TODD J. DAVIS
Norfolk Keen decided to turn his life around by starting his own business. Keen was a single man in his early thirties with short, cropped hair and was a little overweight. He had the appearance of having lived a hard life; he had a few scars on his face and looked at least 10 years older than he really was. When Keen decided to start fresh, the Internet was booming and he had heard stories about other people who made a fortune on the Web. He decided the best option for starting his own business was to open an online retail store; he wouldn't have to maintain normal retail hours and he would be his own boss. Keen lived in an area known for electronics and he envisioned himself employing his extensive knowledge in this field to develop a commercial enterprise. Keen had a high-school GED and grew up working in electronics retail stores and manufacturing plants, but he did not keep jobs for very long. He also tinkered with electronics throughout his life and saw the potential for his new endeavor to grow with his knowledge and passion.
Keen had a difficult past and was in and out of the criminal justice system for various drug-related charges and other offenses. He thought his new business would provide him the stability and focus to beat his addictions and to bring in a steady income. He planned on dedicating the time he used to occupy with drugs to making his new business successful. He bought a computer, rented a small storage room in the busy downtown business district and contacted local distributors to offer their products for sale online.
Norfolk Keen created his Web site, www.IntricateElectronics.com, and began listing items for sale. He specialized in small replacement parts that were inexpensive, hard to find and used in many different large electronic devices. He charged a high markup on the products because he knew customers would have a hard time finding them anywhere else. His Web site looked professional and he had divided the products into categories like mechanical, parts, tools and others. His intentions were genuine and he saw the business venture as a way to give back to his community and make a comfortable living. Many of his products were made in and around the city by companies he knew from growing up and working in the area. He took on the business himself with little help from others—except the occasional assistance provided by his new girlfriend—and excitedly shipped his first orders and contacted his customers if there would be a delay for any reason. However, Keen did not know the laws and regulations he needed to follow to start a business and did not incorporate with the secretary of state.
After his Web site had been up and running for a few months, Keen began having personal problems. He returned to his old drug habits and used the money he earned from Intricate Electronics to pay for his addictions. He stopped shipping products after collecting payment for them; eventually the number of unshipped orders outgrew completed orders. He began lying to buyers who contacted him and tried to stall them as long as possible. Keen had customers who were trying to repair family heirlooms with parts sold on his Web site and they were not interested in a refund. To them, the rare parts were more important than the money.
Allison Reynolds was an elderly woman who had limited experience buying online. She logged in to Keen's Web site to look for a replacement part for her family's antique Wurlitzer jukebox. She found exactly what she was looking for—a power cord—and placed the order. The Web site indicated the credit card system was not working and that she would have to send a check for $42.09, which she promptly did. The check cleared one week later and she eagerly anticipated her order. The jukebox had been nonopera-tional for years and, with a large family reunion coming up, she hoped to have it working for everyone to enjoy. A month passed but the power cord had not arrived, so Allison sent an e-mail to Keen asking for the status of her order. She did not receive a reply and sent two more e-mails, which also went unanswered. She then sent a certified letter to Keen outlining her experience and asking for a refund or shipment. Two weeks went by but she did not hear from Keen or receive her power cord. Allison and Keen lived on opposite sides of the state, and she did not have a driver's license, the only reason—as she later told me—that she did not drive to Keen's office to pick up her order in person. Allison finally filed a complaint against the seller with her local Better Business Bureau.
Connor Jenkins was an avid guitar player and proud of his extensive guitar collection. He was looking for new knobs to add to his Gibson Les Paul guitar. He found the exact ones he was looking for on Intricate Electronics. And although the price was higher than he hoped, he was willing to pay more because he had been unable to find those exact knobs on any other Web sites during his six-month search. Connor paid $36.78 through his PayPal account and awaited their arrival. After a few weeks Jenkins started to wonder why he had not received the order. He called Keen, who claimed to have just returned from a vacation to find his business in shambles; Keen assured Connor Jenkins that he would locate the order and fulfill it as soon as possible. Jenkins normally gave people the benefit of the doubt and had no reason to suspect Keen, but after three more weeks passed and he had not received the knobs, he became suspicious. He called Keen again, who said his computer system had crashed and asked Jenkins to e-mail the order confirmation so Keen could ship the parts. In his e-mail, Jenkins wrote that Keen had two weeks to deliver the guitar knobs or he would be contacting local law enforcement. Two weeks went by, but Jenkins still did not receive the order. Because he lived halfway across the country from Keen, Jenkins contacted Keen's local police department and filed a complaint.
I was a consumer fraud investigator with the Attorney General's Office and was often contacted by police departments to investigate cases involving Internet retailers. After consumers began filing complaints against Intricate Electronics, I was initially provided with 30 to 40 of them and I quickly discerned a pattern: consumers ordered products on his Web site, paid online using credit cards or PayPal or mailed personal checks or money orders, but they did not receive their merchandise. When the customers contacted Keen, he promised to send their purchases promptly, but failed to honor that promise. On other occasions he told customers that he had been out of the country and returned to find his business in a state of chaos. He assured the purchasers that they were in good hands and offered to either provide a full refund or ship the merchandise right away. He also told many customers that his system had crashed and the orders had been lost.
Several of the orders were for low-cost items, so to develop a stronger case I expanded my search for complaints beyond those provided to me. I believed there were many more victims who had not come forward to the police and may have reported complaints to other agencies. Here is a list of complaints I discovered:
Attorney General's Office | 39 |
89 | |
Federal Trade Commission | 20 |
9 | |
Local Police Departments | 13 |
Total complaintsfiled | 170 |
After looking into the 170 complaints against Intricate Electronics and eliminating the duplicates filed with more than one agency, I was left with 126 separate frauds from 40 states with losses ranging from $9 to $849. I contacted a random 38 consumers to determine the current status of their complaints and to understand what deceptive business practices may have been committed by Keen.
I then held a meeting with Assistant Attorney General Christian Jackson to discuss how to proceed. Our goal was to get Keen to promptly ship the products to his customers or have him issue them a full refund. We decided to keep the case in civil court.
Jackson sent Keen a certified letter outlining his offenses under state law, including failing to deliver purchased items to consumers, offering refunds to consumers and not honoring them, making false and/or misleading statements to buyers regarding the delivery of their merchandise and failing to respond to e-mails and telephone inquiries from customers.
The letter was to notify Keen of the intention to take legal action against him and to give him and his attorney the opportunity to meet prior to the start of litigation. It advised Keen that a settlement would have to include an appropriate judgment filed in court, would bar future unlawful conduct and would require the payment of restitution and penalties to injured parties. The letter served as a formal notice that if we were unable to resolve the matter to the consumers' and our satisfaction, a civil complaint would be filed against Keen.
I continued to update my case file and maintained an open line of communication with the agencies that originally sent me their complaints. As my investigation progressed I received 16 more complaints and added them to my file. My goal was to have the most comprehensive list of complaints possible. During my investigation I searched the Internet for key terms, phrases and Web sites similar to Keen's. In one of my searches, I came across a Web site that appeared to share the same layout and format as Intricate Electronics. I checked the registration of the site and found it was to Keen's home address but in the name of his girlfriend. I found three more complaints relating to the Web site under Keen's girlfriend's name that alleged the same pattern of behavior. I added these complaints to the database I was maintaining and had a total of 145 complaints.
Jackson did not hear from Keen regarding the certified letter he sent, so he filed a complaint and preliminary injunction in superior court. Keen did not hire an attorney and, in response to Jackson's filing, requested a "quick and easy resolution to the order." Jackson's civil action contained the facts of the investigation, injunctive relief sought, statement of facts for the case and arguments based on a statutory mandate to protect the public interest in trade and commerce. The preliminary injunction was sought to ensure that Keen could not continue to commit his fraud. We also created a press release to inform the public of Keen and to prevent more potential victims from falling prey to Intricate Electronics. We sought restitution for Keen's customers as well as civil penalties, costs and fees. The lawsuit further requested an injunction to prohibit Keen from transferring or dissipating assets that could be used to pay restitution. I wanted the court to hear customers' stories and was able to include several affidavits from consumers with the court filings.
Keen agreed with the preliminary injunction because he knew what he did was wrong and said he fully intended to ship his customers' orders or refund their money. He admitted that his system did not crash and he had an active database of orders that were pending shipment. Keen provided us with an accounting of outstanding orders, which far exceeded my database of complaints. Apparently many of Keen's victims did not file complaints; this is not uncommon. Keen's list added another 60 customers to my database, bringing the total to more than 200. We worked with Keen to create a schedule for him to ship the products.
Keen began shipping orders and providing refunds while we were still negotiating with him, but we continued to monitor his actions. We filed a final judgment by consent in court that both the court and Keen signed. The terms of the final judgment were as follows. Keen shall not:
Fail to deliver any merchandise within four weeks if payment has been received, unless a later delivery date has been agreed to by the buyer.
Accept orders for merchandise that is not in stock or is not readily available by a third-party supplier.
Make false or misleading statements to consumers in connection with the offering for sale, sale or delivery of merchandise.
Offer a refund of the purchase price of a product and then fail to provide that refund.
Further stipulations were made regarding what Norfolk Keen should do going forward and included:
Post delivery and refund policies clearly and conspicuously on his Web sites.
Maintain and monitor his e-mail address and telephone number for the purpose of responding to consumers' inquiries.
Post his contact information on his Web sites.
Keen agreed to pay a civil penalty of $5,000 in two partial payments—one at the filing of the judgment and the other four months later. Keen also said he would make restitution to outstanding customers either in merchandise or refunds. If he received any additional complaints in the future, he would provide a full refund within 30 days of receipt of the written complaint.
The case received much press in the local newspapers and radio programs. The community felt as though Keen had wounded its local heritage but also felt vindicated that he entered into the agreement, made restitution to his consumers and paid a penalty. The case received national press due to the large number of people who were victims and because online retail sales were increasing at such a high rate. The media wanted to warn and educate others about the possibility of becoming a victim of online fraud.
Keen was allowed to continue operations of Intricate Electronics and since our settlement, only a few complaints have been filed against him and he has promptly rectified them. I have maintained contact with Keen's local police department and heard that he has not committed any unlawful acts since my investigation—he has been clean on his drug tests and his business is going well. He even recently opened a retail store in the downtown area of the city.
This investigation was my first large case involving Internet consumer fraud. Normally the cases I investigate have occurred in my region, where I have contacts in the police departments and other agencies. For this case I had to cast a larger net to find as many complaints filed against Keen and Intricate Electronics as possible.
Note
Lessons Learned
I Keen learned from this case that he must maintain accurate records of his transactions and reply in a timely manner to his customers. I suggest that Internet retailers follow the guidelines we set forth for Keen in our final agreement. They should maintain communication with consumers, be up-front and honest about the products they have in stock and clearly post on their Web sites a reasonable shipping time frame. If a customer orders an out-of-stock product, the retailer should notify the buyer and provide an estimated delivery date.
Todd J. Davis has been a CFE since early 2009. His background includes eight years of campus policing including becoming a sergeant. He was an investigator with the Attorney General's Office for four years and has more than five years of experience conducting criminal fraud investigations. He holds many instructor certificates.