Feds sue in Las Vegas to bust ‘Net pharmacy scam

Friday, May 28, 2004 | 10:47 a.m.

SUN STAFF AND WIRE REPORTS

Scammers lured consumers to a Web site with a bogus offer of pharmacy-discount cards and then tried to debit $10 million from their checking accounts, but only about 30 percent of the debits were successful, U.S. consumer-protection regulators said Thursday.

The Federal Trade Commission said it obtained an order from U.S. District Judge Robert C. Jones in Las Vegas shutting down the operation and freezing more than $2 million that was taken from consumers' checking accounts without their permission.

The case was filed in U.S. District Court in Las Vegas because the pharmacy-card company used a Las Vegas third-party firm to process some of the consumer debits, said Tracy Thorleifson, FTC attorney with the agency's Seattle regional field office.

She said the largest volume of money was being processed through InterBill in Las Vegas, which had about $2 million of the discount-card's assets.

"I don't know why they ended up with the most reserves there, but they did," Thorleifson said. "InterBill is not a defendant."

Callers to InterBill were directed Thursday to a phone message. It says consumers who are calling in reference to Pharmacycards.com about a $139 debit to their bank accounts and are requesting a refund should contact their banks and have the banks submit the transactions as returned items. Then, InterBill's bank will process the refund on the consumers' behalf.

There were two other credit card processing companies in Southern California, Thorleifson said.

Pharmacycards.com and its operators David G. Turner and Steve Pearson contracted with payment processors and attempted to debit $139 from each of more than 90,000 bank accounts without authorization, the FTC said. Banks refused most debit requests, but more than $3.5 million was taken from checking accounts, the FTC said.

The Pharmacycards.com Web site disappeared from the Internet after its operators pocketed $883,869, the FTC said.

"Defendants claimed to operate a legitimate Internet-based business offering consumers a prescription-drug discount card," the FTC said in court papers. "The Pharmacycards.com Web site touted the benefits of the supposed program, promising that the discount card would be accepted by most major retail pharmacies," yet "it appears there were no 'participating pharmacies."'

The companies routed customers' calls to a toll-free number answered by a Montreal call center and referred consumers to a bogus address in Vancouver, the FTC said.

The FTC said Turner, a British citizen and London resident, is the owner of Pharmacycards.com and its parent companies, and Pearson is a manager. The FTC said it did not have an address for Pearson, who provided a U.K. driver's license to one payment processor.

The court papers did not list any addresses for the business except mail drops.

"Beyond the injury to the more than 15,000 consumers who have not received refunds, the consumers' banks, too, suffered losses," the FTC said in court papers.

"It costs a bank between $14 and $30 in customer service costs for each returned" debit request, the FTC said. "Ultimately these costs are passed on to all of the banks' customers."

Bloomberg News

contributed to this report.