Jesse Willms

The pipeline that a free offer opens

Jesse Willms and the companies he controlled offered “free” or “risk-free” trials for acai berry weight-loss pills, teeth whiteners, resveratrol supplements, a work-at-home scheme, access to government grants, free credit reports, and penny auctions.

Buyers handed over card details for what were presented as small shipping and handling fees, plus “bonus” offers just for signing up. They were then charged for the “free” trial itself plus a recurring monthly fee, typically $79.95, and further recurring fees for each bonus. A money-back guarantee existed on paper; cancelling or getting a refund involved time-consuming calls and steps that made the offers, in the FTC’s words, far from risk-free.

As the FTC’s Bureau Director put it: “The defendants used the lure of a ‘free’ offer to open an illegal pipeline to consumers’ credit card and bank accounts.”

The penny auctions

Penny auction bids cost roughly $0.50 to $1 each, and every bid is paid for whether or not the bidder wins, while raising the item’s price by one cent. The offers indicated free bonus bids. People who supplied card details were charged $150 for introductory bonus bids and $11.95 per month for ongoing ones, without knowing.

The wider conduct

The FTC also charged false weight-loss and cancer-cure claims, bogus endorsements by Oprah Winfrey and Rachael Ray, and that the defendants gave merchant banks false or misleading information to keep card processing in the face of rising chargebacks and complaints. Debiting bank accounts without signed written consent also violated the Electronic Fund Transfer Act and Regulation E.

The operation ran through affiliate marketers whose banner ads, pop-ups, sponsored search terms and unsolicited email drove traffic, paid per consumer whose card was charged.

The scale and the settlement

The operation took more than $450 million across the United States, Canada, the United Kingdom, Australia and New Zealand, and almost four million consumers were affected.

The settlement permanently bans Willms and his companies from negative-option marketing, where silence is treated as permission to charge. The judgment is $359 million, suspended on surrender of bank funds and the proceeds of his house, personal property and corporate assets, including a Cadillac Escalade, fur coat and artwork.

Five individuals who provided services to Willms settled separately and are barred from misrepresenting themselves to payment processors and banks. Peter Graver’s judgment is suspended on payment of $20,000; Elizabeth Graver’s $38,000 judgment is not suspended; the judgments against Sechrist, Callister and Milne are suspended for inability to pay.

The FTC credited the Competition Bureau Canada, Service Alberta, the Royal Canadian Mounted Police and the Alberta Partnership Against Cross Border Fraud.

What is not established

Consent orders are for settlement purposes only and do not constitute an admission that the law was violated.