FTC slaps $30 million fine on robocallers promising government cash

Scammers behind a website purporting to be "the source" of free government money were fined an unprecedented $30 million for directing financially strapped Americans to fraudulent sites through automated phone calls, Federal Trade Commission officials announced on Monday.

Paul Navestad and Chintana Maspakorn "robocalled" citizens to trick them into visiting sites that charged fees for information on cash grants, a federal judge ruled in handing down the penalty. The official source for obtaining information on government loans and awards is Grants.gov. The judge from the U.S District Court for the Western District of New York also banned the pair from selling the Social Security numbers, email addresses and other personal information they filched from victims during online transactions.

The defendants broke telemarketing rules by digitally dialing more than 8 million phone numbers, including many listed in the Do Not Call Registry, and playing misleading messages to induce sales, according to a March 23 court decision. The recordings invited victims to visit websites for tips on obtaining cash grants from federal and local governments, foundations and wealthy individuals who could pay off personal debts and alleviate other financial hardships.

The $30 million penalty levied is the largest ever imposed for illegal calls to Americans registered with the Do Not Call list, FTC officials said.

Operating as the "Cash Grant Institute," the two criminals created several websites offering to help consumers overcome their financial problems, commission officials said. One site, cashgrantsearch.com, claimed to be the "Source of Free Money from the Government," displayed pictures of the U.S. Capitol Building and President Obama, and stated, "Did you know that grant money exists for almost any purpose and does not need to be repaid?"

In reality, cash grants are very difficult to obtain and none of the promoted websites actually provided grants, FTC officials said.

"The defendants, in their automated telephone calls, informed consumers that they were already qualified to receive cash grants from the public or private agencies," wrote U.S. District Judge Michael A. Telesca. The advertised websites directed people to another site that charged money for information and provided the criminals with a cut for the referrals. Navestad claimed that he was merely a consultant for the third parties, who themselves were engaged in wrongdoing.

The judge ordered the offenders to destroy all ill-gotten personal information by "burning, pulverizing, or shredding any papers, and by erasing or destroying any electronic media, to ensure that the customer information cannot practicably be read or reconstructed."

The court imposed a $20 million judgment against Navestad -- the largest civil penalty against a defendant ever in an FTC case, commission officials said. And Maspakorn was fined $10 million.

FTC initially filed the case in July 2009. Soon afterward, a court put the kibosh on the defendants' dubious Internet and phone activities.