Internet Wizard Loses His Magic: Intelius Hit with Two Class Action Suits

Crystal Baal
Why can't I wave my wand and make it go away?
Given the sleazy marketing practices of Bellevue-based Intelius over the past couple years, and the hundreds of complaints lodged with state Attorney General Rob McKenna and the Better Business Bureau, the lack of consumer lawsuits against the company has been surprising. Well, that's changing--and fast.

As TechFlash's John Cook reported yesterday, two class action lawsuits have now been filed against the company, best known for online people searches and background checks. Both concern the company's use of confusing ads that trick consumers into buying services from Connecticut partner company Adaptive Marketing -- services they never wanted or, in many cases, didn't know about until the fees showed up on their credit card bills.

The first suit was filed in late August in a California federal court. The suit currently represents California consumers only, but plaintiff's attorney William Restis says "we're seeking to take the case nationwide."

The second suit was filed on October 19 in federal court in Seattle. That suit already claims to represent consumers nationwide, naming as plaintiffs Washington state resident Bruce Keithly as well as a couple from Ohio. That suit quotes liberally from a Seattle Weekly cover story on Intelius last March, which detailed the way the ads work (consumers think they're clicking on a button that will merely give them the information they paid for when it fact it is committing them to ongoing monthly charges from Adaptive).

The suits aren't the only threats facing Intelius. The company, which is seeking to go public, revealed in its latest SEC filing that it is under investigation by State Attorney McKenna regarding these "third-party" ads as well as similar ads for its own services that carry monthly fees. That's apart from an already-disclosed Federal Trade Commission investigation related to laws that regulate how credit information is disseminated.

Cook of TechFlash points out that, facing all this pressure, the company is backing away from what it calls "post-transaction marketing." Presumably as a result, the once booming company experienced an unprecedented loss of $2.6 million for the first six months of this year, according to its SEC filing. Compare that to the $10.9 million Intelius earned during the same period last year.

Will founder and CEO Naveen Jain, who in his former incarnation as head of InfoSpace was accused of insider trading and misleading investors, finally stop calling himself the "Wizard of the Information Industry?" Unlikely.

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