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Monday, Jun 17, 2024

TITAN—Feds Move to Shut Down Web ‘Scams’

A San Fernando Valley company has been shut down and put into receivership by the Federal Trade Commission, after a year-long investigation of dot-com businesses. Titan Business Solutions, which in June was named one of the 100 fastest growing businesses by Entrepreneur Magazine, late last month turned up on a list of the FTC’s “Top 10 Online Scams.” The Burbank-based company, which sold software and other materials to set up home-based medical billing practices serving private physicians, is one of a growing number of companies using the Internet to engage in what the FTC says are deceptive business practices. For its part, Titan claims it is being declared guilty by association. “I think there is a big push by our present administration, and I’m in favor of that, to eliminate telemarketing fraud,” said Scott Ford, president of Titan. “I believe there are unethical players within the medical billing industry, but we’re not one of them, and I feel we were lumped in. I don’t think (the FTC) did a whole lot of research before targeting our company.” Titan, which has been operating under its current management since last year, sold medical billing services to thousands of people who, in turn, used the Titan software and materials to sell electronic billing services to physicians. In addition to providing software and sales and marketing materials, Titan offered support services ranging from help setting up the system and reading and generating reports to motivating customers. Earlier this month, the FTC closed the company down after a U.S. District Court judge issued an injunction against the business and assigned a receiver to handle the company’s affairs. “Thirty percent of the complaints (received by the FTC) are now Internet-related complaints,” said Marianne Schwanke, a staff attorney with the FTC who coordinated the “Top 10” sting. “About two years ago it was at about 12 percent. Last year it was about 24 percent, so it is increasing each year.” The FTC is charging that Titan duped some 14,000 customers by promising that they could each earn as much as $45,000 annually by using Titan’s billing system, including a listing of physicians that could potentially be sold the services. The agency charges that, while some physicians do use such outside services, it is unlikely that they would engage someone working from home to handle their billing. “On the whole, the average person can’t get a job this way, so they spend their money and get nothing in return,” said Jennifer Larabee, an attorney for the FTC. No relationship with doctors The agency charges that Titan’s marketing materials implied that it had the kinds of pre-existing relationships that would encourage physicians to make use of its customers’ services, when the physician lists were actually culled from Medicare listings. “Consumers were told to send a letter of introduction, and they had to believe they were sending a letter to someone who already knew about Titan when, in reality, all they were doing was cold-calling doctors with letters,” Larabee said. Ford counters that the company clearly qualified the claims it made, explaining that the physician lists merely represented those doctors in the state who were currently processing claims on paper and therefore potential customers for an electronic billing service. “If you owned a retail store for big tall men, and I gave you a list of every man over 6 feet 2 inches tall and 225 pounds, I can’t tell you they’re going to buy clothes from that store, but they’re pre-qualified,” said Ford. “At no time did we represent that we have a pre-existing relationship (with the doctors).” Ford said that the company estimated potential earnings by multiplying the average per-claim processing fee (about $3) by the estimated number of claims a physician files annually (350 to 500 claims), but he added that Titan did not promise customers would achieve those levels. “The consumer is informed that their income is solely determined by their own efforts and ability,” Ford said. “It’s also well-documented within the disclosure statement. We’re not in a position to guarantee anyone any income.” In support of his argument, Ford said he has received numerous letters from satisfied customers, praising the company’s software and its customer support services. He said that the FTC filed written complaints from 18 consumers who did business with Titan, and half of those complainants had previously been issued refunds. The remainder of the complaints were either considered frivolous or were issues that the company had not yet resolved, Ford said. The FTC claims that its charges came after a comprehensive study that included a consumer complaint database used by over 200 law enforcement agencies. The FTC generated a list of categories that showed up most often from that list, and then compiled its “Top 10” companies. One reason that Titan was targeted, the agency said, was that it operated a Web site to conduct its business. “The reason it was part of the Top 10 is because the Web site was an integral part of the way they did business,” said Amy Brothers, another FTC attorney. “That’s why it was chosen to be part of the sweep.” Although the agency investigates deceptive business practices regularly, this is the first time it decided to focus on what it calls “dot-com cons.” Internet fraud on the rise “The Internet is so ubiquitous and there are so many online businesses, this is where our complaints have been increasing,” said Schwanke. “And we feel it’s important to send a message that the same rules apply offline and online.” Before the days of e-commerce, FTC officials said, most con artists were relegated to advertising locally, which limited the scope of the damage they could do. With the Internet, the number of victims, and therefore, the damage done, has increased exponentially. “The Internet makes it easy for scam artists to reach many more consumers than they would (have before), and the nature of the Internet makes it more difficult to find the perpetrators,” Schwanke said. Ford said the company plans to fight the charges, but he added that the damage already done to the business is irreparable. Titan has invested over $1 million in technology and staffing. Its computers and software have been confiscated and will be auctioned off, Ford said, and by the time the issue is resolved, its staff will likely have gone on to other jobs. “You have 100 employees scattered to the wind and, due to the fact that the receiver is not willing to support the current customers, there will be many unsatisfied customers,” said Ford. “The damage to the company will be incredible at that point.”

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