Utah-based Pacific WebWorks has agreed to provide information in what Google Inc. says is "the tip of the iceberg" of a nationwide fraud that has scammed thousands of people out of millions of dollars.
Google attorney George Haley told U.S. District Judge Bruce Jenkins at a Wednesday hearing in Salt Lake City that Pacific WebWorks had consented to Google's demand that it provide possible evidence as part of a lawsuit filed last week against the Utah company and unnamed other defendants.
"There's a major national scam that's going on across the country," said Haley, adding that the alleged fraud involves roping in people by using pitches about making money with Google while working at home.
Google is being blamed for the massive fraud by some consumers and state attorneys general, and the Internet search giant wants to discover who besides Pacific WebWorks might be behind the efforts that involve at least 2,650 Web sites, Haley said.
Web sites linked to the Utah company "are the tip of the iceberg, and discovery [of evidence] is required to determine whether PWW or others are the masterminds behind the scam," Google said in a memo to the court before the Wednesday hearing.
Haley also told Jenkins that Google and Pacific WebWorks had reached an "agreement in principle" to settle the lawsuit, but he declined after the hearing to elaborate. Haley said others will be named in the lawsuit as their identities are discovered.
In court Wednesday, an attorney for Pacific WebWorks said only that the company had agreed to cooperate. CEO Kenneth W. Bell declined later in the day to comment, after last week saying in a statement that Pacific WebWorks would "vigorously and responsibly defend itself."
In court papers, Google attorneys said the hundreds of Web sites linked to the alleged fraud change addresses frequently and that their ownership is obscured. They lure consumers with false ads and images, and in accounts portrayed as news stories, in which people make hundreds of dollars a month using Google.
The sites "trick consumers into providing credit or debit card information to cover nominal 'shipping and handling' or 'access' fees, which information defendants then use to charge unexpected, recurring monthly fees ranging up to $79.90 per month," Google told the court.
Google's allegations against Pacific WebWorks appear similar to those made against the Salt Lake City-based company that resulted in a 2007 settlement with the Utah Division of Consumer Protection. In that action, the division said Pacific WebWorks offered a "free trial" to a CD called "E-commerce Tutor" that supposedly provided instructions on how to make money on eBay.
Pacific WebWorks failed to tell consumers up front about additional charges and did not properly allow them to authorize those charges on their credit cards, according to the state citation. In the settlement, the company agreed to abide by Utah consumer laws in future transactions.
A spokesperson on Wednesday said the division would not confirm or deny it is investigating Pacific WebWorks for violating the settlement.
Hundreds of complaints are posted on Internet message boards against Pacific Webworks and related companies. The local Better Business Bureau has given the company an "F" grade after receiving 732 complaints.
Pacific Webworks also is facing a proposed class-action lawsuit in Illinois that includes many of the same allegations as the Google action. In addition, the Federal Trade Commission in June lodged a lawsuit in federal court in Nevada against entities that appear, according to court documents, to be connected to Pacific Webworks.
Pacific WebWorks shares were up 1 cent Wednesday in over-the-counter trading to finish at 5 cents a share.
In ads with false images and in accounts portrayed as news stories, consumers are told they can earn hundreds of dollars a month through Google, falsely implying the Internet search company is offering the products.
The sites say there is only a small fee for processing or shipping.
In reality, consumers are charged up to about $80 a month on credit or debit cards.
Consumers receive nothing or get products that are practically worthless.
The company refuses to refund most charges, saying customers didn't read the fine print of sales agreements.
Some consumers say there was no agreement presented or that the consent part was buried far into a long document.
Sources: Court documents, Better Business Bureau, interviews