Pacific WebWorks has had a very profitable year despite a raft of complaints from its customers, a class action suit filed against it in Illinois and now a civil suit from Google filed on Monday.
In a year where tech companies have taken a battering due to poor economic conditions, Pacific WebWorks has said its growth has come from Web hosting, an Internet payment system and by software tools for creating and maintaining Web sites, called "Visual WebTools".
It's a crowded field where major Internet companies such as Yahoo, Google and Microsoft give away adequate Web site management tools for free.
For nine months through Sept. 30, the company reported $21.4 million in gross profit, up from $7.1 million for the first nine months of 2008, according to a 10-Q filing with the U.S. Securities and Exchange Commission.
"We enjoyed dramatic growth during 2009," the filing read. "We expect revenue growth in the future to be approximately 10 percent to 20 percent per annum rather than the extreme growth we experienced when we initially transitioned to our new marketing approach towards the end of the first quarter of 2009."
Google alleges that marketing approach includes creating deceptive Web sites promising people lucrative income for doing simple tasks online from their home. Those schemes were often marketed using Google's brand name, which the Internet giant say has been improperly used. The names included "Google Adwork" "Google Payday Kit" and "Google Marketing Kit" among many other variations.
The schemes are advertised as free, but then people who sign up for the program are charged a small fee in order to receive an instructional DVD. Their credit card is then subsequently charged monthly between $50 to $79.90, and it's hard for victims to get the charges reversed, according to Google lawsuit. The victims often never receive a DVD or any other material for their money, the lawsuit says.
Pacific WebWorks' president, Christian Larsen, said on Tuesday he did not have a comment on the law suit.
Schemes such as the ones cited in Google's lawsuit have been prolific since earlier this year, said Chris Boyd, director of malware research with FaceTime Security Labs, who had blogged about the issue.
The schemes have become increasingly more sophisticated, to the extent that the scammer would create convincing fake news stories in order to dupe people into believing work-at-home jobs were real.
"It seems these scams have become more and more obnoxious as time has gone on," Boyd said. "A lot of people will fall for these things."
Some Web sites that appear to be connected with Pacific WebWorks are still online. One Web site offering a "Google Biz Kit" for an initial $1.95 payment shows the terms and conditions. The terms apparently are for a separate Web site called "www.profitcenteronline.com." On Pacific WebWorks' answering machine after business hours, a recording directs callers to that Web site.
The terms do warn that people if they fail to cancel their subscriptions, they will be charged $79.90 at the end of the trial and every month afterward for the Visual WebTools software. Companies can face regulatory sanctions, however, if their terms and conditions aren't presented in a clear way.
Pacific WebWorks is based in Salt Lake City and has 21 employees with a 50-person call center in the Philippines. Chief Executive Officer Kenneth W. Bell, earns $205,000, according to the company's financial profile.
It's not difficult to find several Web forums with reports from people complaining of problems with Pacific WebWorks or subsidiaries such as its Intellipay payments branch and affiliates such as the The Quad Group (TQG).
Many of the victims contend they weren't aware they were going to be charged high recurring monthly fees or had difficulty recovering money after calling customer service.
High numbers of customer complaints can cause serious problems for merchants, as card companies such as Visa will assess fees to a merchant's bank if a merchant has too many chargebacks, a condition in which a retailer must refund a customer for a credit-card purchase.
In the 10-Q filing, Pacific WebWorks indicates it had difficulty with credit card processing.
"Our primary challenge continues to be in the area of managing our credit card processing demands with the unreasonable requirements of the credit card associations (i.e. Visa, MasterCard, ect.)," the filing reads.
Pacific WebWorks did not specifically mention chargeback problems in the 10-Q filing. However, it said it decided to sell part of its hosting operations portfolio in June and July to deal with the credit-card processing problem.
The portfolio was sold for $418,196 to TQG, which is owned by officers and directors of Pacific WebWorks.