http://www.nytimes.com/library/tech/99/04/biztech/articles/23privacy.html
April 23, 1999
By STEPHEN LABATON
U.S. Agency Cracks Down on Internet Investigators
Web Sites of Information Brokers Proliferate
WASHINGTON -- The Federal Government Thursday began cracking down on the
deceptive practices of a proliferating number of private investigators who
advertise on the Internet that they can inexpensively provide confidential
details about bank accounts and telephone records.
In the first civil case of its kind, lawyers at the Federal Trade
Commission accused a Colorado couple of violating the law by posing as
bank customers to trick banks into providing confidential information. The
couple, James and Regana Rapp, had advertised on their Web site that their
company, Touch Tone Information Inc., could obtain bank records,
unpublished telephone numbers and financial assets.
Government officials said Touch Tone Information, one of scores of
investigative agencies that glean confidential information under false
pretenses, had employees make hundreds of telephone calls in which they
falsely claimed to be either a bank customer or relative. The Federal
Trade Commission Act makes it illegal to use such deceptive trade
practices.
Rapp acknowledged in an interview today that he and his employees had
tricked many banks and other institutions into providing confidential
information. Touch Tone's Internet site advertised that for $100 it could
obtain information within 10 days about a bank account -- $200 for a stock
account. It also said it could obtain telephone toll records and unlisted
numbers and addresses.
Rapp said that as a result of the lawsuit, he had removed his Web site and
would stop the practice of posing as a customer of the institution that he
was trying to get information from. He said that the trade commission's
action would curtail only a small part of his investigations business and
complained that it would only hurt victims -- clients like mothers seeking
payments from dead-beat fathers and other government agencies that he said
had employed him to track down assets.
"If you're a dead-beat dad or a neglected spouse," Rapp said, "you don't
have to worry anymore."
Commercial Web sites run by private investigators have flourished in
recent years, advertising the ability to find a wide array of public and
confidential information -- like telephone records and credit and bank
accounts -- for lawyers, spurned spouses and burned business partners.
Some of the information they sell is available in public records, but
other information can only be obtained by deception or bribery, privacy
experts say. Although law-enforcement officials in some states like
Connecticut and Massachusetts have prosecuted investigators who illegally
obtain information by pretending to be either a bank customer or relative,
the Federal Government has moved more slowly.
Many privacy experts say that as long as law firms and big businesses are
largely insulated from Government prosecution because the laws are
narrowly written, the deceptive practices of investigators like the Rapps
will never be curtailed.
"The F.T.C. cannot stop this practice because there is a lot of value for
this data, and people will continue to pay for it," said Evan Hendricks,
editor of Privacy Times, a Washington news letter that covers privacy
issues.
But officials at the Federal Trade Commission said the case was filed as a
warning to both the information brokerage industry and the bigger fish,
the firms that retain the investigators.
"We want to send a message to others that this kind of deception and
invasion of privacy is unacceptable," said Robert Pitofsky, chairman of
the commission.
Today's lawsuit is part of a broader policy agenda promoted by Pitofsky to
address privacy issues and the Internet. Earlier this week, the commission
announced a proposal for new rules intended to protect the privacy
interests of children on the Internet by generally requiring operators of
Web sites to obtain parental consent before soliciting information from
children under 13.
The agency has asked Congress for the authority to seek civil penalties
against brokers who obtain sensitive financial information about
individuals under false pretenses. In its case brought today, the agency
sought forfeiture of Touch Tone's profits and an injunction against any
future deceptive practices by the company.
Representative Jim Leach, the Iowa Republican who heads the House banking
committee, recently introduced legislation that would make it a crime to
knowingly deceive a financial information to obtain confidential
information. But the proposal would also raise the burden of proof for
civil cases, which has created some concern at the Federal Trade
Commission.
Officials at the Justice Department have said they believe they implicitly
have authority to make criminal cases under Federal wire fraud laws.
Still, the laws on the issue are far from clear.
Orson Swindle, a member of the Federal Trade Commission, dissented from
the agency's decision to file a lawsuit against Touch Tone on the ground
that he did not think the Federal Trade Commission Act or the agency's
guidelines on the law prohibited the Rapps' conduct.
-o-
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Received on Fri Apr 23 18:35:42 1999