Buyers on the Internet face of gauntlet of operators attempting to defraud them through auctions, non-delivery of merchandise and the theft of credit card details, according to a report by the Internet Fraud Complaint Centre (IFCC) in the US.

The IFCC reported referring 48,252 fraud complaints to law enforcement authorities in 2002, triple the number of referrals made in 2001. The case involved a potential total dollar loss of US $54 million, up from $17 million in 2001.

For the third straight year, Internet auction fraud was the most reported offence, making up 46 percent of referred complaints. The failure to receive merchandise and the non-payment for services accounted for 31 percent of complaints. Credit and debit card fraud made up nearly 12 percent of complaints.

The IFCC also processed an additional 36,920 complaints on computer intrusions, unsolicited e-mail and child pornography.

The Internet Fraud Complaint Centre is run by the FBI and the National White Collar Crime Centre. You only have to go the US district attorneys Internet sites to find a case involving large sums stolen through the Internet.

One such case, filed in March, describes how members of the Mafia have now moved to the Internet, where it has found a new way to fleece the public. According to the case the Mafia managed to allegedly defraud $230 million from consumers in the US, Europe and Asia through the Internet.

The indictment in the fraud names Richard Martino, described in the court filing as a member of the "Gambino Organised Crime Family of La Cosa Nostra. Two executives and five corporations for their participation in a scheme that offered bogus "free tours" of adult entertainment websites.

The group used websites based on magazines published by the Crescent Publishing Group, Inc., a Manhattan-based publishing company. Crescent published over a dozen different magazines and had almost $40 million in print revenue.

According to the indictment, the websites were part of a joint venture formed in 1996 between Crescent and Lexitrans, Inc., which was secretly controlled by Martino and featured content from magazines published by Crescent, including Playgirl, High Society and others.

The heart of the scheme involved advertised tours of the websites by tricking the users into providing credit or debit card information, purportedly as proof of age. The group promised that the card would not be billed but instead they charged users $59.99 per month after the initial website visit, without the users' knowledge or consent.

Due to the high number of "chargebacks" from disgruntled website users who complained about unauthorised charges to their credit cards Visa finally cut the company off from its Visa programme in the US. The defendants then created a series of shell companies with new bank accounts — all secretly controlled by Crescent — on a continuous, rolling basis, in violation of Visa's operating regulations, and abandoned their old accounts as chargeback rates mounted.

Crescent and its chief executive have since paid out $30 million in penalties as a settlement in the case without admitting liability. The FBI is now going after the Gambino crime family for the $230 million it says is owed consumers.

***

Many firms struggle to find a balance between a centralised control of their information technology (IT) systems and the increasing pressure from business executives for them to get more involved in the management of such systems, according to a new study by Forrester.

A survey by the firm found that one-third of business leaders are displeased with their IT shop's performance. Among the 437 business leaders involved in the survey, those who are dissatisfied with their companies IT also tend to instigate organisational battles. "With ownership battles comes lower project performance," Forrester says.

"Firms where business execs are unhappy with IT face average project failure rates of 32 percent compared with 19 percent at other firms. Forrester also found that most business leaders, including those satisfied and dissatisfied with IT, want IT to help lower company operating costs.

But execs who are pleased with their IT shop lean more on it to help improve employee productivity and product and process quality.

***

Tech Tattle deals with issues in technology. Contact Ahmed at editor@offshoreon.com.