When serial entrepreneur Naveen Jain left the company he founded, InfoSpace, in disgrace in late 2002, a lot of people thought he would never be trusted by the financial markets again (see this three part series from the Seattle Times that talks extensively about the rise and fall of Jain at Infospace and details his violations of insider trading laws). At its height Infospace was worth $31 billion. Today it’s worth less than 1% of that.
But memories are short, it seems. After leaving InfoSpace Jain started a new company, Intelius, across the street from his old offices in Bellevue, Washington. The company sells background information on people - they describe themselves as an “information commerce company.” They’ve grown rapidly and now claim that over four million people have purchased products from them. Revenue has grown from $18.1 million in 2004 to $88.5 million in 2007. In their most recent fiscal quarter, ending March 31, 2008 the company had $31.8 million in revenue, a nearly $130 million run rate. They are also very profitable, with $22.5 million in EBITDA in 2007.
It’s no surprise that the company’s revenue growth and profitability have led them to pursue an IPO. Well known investment banks Deutsche Bank and UBS are underwriting the deal, which was first filed with the SEC on January 10. The most recent version of their registration statement, filed on May 19, is here.
Given Jain’s history, you’d think he’d go out of his way to be squeaky clean at his most recent startup, particularly as the company is going public and under significant scrutiny. But that may not be the case.
Intelius has been on the receiving end of hundreds of consumer complaints alleging fraud, many of which are around a partnership the company has with Adaptive Marketing and a “product” they offer called Privacy Matters Identity.
Every time a customer buys a product at Intelius, they are shown a page telling them “Take our 2008 Consumer Credit Survey and claim $10.00 CASH BACK with Privacy Matters Identity.” The user is then shown two survey questions and asked to enter their email and click a large orange button. They can choose to skip the survey by clicking on a small link at the bottom of the page.
Undoubtedly a lot of consumers do the survey and move forward to the next page - it only takes a second. But what most people don’t do is read the fine print, which gives no real details on the $10 cash back (in fact, it is never mentioned again, anywhere). Instead, in light gray small text, users are told that by taking the survey they are really signing up to a $20/month subscription. Intelius forwards your personal information, including your credit card, to Adaptive Marketing. The next day a $20 charge appears on your credit card, and each month afterwards.
Here’s a screen shot of the offer. Click to see the full size version as it appears during the check out process.
Of course you never hear from Adaptive Marketing again (why take a chance that you’ll wonder who they are). Instead, the credit card charges keep coming, and the company obviously hopes you never notice.
This survey is quite literally a complete and total scam. And since users continue to pay forever (or until they try to stop it), the contribution to Intelius’ revenue grows significantly over time.
And it also appears that the scam is what’s driving most or all of Intelius’ revenue growth. It’s not clear what percentage of the $20/month is given back to Intelius (it’s been redacted from the agreement they filed with the SEC). However, the company had $17.2 million in revenue in Q1 2007, and Adaptive Marketing accounted for just 1.5% of that. In the most recent quarter they had $31.8 million in revenue, and Adaptive Marketing contributed a whopping 38.9% of that total. Revenue grew by $14.6 million/quarter in the last year. The Adaptive Marketing scam contributed $12.4 million of that gain, nearly all of it.
In other words, without the survey scam, Intelius would have nearly no revenue growth. Companies that aren’t growing don’t go public.
How did I track all this financial data down? It’s all listed in the publicly available registration statement, prepared by the company and its bankers, accountants and lawyers.
All of these parties, (Deutsche Bank, UBS, Karr Tuttle Campbell (company counsel), Fenwick & West (underwriters counsel) and BDO Seidman (accountants), have a responsibility to conduct due diligence and ferret this kind of stuff out. Apparently, no one noticed. Perhaps now they will.
Update: Naveen Jain’s son responds to this post here.
This story has to be heard even more
http://digg.com/business_finan.....m_SCAMMING
Digg it folks
I saw someone ask what a legitimate site for doing background checks is. I worked in HR for a local school district for a long time, background checks were of a huge concern for our area.
The problem with intelius, other than the fact that they are scammers, is that they are not FCRA compliant, basically meaning there is no way of verifying that the John Doe report you receive is really the John Doe you were looking for. When I would perform background checks before woudl use a company called Crimcheck.com - they were FCRA compliant - however they weren’t instant.
The parallel story here is the unbridled distribution of “credit header data. Credit header data is the personal identification information that accompanies consumer’s credit reports. It consists of name, name variations, address, former addresses, telephone numbers, (including unpublished numbers) date of birth, and social security number. It is easily available from the following sites.
http://www.intellius.com
http://www.ussearch.com
http://www.peoplefinders.com
The Gramm-Leach-Biley Act was intended to prevent the distribution of this information yet for some reason no one is enforcing it.
Should these companies be allowed to sell access to information that can be used for fraudulent purposes? Should these companies be allowed to have access to it at all? What about the Privacy Act if 1974?
http://www.usdoj.gov/oip/privstat.htm
How can they even get away with selling this information. By law, it is supposed to be private!
I certainly hope no one out there thinks that this is typical of the background screening industry. The screening industry is full of very dedicated firms that take their service very seriously. Unfortunately, every industry has it’s share of scam artists. There are even bad doctors, lawyers and dentist! One bad apple should not spoil the barrel. For more information on the screening industry, and to find legitimate firms, go to the website for the National Association of Professional Background Screeners at http://www.napbs.com
To find legitimate screening firms, go to the website for the National Association of Professional Background Screeners at http://www.napbs.com
Speechless… Cut off his fingers.
wow… good post, i may just consider resubscribing to techcrunch rss feed…
Let them go IPO and let us all short that stock ! will serve this guy well …
what is interesting is this quote
“• Wall Street analysts, including famed dot-com guru Henry Blodget of Merrill Lynch, privately expressed grave concerns about InfoSpace while at the same time publicly touting its stock. In a private e-mail to colleagues, Blodget asked, “Is this really a world-class company, or just a world-class storyteller?” Soon after, he gave InfoSpace stock his highest rating.”
on this article:
http://seattletimes.nwsource.c.....ain06.html
Now why would an analyst give a rating like that? Should you even be listening to analysts?
i think analysts purposely push a bubble look at this quote
“Hess explained that she plunged into InfoSpace after reading glowing reports from stock analysts and media accounts of Jain and InfoSpace. “I feel like the American public was lied to,” she said.”
To Dmitry and others -
3 years ago, I wrote a very negative review on infospace.com and Intelius. They’ve been doing this misleading stuff for years. Where if you enter a name you know is fake, they return results suggesting they have data on that “person” -
http://www.amazon.com/InfoSpace/dp/B00006BW50
Naveen is a crook. Anybody who has ever worked for him knows that in their hearts. The problem is that he has an incredible ability to rope people around him into his fantasy world. As George Costanza once said, “It isn’t really a lie, if you believe it.” That is Naveen. He actually believes his bull crap, and know it looks like he has his son shilling for him. Funny thing…Naveen will live happily with himself because he is a narcissist, but wants respect (and achknowledgement from someone like Bill Gates). I have known Naveen a long time and while I don’t dislike him, he should not be running a public toilet, let alone a public company. Sorry Naveen, not good karma here.
If this acutally goes to IPO, this has class action written all over it. One may expect to see class action lawsuits against Deutsche Bank, UBS, Karr Tuttle Campbell (company counsel), Fenwick & West (underwriters counsel) and BDO Seidman (accountants). Whatever fees they make will pale by comparsion to the cost of defending the class action lawsuits, and of course if the class action pervials or a sett,ement is reached, the fallout could be tremendous. Unfortuantley, with these IPO scams, we have gotten to the point where we need to rely on class action lawsuits to protect investors if the underwriters do not do thier job.
Its actually fun to run fake numbers through their website and see how they ‘track down’ the information.
Try: (323) 000-0000 - Only $4.95! (Limited time offer)
Thanks
At the outset.had announced a profit like any other company and I were not these are profits at a constant level.!!! Did not announce any losses for the piece that the company has dealt with the matter as confidential sources inside the administration said no one knows what causes.The future has a lot of news on this subject to the piece and then ask the company to maintain its list of lists and very well
Thank you for this topic .
Check out this people search and information website that I recommend; http://www.uspublicrecords.com
Intellius is a company run by bunch of dishonest but rich folks. Everyone in this company has no moral values/honesty and Naveen tops it. People say that your cheating skills are the one they interview you for in the job interview. But Naveen and his crew knows how to game the system and SEC will still approve Intellius IPO. Very sad!
Back about 6 or 7 years ago, one of the two big Seattle dailies did a major expose on naveen jain and a few other notorious scammers. It’s worth reading.
I used Intelius but definitely did not take the survey and still got subscribed to not only PMIdentity but also 24ProtectPlus, each at $19.95 per month. To add insult to injury, the Intelius information was inaccurate.
My company conducted a background check on a new employee through Intelius on May 26, a few days before the post and was charged $69.90 for it, which was only marginally helpful by the way. Then, on May 29, an unrelated and unexpected charge appeared on my online statement for $19.95 from “AP9*PMIDENTITY.COM-V”, and didn’t know what it was. I remembered reading the post about Intelius and realized I’d been hit by the scam. I found the PMIDENTITY.COM website and eventually found the contact number. On the recording, one of the first options is to “cancel your membership” and asks for your member ID or credit card number to confirm. Of course I didn’t have an ID, so I put in my credit card number. Then I spoke with a rep, who confirmed my $19.95 would be refunded, but talked in riddles until I asked for a yes or no about my refund. We’ll see if it shows up. Clearly, they have had plenty of experience in dealing with scammed “members.” A company that wants to go public with this kind devious business practices is going to be a tough sell. Instead of filing with the SEC, maybe they should be talking to the BBB.
It seems like Intelius is getting singled out for doing what lots of much bigger companies have been doing for years. And it’s not just dot-coms (I see this tactic all the time at Godaddy and Monster), but large brick-and-mortar companies as well.
I once got “free issues” of Entertainment Weekly as part of my purchase at Best Buy just by saying “yes” to the cashier. What it really was was a trial subscription, where my credit card was automatically billed full price after the first month. The Intelius thing was better because it says right there where you enter your info that you’re sending your CC info to another company and will get billed. The Besy Buy thing was much less obvious. And Best Buy is far from alone in this tactic.
So where’s the article on Best Buy (etc.) being a scam artist?
Deutsche Bank Securities, Bear Stearns & Co, CIBC World Markets and Cowen and Co:
Great job doing your due-diligence, boys.
Any update on whether these guys will get thier IPO? I wonder waht Deutsche Bank, UBS, Karr Tuttle Campbell (company counsel), Fenwick & West (underwriters counsel) and BDO Seidman (accountants) are goin gto do in respse to this information? Who in the world wold want to buy that stock?
They’ll probably get their IPO. The purported scam (as illustrated in this article) is just a cross-selling tactic that a huge number of companies use, and there’s nothing illegal about it.
As for what the company does, it’s not illegal either. They take public records that are already available online (assessor records, census records, etc) and put them in one big database. Instead of searching through hundreds of online gov’t databases, you can pay Intelius and just search once.
Having just used the Intelius “service” I can only agree that it’s a misleading unconscionable crooked scam and that the perpetrators of this horror should be in jail, not writing ipo’s. Most people are not as expert in using the internet as maybe they should be and some may be older and impaired but that’s no reason to subject them to stupid scams. Once again, in my opinion, this narcissistic piece of shit, Naveen Jain, should be in jail. Unfortunately, there are a lot of rich but petty criminals like him and prosecuting these borderline cases is unrewarding to prosecutors so until he does something more rank and obvious, he’ll continue to profit from his scams.
If I were his son, I’d be hugely embarrassed about my father. But I imagine it’s difficult to be in such a narcissist’s family because, of course, everything is “all about him”.
Oh… I forgot to add that if you need such a service, the way to go is to use a “virtual” credit card such as provided by Citibank (www.citibankcards.com). Then you can set a limit, like $5 or $10 and if they try to bill monthly, the credit card company tells them to go to hell where they belong. They can bray all they want, they won’t get more than what you allow.
Just my two cents - with all of the comments, I couldn’t help but buy something from Intelius to see what the so called “scam” was about. I went through the site, but some basic product got the “scam” offer, but I must say it seems pretty clear to me. Now, the pitch I saw was different that the screen shot that is in this article, so maybe they’ve changed it. However, I agree with some earlier posts, it may be aggressive but scam seems a bit over the top. I think most e-commerce sites do this stuff, I signed up for Classmates once (mistake) and got the same type of promotion. I don’t recall anyone calling them a scam. It just doesn’t seem to me that this is someone selling swamp land in Florida as beach front property. It’s similar to Amazon saying hey if you liked this book, maybe you’ll like this other book too.
One last thought - I actually think the product Intelius is pitching post transaction is better than the one I bought initially, which to me is sort of funny.
It is always amazing to me how the people who write in blogs are usually the people with negative comments, so had to throw in my comments.
AC says that the data Intellius sells is not illegal but sourced from public records such as assessor and census records.
This is far from the truth. Intellius, (USSearch,Peoplefinder) are selling “credit header data.” This is the information credit card companies compile along with your actual credit history. By law, the information shouldn’t be made public. Who wants there SSN, date of birth, unpublished addresses, unpublished telephone numbers and the names and ages of other family members accessible by the general public?
Attorney General take note: these guys are violating our privacy. SHUT THEM DOWN!!!
Intelius explains what they do here:
http://www.intelius.com/privacy-faq.php#3
According to that, they don’t sell credit data or any other personal data that’s illegal to distribute. I think they would have been shutdown long ago if they actually sold that stuff.
I’ll used this company USPublicRecords.com in the past with know problems and I’ve also used Intelius, Inc. with no issues as well!!!!
http://www.USPublicRecords.com
AC would have us believe that Intellius is being truthful in the disclosure statement on their website. I think otherwise.
Social Security Numbers, your date of birth, your family member’s dates of birth, prior addresses and unpublished telephone numbers do not appear in “real estate deeds and telephone directories.”
They are selling CREDIT HEADER DATA in violation of the Gramm-Leach-Bliley Act.
Conspiracy theories are fun, but usually the reality is the boring, obvious one.
So far we have a dirtied CEO and a tricky opt-in ad, but no evidence of illegal activity uncovered. If you have enough hard evidence to build a court case, then do it.
Considering that there are about 300 million potential plaintiffs, this could potentially be the largest class action suit in history.
http://epic.org/privacy/glba/
I applaud you Michael Arrington for standing up for the “little guy” that doesn’t really have a voice and is powerless against large corporations that commit fraud such as Intelius. Please continue to show the proof of how Intelius is nothing more than a scam. It’s a scam, scam, scam… Plain and simple. The “product” that I paid for from Intelius was nothing more than hodgepodged data that was hopelessly incorrect. The bottom line is that what I received from Intelius was a big pile of crap. You would think that once they would screw me with their “product”, then they would leave me alone…. But! Oh, no they wouldn’t! Instead… They gave my credit card information to 24 Protect Plus, which I NEVER contracted any services from in any shape or form. I called this 24 Protect Plus to try to cancel any so called “services”, but all I could get was a recording. 24 Protect Plus was nothing more than a shell of a webpage with all broken links!! 24 Protect Plus was nothing but a scam!! I had to cancel my credit card to end this extortion from Intelius and their partner, 24 Protect Plus. Luckily I got my money refunded from 24 Protect Plus by my credit card company. I am filing a compliant with the BBB, contacting my state attorney general’s office, and signing up for the class action lawsuits against Intelius and 24 Protect Plus. Please Michael Arrington, make the public aware of the fraud committed by Intelius, 24 Protect Plus, and Naveen Jain. Let the facts speak for themselves. I’m sure you have no trouble finding many, many people like me who have been defrauded by Intelius and 24 Protect Plus. Best of luck Michael Arrington!
I too was scammed by this company Intelius. I signed up for a people search and was under the impression I was paying $2.95. NEVER did I see a screen that told me to sign up for a rebate. I didn’t realize I was being charged $19.95 a month until this month…9 months later! When I called the company, I asked the girl to send me a copy of the supposed form I filled out that ok’d this transaction and she got irate with me and told me there was no copy of it…I just signed up for it! I want this company to pay for what they are doing to people. DOES ANYONE KNOW WHO I CAN CONTACT THAT IS FILING ANY KIND OF LAWSUIT AGAINT INTELIUS? Please let me know…I want them to pay!
http://www.oag.state.ny.us/pre.....0a_08.html
As a victim of this scam, I can tell you that 1. You don’t need to sign up to take the survey. I refused the free offers and was still charged without being informed. 2. At least for me, it was not a subscription to one service, but, rather, Intelius signed me up for two monthly subscriptions (24ProtectPlus and PMIdentity) each at $19.95 per month.
I got taken in by this scam and did not notice for over 6 months largely because I dont charge much on my CC so rarely check the notice.
Now however I do check, I also have contacted both the state and the DOJ and informed them that I did not knowingly authorize this and that I want them to look into this for fraud on the companies part.
This is a bogus company that doesn’t even give you the correct information. What govenment agency can we complain too?
I work at a class action law firm and we are investigating this issue with Intelius. I am interested in talking to people and hearing about their experiences. Please contact me at abby1100ny@yahoo.com if you’ve had problems with Intelius or if you have any questions on this investigation. Thanks, Abigail.
I work at a class action law firm and we are investigating this issue. I am interested in talking to people and hearing about their experiences. Please contact me at abby1100ny@yahoo.com if you’ve had problems with Intelius or if you have any questions on this investigation. Thanks, Abigail.
so where does one go to get an individual background check on one’s self?
First…let me say Thank You Mr. Arrington for calling attention to this injustice. It was simple enough to google and realize the harm that is being done, but I failed to do this before proceeding to deal with Intellius.
Please people don’t call us idiots until you’ve walked a mile in our shoes…then you’re a mile away with our shoes and we’re not likely to catch your insensitive ass.
Like others in the post…I DID NOT take a survey, yet my credit card was charged $19.95 by a New Named Theif…ValueMax123. They all are driven by a company named Adaptive Marketing LLC, They made it easy to be charged and almost impossible to get thru for someone to reverse the charges. You can tell them 20 times you didn’t subscribe and with an arrogance in their voice they can assure you did…operator Lisa #16503 stated my credit card would be credited in 2-3 business days. Its strange Adaptive Marketing LLC offers their customers…ValueMax123, 24Product Plus, etc. a “No questions asked” full refund policy for unauthorized charge complaints. Intellius also tricks you into another subscription called Identity Protect. Starts out as a 7 Day Trial Demo with no charge noted to your statement, but then on that 7th day they hit you with a $19.95 charge and every month after that.
I’m a simple homemaker who lives by the golden rule but I’m mad as heck and think I might just go Erin Brockovich on these people. There is clear evidence all over the web by people who have been taken advantage of. It appears Intellius is taking steps toward increasing their ill-gotten gain. I would like to see this taken to the media masses, at least save a few from the trouble these creeps put us thru and what would be sweet is to have this company be held accountable. To me its right up there with the folks who used dirty useless paper to fail our economy. If these people go public, will they bail and dump the worthless stock into our unsuspecting portfolio’s? I’ve only just begun.
You have shamed your mother Naveen!
Why is this ugly bastard called Naveen still in business? Who is he paying off to continue his scam? He’s a creep with obvious intent to rip off good and honest people! I purchased a one-time address search for an old friends address for $2.99 after clearly reading that I would not be billed any further. The information I received was useless and immensely outdated. Next thing I noticed is that his goons have stuck their grubby paws into my account and deducted $19.95 for a subscription I did not agree to. Sure they can stick fineprint way in the back somewhere but it does no good on the net since it can be altered at their convenience at any time and also contradicts their front page statement reading’ “Your card will NOT be billed any further”. Yes, I got my $19.95 back after filing a non-authorized deduction at my bank and getting a new debit card, but this asshole counts on the ones who DON’T fight or are oblivious to the fact they have even been taken.
Naveen Jain, I hope you get thrown in prison very soon and share a cell with a horny 400 pound madman named “Bubba” for the rest of your pathetic life!
Seems like this crook is running fan club websites to get information as well. How low can you go?
Intellius has been charging me $20 a month for a subscription for 3 months without my knowledge. Jain needs to be put in jail with a zipper installed in the seat of his bright orange trousers. Every Saturday night should be party night behind that zipper. What doesn’t the Washington AG put this bastard in jail along with every employee working in that sham company over in Bellevue.