FTC v Innovative Marketing – the agreement with James Reno and Byte Hosting
Back on the 11th I reminded everybody that I expected the proposed stipulated final order between the FTC, Reno and ByteHosting to be filed within days. As luck would have it, a Final Order For Permanent Injunction and Monetary Judgment as to James M. Reno and ByteHosting Internet Services, LLC was filed with the Court the very next day.
Below are the proposed terms of the Permanent Injunction and Monetary Judgment.
Bear in mind, when you read about the monetary judgment, that earlier court documents have disclosed that “after weeks of searching, the FTC has located only $174,000 of the defendants' assets. ... The bulk of these funds belong to James Reno.”
Also bear in mind, the Permanent Injunction and Monetary Judgment has not yet been signed by the Judge Hon. Richard D. Bennett.
The Order is described as "remedial in nature, and no portion of any payments paid herein shall be deemed or construed as payment of a fine, damages, penalty or punitive assessment".
Take a deep breath ladies and gentlemen, there is a lot of information here… “Defendants” refers to Reno and ByteHosting Internet Services.
Reno and ByteHosting Internet Services, as well as their officers, agents, servants, employees and those persons in active concert or participation with them who receive actual notice of the order by personal service or otherwise, are PERMANENTLY RESTRAINED AND ENJOINED from:
A. directly or indirectly misrepresenting, expressly or by implication, that:
(1) a computer can or any other type of remote or local computer analysis has been performed; or
(2) security or privacy problems have been detected on a computer,
B. publishing, disseminating, distributing, installing, downloading or providing customer support for any software that interferes with a consumer's computer use, including but not limited to software that:
(a) changes consumers' preferred Internet homepage settings;
(b) inserts a new advertising toolbar onto consumers' Internet browsers;
(c) generates numerous "pop up" advertisements on consumers' computer screens when consumers' Internet browsers are closed;
(d) adds advertising icons to the computer's desktop;
(e) tampers with, disables, or otherwise alters the performance of other programs, including anti-spyware and anti-virus programs;
(f) alters Internet browser security settings, including the list of safe or trusted websites;
(g) installs other advertising Software on consumers' computers;
(h) conducts, or purports to conduct, a computer scan that purports to detect security or privacy threats that do not exist on the scanned computer; or
(i) creates security or privacy threats on a computer for the purpose of selling Software to eliminate those problems.
C. concealing or attempting to conceal their identities by, among other things:
(a) using any domain names that have been registered using false or incomplete information;
(b) claiming that they place advertisements on behalf of, or otherwise represent, individuals or entities, unless they possess written authorization to represent such individuals or entities.
D. engaging in commercial activity of any kind - whether as a partner, employee, employer, officer, director, control person, independent contractor, consultant, service provider, or otherwise - with Innovative Marketing, Inc., Sam Jain, Daniel Sundin, Marc D'Souza, Maurice D'Souza, or Kristy Ross, or any entity controlled by Innovative Marketing, Inc., Sam Jain, Daniel Sundin, Marc D'Souza, Maurice D'Souza, or Kristy Ross.
In connection with the marketing, distributing, or sale of, or the provision of customer support for, any goods or services, Defendants and their officers, agents, servants, employees and attorneys, and persons in active concert or participation with them who receive actual notice of the order by personal service or otherwise, are PERMANENTLY RESTRAINED AND ENJOINED from:
(a) misrepresenting, directly or by implication, to any potential purchaser of any goods or services, any material fact, including but not limited to:
(1) the total cost to purchase, receive, or use, or the quality of, any good or services that are subject to the sales offer;
(2) any material restrictions, limitations, or conditions to purchase, receive or use the goods or services; or
(3) any material aspect of the nature or terms of a refund, cancellation, exchange, or repurchase policy for the goods or services; or
(b) providing substantial assistance to any third party to make any material misrepresentation including but not limited to those misrepresentations prohibited by paragraph (a) above.
(a) Judgment in the amount of $1,859,954.93 jointly and severally against the defendants.
(b) The monetary judgment be suspended upon defendants compliance with certain conditions, including that within 15 days after the date of entry of the Order, the defendants pay:
(1) $17,827 from bank accounts listed in an attachment to the order to the IRS and State of Ohio;
(2) the remaining balance of all bank accounts listed in the attachment (approximately $98,870) to the Commission (with the defendants allowed to withdraw and retain just $7,500.00). Monies paid to the FTC or its agent are to be used for "equitable relief, including but not limited to consumer redress, and any attendant expenses for the administration of such equitable relief".
If the defendants have failed to disclose any material asset or materially misstated the value of any asset in certain financial statements or related documents, or have made any other material misstatement or omission in the financial statements or related documents, then the Order shall be reopened and suspension of the judgment shall be lifted for the purpose of requiring payment of the full judgment (less anything already paid). If such a reinstatement occurs, the Court shall make an express determination that the monetary judgment shall be immediately due and payable (with interest).
So that the Commission can monitor and investigate compliance with any provision of this order and investigate the accuracy of any defendants' financial statements:
(a) The defendants shall submit within 10 days of receipt of written notice from a representative of the Commission, additional written reports which are true and accurate and sworn to oath under penalty of perjury; produce documents for inspection and copying; appear for deposition; and provide entry during normal business hours to any business location in each Defendants' possession or direct or indirect control to inspect the business operation.
The Commission is authorized to use all other lawful means, including but not limited to:
(1) obtaining discovery from any person, without further leave of the court, using certain prescribed Federal procedures;
(2) posing as consumers and suppliers to the Defendants, their employees, or any other entity managed or controlled in whole or in part by any defendant, without the necessity of identification or prior notice; and
(c) Defendants shall permit representatives of the Commission to interview any employer, consultant, independent contractor, representative, agent, or employee who has agreed to such an interview, relating in any way to any conduct subject to this order (the person interviewed may have counsel present).
The Defendants must, for a period of 5 years from the date of entry of the order, notify the Commission of:
(a) any changes in the defendant's residence, mailing address and telephone number within 10 days of the date of such change;
(b) any changes in the defendant's employment status (including self-employment) and any change in such defendant's ownership in any business entity, within 10 days of such change. Such notice will include the name and address of each business that such defendant is affiliated with, employed by, creates or forms, or performs services for; a detailed description of the nature of the business; and a detailed description of such defendant's duties and responsibilities in connection with the business or employment; and
(c) any changes in the defendant's name or use of any aliases or fictitious names.
(d) any changes in structure of the corporate defendant or any business entity that any defendant directly or indirectly controls, or has an ownership interest in, that may affect compliance obligations arising under the order.
(e) 180 days after the date of entry of the order, and annually thereafter for a period of 5 years, defendants shall each provide a written report to the FTC, which is true and accurate and sworn to under penalty of perjury, setting forth in detail the manner and form in which they are complied with the order.
(f) Each defendant shall notify the Commission of the filing of a bankruptcy petition by such defendant within 15 days of filing.
RECORD KEEPING PROVISIONS
For a period of 8 years from the date of entry of the order, defendants, for any business that such defendant directly or indirectly controls, or in which such defendant has a majority ownership interest, and their agents, employees, officers, corporations and those persons in active concern or participation with them who receive actual notice of this Order by personal service or otherwise, are HEREBY RESTRAINED AND ENJOINED from failing to create and retain as set out in the order:
(a) accounting records
(b) personnel records
(c) customer files
(d) complaints and refund requests
(e) records reflecting contact information and detailed payment history for all persons or entities engaged in the marketing, sale, distributing or installing of software at the direction of, or for the benefit of, the defendants
(f) copies of all scripts and training materials used in connection with the training of staff in customer support
(g) all records and documents necessary to demonstrate full compliance with each provision of the order
DISTRIBUTION OF ORDER
Every 5 years from the date of entry of the order, defendants shall deliver copies of the order to:
(a) Corporate Defendant: all principals, officers, directors and managers; and all employees, agents and representatives who engage in conduct related to the subject matter of the order; and any business entity resulting from any change in structure set forth in the Order
(b) Individual defendant as control person: for any business that the individual defendant controls, directly or indirectly, or in which such defendant has a majority ownership interest - all principals, officers, directors and managers; and all employees, agents and representatives who engage in conduct related to the subject matter of the order; and any business entity resulting from any change in structure set forth in the Order.
(c) Individual defendant as employee or non-control person (aka Reno himself): for any business where the individual defendant is not a controlling person of a business but otherwise engages in conduct in connection with the selling, distributing, marketing or provision of customer support for computer security software, such defendant must deliver a copy of the order to all principals and managers of such business before engaging in the conduct.
(d) Defendants must secure a signed and dated statement acknowledging receipt of the Order from all persons receiving a copy of the order.
COOPERATION WITH THE FTC
Defendants shall, in connection with this action or any subsequent investigations related to or associated with the transactions or the occurrences that are the subject of the FTC's complaint, cooperate in good faith with the FTC and appear at such places and times as the FTC shall reasonably request, after written notice, for interviews, conferences, pretrial discovery, review of documents and for such other matters as may be reasonably requested by the FTC.
One last thing…..
I noticed tonight that visitors to bytehosting.com (and several other Reno owned domains) are being redirected to google.com. That is a trick that I have seen being used quite a few times to divert visitors away from malvertizing domains.