Broadband Tech > Security > Scam and Phishbusters > Missed this? FTC Charges Payment Processing Firm with Fraud

said by Doctor Olds:

For Release: December 11, 2007

FTC And Seven States Sue Payment Processor that Allegedly Took Millions from Consumers’ Bank Accounts on Behalf of Fraudulent Telemarketers and Internet-based Merchants.....

said by MGD:

...why this type of fraud regularly results in only civil FTC action is beyond me.

said by MGD:

Excellent, thanks for posting.. why this type of fraud regularly results in only civil FTC action is beyond me. Imagine if thieves and bank robber's worst case scenario was returning the ill gotten gains (Disgorgement), and future prohibition. Everyone would then put on a shirt and tie and take a crack at it.

I am very surprised at Derrelle Janey's alleged involvement:

said by Snowy:

.....If they are indeed one in the same then maybe the answer isn't as complicated as some would wish us to believe?

said by Doctor Olds:

....I find it telling when Derrelle Janey went out of the US to find business:

" Janey has also sought out new frontiers for the company. Last month, he traveled to Trinidad and Tobago, "...

said by Doctor Olds:

....Looks like the info below will need to be changed to Serving Time, after the convictions. ...

19. Defendant Your Money Access, LLC ("Your Money Access") is a Florida limited liability company headquartered at 4185 West Lake Mary Boulevard, Suite 177, Lake Mary, Florida 32746. Your Money Access does or has done business using the brand names Netchex Corp., Universal Payment Solutions, Check Recovery Systems, Nterglobal Payment Solutions, and Subscription Services, Ltd, and has operated offices located at 1021 Neshaminy Valley Drive, Bensalem, Pennsylvania 19020 and at 1035 Greenwood Boulevard, Lake Mary, Florida 32746. Your Money Access transacts or has
transacted business in this District.

20. Defendant YMA Company, LLC ("YMA Company") is a Florida limited liability company also headquartered at 4185 West Lake Mary Boulevard, Suite 177, Lake Mary, Florida 32746. YMA Company was formed in March 2004, and it is a wholly-owned subsidiary ofYour Money Access. YMA Company transacts or has transacted business in this District.

21. From at least November 2003 through on or about December 1, 2006, Your Money Access, directly or through YMA Company, processed millions of dollars in debit transactions to consumer bank accounts on behalf ofits client merchants. Your Money Access and YMA Company are collectively referred to hereinafter as "YMA."

22. Defendant Derrelle Janey ("Janey") was the President ofYour Money Access. Individually or in concert with others, he has formulated, directed, controlled, or
participated in the acts and practices set forth herein. He transacts or has transacted business in this District.

23. Defendant Tarzenea Dixon was the ChiefExecutive Officer ofYour Money Access. Individually or in concert with others, she has formulated, directed, controlled, or
participated in the acts and practices set forth herein, She transacts or has transacted business in this District.

24. Your Money Access, YMA Company, Janey, and Dixon are hereinafter referred to collectively as "defendants."

COMMERCE

25. TIle acts and practices of defendants alleged in this complaint have been in or affecting commerce, as "commerce" is defined in Section 4 ofthe FTC Act, 15 U.S.c. § 44.

BACKGROUND

26. Since at least November 2003 through on,or about December 1, 2006, defendants, through:YMA, offered payment processing services to hundreds of client merchants.
YM.A acted as a "third-party payment processor" (hereinafter referred to as a "payment processor"). It contracted with client merchants to receive consumers' bank account information, processed debits to the consumers' bank accounts, and transferred the funds from the consumers' bank accounts to its client merchants' accounts.

27. As described more fully below, many ofYMA's client merchants have engaged in the practice ofunauthorized debiting of consumers' bank accounts, either as a result of deceptive sales pitches or in the absence of any sales pitch whatsoever. In numerous cases, YMA's client merchants engaged in deceptive telemarketing, direct mail, or Internet-based schemes. These schemes are designed to extract money from consumer bank accounts by inducing consumers, through misrepresentations and omissions in connection with the marketing ofproducts or services, to provide the client merchant with the consumer's personal bank account information. Armed with the consumer's bank routing and account numbers, the fraudulent merchant then transmitted the account information to YMA, which processed the debits to the consumer's bank accounts.

28. By providing its client merchants access to the United States' banking system and the means to extract money from consumers' bank accounts, YMA played a critical role in its clients' fraudulent and deceptive schemes.
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34. YMA used the consumers' bank routing and account numbers provided by its clients to prepare RCCs drawn on consumers' accounts. In some cases, the RCCs were made payable directly to YMA, and in other cases they were made payable directly to YMA's client merchant.

35. YMA deposited the RCCs into a YMA or client merchant bank account, Banks treat RCCs like ordinary signed checks, and they thus caused RCCs to be submitted to the consumers' banks for payment from the consumers' accounts.

36. In numerous instances, after YMA debited consumers' accounts using either an ACH or RCC debit, its client merchants:
(1) failed to deliver the promised products or services, or
(2) sent consumers relatively worthless items, such as a package containing information on how to obtain the very product or service that the client merchants initially promised consumers.

37. In exchange for processing every attempted ACH or RCC debit to a consumer bank account, YMA charged its clients a "processing fee." In addition, YMA charged its clients a much higher fee ("return fee") for processing every transaction that was returned through the banking system. These return fees formed a substantial source of income for YMA.

38. A returned transaction refers to a transaction refused or reversed by the consumer's bank due to any number of reasons, such as an invalid bank account number, a closed or
nonexisting bank account, or the consumer's notice to his or her bank that the debit was unauthorized.

39. A large number ofreturned debit transactions associated with a single merchant, regardless ofwhether through ACH or RCC debits, commonly indicates a problem with the transactions between the merchant and its customers.

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YMA'S BUSINESS PRACTICES
51. . Defendants, through YMA, offered payment processing services to hundreds of client merchants from at least November 2003 through 011. or about approximately December 1, 2006.

52. On or around June 23, 2004, Your Money Access, acting through its wholly owned subsidiary, YMA Company, purchased three companies that previously operated a payment processing business located in Newtown, Pennsylvania. These three companies, Universal Payment Solutions, Netchex Corp., and Check Recovery Systems, Inc. (hereinafter referred to collectively as the "Newtown Companies"), were under common ownership, management and control.

53. Prim-to YMA's acquisition, the Newtown Companies had processed payments for a large number offraudulent client merchants. Many of the Newtown Companies' client merchants generated high total retum rates - often in excess of 40 percent, 50 percent, and even 70 percent. In addition, the merchant files of these Newtown Companies' client merchants contained numerous signs of deceptive activity, such as sales scripts that contained representations about the merchant's product or service that were facially false or highly likely to be false.

54. The founder and operator of the Newtown Companies, Donald Hellinger ("Hellinger"), had a history of operating illegal fraud schemes. In July 1995, Hellinger settled FTC
allegations that he had engaged in the deceptive promotion of credit cards and other products via "900 numbers." FTC v. Interactive Marketing Concepts, Inc., et aI., Civ. No.
95-cv-3554 (D.N.J. July 28, 1995). Moreover, prim-to YMA's acquisition of the Newtown Companies in June 2004, a number of the Newtown Companies' client merchants had been sued for consumer fraud. See,~, FTC v. Sun Spectrum Communications Organization, et aI., No. 03-81105-CN (S.D. Fla. 2003) (settlement permanently enjoined Sun Spectrum and its principals from engaging in telemarketing of credit products and services and ordered judgment of $9,066,434 in equitable relief); FTC v. Capital Choice Consumer Credit, Inc., et al., No. 02-21050-CN (S.D. Fla. 2002) (final post-trial judgment ordered establishment of consumer redress fund of $36,716,000 and permanently enjoined defendants from participating in sale or marketing of credit cards and debiting consumer banle accounts withoutprior written authorization); and FTC v. Diversified Marketing Services, et aI., Civ. No. 96-388 M (W.D. Okla. 1996) (settlement provided $1.5 million in consumer redress and permanently enjoined defendants from charging consumer credit cards or bank accounts without consent).

55. Notwithstanding the signs of deceptive or unauthorized debiting activity contained in the Newtown Companies' client merchant files and reflected in the high return rates generated by these client merchants, after its acquisition ofthe Newtown Companies, YMA continued to process fOT a large number ofthe Newtown Companies' former client merchants.

56. For example, prior to YMA's purchase of the Newtown Companies in June 2004, the Newtown Companies had processed for a company named "A.I.G. Limited," whose principal was Ken Gomes. During a three-month period, between February 11, 2004 and May 21, 2004, the Newtown Companies processed on behalf of this company more than $3,142,000 in RCC transactions, with a return rate of 55 percent. Despite this return rate, YMA continued processing for Ken Gomes for more than 13 months after its purchase of
the Newtown Companies. Between June 23,2004 and August 2005, YMAprocessed on behalf of Gomes's multiple and constantly changing business names, more than $13:5 million dollars in attempted RCC transactions, with a return rate of 49 percent.

57. After its acquisition of the Newtown Companies, YMA accepted and processed on behalf of numerous new client merchants (that had not been former clients ofthe Newtown
Companies). Many ofthese new clients generated similar levels of return rates as the Newtown Companies' former client merchants, and they had sales scripts that were
strikingly similar to those used by the Newtown Companies' former client merchants. In all, on behalf ofboth YMA's new clients and the Newtown Companies' former clients, between June 23, 2004 and March 31,2006, YMA processed a total ofmare than $200 million in debits and attempted debits. Most ofYMA's clients during this time period were new clients that had not been previously Processed by the Newtown Companies.

A. Unauthorized Debiting

58. Prior to processing debits on behalf ofits clients, defendants received information and documentation strongly indicating that their clients were engaged in unauthorized
debiting practices. Since at least its June 2004 acquisition of the Newtown Companies, YMA purportedly employed procedures to screen new merchants (that had not been previously processed by the Newtown Companies), prim to accepting them as clients. These purported screening procedures require potential clients to submit an application that includes certain information and documentation regarding the applicant's identity, location, type ofbusiness, and sales practices, including copies of the sales scripts used to market the product or service and, when appropriate, copies of the product (or "fulfillment package") sold to consumers. YMA then purportedly reviewed theapplication materials before approving or rejecting the applicant. Despite its own
purported screening procedures, YMA routinely failed to implement these procedures or ignored their results.

59. In many cases, prospective merchant clients failed to provide YMA rudimentary information about their identity or business practices, submitted incomplete merchant
application forms, and failed to provide any supporting documentation at all, such as copies of sales scripts or fulfillment packages allegedly used by these merchants. YMA
nonetheless approved these merchants for processing.

60. As described below, YMA agreed to process for a number of allegedly different clients whose files indicated the deceptive marketing of the same types of schemes over and
over again, using similar or virtually identical sales scripts. These schemes include:
government grant services, discount medical and prescription benefits programs, credit
repair and credit restoration services, identity theft prevention services, telemarketing
fraud prevention services, credit cards, and other discount "benefits" packages.

61. The applications prospective merchant clients submitted to YMA contain numerous
signs of deceptive activity. Among other things, a large number of these applications:
include sales scripts with representations about the purported product or service for sale
that are facially false or highly likely to be false; and include sales scripts and other
supporting documentation that contain contradictions or glaring inconsistencies in the
representations about the nature, conditions, terms, characteristics, or price of the
product or service purportedly provided. The merchant files also contain numerous
other indications ofthe deceptive nature ofthe applicant's businesses. Some
demonstrative examples are detailed below.

62. In numerous instances, YMA agreed to process for merchants whose application
materials include sales scripts that contain statements regarding the product or service
that are facially false or highly likely to be false. For example, several allegedly
different merchants submitted sales scripts that include the same facially false
representations regarding an anti-telemarketing fraud protection device called "EZ
Hangup Device." Among other things, these scripts promise consumers that their
telephone numbers will be placed on the Do Not Call list for ten years, and that they will
never receive another telemarketing call again. TIle FTC administers the National Do
Not Call Registry, which, at the time the representations were made, provided for a fiveyear
registration period. No consumer telephone number could be placed on the
National Do Not Call Registry for ten years. Moreover, registration on the National Do
Not Call Registry does not guarantee that a consumer will never receive another
telemarketing call again. Despite the falsity ofthe representations contained in these
sales scripts, YMA accepted as clients several merchants who were marketing the "EZ
Hangup Device." Between November 2005 and March 2006, YMAprocessed on behalf
ofthese client merchants a total ofmore than $993,000 in RCC transactions, with return
rates ranging from 65 to 77 percent.

63. Typically, when merchants who engaged in telemarketing applied to YMA, they
submitted both a sales script, reflecting the initial sales pitch, and a "verification script," used by the merchant to tape record the consumer after the initial sales pitch,
purportedly "authorizing" the debit to his or her account. In numerous instances, YMA
agreed to process for merchants who submitted sales scripts and verification scripts that
contained glaringly inconsistent or contradictory representations about the product or
service being marketed. For example, the salesscript ofYMA client "JAS Planning,
Inc." informs the consumer:

[Y]our name has come up on a list of individuals who qualify for a
New Federal Government Grant up to $25,000 ... [and you are] eligible
for a minimum of 5K in non refundable federal grant money, .... We are
so confident you will receive a minimum of 5K over the next 8 months,
that as a special bonus for signing up today you will also receive as a
bonus a certificate for $500 in emergency cash and a gift certificate for a
$1000 catalog shopping spree absolutely free ...

By contrast, the verification script for the same client states:

You do understand that this is all public information and American
Grant Information is simply providing you with a guide to assist you in
finding the correct grant for you ... correct?

Despite the differences between the representations made in the sales script and the
verification script, YMA's merchant file for tbis client does not contain copies ofthe
product allegedly being offered, including copies of the "certificate for $500 in
emergency cash" or the $1000 gift certificate for a "catalog shopping spree" allegedly
provided as special free bonuses. YMA accepted and processed on behalf of JAS
Planning, between September 2004 and June 2005, more than $5,333,000 in attempted
RCC transactions, with a retum rate of 67 percent.

64. In numerous instances, YMA accepted for processing merchants whose applications
indicated the use of multiple and constantly changing fictitious company and product
names, often for the sale of the same alleged underlying product type. The use of
multiple and constantly changing company and product names often indicates the
attempt of such merchants to conceal their true identities from consumers (or law
enforcement agencies). For example, between June 2004 and March 2005, YMA
processed more than $2.6 million in attempted RCC transactions for a client known as
"Consumer Grants USA," with a return rate of 63 percent. YMA created multiple
separate merchant accounts for this client, through which it processed on behalf of this
client's multiple and constantly changing business names.

65. In numerous instances, YMA accepted as clients "new" companies whose principals or
related personnel were associated with past YMA clients who had engaged.in
unauthorized debiting or other illegal sales practices. For example:
A. YMA processed on behalf of Dortel Marketing Inc., a company operating out of
Quebec, Canada, more than $274,000 in attempted RCC transactions between
January 21,2005 and April 18, 2005. During this time, the president of'Dortel
was Paul McKeefrey. The sales script of Dortel included dubious
representations regarding the company's ability to protect consumers from
unauthorized charges to their bank accounts by fraudulent operators. Dortel
generated a return rate of 82 percent. Despite these signs of Dortel's fraudulent
activity, YMA accepted as a new client another company controlled by Paul
McKeefrey called Power Tamer Enterprises. YMA processed on behalfPower
Tamer Enterprises from March 2, 2006 through March 27, 2006, more than
$90,675 in RCC transactions, with a return rate of 72 percent.
B. Similarly, when YMA purchased the Newtown Companies in June 2004, the
Newtown Companies were processing for a client named 9106-3511 Quebec,
Inc., doing business as "First Star Consultants." At the time ofYMA's purchase,
the sales script showed the merchant was selling advance-fee credit cards, in
direct violation of the FTC's Telemarketing Sales Rule, which specifically
prohibits, inter alia, the promise of an extension of credit or loan in exchange for
an advance-fee payment. 16 C.F.R. § 310.4(a)(4). Despite evidence that this
client was violating the TSR, YMA processed on behalf of this client, between
June 23,2004 and July 28,2005, more than $894,907 in RCC transactions, with
a retUTTI rate in excess of 29 percent.

66. On April l l , 2005, after receiving numerous inquiries from law enforcement agencies
regarding its practices and those of its clients, YMA published a revised "Risk
Management Policy," in which it announced that it would cease processing for certain
types ofproducts due to the "increased risks associated with" these types ofproducts.
These prohibited products include: (1) credit cards; (2) debt consolidation/debt
negotiation services; (3) credit repair and credit restoration services; (4) government
grants; (5) discount prescription programs; and (6) other "benefits" packages.

67. Notwithstanding its revised policy, YMA continued processing for clients whose
application materials indicated the sale of a prohibited product and who had been
accepted for processing prior to April 11, 2005. For example, YMA continued
processing ACH transactions for a client named "Free Medicine Direct," a company
engaged in selling discount prescription benefits, for more than four months after April
11,2005. Not only was Free Medicine Direct engaged in selling a product prohibited by
YMA's revised policy, but Free Medicine Direct's sales script included dubious
representations that the consumer had been pre-approved for a free prescription medicine
program, under which he or she would receive "free" prescription medicines.

68. Moreover, YMA continued to accept, long after April 11, 2005, a large number of new
clients that purported to sell the types ofproducts prohibited by its April 11, 2005 revised
"Risk Management Policy" and that submitted suspiciously similar or virtually identical
sales scripts to market these types of products.

For example:

A. For the time period between October 2005 and March 2006 alone, YMA accepted
and processed for at least 19 allegedly different new clients offering government
grants. Among those 19 clients, 12 indicated they were selling the same product,
"Government Grant Information Guide." YMA processed on behalf ofthese 19
clients a total of more than $5;950,057 in RCC transactions, with an average total
return rate in excess of 58 percent.

B. Between October 2005 and March 2006, YMA accepted and processed for eight
allegedly different new clients selling discount prescription benefits plans.
DUling this time period, YMA processed on behalf of these eight clients a total of
more than $1,679,538 in RCC transactions, with an average total return rate in excess of 54 percent.

C. Between October 2005 and March 2006, YMA accepted and processed for nine allegedly different new clients selling benefits packages, which included identity theft and telemarketing fraud protection services. DUling this time pe~od, YMA processed on behalf of.these nine clients a total of more than $2,552,478 in RCC transactions, with an average total return rate in excess of 74 percent.

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80. Between June 23, 2004 and March 31, 2006, YMA attempted to debit on behalf of its RCC clients more than $100 million in RCC transactions. Of these attempted RCC debits, more than $58 million were ultimately returned by consumers or consumers' banks for various reasons. In numerous cases, YMA's individual RCC clients generated return rates of 50 percent, 60 percent, or even 80 percent.

81. When measured against the 0.50 percent estimated average industry retum rate for bank checks in 2003, more than 95 percent ofYMA's RCC clients' accounts generated return rates that were double to 188 times the industry return rate. More than half ofYMA's RCC clients generated total return rates that were more than 100 times the industry return rate.

82. Despite the signs that their clients were engaged in unauthorized debiting practices, defendants continued to debit the bank accounts of consumers on behalf of their numerous merchant clients.

83. Defendants have caused consumers substantial monetary loss by causing funds to be debited from the consumers' banle accounts without the consumers' authorization and by causing consumers other related harm, such as incurring the costs of closing accounts, paying over-draft fees, bouncing checks, opening new accounts, and ordering new checks. Such consumers could not reasonably have avoided this injury.

said by MGD:

After I first read the complaint, ... and then thought about it... I had to go back and read it again. If only 10% of that is true.. where are the handcuffs ?? Why O why, are there no criminal charges. This does not need any new laws, there are multiple felonies covered here, Unbelievable !! Bring in the FBI on this. And that is just the tip of the iceberg in this type of fraud.

Speaking of which, I wonder what the Gioeli brothers, and sister, are up to these days. »[Credit Card Fraud] Dream Smile and leanrx.com

MGD