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Defendants Barred From Obtaining or Selling Consumers’ Phone Records to Third Parties

The Federal Trade Commission has put a permanent halt to an operation that allegedly obtained consumers’ confidential phone records without their knowledge or consent and sold them to third parties. The defendants are barred from obtaining consumers’ telephone records without their consent and court orders impose judgments on the defendants totaling more than $600,000 – the estimated amount of their ill-gotten gains.

This is the latest in a series of FTC cases targeting telephone pretexters – individuals who use false pretenses to obtain consumers’ confidential information. Since 2006 the FTC has charged sixteen individuals and their corporations with violating federal law by pretexting to obtain phone records of third parties. All have now been barred from pretexting and all have been ordered to give up the money they made engaging in the illegal practice.

In February 2007, the FTC asked a U.S. district court to order a permanent halt to the operations of a company that sold consumers’ confidential phone records, including information on calls placed and received. The FTC also sued the individuals who had used false pretenses to obtain the records from phone companies and then supplied those records to the company for a fee. The agency alleged these practices were unfair and deceptive in violation of federal law, and could endanger consumers’ safety. The agency also asked the court to order the defendants to give up their ill-gotten gains.

According to the FTC complaint, the Telecommunications Act of 1996 provides that a customer’s phone records may only be disclosed “upon affirmative written request by the customer.” But the agency alleged that since at least 2005 Action Research Group, Inc., and its principals, Joseph and Matthew DePantes, sold confidential customer phone records, including lists of calls made and the dates, times, and duration of the calls, to third parties, without the knowledge or consent of the customers. To get the records, these defendants relied upon the other defendants, Eye in the Sky Investigations, Inc., Cassandra Selvage and Bryan Wagner, who obtained them from phone companies through “pretexting” – using “false pretenses, fraudulent statements, fraudulent or stolen documents or other misrepresentations, including posing as an account holder or as an employee” of a phone company. Selling the records constitutes an invasion of privacy that could endanger the health and safety of consumers, the agency alleged.

The DePantes and ARG agreed to settle the FTC charges. Defendants ESI, Cassandra Selvage, and Bryan Wagner are subject to default judgments entered by the court.

The settlement and default judgments permanently bar the defendants from obtaining, marketing or selling customer phone records or consumers’ personal information derived from those records. They also bar the defendants from pretexting or using others to pretext to obtain consumers’ information. The settlement order entered a judgment in the amount of $67,000 against the DePantes and ARG, the estimated amount of ill-gotten gains the defendants earned from their illegal scheme; the judgment was suspended upon a payment of $3,000 based on the defendants’ inability to pay. In the default judgments, the court ordered Wagner to give up $428,085 in ill-gotten gains and ESI and Selvage to give up $110,762.

The Commission vote to accept the settlements was 5-0. They were filed in U.S. District Court for the middle district of Florida, Orlando division.

NOTE: Stipulated final orders are for settlement purposes only and do not constitute an admission by the defendant of a law violation. Consent judgments have the force of law when signed by the judge.

What are your comments in this topic?

Jimmie Mesis, Editor-in-Chief
PI Magazine

Selected Laws Governing the Disclosure of
Customer Phone Records by Telecommunications
Carriers, a recently released Congressional Research Service report, summarizes the laws, legislation and congressional actions related to telephone call log records. The Federation of American Scientists has a database of some of these CRS reports, which are selectively released by members of Congress.

It appears that a case involving the hiring of an out of town private investigator on a death penalty case may have an impact on how the state pays court appointed investigators.

It all started when a Hillsboro lawyer hired Dave Panter, an ex-cop from Tillamook and an investigator from a nearby county to defend a murder case. However, the state Office of Public Defense Services refused to cover the investigator’s travel expenses from his office to Hillsboro.

The state offered to pay for Panter’s hotel and meals in Hillsboro, but it refused to pay him the standard state rate of $34 an hour for a capital case, plus 40.5 cents a mile for gas, to make the 60-mile drive between Tillamook and Hillsboro.

Since the state has refused, and a Washington County Circuit Court judge is set to decide the issue in a hearing Thursday, May 10.

“These guys haven’t had any raises since the 1970s,” says Barbara Baughman, a Portland private investigator who charges $75 an hour.

What do you think about the fees and expenses associated with court appointed investigator cases?

Philadelphia will be the first region in Pennsylvania to implement an automated inmate release telephone notification. The service, which just covers local jails, will be available to anyone, not just crime victims, when it goes into operation in June 2007. The Statewide Automated Victim Information and Notification (SAVIN) alert program will add the other counties over the next 18 months, and may later add state inmates.

The Houston Independent School District is the most recent Texas school district to post its payments to vendors online. Expenses can be identified by vendor but not by type of expenditure. Other districts have some payment information online as well.

A law under consideration in the Nevada legislature would prevent sealing of court cases involving high-profile litigants, which the judges had been doing, according to a survey by the Nevada Appeal.

Data brokers who were sued last year by AT&T for purloining customer telephone records have settled with the telecommunications company.

The 13 defendants were not initially named in AT&T Services, Inc. v. John Doe, filed in District Courts in Texas and California, until AT&T was able to subpoena the Internet service providers. They are now named and a permanent injunction disallows them from conducting similar business in the future.

Corporate malefactors angle to “clean up” mentions of their names in court records. The powerful and the fearful each have their reasons… From AP:

Residential Funding wants Heffernan’s claims about who stiffed employees and which name names, stricken from the court record.

The GMAC unit, Residential Funding Co., is the largest secured creditor in Mortgage Lenders’ Chapter 11 case.

In court documents in March, Residential Funding said it wants to erase “scandalous” statements Heffernan made while fighting criminal prosecution in Connecticut for failing to pay employees up to $2.5 million in wages owed when Mortgage Lenders Network went bankrupt Feb. 5.

According to numerous wire releases, it appears that the private investigators implicated in the Hewlett-Packard Co. scandal, will avoid jail time in a no contest plea deal to misdemeanor charges on fraudulent wire communications in California.

In a statement issued by the Attorney General’s Office, the court did not accept the plea from investigators, Ronald DeLia, with the private investigation firm of Security Outsourcing Solutions Inc. and Matthew DePante, a third-party consultant working with Action Research Group. Rather, the judge offered to officially dismiss the case against them in September if they complete 96 hours of community service and pay restitution to victims.

Another defendant, private investigator Bryan Wagner, who previously worked at Action Research Group, also was charged in October. The state’s case against him was dropped after Wagner pleaded guilty to the same charges in federal court and agreed to testify for the prosecution.

The investigators were initially charged in October with four felony counts: use of false or fraudulent pretenses to obtain confidential information from a public utility; unauthorized access to computer data; identity theft; and conspiracy to commit each of those crimes. Each of those charges carried a fine of up to $10,000 and three years in prison.

While the deal with state prosecutors allows all the defendants to escape jail time, federal prosecutors have said their investigation of the HP leaks probe is ongoing. The saga continues…what do you think?

The Federal Trade Commission has settled another telephone pretexting case, Federal Trade Commission, Plaintiff, v. Information Search, Inc. and David J. Kacala, individually and as an officer of Information Search, Inc., Defendants. The FTC will collect $3000 from the telephone information broker, who is also required to abandon the now illegal practice of impersonating telephone subscribers to get toll call records from the telecommunications carrier. The Commission had previously filed suit against Information Search, Inc. for obtaining personal financial bank account records in violation of the federal law known as Gramm-Leach-Bliley.

The Federal Trade Commission testified today at the Committee on Energy and Commerce on, Combating Pretexting: H.R. 936, Prevention of Fraudulent Access to Phone Records Act. The text of the testimony of other participants is not yet available.

The laws of conducting surveillance on insurance claimants can vary by state and even by country.

An article appearing in Out-Law.com highlights the potential conflict of British laws that involve government surveillance and verifying the validity of an insurance claim.

In August 2002, the UK police instructed a private detective firm to observe a former sergeant to see if he was doing anything that was inconsistent with his claimed injuries. Nine minutes of video footage showed the ex-policeman mowing the lawn and in his car.

The former policeman wanted the Tribunal to rule against the police force under RIPA, the Regulation of Investigatory Powers Act, but the Tribunal has found that it has no jurisdiction to do so because the filming of the former policeman did not constitute the kind of surveillance that RIPA governs.

The Tribunal is where individuals who think that their rights have been infringed can complain about the actions of public bodies. The Tribunal, though, only has jurisdiction if the surveillance dealt with is “directed surveillance” within the meaning of sections 26 and 48 (1) and (2) of RIPA.
See: The ruling (27-page / 231 KB PDF)

The California Supreme Court has ruled that a county trial court must determine whether a psychologist used subterfuge to obtain an interview with the foster mother of a woman who had claimed as an adult a repressed memory of childhood sexual abuse.

Psychologist Elizabeth Loftus, a renowned expert on the fallibility of eye witness evidence and an opponent of the notion of repressed memory, was a defendant in a civil court case that originated in Solano County California. Loftus reviewed a court case file and interviewed the foster mother in preparation for an article she was writing. The foster mother claimed that Loftus posed as a supervisor of the mental health professional in whom the plaintiff had confided. The alleged misrepresentation of the doctor-patient role is apparently the aspect of the invasion-of-privacy claim that concerned the Supreme Court.

At the same time, we also conclude that the Court of Appeal correctly determined that plaintiff’s action for improper intrusion into private matters could proceed based upon the claim that Loftus obtained personal and sensitive information regarding plaintiff from her former foster mother by misrepresenting herself as an associate of Corwin, a psychiatrist with whom plaintiff had a close professional relationship.

Although the opinion asserted that a misrepresentation of the patient-physician relationship is “different from the more familiar practice of a news reporter or investigator in shading or withholding information” this issue is being remanded to the trial court to decide.

The Los Angeles Times report quotes the representative for the news media who reflected on the court’s reasoning saying, ‘ “The problem is you don’t know with any predictive certainty” which sorts of misrepresentations would create liability.’

Also read:
Interview Methods Face Trial
California high court allows suit claiming misrepresentation to proceed, ABA Journal

Who Abused Jane Doe?
The Hazards of the Single Case History
Elizabeth F. Loftus and Melvin J. Guyer
Case histories make contributions to science and practice, but they can also be highly misleading.

What’s your opinion of the relevance of this case to private investigators?

Madera County, California real property parcel maps can be searched by address and viewed online.

The Sacramento County, California probate court is adding online document images to its Web site. Only cases filed after February 5, 2007 are currently included.

The recent expansion of the role of Arizona Ombudsman-Citizens’ Aide Office will provide a complaint center for addressing public records access violations.

The Indiana Attorney General has an online, searchable database of the legal actions they have initiated against violators of Indiana’s consumer protection laws. Search by county and/or year or view a list by defendant’s name, with links to the public filings and court orders.

The Pasco County, Florida Sheriff has added many new online tools to its Web site: Active calls log, Dispatch log, Subdivision activity log, Inmates in jail, and Outstanding warrants.

Private investigator, Bryan Wagner, of Littleton, Colorado pleaded guilty on Friday to identity theft and conspiracy charges in United States District Court in San Jose. His sentencing is now scheduled for June 20 in San Jose federal court.

The private investigator admitted to the two felony counts as part of a plea deal based on his obtaining the SSN’s and telephone toll records of journalists, former Hewlett-Packard directors, and their family members.

Mr. Wagner admitted to “pretexting” the telephone companies into releasing their records. He admitted to using personal information to set up online accounts in the names of several people to access their telephone toll logs and billing records.

Mr. Wagner’s lawyer, Stephen Naratil, stated his client was the “little guy” who was tricked by others into thinking the investigative method he used was legal. He also said that Mr. Wagner would testify for prosecutors as they pursue other figures in the case.

The four other defendants associated with this case have all pleaded not guilty. You can read more about this here.

What’s your opinion on this?

Several media outlets, including CBS News, Mercury News, and the Computer Business Review are reporting that one of the private investigators charged in the HP scandal will plead guilty today under a plea deal.

It is reported that 29 year old Bryan Wagner, of Littleton, Colorado is expected to enter a guilty at a scheduled arraignment hearing today in a San Jose federal court.

According to Stephen Naratil, Wagner’s lawyer, his client “accepts the full responsibility for what he’s done, although he never thought or intended his actions to be illegal…“He was assured numerous times that what he was doing was legal.”

It appears that federal prosecutors applied the preasure and presented an offer to Wagner in return for his cooperation. There is no doubt that Wagner’s testimony about his involvement will help federal prosecutors develop a case against all those involved.

Under the proposed deal, Wagner faces a two year manditory prison sentence on identity theft charges and a maximum of 5 on the conspiracy charges.

This is a very important case to follow as the results of the federal probe, potential convictions and penalty phase will have a significant impact on future legislation. The January issue of PI Magazine features several articles about the HP scandal and our responsibilities as investigators to remain ethical, at all times, on all cases.

What’s your opinion on this? Add your comments below.

Playing with a virtual reality toy may lead the player to imagine features of the device that weren’t there, according to a marketing professor’s study, Learning Through Virtual Product Experience:
The Role of Imagery on True Versus False Memories.

Although object-interactivity will likely improve memory of associations compared to static pictures and text, it may lead to the creation of vivid internally-generated recollections that pose as real memories. Consequently, compared to information conveyed via static pictures and text, object-interactivity may cause people to falsely recognize more non-presented features.

Perhaps the recollections of that witness who is an avid consumer of a “virtual experience” game aren’t so reliable in other areas. Something to add to your false memory folder.

Thanks: Ars Technica

A Pittsburgh Post-Gazette article reports that a former Beaver County school district security guard filed a lawsuit against Marty Griffin, a KDKA-TV investigative reporter and a local private investigator for defamation and invasion of privacy.

James A. Law Jr., claims that a television report misrepresented his criminal history. He also claims that the report quoted private investigator Louis W. Gentile, with the firm, Gentile, Meinert and Associates, and that it included unsubstantiated and false statements.

A Concord Monitor online article is reporting that the New Hampshire State Supreme Court has upheld a Concord woman’s stalking petition against Brian Blackden, a local private investigator, partly because he refused to tell the court why he’d been hired to follow the woman.

In an unanimous decision, the justices ruled that the private investigator’s unwillingness to reveal his reasons for following the woman last year made it impossible for the trial judge, or them, to determine whether Blackden had a legitimate purpose to surveil the woman.

This ruling is very important to private investigators through out the United States. While other states do exempt private investigators, New Hampshire does not, the court ruled. To be exempt, Blackden needed to show his purpose in following the woman was lawful and legitimate.

“(Blackden) contends that he met this burden of proof by testifying that he secretly followed (Miller) in his capacity as a licensed private detective,” the court wrote. “We disagree.”

The Federal Trade Commission announced a settlement of its complaint against Integrity Security & Investigation Services for “unfair or deceptive acts or practices in or affecting commerce” by obtaining telephone customer data and credit card purchase records. Four other similar cases against other data brokers are still pending. The FTC has little enforcement authority in this area and the cost for each investigation must be very high for the immediate results.

The settlement bars the defendants from obtaining or selling consumers’ phone records or personal information unless authorized by law or court order. It bars them from pretexting – obtaining records using false pretenses – or hiring others who pretext to obtain phone or financial records. Under the terms of the settlement, the defendants will give up $2,700 in ill-gotten gains – the entire amount they earned from selling the phone records and credit card transaction reports.

The order also requires the defendant to “appear and provide truthful testimony in any trial, deposition, or other proceeding related to or associated with the transactions or the occurrences that are the subject of the Complaint, without the service of a subpoena…”

The FTC action and states’ attorney generals lawsuits shine an ever brighter spotlight on data gathering techniques, which has prompted congressional hearings and more specific state laws banning pretexting to obtain telephone records. No doubt, other industries and research methods will be targeted as a “consumer protection” concern without consideration for other overriding interests.

The legitimate corporate governance issues that prompted the leak investigation by Hewlett-Packard has fallen from the front pages, now covered with the long expected indictments by the California Attorney General, Bill Lockyer, who is a current candidate for State Treasurer. As I mentioned a few weeks ago, Lockyer is charging various parties, from HP’s Patricia Dunn to the individuals who obtained the telephone records, with violations of several criminal statutes. The complaint lists the accusations.

The Federal Trade Commission testified last week on telephone record acquisition before the House Committee on Energy and Commerce Subcommittee on Oversight and Investigations. Joel Winston, an FTC Associate Director, requested that Congress “enact specific prohibitions against telephone records pretexting and to allow the Commission to seek civil penalties against violators…” Winston advocated for an exemption for law enforcement, which have been among the recipients of the data broker’s services, according to those who previously testified before Congress. A law enforcement privilege could further disadvantage criminal defendants, whose representatives would not be accorded the same access.

News and Opinion, in print, audio and video on HP and corporate governance related to telephone records

C-Span, Congressional Hearings on Telephone Pretexting

Many state appeals and supreme courts post their decisions at their Web sites and will deliver newly issued opinions, some with captions and summaries, to you by email or syndication. Look at your state’s court site to determine if it offers a notification service.

The Iowa Court of Appeals offers email notification of “supreme court opinions, court of appeals opinions, press releases and orders.” Conversely, the New Jersey judiciary Web site posts opinions and calendars of upcoming decisions but doesn’t have a built-in notification. In this case, I use the low-cost service, WatchThatPage, which sends me the new content whenever this Web site is updated. I receive case summaries that look like this.

A-52-05 State v. Saleem Crawley (58,340)
Where police officers, in response to an anonymous tip about criminal activity, requested defendant to stop and answer some questions because he matched the description provided in the tip, can defendant be found guilty of obstruction for running away? Certification granted: 10/12/2005
Argued: 2/15/06
Decided: 7/24/06

I can then go to the court site to read the full opinion. Rutgers Law library has constructed an RSS feed for New Jersey appeals and tax cases.

Even better, the Utah Appellate Court provides real-time delivery of court opinions by RSS, a free means of receiving updated content from user selected sites. The RSS program I like is Bloglines. Here you can collect and read all your dynamically refreshed content at one Web site.

Ohio, West Virginia, Oklahoma, Nevada and Maryland all distribute court opinions by RSS. The U.S. 7th Circuit Court of Appeals’ opinions are also syndicated.

Butting heads with a prior Supreme Court decision, a federal appeals court ruled that a third party who receives or broadcasts an illegally recorded telephone conversation violates the wiretapping statutes.

The majority said that the “eavesdropping statute may not itself make receiving a tape of an illegally-intercepted conversation illegal. But it does not follow that anyone who receives a copy of such a conversation has obtained it legally and has a First Amendment right to disclose it.”

Judge David B. Sentelle’s dissent argues that the decision ignores the U.S. Supreme Court’s 2001 ruling in Bartnicki v. Vopper, which found that when information is illegally intercepted, federal wiretap laws are unconstitutional when applied to a third party who legally receives the information and discloses it to the media. Full story

Close on the heels of the legislation, regulation and litigation over the privacy of telephone subscriber information is the examination of “caller-id spoofing”. The Florida Attorney General has issued subpoenas to a website that claims to sell “calling cards that allow parties to display fraudulent numbers on caller ID”. Reported at consumeraffairs.com, which also has an extensive set of links to prior articles on the whole telephone subscriber investigation blow up.

The Federal Communications Commission (FCC) has been investigating businesses that advertise products and tools that will enable the caller to display a self selected number on the receiver’s caller-id. The recent Wired article cites Orin Kerr, a law professor, who suggests that the proposed regulation of telephone spoofing may interfere with the 1st Amendment right to anonymous speech.

Just in case I haven’t sufficiently played out this theme, let me remind you that the federal government and the state Attorneys General are actively pursuing anyone they can identify who obtains or sells telephone subscriber information. [Just search PI buzz with the word telephone for all my postings.] This letter from the US House Committee on Energy and Commerce lists numerous companies from which they’ve requested detailed operational information, including customer names.

By calendar year since 2000, list the names of the top 20 customers, by revenue, for each of ARI’s data broker Web sites. With each customer listed, and for each calendar year, provide the total dollar amount paid by the customer to the data broker.

Some of the companies to which the Committee has has sent their inquiry are Richard J. Downing, owner of Piranha Investigations, Michele Yontef of Telcosecrets and Advanced Research, Inc.

Sprint Nextel filed another lawsuit seeking an injuction against yet another PI. The Sprint press release conveys their public attitude toward the practice of obtaining telephone subscriber data without the customer’s permission.

As we dig deeper into the origins of this fraud, we’ve determined that, in some cases, companies with no Internet presence whatsoever are handling the dirty work for these online operations…

The U.S. Federal District Court (11th Circuit) issued a Restraining Order in Cingular Wireless LLC vs. Data Find Solutions, INC ., James Kester, 1ST Source Information Specialists INC., Kenneth W. German, Steven Schwartz, filed December 2005 (email me for a copy). Cingular’s complaint suggests that accusations from customers about Cingular’s business practices prompted the legal action, not concerns for customer’s privacy.

Cingular’s customers whose information has been obtained
wrongfully by Defendants have mistakenly accused Cingular of selling their private information to third parties, thereby harming the Company’s relationship with its customers…

In the Complaint (email me for a copy), Cingular demands repossession of the goods obtained by the defendants.

Cingular is entitled to replevin of all of its customer information in the possession of the Defendants, regardless of form or manner of storage, including without limitation Cingular’s customer information existing on Defendants’ computers and hard drives .

Among the actions listed in the Temporary Restraining Order that the defendants are enjoined from is “disposing of any confidential Cingular customer information, other than by returning it to Cingular.”

One of the methods Cingular posits 1st Source Information may have used to obtain customer account information is social engineering.

The legal underpinning for the action Cingular cited is the Federal Computer Fraud and Abuse Act, 18 U.S .C. § 1030 and the Georgia Fair Business Practices Act as the basis for its claims.

Websites identified as associated with the defendants are www (dot)locatecell (dot)com, www(dot)celltolls(dot)com, www(dot)datafind(dot)org and peoplesearchamerica(dot)com.

More on this topic: Devious Tactic Snags Phone Data

Technorati Tags: cingular, cell+phones privacy, social+engineering