$75 million telemarketing scam alleged

Posted: September 15, 2007

In telemarketing, it's called "cramming" - slipping a charge onto a monthly bill without a customer's knowing it.

And yesterday, federal prosecutors charged three operators of a defunct Old City Internet company with cramming about $75 million in bogus charges onto the bills of 350,000 small businesses across the country.

At a news conference yesterday, U.S. Attorney Patrick Meehan said the online fraud was massive. In a 27-count indictment, prosecutors alleged that Neal D. Saferstein of Mount Laurel and two partners "picked the pockets" of small businesses, charging each $29.95 a month for Internet services their owners did not want or know about.

"It was the drip, drip, drip of paying $29.95 a month" that brought the operation $49 million in gross revenue in 2003 alone, Meehan said.

Prosecutors said Saferstein, 34, started GoInternet.net Inc. in 1997 and closed it in October 2004. He was apprehended early yesterday in a car near his home and arrested.

Saferstein has been living with his father, his lawyer, Donald Moser, said. He would not comment further on the case.

Saferstein appeared at an initial hearing before U.S. Magistrate Judge Linda Caracappa wearing shorts and a black promotional T-shirt for the Apple Power Mac G5 computer.

Prosecutors are seeking to detain him without bail. A hearing will be Wednesday.

Saferstein ran his business with Tyrone L. Barr, 33, of Philadelphia, and Billy D. Light, 39, of Voorhees.Barr turned himself in yesterday and Light is expected to do so next week, said Jennifer Williams, an assistant U.S. attorney.

Saferstein faces criminal charges for perjury, tax evasion, mail and wire fraud, and failure to pay payroll taxes. If convicted on all counts, he would face 367 years in prison and a maximum fine of $4.71 million.

At one time, GoInternet and its sister company, Mercury Marketing, had 1,000 workers in two Old City offices - at 20 N. Third St. and 6 Strawberry St.

The indictment said Saferstein designed the GoInternet "business plan," which went like this:

Telemarketers in Philadelphia would reach out by phone to groups all over the country - a Baptist church in Alabama, a construction company in Indiana, a wheelchair-recycling business in Wisconsin, a land developer in Florida.

They would pitch Internet services: designing Web sites, creating e-mail accounts, offering dial-up services.

Operators would draw customers into receiving "welcome packages" without fully disclosing that by agreeing to receive the packets, the customers were accepting the company's services, prosecutors said. The company then would start billing for those services - unless a customer canceled within 15 days.

Prosecutors said the welcome packages looked like junk mail and routinely were thrown away. GoInternet would work through billing middlemen to include the charges on phone bills of customers as "telecommunication services."

"Customers routinely paid their monthly telephone bills without noticing GoInternet charges," the indictment said.

The indictment said GoInternet did create Web pages, but they were "generic, bare-boned and mistake-ridden Web pages that were of virtually no value to customers."

Also, the Web addresses could not be located using major search engines such as Google or Yahoo.

A Web site developed by GoInternet for Boston Chipyard said the company specialized in sailboat parts. Boston Chipyard sells chocolate chip cookies.

Larissa Bungo, an attorney for the Federal Trade Commission in its Cleveland office, said regulators were bombarded with complaints. She said she personally reviewed 12,000.

In 2001, the FTC entered into a consent decree with GoInternet to prohibit the company from unauthorized billing.

Instead of ceasing fraudulent practices, the company picked up the pace, the indictment said.

Meehan said that what had been most surprising about the case was the "totality" of the methods to hide costs to customers.

He added: "Too many consumers never take the time to look at their bills."


Contact staff writer Jennifer Lin at 215-854-5659 or jlin@phillynews.com.

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