Internet Service Provider Awarded $1 Billion in Spam Damages

Grant Gross, IDG News Service

Antispam activists disagree about whether a $1.08 billion judgment against three spammers in Iowa last week will discourage others from sending unsolicited bulk e-mail.

Judge Charles Wolle, with the U.S. District Court for the Southern District of Iowa, awarded the money, believed to be the largest spam judgment ever, to Robert Kramer, owner of CIS Internet Services, an ISP (Internet service provider) based in Clinton, Iowa. Kramer accused the three companies of sending his 5000-customer ISP millions of pieces of spam between August and December 2003.

Wolle, using an Iowa antispam law and a U.S. racketeering law, ordered Cash Link Systems of Florida to pay Kramer $360 million; AMP Dollar Savings of Arizona to pay $720 million; and TEI Marketing Group of Florida to pay $140,000. The Iowa spam law allows damages of $10 per spam message sent, plus punitive damages.

Opinions Differ

Kramer doesn't expect to collect the entire judgment, but he hopes to collect at least enough money to cover the damages caused by the spam, says his lawyer, Kelly Wallace, of Wellborn and Wallace, in Atlanta. The damages total "several hundred thousand dollars," and the spammers have "considerable assets," Wallace says.

"This is the best kind of law you can practice on the civil side," says Wallace, whose law firm specializes in suing spammers. "You feel good at the end of the day. We're putting spammers out of business."

Major ISPs have turned to the courts to deal with their increasing spam problems.

But Laura Atkins, president of the antispam group SpamCon Foundation, questioned whether the award would actually stop many spammers. The three companies are likely to pay a small fraction of the judgment, she says, and many spammers are based in Florida because the law there allows those filing bankruptcy to keep significant assets.

SEC Involvement

Another factor may make collection difficult in this case. Defendant Cash Link Systems, which used unsolicited e-mail to advertise a cashless automated teller machine (ATM), had its assets seized in July by the U.S. Securities and Exchange Commission (SEC). The SEC accused Cash Link Systems of conducting a fraudulent investment scheme.

The judgment was the largest against a spammer that Atkins can recall, and it may cause some small-time spammers to think twice after seeing the judgment, but will not affect large-scale spammers, Atkins says. "(The defendants) will file for bankruptcy, they'll reincorporate under a new name, and they'll move on," she adds.

Spam prosecutions resulting in jail time, such as a Virginia case in November that included a jail sentence of nine years, would be more effective in discouraging other spammers, Atkins says. "Spammers can avoid the judgment, but jail is different," she says.

But John Levine, a board member of the Coalition Against Unsolicited Commercial Email, says the judgment could help educate spammers and judges about spam law. "This should help get the message across that spamming is illegal, that you can actually get in trouble...if you do it," says Levine, also chairman of the Internet Research Task Force's antispam group.

Going to School on Spam

The case is also an opportunity to show judges the damage spam does, Levine says. "Spam law is so new," he adds. "That's one educated judge, and 10,000 to go."

The lawsuit may also allow Kramer's ISP to seize the computers owned by the spammers, slowing their opportunity to start a new spamming business, Levine says.

Kramer accused Cash Link Systems of sending his ISP 60,000 pieces of spam a day, and AMP Dollar Savings of sending 120,000 pieces of spam a day, between August and December 2003. TEI Marketing Group, which was marketing software that buyers could use to "find out anything about anyone," was accused of sending the ISP 1400 spam messages.

AMP Dollar Savings was a bulk e-mailer for hire, sending pitches for mortgage refinancing, penis enlargement pills, and Cash Link Systems' ATMs, says Wallace Kramer's lawyer. "If you can sell it with spam...they were doing it," he says.

Phone numbers listed for Cash Link Systems and AMP Dollar Savings were disconnected Monday.