The lawsuits were filed in in Illinois and New Zealand High Court in Christchurch over the past week. They describe an international spamming operation run out of New Zealand, Australia and the U.S. that sold the kinds of phony male-enhancement pills, knock-off prescription drugs, sex toys and replica watches that have gummed up e-mail inboxes for years.
In addition to freezing the group's U.S. assets, the FTC is seeking damages for consumers who bought the bogus products, said Steve Wernikoff, an FTC staff attorney who worked on the case. That could end up costing the alleged spammers millions of dollars, he said. "We hope that we can shut down parts of the operation or make it more difficult for them to operate," he said.
Two brothers, Shane Atkinson of Christchurch and Lance Atkinson of Pelican Waters, Queensland, Australia, are named in the suits, as is Texas resident Jody Smith and Roland Smits, also of Christchurch.
The suits stem from a December 2007 raid by the New Zealand Department of Internal Affairs that seized 22 computers and documents from several locations in Christchurch, including the home of Shane Atkinson.
Since then, the U.S. Federal Trade Commission (FTC) and New Zealand authorities have worked together to build their case, according to Department of Internal Affairs spokesman Trevor Henry. "They have spent months just going through [the data] and analyzing and pulling it all together," he said.
The Atkinson brothers apparently knew they were attracting some unwanted attention even before the raid.
New Zealand authorities seized the computers just days after a BBC reporter, looking to track down the source of some spam in his inbox, telephoned Shane Atkinson for an , according to the Department of Internal Affairs.
The spamming network, which may have accounted for as much as one-third of the world's spam at one point, included operations in the U.S., Australia, New Zealand, China, India, Russia and Canada, the FTC said in a statement, released Tuesday.
After examining the products sold by the spam network, the FTC found that the spammers were selling "100 percent herbal" male-enhancement pills, called VPXL, that did not work as promised, and which were certainly not all-herbal. The pills contained sildenafil, the active ingredient in Viagra, and could have been dangerous to people who were also taking nitrate-based drugs used to treat conditions such as high blood pressure, diabetes or heart disease.
The FTC also found out that some drugs sold by the spammers were shipped direct from India and had not been approved by the U.S. Food and Drug Administration. They found that other products, such as a Hoodia gordonii weight-loss pill, simply didn't work as advertised.
Although spamming is a federal crime in the U.S., the U.S. Federal Trade Commission and the Department of Internal Affairs have launched civil suits in the matter. Civil cases are considered to be easier to win in court.
The U.S. Federal Bureau of Investigation has taken an interest in the matter, however, and recently executed search warrants in Chicago and St. Louis in connection with the case, Wernikoff said.
Three years ago, the FTC obtained a US$2.2 million judgment against Lance Atkinson for marketing similar products, but the Commission has yet to collect a cent from that judgment, Wernikoff said.
On Oct. 6, following the FTC suit, a federal judge signed a temporary restraining order that called for a halt to the operation.
Apparently, spam still pays big money.
The group has been grossing more than $500,000 per month in Visa credit card sales alone, Wernikoff said.
New Zealand authorities are seeking US$121,000 (NZ$200,000) in fines each from the Atkinson brothers and Smits, claiming that they collectively sent more than two million e-mail messages to New Zealanders between September and December 2007 and earned more than US$2 million from spam during this four-month period.
Richard Cox, chief information officer with the antispam group Spamhaus, praised the FTC and the New Zealand government for targeting one of the with their actions.
But will the suits actually cut down on global spam? "We don't know," Cox said. "What we don't know is whether these guys will risk this happening again. The sort of fines they're going to get are going to be small change, relative to the profits they've made," he added.
"They can look at a $1 million fine as the cost of doing business."