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Medina millionaire's rep takes another hit with $1.3 million Intelius settlement

Original post August 10

Bellevue-based Intelius has agreed to pay $1.3 million in a settlement over allegations that it tricked customers into deceptive credit card charges, state Attorney General Rob McKenna said Tuesday.

Company CEO Naveen Jain was aware of thousands of consumer complaints, but he did nothing about them, according to the Attorney General's Office.

Jain, who lives in Medina, settled a separate case over alleged trade-rules violations during his time as CEO of InfoSpace, an internet search company he founded in 1996.

A Seattle Times report from 2005 showed that Jain used charisma and deception to make InfoSpace appear more successful to investors than it really was before its stock took a nosedive.

A lower court issued a $247 million judgement against Jain for violations of short-swing trading rules, but he settled the case for $105 million during an appeal.

The Intelius settlement stems from allegations that the company, which specializes in online background checks and public-records searches, trapped customers unwittingly into programs they didn't want.

The alleged "post-transaction marketing" scheme worked by getting customers to buy services and then forcing them to click through prompts that appeared to confirm their orders once Intelius had their credit card information.

The problem is that some of those clicks would sign people up for additional services that included monthly fees.

"Post-transaction marketing plunges you into an online labyrinth where the only way out is to click and click and click," McKenna said. "One wrong turn and you're enrolled in a membership program that costs you $20 or more each month. And you'd never know until you scrutinize your credit card bill."

The Attorney General's Office says Intelius swindled $62 million in one year through one such program called Identity Protect.

Intelius admitted no wrongdoing in its settlement, but the company agreed not to do business with several companies it was involved with before. It also promised not to share credit card information with other organizations.

In addition, customers must now give their express consent before Intelius can enroll them in membership programs.

Consumers from Washington state are eligible for refunds if they were enrolled in the company's Identity Protect program before Aug. 12, 2009, have not received full refunds, and have not used any "member-enabled benefit."

The Attorney General's Office has been monitoring several companies that it claims use "post-transaction marketing" schemes.

"Investigations by our office suggest more than $50 million has been deceptively obtained from Washington consumers by a handful of businesses," McKenna said.

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