Malibu Online Adult Operator Sentenced in Scam

LOS ANGELES – A renegade online adult operator was sentenced Monday to more than 11 years in federal prison as a result of a scam that defrauded 900,000 credit card holders.

The operation by Kenneth Taves, called NetFill, was based out of Malibu, Calif., and has become the largest Internet fraud case to date that has resulted in a conviction.

Only the ongoing federal probe of the Gambino crime family’s online adult business in Overland Park, Kansas, comes close.

In that case, shell companies were used to help run adult Internet sites and 900 numbers that advertised free trials but charged customers anyway, the FBI says. The agency says that scam generated $750 million in revenue.

Taves’ scam, prosecutors say, bilked credit card holders out of $37 million.

Taves purchased access to lists of more than 3.7 million valid MasterCard and Visa credit cards from Charter Pacific Bank in Agoura, Calif., and charged customers $19.95 a month for access to selected Internet pornography sites. None of the customers ever ordered the service.

The 52-year-old Taves pleaded guilty in 2001 to possessing credit card account numbers with intent to defraud consumers and with obtaining money through unauthorized credit card charges.

On Monday, U.S. District Judge J. Spencer Letts also ordered Taves to pay full restitution to the victims.

Previously, federal authorities seized more than $20 million from his holdings, including secret bank accounts in the Cayman Islands and the South Pacific island of Vanuatu.

They also recovered an additional $12.8 million from a variety of sources, including the sale of Taves' $3.5 million home in Malibu.

In January 1999, the Federal Trade Commission filed a case in U.S. District Court in Los Angeles against Taves and his wife, Teresa Taves, Dennis Rappaport and their businesses – J.K. Publications Inc., MJD Service Corp., Herbal Care Inc., and Discreet Bill Inc.

Rappaport fled to Jamaica soon after he was served with the complaint. The court entered a default judgment against him.

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