U.S. Fails to Prosecute Internet Fraud Cases: Report

WASHINGTON(Reuters) – While Web users drown in spam and fend off scams aimed atstealing their money, U.S. federal and state law enforcementauthorities are doing little to resolve what has become amulti-billion-dollar problem, a think tank said on Monday.

In the 20 states that give a number for consumer complaints, therewere roughly 20,000 Internet-related complaints in 2007, said thegroup, which surveyed officials in all 50 states but received widelyvarying amounts of data.

Eight states put Internet-related complaints among their top-threeconsumer headaches in 2007 while 24 states had some form of onlinefraud in their top 10 complaints, according to the Center for AmericanProgress (CAP), which worked with the Center for Democracy andTechnology.

And the complaints are not unfounded; spyware, viruses and phishingcost consumers $7.1 billion in 2007, up from $2 billion the previousyear, the report said.

Phishing is using e-mail to try to fraudulently get information likepasswords or credit card numbers. Spyware is software installed on acomputer without the owner’s consent. It can be used to monitorcomputer use, or take over the computer.

Paula Selis, senior counsel for the office of Washington state’sattorney general, warned that crime associated with the Internet coulddamage online commerce. "There must be a recognition that online fraudis a huge threat," she told reporters.

Despite the large number of complaints, the group found few prosecutions of online fraud.

"It’s clear … that state attorneys general are not doing a wholelot about Internet consumer protection," Reece Rushing, CAP’s directorof regulatory and information policy, said at a news conference. "Theyhaven’t made it a priority. In the states that have made it a prioritythey’ve been able to win settlements."

The National Association of Attorneys General’s bimonthly CybercrimeNewsletter for 2006 and 2007 mentioned just 55 prosecutions of Internetfraud, 26 related to online sales or services, 15 related to datasecurity or identity theft and 14 involving spyware, spam or phishing.

In 2007, Washington state sued Consumer Digital Services, accusingit of promising free goods in exchange for personal information. As aresult, more than 13,000 Washington state consumers were charged $14.95on their phone bills for Internet services they did not want. Under thesettlement, the money is to be refunded and the company to paypenalties and fees that could total $1 million, the report said.

(Reporting by Diane Bartz; Editing by Braden Reddall)