For the owners of the Websites for Playgirl and High Society magazines, it must seem like a case of déjà vu all over again: chief executive officer Bruce Chew is one of five – including a reputed member of the Gambino crime family – freshly arrested in a scam where surfers who thought they were getting free cyberporn tours were getting freed from about $230 million instead.
Brooklyn District Attorney Roslynn R. Mauskopf told Dow Jones Newswires that what the surfers thought was a free peek at the porn turned out to be a $59.99-a-month charge.
For Chew, it must have sounded like a blast from the past – he and his company faced a very similar case brought by the Federal Trade Commission in late 2001. In that case, they billed thousands of customers illegally for services advertised as free services, while billing others who never even visited any Crescent-owned sites. That scam was said to have landed Crescent about $188 million.
The company was forced to settle with the FTC for $30 million in customer restitution, and to post $2 million corporate bond plus $500,000 bond for each individual defendant, before they could go back into cyberbusiness. And, they were ordered to lay off the illegal practices in the future.
Turned out the future is now, according to federal authorities. Chew, reputed Gambino member Richard Martino, businessman Norman Chanes, and two others are accused in a scam that involved tricking customers into giving up credit information for free cyberporn visits but making it all but impossible for them to leave the sites – while their charges were running up, Mauskopf said, announcing the indictment. Martino is said to have channeled about $8 million of the proceeds to the Gambino Family, while all three face the possible government seizure of their homes.
Chew, Martino and Chanes were hit with money laundering and other charges, facing a possible 20 years in prison if convicted. They're accused of using three companies they controlled to launder illegal profits, according to the indictment. Those three companies (Mical Properties, Dynamic Telecommunications, and Westford Telecommunications) were named in the indictment, as were Lexitrans, Inc. and Harvest Advertising, which authorities said controlled or designed the Websites used in the scam.
Crescent's 2001 settlement with the FRC explicitly barred either the company or its people from misrepresenting their services or products in any advertising, promotion, or sales offers – especially, the FTC ruled at the time, cost and terms of Website access.
"If the defendants continue to advertise 'free tours' of their adult sites, the settlement requires clear and conspicuous disclosure about: how consumers can exit their sites without incurring charges; when the "free tour" has ended; and that by continuing, consumers will incur fees," the FTC settlement continued, while also ordering record keeping provisions to let the FTC monitor Crescent's compliance in the case.
