Ben Stein steals your money

I know it. I’m a bit of a leech when it comes to the blog entry; I riff shamelessly off of other blogs. That said, I think I’ve got something to add to the story of Ben Stein’s descent from New York Times windbag to douchebag to scumbag.

As Felix Salmon discusses in his blog, Stein is shilling for a new website, freescore.com (also freescore.tv), that is running a “predatory bait-and-switch.” Freescore provides a “free” credit report, and then charges $29.95 per monthly for not doing so much else. I wonder what the FTC has to say about charging for a credit report when the Fair Credit Reporting Act requires the credit rating agencies to hand it out once a year via annualcreditreport.com.

To use some horrible business-speak, here goes my “value add” to the story:

Not shockingly, the company that owns freescore.com, Vertrue Inc., has a history of deceptive business practices. For years it has been figuring out creative ways to gain access to credit cards to charge monthly fees with the hopes that victims won’t notice. If a victim does notice, Vertrue makes them jump through hoops to get the monthly fees removed.

FREESCORE’S CONNECTION TO VERTRUE, INC.

Freescore.com’s registration with the US Patent and Trademark Office lists the owner as Adaptive Marketing LLC. Freescore.com is also listed as an Adaptive Marketing product on its website. Adaptive Marketing is listed as Vertrue company on its website. Adaptive Marketing was the registered owner of the website freescore.com from at least April 2008 until sometime in late June 2009, when the registrant changed to Corporation Service Company of Yarmouth, Nova Scotia. I’m not sure why that would be.

QUICK HISTORY OF VERTRUE

Vertrue started out life as CardMember Publishing Corporation in the late ’80s. In 1996 it changed its name to MemberWorks Incorporated and then again in 2006 to Vertrue Incorporated. It went public in 1996 and then was taken private again in 2007.

THE SALACIOUS AND DECEPTIVE STUFF

So just to start with, take a look the Better Business Bureau report on Vertrue. BBB is a fairly conservative organization, and it gives Vertrue an “F”! BBB received more 2,595 complaints against the company.

Complaints reported to the Bureau primarily involve claims of unauthorized charges by the Company’s affiliates. In such cases, customers reported no recollection of having agreed to the programs that were billed to their credit card, debit card or bank account. In some of the cases, consumers reported being charged for two or three years.

In 2000, when Vertrue was still called MemberWorks, it settled a case brought by the New York Attorney General. MemberWorks offered a free 30-day trial membership in discount programs. It then charged the victims a $144 annual fee without their knowledge.

At about the same time, according to the FTC,

. . . Minnesota, New York . . . , Nebraska, and California—have obtained either an Assurance of Voluntary Compliance (“AVC”) or a court settlement with MemberWorks. Nebraska obtained an AVC in February 2001 that applies nationwide. The AVC requires MemberWorks to provide refunds to consumers alleging unauthorized charges and includes detailed conduct provisions applicable to MemberWorks’ marketing of membership programs.

MODERN-DAY SALACIOUS AND DECEPTIVE STUFF

Vertrue received a request in May from the Senate Commerce Committee regarding its billing practices. It’s the same old Vertrue story—monthly charges on a credit card unless the dubious subscription is canceled.

In January of this year, a civil case was filed in Cuyahoga County Court of Common Pleas against Adaptive Marketing and Vertrue. The case made its way into federal court as a civil fraud case, Smith et al. v. Vertrue Inc. et al., in U.S. District Court in Cleveland, and is now listed as Vertrue Inc. Marketing and Sales Practices Litigation case number 09-vm-75000-PAG. It remains to be seen what will happen with this case, but the complaint tells the usual story of no permission and monthly fees etc.

For the obsessed there are also these cases here, here and here.

LAST PITHY NOTE

So the co-founder, CEO and president at Vertrue lists on his LinkedIn profile that he has a Harvard MBA. He probably should have taken Harvard’s new MBA oath.

And Ben . . . WTF? Did you really need the money that badly? I hope the NY Times drops you over this.

Update:

Goodbye Mr. Stein.

Science for investigators

I recently found the podcast/radio program Radiolab through a post on The Baseline Scenario.  It’s a great science show with similar production to This American Life.  For investigator types,  this show (on deception) and this show (on forensics, archeology, genealogy, and genetics) are a lot of fun.

Does Goldman Sachs do due diligence?

I’m commenting again on something Matthew Goldstein posted a couple of days ago. Apparently, Sergey Aleynikov (aka Serge Aleynikov), an IT professional and former employee for Goldman Sachs, stole the company’s trading software to sell to a foreign company. Take a look at Goldstein’s posts here and here and Zero Hedge’s post here for the details.

SERGE IS PROBABLY SERGEY

Goldstein says he found Serge Aleynikov  “on the social networking site LinkedIn (the difference in spelling of the first name could not be immediately explained).”

It seems pretty likely that the Serge Aleynikov Goldstein that is found on LinkedIn and the one charged by the government are one and the same.

1. The ages match up. The Sergey Aleynikov in that was in Bureau of Prison’s custody is 39 years of age (for those interested, he is currently housed at the Brooklyn Metropolitan Detention Center). The Serge Aleynikov on LinkedIn started his associate of applied mathematics at the Moscow Institute of Transportation Engineering (MIIT) in 1987. This would put him at around 17 when he started this degree. A website run by an Israeli programmer John Neystadt lists Sergey Aleynikov as graduating from MIIT in 1992 along with photos that look to be the same person from the LinkedIn page.

2. Company records and lawsuit filings indicate that Sergey and Serge are the same person. LinkedIn lists Serge Aleynikov as the President and Senior Technical Director at Orbit Communications and Networking Dimension from 1996-98. In 1997, Merv Griffin Productions sued Networking Dimension Corporation, along with Sergey Aleynikov, Vadim Resyev, Leonid Ivanutenko and CIS Development Foundation Inc. in US District Court, Central District of California (civil case number 97-cv-08408-AAH-RC) for trademark infringement.

Networking Dimension was a New Jersey corporation from 1995 until it was suspended in 1998. In New Jersey corporate records, the company’s incorporator is listed as Alexsandr Bondarev (sic) and its agent as Serge Aleynikov. Alexander Bondarev is listed as the Chairman of the Board for CIS Development Foundation. I have not seen the original complaint, but according to The Pitch, the lawsuit claims that Networking Dimension operated an infringing online version of Wheel of Fortune at www.fortune-wheel.com. According to The Pitch, the registered domain owner was CIS Development Foundation. The Pitch notes, “The defendants made no effort to defend themselves, failed to appear in court, and in January 1998 were permanently enjoined from further infringement of the Wheel of Fortune copyright.”

SERGE’S TENUOUS CONNECTION TO FRAUD

The Pitch also claims, in a further twist, that CIS (where Serge worked which was sued along with Serge’s company in the Wheel of Fortune case and whose chairman was the incorporator for Serge’s company) is connected to Express Shipping Service, which was named as an organized crime front in an alcohol smuggling case both here and here. Express Shipping Service, Inc. of New Jersey was registered as a corporation in 1993-2005. Its mailing address was listed at the same building as Networking Dimension (Serge’s company), though Networking Dimension also listed a suite number. Its incorporation paper work lists its president as Mikhail Dyakovetsky. In a Federal Registrar report for 1997 (www.gpo.gov/fdsys/pkg/FR-1997-11-19/pdf/97-30404.pdf), Leonid Ivanutenko was listed as an officer (remember, he was also sued in the Wheel of Fortune case). A Mikhail Dyakovetsky was charged with conspiracy to defraud the United States and obstruction of justice. The case was filed in US District Court for New Jersey (case number 01-cr-00350-WHW-1). Dyakovetsky is now deceased. A Leonid Ivanutenko was also charged with conspiracy to defraud the United States during the same time period as Dyakovetsky. His case was also filed in US District Court for New Jersey (case number 00-cr-00259-WHW-1). Both plead guilty, and Dyakovetsky’s case was eventually dismissed because of his death while Ivanutenko received probation.

I’d be curious to know if Goldman Sachs knew anything about this (potentially tenuous) connection to dubious activities. At the very least did they look into it at all?

Stanford CFO to cooperate

Stanford’s CFO, who has also been charged along with Sir Allen in the Ponzi scheme, will be cooperating with authorities, according to the FT.

It’s been a while (and there’s been a Supreme Court decision) since I really understood how sentencing of cooperators works in US federal courts. If I remember correctly, the CFO will plead guilty to charges that get him the worst possible sentence he could get. After he has cooperated with the government but before he is sentenced, the government will file a 5K motion for a downward departure from the mandatory minimum sentencing guidelines. A cooperator can go from a mandatory life sentence to a year or even less. For a while there, judges could not give a sentence below the mandatory minimums without a 5K. This shifted a lot of the power for sentencing to the prosecutors. For a cooperator, it can be a lot of pressure to say what you think the prosecutor wants to hear.

If all goes right, the prosecutor will have the right incentives to get the cooperator to tell the truth and not say what conveniently fits in with the rest of the case. I’m guessing that in this particular case there is probably a fairly decent paper trail to corroborate anything the CFO has to say.