U.S. fails to prosecute Internet fraud cases: report

WASHINGTON (Reuters) - While Web users drown in spam and fend off scams aimed at stealing their money, U.S. federal and state law enforcement authorities are doing little to resolve what has become a multi-billion-dollar problem, a think tank said on Monday.

In the 20 states that give a number for consumer complaints, there were roughly 20,000 Internet-related complaints in 2007, said the group, which surveyed officials in all 50 states but received widely varying amounts of data.

Eight states put Internet-related complaints among their top-three consumer headaches in 2007 while 24 states had some form of online fraud in their top 10 complaints, according to the Center for American Progress (CAP), which worked with the Center for Democracy and Technology.

And the complaints are not unfounded; spyware, viruses and phishing cost consumers $7.1 billion in 2007, up from $2 billion the previous year, the report said.

Phishing is using e-mail to try to fraudulently get information like passwords or credit card numbers. Spyware is software installed on a computer without the owner's consent. It can be used to monitor computer use, or take over the computer.

Paula Selis, senior counsel for the office of Washington state's attorney general, warned that crime associated with the Internet could damage online commerce. "There must be a recognition that online fraud is a huge threat," she told reporters.

Despite the large number of complaints, the group found few prosecutions of online fraud.

"It's clear ... that state attorneys general are not doing a whole lot about Internet consumer protection," Reece Rushing, CAP's director of regulatory and information policy, said at a news conference. "They haven't made it a priority. In the states that have made it a priority they've been able to win settlements."

The National Association of Attorneys General's bimonthly Cybercrime Newsletter for 2006 and 2007 mentioned just 55 prosecutions of Internet fraud, 26 related to online sales or services, 15 related to data security or identity theft and 14 involving spyware, spam or phishing.

In 2007, Washington state sued Consumer Digital Services, accusing it of promising free goods in exchange for personal information. As a result, more than 13,000 Washington state consumers were charged $14.95 on their phone bills for Internet services they did not want. Under the settlement, the money is to be refunded and the company to pay penalties and fees that could total $1 million, the report said.

(Reporting by Diane Bartz; Editing by Braden Reddall)