The duo announced, at a New York City press conference on Thursday, parallel anti-spam lawsuits against three e-mail marketing companies that include six civil complaints of fraudulent business practices.
The investigation and subsequent suits are centered on the e-mail transmission practices of New York-based Synergy 6 Inc., and its president Justin Champion, and the contracted work of two of Synergys partners: OptInRealBig.com LLC, a Westminster, Colo.-based marketing firm, and its president, Scott Richter; and Delta Seven Communications, based in Plano, Texas, and its principals, Denny Cole and Paul Boes. Richter has been labeled the third most-prolific global spammer by the Register of Known Spam Operators, an anti-spam and consumer advocacy group.
According to the company and federal officials, the legal actions are the unique culmination of a six-month investigation and collaboration between one of the most influential state law-enforcement agency and Microsoft. The collaboration comes months after the pair were at odds during the highly-publicized, multi-state antitrust case against the Redmond, Wash.-based corporation.
In the press conference, Spitzer—known for his tough rhetoric in fighting fraud in securities cases, and most recently in "market timing" practices by mutual fund managers—mentioned that he was pleased to be working with Microsofts General Counsel Brad Smith, since they were old college pals. However, Spitzers levity turned serious as he highlighted the background investigation.
In his presentation, Spitzer offered details of how Microsoft set up a set of "spam traps," designed to attract fraudulent e-mail transmissions. These traps captured 8,000 spam e-mails between May 13 and June 13 this year.
New York is seeking $500 per fraudulent comment based on its discovery of 40,000 fraudulent comments during a single month period —equal to $20 million in total. Microsoft is suing for $18.8 million in damages in Washington state and "would be happy to pursue the remainder if theres anything left after New Yorks case," Smith said during the question period.
"I think New York needs it more," Spitzer offered as a rejoinder.
Spitzer told press conference attendees that spam practices inhibit effective e-commerce, and is a major resource drain on Internet service providers, enterprises and consumers. He added that it is a practice with "no viable business model."
Spitzer vowed to drive spamming into bankruptcy in New York and elsewhere.
Both Spitzer and Smith mentioned repeatedly the presidents of Synergy 6 and OptInRealBig.com, Justin Champion and Scott Richter, respectively, were central figures of the fraud.
Smith characterized todays announcement as establishing a "new road map for investigatory work." He went on to say that these cases would prove that the defendants in this case used "intentional, deceptive" methods and abused some "514 compromised computers including innocent schools, hospitals and government ministries in the U.S. and abroad."
In a statement, OptInRealBig.com and Scott Richter "vigorously" denied any violations of New York law and "asked their clients and friends make no decision regarding any liability on their part until they have the opportunity to respond to any allegations made against them." Richter said in the statement that he and the company will avoid any further comment pending a review of the complaint.
When asked about how this injunction tied into the recently signed-into-law anti-spam bill, Smith said that is not affected by it, as many state laws are already on the books. Smith added, however, that the new law is helpful as it sets the national standard as of Jan. 1, 2004.