court released assets for attorneys fees but extended the receivership estate to include several named affiliates and the assets and business records of individual defendants Ken and Theresa Taves.

In April, the Court held a hearing to determine whether Ken and Teresa Taves were in contempt for transferring and failing to disclose a Malibu residence worth approximately $2 million. The Court heard a second contempt motion over the Taves’ failure to disclose and repatriate $6.2 million held in the Cayman Islands. The Court found the Taves in civil contempt on both motions. The U.S. Attorneys’ office for Los Angeles moved for criminal contempt, and Ken Taves was incarcerated.

On June 10, 1999, the Court entered a stipulated final judgment against Mittman. In late February 2000, Ken Taves was indicted for making false statements to FTC attorneys. On March 8, 2000, the Court issued a default judgment against Rappaport, holding him liable for up to $40 million in redress.

The Commission filed a motion for summary judgment against the other defendants in November 1999. After a hearing in April 2000, the Court issued a 72-page decision, finding all but one defendant (O’Bannon) liable for "unfair" practices and unauthorized credit card charges. After a trial on June 14, 2000, the court issued a 43-page decision finding that over 90 percent of defendants charges ($43 million) were fraudulent. After subtracting the amount of credits or chargebacks that had already been issued, the court found the defendants liable for $37.567 million in redress to consumers.

http://www.ftc.gov/opa/1999/9901/netfill.htm (press release -complaint / TRO)

http://www.ftc.gov/opa/1999/9902/petapp4.99.htm (press release - adding defendants, dismissing Net Options)

http://www.ftc.gov/opa/2000/09/netfill.htm (press release - final order and injunction)

This page was last modified on July 22, 2007.

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