Web scam: How one ISP took the money and ran
April 28, 1999
by Daniel Tynan
(IDG) -- All Gregg Buchanan wanted was an Internet account for his 80-year-old mother. Instead, he got taken for a ride.
Buchanan, a senior applications engineer for Intel in Hillsboro, Oregon, was no newbie. When he shopped for an Internet service provider in January, he used an ISP finder site on the Web, assembled a spreadsheet of his top choices, and visited their home pages.
The phantom ISP
One ISP stood out: InfoNet Corporation. "InfoNet had a professional-looking site and an attractive offer," Buchanan says. A year's worth of Web access -- including two e-mail accounts and space for a home page -- cost a mere $9.99 a month. So he activated the account instantly by paying via I-Check.net, a third-party service that debited $119.88 from his mother Geraldine's checking account.
At first, Buchanan says, "I had a sense of pseudo well-being. Then I started my sojourn into hell." He couldn't get the second e-mail account or the server space they'd paid for. InfoNet didn't return his phone calls or e-mail. After two weeks, the access account stopped working. Buchanan and his mother were out $120, and they were steamed.
They were not alone. A PC World investigation has uncovered dozens of angry users who'd like to have a word with Matthew Nichols, InfoNet's alleged chief executive officer. In late April, the U.S. Postal Inspector's office in Charlotte, North Carolina, was investigating the company for potential mail fraud.
The InfoNet story illustrates how the Web -- with its low start-up costs and the capability to operate from anywhere -- can help a marginal business fool even Web-savvy consumers like Gregg Buchanan. It also shows how easily a virtual company can vanish.
The Web shell game
At first glance, InfoNet certainly looked the part of a big national service provider. Its Web site advertised an extensive menu of Internet services, as well as access numbers across the country. The company claimed to be the "fifth-largest ISP in the world," serving more than 200,000 customers. It boasted it had offices from the Florida panhandle to Puget Sound, including a headquarters at One InfoNet Way in Atlanta.
In reality, InfoNet operated out of a rented townhouse on a residential street in Franklin, North Carolina. According to the U.S. Postal Service, the One InfoNet Way address -- along with eight other locations listed in the company's domain name registrations -- does not exist. Only four of the company's many phone numbers worked; all sent callers to the same voice mailbox.
And if the InfoNet site seemed impressive, it was for good reason. At one point in February, InfoNet's site contained copies of pages found on IBM's Web site, including a page sporting PC World's Best Buy logo. (IBM Internet Connection Services won a PC World Best Buy award in 1997; we've never reviewed InfoNet.) In a published report, Matthew Nichols, identifying himself as CEO of InfoNet, blamed an unnamed Web design firm for the error. (Our numerous attempts to contact Nichols for comment were unsuccessful.)
After IBM contacted InfoNet, the look-alike pages were replaced by a notice saying the firm had been "sold to AccessNet Communications of Denver, Colorado, for $2.5 million." A few days later, the site reappeared sporting a new look, then disappeared again.
Angry InfoNet customers began trying to reach the company. About two dozen of them contacted Infonet Services Corporation, a $380 million communications services firm in El Segundo, California. The firm, which has no affiliation with the similarly named ISP, has filed a trademark infringement suit. However, it has not located Matthew Nichols to serve him with a subpoena, says Michael Grace, an attorney handling the suit.
Another 45 customers contacted I-Check.net, the vendor that provided InfoNet's payment system. Ron Ehli, CEO of I-Check in Tacoma, Washington, says that his company turned off the account in late February because I-Check was unable to contact InfoNet about the complaints.
When a brick-and-mortar company goes under, it leaves a street address. But a Web-based firm can seem to evaporate completely. If the addresses it provides are phony, you may not know where to turn when you've been burned.
"Generally, you need a physical address to make a complaint," says Susan Grant, director of Internet Fraud Watch in Washington, D.C. "If it's a Web site, you can get information from the site-registration people, but it may just be a front for someone else."
Gregg Buchanan, looking for information about InfoNet, searched Network Solutions' domain registration database, but most of the InfoNet data he found was false. Network Solutions representative Nancy Huddleston says that with more than 7000 domain registrations a day, the company can't verify the addresses, phone numbers, or identities of registrants.
Disgruntled InfoNet customer George D. Malmos, a pharmacist in Cedar Hill, Texas, tried the Better Business Bureau in Georgia and Colorado, but he also had no luck. "To get ripped like this and get nothing but vapor trails is incredibly irritating," says Malmos.
One persistent InfoNet customer, Catherine Evangelista of Cary, North Carolina, managed to track down the company and get a refund. She talked to the local sheriff, the state attorney general's office, the regional postal inspector, and the FBI. She even sweet-talked a phone company representative into dialing Matt Nichols' unpublished telephone number.
Eventually, Evangelista got her money back, plus a little extra for the long-distance charges she incurred. "I don't know if what happened to me was fraud, but it was pretty damned hard to get my money back," she says.
Eddy Boucher, a postal inspector in Charlotte, says that his office is reviewing mail fraud allegations based on InfoNet's receipt of payments through the U.S. mail.
Alive and clicking
The story doesn't end there. PC World has found two other ISP companies -- one defunct, the other still active -- with links to InfoNet.
In early 1998, Franklin, North Carolina-based Western North Carolina Internet began offering dirt-cheap Net access. Then consumer complaints started pouring in, says Pat Taylor, chief investigator with the Macon County sheriff's office. Users who had paid for Internet access could no longer log on. Six months later WNC Net shut down in the midst of an FBI investigation.
In an e-mail sent to WNC Net subscribers in October 1998, co-owner Donnie Griffin admitted to reselling a handful of Internet accounts to several users. Last March, the U.S. Attorney's Office declined to press charges against Griffin, who was 16 at the time of the investigation. In a report published last March in the Franklin Press, FBI spokesperson Joanne Morley says that the Attorney's Office "declined to prosecute, probably because [Griffin is] a juvenile."
An ad that WNC Net placed in the Franklin Press last September identifies Judy Estelle as co-owner of the ISP. Estelle's last known address is the Franklin townhouse that was home to InfoNet. Investigators for the sheriff's office in Rabun County, Georgia, say that Judy Estelle also received mail at InfoNet's P.O. box in Dillard, Georgia.
On February 18 of this year Estelle opened a new account with I-Check.net for InTech@net, a low-cost service provider based in Frisco, Colorado. (According to Ehli, I-Check closed the account once it learned InTech was related to InfoNet.) Two InfoNet phone numbers were also used by InTech; both send callers to the same voice mailbox. PC World sent overnight letters to ten locations provided by InTech@net; all were returned due to invalid addresses or recipients.
As of this late April posting, PC World has not received any complaints from InTech@net customers. A dial-up account we opened with the firm was still operating after a month.
We tried to contact InTech via mail, phone, fax, and e-mail. In return, we got an e-mail signed by "Lori Hendricks, president" of InTech. The e-mail denied that InfoNet had any ownership interest in InTech and said that InfoNet merely provided its "ISP backbone" and handled all of its "technical matters," including domain name registrations.
Soon after we received that e-mail, the InfoNet site reappeared, featuring a letter from "William R. Page Jr., Founder/Chairman/CEO." (On InTech's domain name registrations, William Page Jr. is listed as vice president of InTech Corporation.) The letter offered to restore access to users who had been cut off, but it said that the company would not provide refunds. One InfoNet user contacted by PC World reported that his service had been restored.
That's not good enough for Gregg Buchanan. "You put up a Web site, and people just pour money into it. It's amazing how well they can hide."
The moral? Know who you are doing business with before you do business with them. As we move closer toward a Web-based economy, that advice is more relevant than ever.
For information on ISP finders, plus ways to avoid getting taken for a ride, see "Web Scam! How One ISP Took the Money and Ran" in the upcoming June issue of PC World magazine.
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