• by Wendy Davis  @wendyndavis, November 9, 2009

Law enforcement officials in New York and Texas have extracted $750,000 from social networking site Tagged.com to settle investigations that the company engaged in deceptive email marketing.

The company came under fire earlier this year for allegedly duping new members into providing email addresses and passwords. Tagged then allegedly sent all of the new members' contacts invitations that appeared to have come from the members themselves.

The agreement with both New York and Texas, unveiled Monday, calls for Tagged to give clear and conspicuous notice to consumers before accessing their email boxes. The pacts also require Tagged to obtain consumers' explicit consent before sending invitations to their contacts. Tagged will pay $500,000 in New York and $250,000 in Texas.

New York Attorney General Andrew Cuomo said in July that he planned to sue the company for false advertising, invasion of privacy and engaging in a deceptive business practice. The following month, two California residents brought a potential class-action lawsuit against Tagged for allegedly harvesting their email contacts.

Tagged CEO Greg Tseng said Monday in a blog post that Tagged had revamped its registration procedures after meeting with Cuomo's staff. "Despite differences of opinion about Tagged's intentions, we did acknowledge that the membership drive aggravated some customers," Tseng said.

Among other changes, Tagged says it now clearly labels the buttons to "import friends" and "send invites," and added an additional screen confirming that members want to send email invitations to their contacts.

Earlier this year, Tseng said Tagged had tested a new registration system, but put the brakes on in June after receiving around 2,000 complaints. The New York authorities alleged that Tagged sent more than 60 million deceptive email invitations between April 16 and June 7 of this year.

Scott Kamber, a lawyer with KamberEdelson who is representing consumers in the pending civil lawsuit against Tagged, says his clients will continue to pursue their lawsuit regardless of the company's settlements with law enforcement authorities. The plaintiffs he represents allege that Tagged violated the federal Stored Communications Act and Computer Fraud and Abuse Act.

"We expected that there would be a resolution with the Attorney General's office," Kamber said. "At the end of the day, I think our suit probably facilitated that resolution," he said, adding that the private lawsuit put additional pressure on Tagged to reach a settlement with law enforcement officials.

Tagged isn't the only social networking site to come under fire for asking users to provide email passwords and then sending messages to contacts. Reunion.com also faces a pending class-action suit stemming from similar allegations, although that case was brought by recipients of the emails and not the people whose contacts were allegedly harvested. U.S. District Court Judge Maxine Chesney in California initially dismissed that case because the recipients didn't claim they lost money as a result of the emails, but recently requested additional legal briefs on the issue.

Tseng previously faced legal action regarding email ads. In 2006, he served as CEO of JumpStart, which agreed to pay $900,000 to settle a spam complaint by the Federal Trade Commission.