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Montana family members and an accountant accused of tacking $70 million in bogus charges onto phone bills across the nation say they had a system in place to check that their customers actually wanted the services being offered.
Nathan Sann and accountant Robert Braach filed sworn statements Tuesday in U.S. District Court in Missoula. It was the first detailed response to allegations by the Federal Trade Commission that companies run by Steven Sann, his wife Terry, son Nathan and Braach engaged in years of "cramming," or adding unauthorized charges to a phone bill.
The federal agency alleges in the civil complaint filed last month that many of the Sanns' customers didn't order the voicemail and electronic fax services they received or know they were being billed for them.
The charge is typically $14.95 and appears near the end of the phone bill month after month unless the customer notices and challenges it.
The FTC is asking a judge to issue a preliminary injunction that will force the Sanns to stop operating the companies and freeze their assets.
Nathan Sann, Braach and attorney Andrew Lustigman in separate affidavits disputed the federal agency's account and asked U.S. District Judge Dana Christensen to deny the injunction.
The companies had more than 1 million customers, all generated by Internet sales through third-party marketers, but they stopped charging customers in April 2012 and don't intend to start again, Nathan Sann said.
The Sanns' services were marketed by outside companies including Clash Media and DMI Partners that run websites offering free products or job-search assistance.
The user must navigate through a series of marketing offers that can appear to be part of a routine information request before arriving at the job listings or the prize drawing the user was seeking.
The marketing practices used to sign up customers were "clear and unambiguous" and customers were charged only after going through a "robust validation process," Braach said.
That included requiring a customer to effectively agree to the services multiple times when signing up online by completing a form, checking a box to agree to terms and conditions, and clicking "sign up now" and "confirm" buttons, he said.
The companies also checked whether the telephone number was active and whether the IP address of the computer used by the person who signed up for the services was "within approved risk parameters," Sann said.
Hundreds of complaints have been filed against the Sanns' businesses with the FTC, the Better Business Bureau and with phone companies, the FTC complaint says.
Of the $70 million billed since 2008, the Sanns' companies have returned more than $40 million after customer challenges, according to the complaint.
Braach said the FTC overstates the complaints. The companies received an average of 450 complaints per month among 92,586 monthly billings records, he said.
Lustigman argued against the FTC request to freeze the Sanns' assets, saying they needed the money to be able to defend themselves against the charges.
Sann attorney Sarah Rhoades has also asked Christensen for a stay in FTC civil action, saying there is a criminal investigation already under way.
Federal agents raided Steven Sann's Missoula office and home, and Braach's office, in November 2011, seizing 60 boxes of documents.
No charges have been filed.