Judge Orders $16M Payment From Fake News Site Marketers

Sites Hawked Weight-Loss Products Using News Network Logos
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A Connecticut U.S. District court has issued a $16 million summary judgment against LeadClick ($12 million) and Corelogic ($4 million), affiliate marketers that drove traffic to fake news sites that hawked LeanSpa acai berry and 'colon cleansing' weight-loss products.

The sites -- channel8health.com, dailyhealth6.com and online6health.com -- often included the logos of news outlets, including CNN, MSNBC and Fox News, to lend weight to their claims about weight loss.

The Federal Trade Commission had sought the judgment, which the two companies are challenging in a federal appeals court. The money is not a fine, but disgorgement of the marketers' "ill-gotten gains" from driving traffic to the websites, where consumers bought the product through a "free trial" offer that morphed into a monthly $79.99 payment that was tough to cancel.

The companies don’t have to pay the money until the defendants have exhausted their appeal, which would be if the Supreme Court denies cert. But if they appeal and lose, they would have to pay the judgment plus what had accrued during the appeal.

The FTC had already settled back in January 2014 with LeanSpa and one of its principals, Boris Mizhen, for $7 million, but the marketing companies -- allegedly LeadClick and CoreLogic -- which were paid millions to create the bogus news sites and drive Web surfers to them, did not settle.

The FTC then sought the judgment in the Connecticut court.

“This ruling is good news because it takes ill-gotten gains out of the hands of companies who knew they were promoting a scam and gives them back to the consumers who lost millions of dollars,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection, in announcing the judgement. “It also makes clear that a parent company cannot retain ill-gotten gains of its subsidiaries.”

The case dates back to December 2011, when the FTC and the State of Connecticut sued LeanSpa, Boris Mizhen and the marketers.