Marketing Exec Ordered To Pay $163M For 'Scareware' Scam
An executive with Innovative Marketing was hit with a $163 million judgment for helping to sell "scareware" to Web users.
U.S. District Court Judge Richard Bennett in Maryland ruled last week that Kristy Ross, who served as vice president of business development, was personally liable for money lost by consumers who were duped into purchasing unneeded software.
Bennett ruled that Ross "had authority to control the deceptive practices or acts" of Innovative Marketing, and that she "participated directly in these deceptive practices."
The judge also entered an injunction banning Ross from ever again marketing computer security software.
The ruling, published Tuesday by the Federal Trade Commission, stems from a 2008 FTC complaint against Innovative Marketing, ByteHosting Internet and seven individuals connected with the companies. The FTC accused them of marketing software via online pop-ups that told consumers their computers were infected with malware.
The ads told consumers that the malware could be fixed by purchasing software that cost between $30 and $100. Between 2004 and 2008, around 1 million consumers purchased programs like WinFixer, WinAntiVirus and Popupguard.
All of the people charged by the FTC settled the case except for Ross. Her lawyer argued that she shouldn't be held liable for the actions of the company, given that she wasn't a corporate officer and didn't directly participate in or control any deceptive acts.
But Bennett rejected those arguments and ruled that Ross was personally liable. The ruling, which came at the end of a brief trial, noted that Ross "used her expertise in marketing and personally approved, developed, wrote, altered, reviewed, and contributed to a large number of them."
Bennett wrote that on two occasions, Ross told developers to delete disclaimers that would have alerted consumers that the pop-ups were ads and not based on actual scans of their computers.
The judge also said that Ross was aware of complaints from consumers, because an ad network that Ross worked with, MyGeek (now called AdOn), reported problems to her.
"Chat log conversations involving Ms. Ross indicate that she was aware that the ads were “unpleasant” and that she knew that (Innovative Marketing's) advertising was causing problems, including low customer retention and even lawsuits."
Bennett ruled that Ross, along with Innovative and two other individuals were liable for around $163 million -- the amount the FTC estimated would be needed to reimburse consumers.