FTC Takes Action on E-Mail Schemes

In the first of a series of planned government crackdowns on junk e-mail schemes, the Federal Trade Commission announced actions Tuesday against one of the most widely distributed get-rich-quick scams.

The e-mail, which promised recipients they could “Be a millionaire like others within a year!” on a $25 investment, is an illegal chain letter ruse, the FTC said. Seven people caught last year in an agency sting agreed to a federal court judgment that required them to return future funds gained from the scheme.

In addition, the FTC said it had sent warning letters to 2,000 other people allegedly involved in distributing the e-mail.

FTC officials said they are serious about pursuing e-mail scams, but they acknowledge it’s an uphill battle. The agency has only 271 investigators to examine all types of commercial claims nationwide, online or otherwise. Some computer users get at least that many unsolicited e-mail offers a week.

“If we or others involved could figure out an efficient way to make it stop, we would,” said Eileen Harrington, the agency’s associate director for marketing practices.

The chain letter e-mail--which asked a recipient to send $5 to five people listed, substitute his or her own name for one and then forward the e-mail to as many people as possible--came to the agency’s attention because of its bold claim of legitimacy. “If you have any questions of the legality of this program,” the e-mail stated, “contact the Office of Associate Director for Marketing Practices, Federal Trade Commission.”

Harrington started receiving calls about two years ago. “They’ve got some chutzpah, putting that in the e-mail,” she said.

In September 2000, the FTC sent 1,000 letters to people named in the e-mail, warning them that chain mail is illegal. One of the letters was received by Chad and Megan Estenson of Warwick, N.D.

“It was a generic letter, we didn’t think it matched this program,” said Megan Estenson, 27, who is a Head Start teacher. They believed the e-mail they were distributing was legal because they received goods--a series of reports on topics such as “The Insider’s Guide to Advertising for Free on the Internet”--for their initial $25 payment.

But receiving goods does not make a chain mail-type program legal unless there is a source of outside income to support claims of wealth to be gained.

In October 2001, the couple accepted a $5 payment from an FTC investigator working undercover, thus substantiating they were still involved in the scheme.

Megan Estenson said she and her husband didn’t realize they were breaking the law until they received a notice that the FTC had taken action against them in U.S. District Court. “Of course, you feel foolish,” she said. “I’m a college- educated woman. We fell for this thinking it was something legal.”

Still, she resents the action taken against them. “The FTC is a big hammer and we are a little nail. I don’t really know why they are wasting their time on me, when there is something like Enron out there,” she said.

She would not disclose how much she and her husband had received from the scheme, but said it was nothing approaching the riches promised. Since signing the court judgment, she said they had received and returned $25.

Returning funds received only after the court action seems like little more than a wrist slap, but Harrington said a federal court stipulation is a serious matter.

“There are many times in our lives when we have to fill out papers that ask if we have ever been the subject of a law enforcement action,” Harrington said. “It will follow them everywhere.”