Digest 09.25.2020: Multimillion Charity Scam | Data Privacy Risks of Fertility App | Lexis Settles Whistleblower Complaint


Alleged Scammers Collected Tens of Millions of Dollars for Fake Charities

  • Minnesota AG Keith Ellison, New Jersey AG Gurbir Grewal, New York AG Letitia James, Virginia AG Mark Herring and the Federal Trade Commission (“FTC”) reached a settlement with Mark Gelvan, multiple companies under his control, and his associates (collectively “Defendants”) over allegations that they ran a deceptive fundraising scheme in violation of the FTC Act, the Telemarketing Sales Rule, and various state laws relating to charitable organizations and consumer protection.
  • The complaint alleged that Defendants solicited and accepted tens of millions of dollars from donors on behalf of sham charities, including those purporting to support Vietnam veterans, breast cancer survivors, and disabled police officers, through telemarketing and mailings that promised the money donated would go to worthy causes, but in reality less than 5 percent of the donations collected were spent on the stated charitable programs.
  • Under the terms of the proposed settlements with Gelvan and the individual defendants, among other things, Gelvan and the corporate defendants are subject to a monetary judgment of approximately $56 million, partially suspended due to inability to pay and therefore reduced to approximately $45,000 for the companies and $800,000 for Gelvan individually. Gelvan’s three individual associates will also be subject to monetary judgments totaling $2.49 million, also partially suspended and reduced to approximately $47,000.
  • All funds will be paid to New York, which will distribute them to charities providing the services that the sham charities purported to provide. In addition, all individual defendants will be permanently barred from participating in any charity fundraising, including political action committees.

Consumer Financial Protection Bureau

Auto-Loan Servicer Improperly Imposed Loss Damage Waiver on Customers

  • The Consumer Financial Protection Bureau (“CFPB”) reached a settlement with auto-loan servicer Lobel Financial Corporation (“Lobel”) to resolve allegations that Lobel engaged in unfair practices regarding its Loss Damage Waiver (“LDW”) product, in violation of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
  • According to the consent order, the CFPB found that Lobel improperly added its LDW product, which is not an insurance product, to accounts of customers with insufficient insurance instead of force-placing insurance on their accounts, continued to bill certain consumers for LDW coverage while failing to actually provide the coverage, charged some customers LDW-related fees without disclosing them in its LDW contract, and collected LDW-related fees from customers who were not obligated to pay them.
  • Under the terms of the consent order, among other things, Lobel will pay approximately $1.35 million in consumer redress, a $100,000 civil money penalty, and promulgate a written redress plan.

Consumer Protection

Massachusetts AG Alleges that Payment Processor Should Have Known Cryptocurrency Offer Was a Scam

  • Massachusetts AG Maura Healey reached a settlement with payment processor Stripe, Inc. to resolve allegations that its fraud prevention practices violated Massachusetts’s Consumer Protection Law.
  • In the assurance of discontinuance, the AG’s office alleges that Stripe processed payments for an allegedly fraudulent and unregistered offer and sale of cryptocurrency, and that Stripe knew or should have known that the offer and sale was fraudulent, but failed to prevent harm to consumers because its risk monitoring and fraud prevention and mitigation procedures were inadequate.
  • Under the terms of the assurance of discontinuance, among other things, Stripe agreed to pay $120,000 to the AG’s office. Stripe also improved its risk monitoring and fraud prevention and mitigation procedures, including by enhancing duplicate screening procedures for accounts with shared bank accounts, improving the protocols for review and monitoring of merchants’ websites, and revising its procedures regarding the handling of law enforcement requests and consumer complaints.

FTC Sends Strong Signal to VoIP Providers: Facilitating Illegal Telemarketing Calls Can Result in Steep Consequences

  • The Federal Trade Commission (“FTC”) and Ohio AG Dave Yost reached a settlement with Educare Centre Services, Inc. (“Educare”), voice-over-internet-protocol (“VoIP”) provider Globex Telecom, Inc. (“Globex”) and associated companies and individuals (collectively “Defendants”) to resolve allegations that Globex facilitated calls, including illegal robocalls, that promoted Educare’s alleged credit card interest reduction scam in violation of the FTC Act, the Telemarketing Sales Rule, and Ohio’s Consumer Sales Practices Act and Telephone Solicitation Sales Act.
  • The complaint alleged that Educare, which was controlled by Mohammed Souheil, Globex’s former CEO and President, used Globex’s services to make illegal robocalls to U.S. consumers to market Educare’s fraudulent credit card interest rate reduction services, and that Globex knew, or consciously avoided knowing, about Educare’s illegal activities.
  • Under the terms of the settlements with the Defendants, among other things, Globex and a subsidiary will pay $1.95 million to the FTC, Souheil and two companies under his control are collectively subject to a $7.5 million judgment, largely suspended for inability to pay, and the rest of the defendants, including Educare, are collectively subject to judgments totaling $10.3 million, largely suspended for inability to pay. In addition, the non-Globex defendants will be banned from participating in any telemarketing activities in the United States and from marketing debt relief products or services.

Data Privacy & Security

California Attorney General: Fertility App Must Improve Data Privacy and Security Measures; Pay $250,000 Civil Penalty

  • California AG Xavier Becerra reached a settlement with mobile-app maker Glow, Inc. and related company Upward Labs Holdings, Inc. (collectively “Glow”) to resolve allegations that its fertility-tracking mobile app improperly and unsafely handled women’s personal and medical information in violation of the state’s Confidentiality of Medical Information Act, Unfair Competition Law, and False Advertising Law.
  • The complaint alleged that, among other things, Glow’s app failed to adequately safeguard health information, allowed access to users’ information without their consent, contained security flaws that could allowed third parties to reset user account passwords without user consent, and made misleading claims about the security of users’ data.
  • Under the terms of the proposed final judgment, among other things, Glow will pay a $250,000 civil penalty will be required to incorporate privacy and security design principles into its mobile apps, and to obtain affirmative user consent prior to sharing or disclosing sensitive information.

False Claims

LexisNexis Settles False Claims Allegations of Nonpayment of Agency Fees Owed to Florida

  • Florida AG Ashley Moody reached a settlement with data company LexisNexis Coplogic Solutions, Inc. (“Lexis”) to resolve allegations that it systematically underpaid fees it owed under a contract to the state in violation of Florida’s False Claims Act.
  • The complaint, filed by a whistleblower, alleged that Lexis underreported that number of Florida auto crash reports it sold to the public and did not pay the full amount of the agency fees it collected from its sales of the reports because it did not report or pay fees on repeat sales.
  • Under the terms of the settlement, Lexis will pay approximately $7.8 million to Florida, of which $300,000 will cover attorneys’ fees and costs, $1.8 million to the whistleblower, and $300,000 to whistleblower’s counsel.
  • Lexis has previously reached a $5.8 million multistate settlement over similar allegations.