Subject:

FEDERAL TRADE COMMISSION SETTLEMENT – Particular interest To Private Investigators

NCISS Legislative Committee Chairman Ed McClain reminds all Investigators … need to be familiar with Gramm-Leach-Bliley Legislation; and be sure they are not in violation of the “pretexting restrictions”.  

March 8, 2002 ~ Information Brokers Settle FTC Charges

Consumers' confidential financial information was alleged to be obtained through the deception of information brokers who allegedly used deception to obtain consumers' confidential financial information. Several organizations have agreed to settle Federal Trade Commission charges that their practices violated Federal Law. The settlements bar the operators from obtaining or hiring others to obtain consumers’ financial information through illegal means or by hiring or contracting with others who use illegal methods to obtain consumers' financial information.

Also, the settlements require the defendants to surrender the money made in the illegal scheme. In April 2001, the FTC filed suit in three U. S. District Courts to halt the operations of information brokers who allegedly used false pretenses, fraudulent statements, or impersonation illegally obtaining consumers' confidential financial information, such as, bank balances, and sell it. The practice of obtaining consumers' private financial information under false pretenses is defined as "pretexting." Specifically, the Gramm-Leach-Bliley Act outlaws pretexting, and soliciting others to pretext.

"Pretexting, as alleged in these cases, undermines consumers' basic expectation of confidentiality in their financial information," said J. Howard Beales, III, Director of the FTC's Bureau of Consumer Protection. He said, “The clients of pretexters are often law firms, and other businesses. These buyers should beware, because knowingly obtaining pretexted information is illegal, too.”

In court documents, the FTC charged that the defendants maintained Web sites where they advertised that they could obtain non-public, confidential, financial information -- including such

things as checking and savings account numbers and balances, stock, bond and mutual fund accounts and safe deposit box locations -- for fees ranging from $100 to $600, depending on the information sought. In sting operations set-up by the FTC in cooperation with local banks, investigators established dummy bank accounts in the names of cooperating witnesses. Then, called defendants posing as purchasers of the defendants' pretexting services. In the three cases, an FTC investigator posed as a consumer seeking account balance information on her fiancé's checking account. The investigator provided limited information about her "fiancé's" account to the defendants. 

The defendants (or persons they hired) called the bank, identifying themselves by the name of the supposed "fiancé," and asked to check his balance. Later, the defendants provided the account balance information to the FTC investigator. The FTC asked the courts to halt the illegal

practices permanently, freeze the defendants' assets pending trial, and order them to give-up their ill-gotten gains. The courts temporarily enjoined the defendants from continuing the illegal practices and imposed partial freezes of their assets pending trial.  In the end, the settlements reached resolved those court cases. The settlements bar the defendants, in connection with the obtaining, offering for sale or selling of customer information of a financial institution from:

(1) Misrepresenting their identities or their right to receive customer information;  using others

who will obtain information using deception; 

(2) Selling or disclosing customer information obtained from a financial institution; and making

false and misleading statements. Also, the settlements bar the defendants from violating the

pretexting provisions of the Gramm-Leach-Bliley Act, and require the defendants to

surrender their ill-gotten gains.

The FTC Commission complaints name Information Search, Inc., and David Kacala of Baltimore, Maryland; Victor L. Guzzetta, doing business as Smart Data Systems of Staten Island, New York; and Paula Garrett, doing business as Discreet Data Systems of Humble, Texas. The cases were filed under seal in U.S. District Courts for the District of Maryland, the Eastern District of New York, and the Southern District of Texas.

Defendants Paula Garrett and Victor L. Guzzetta will pay $2,000 each. Based on financial statements provided by defendant David Kacala, a $15,000 payment will be suspended. Should the Commission have evidence that the defendant made misrepresentations in his financial statements, then the entire amount of the judgment will become immediately due. All the settlements contain record keeping provisions to allow the Commission to monitor compliance with its order. The Commission Vote to approve the Stipulated Final Judgments and Orders was 5-0.

NOTE: Consent judgments 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 a judge.

For more information: http://www.ftc.gov/os/2002/03/index.htm#8">Copies</A> of the complaints and stipulated final judgments and orders are available from the FTC's Web site at

http://www.ftc.gov/ or http://www.ftc.gov</A>.

Information can be retrieved from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them.

To file a complaint, or to get free information on any of 150 consumer topics,

Call toll-free, 1-877-FTC-HELP (1-877-382-4357).

Or, use the Complaint Form at <A HREF="http://www.ftc.gov/"> http://www.ftc.gov</A>.

The FTC enters Internet, telemarketing, identity theft and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad. MEDIA CONTACT: Claudia Bourne Farrell, Office of Public Affairs 202-326-2181   STAFF CONTACT: Brad Blower 202-326-2646 and/or Russell Deitch at 202-326-2585. (FTC File Nos. X01 0041, X01 0042, X01 0043).