BUSINESSWEEK ONLINE : APRIL 3, 2000 ISSUE
BUSINESS WEEK E.BIZ -- SPECIAL REPORT

Online Scambusters
A team of lawyers at the FTC is on the cutting edge of cybersleuthing

Paul Luehr helps suckers help themselves. Thousands of opportunists in search of easy money on the Internet have been lured to www.ari.net/NetOpportunities, where a lurid banner proclaims: ''The Internet is a GOLD MINE!!!'' Even those with no experience, it says, can get rich quick--as an ''Internet Con$ultant.''

Despite the glaring appearance of a scam, there's no wrongdoing here. It's a trap set by Luehr's team of Federal Trade Commission cybercops. Take the bait and up pops a stern warning: ''You could get scammed!'' It's part of the work being done by Luehr's dozen lawyers. Separately, the unit has brought 116 civil Internet fraud cases, making it a global leader in enforcement.

The FTC is in the cybersleuthing vanguard. In 1997, it went after pornographers who tricked people into using their computers to phone Moldova for $2 a minute. And its influence grows. It manages the world's biggest database on Internet fraud. This month, it will help government watchdogs in 35 countries find suspicious Web sites--and warn operators they might be breaking the law. In past hunts, up to 40% of warnings led to closings.

At first blush the 36-year-old Luehr seems an unlikely cyberhero. He is almost constitutionally incapable of taking credit for anything. He insists he's just a member of a team. And, like a good bureaucrat, he deflects all praise upward to his boss, consumer protection chief Jodie Bernstein.

But the self-taught computer whiz has pursued high-profile cases with all the gusto of a big city district attorney. ''The con artists shouldn't have all the fun,'' he says. He forced the masterminds of the Moldova scam to fork over $2.14 million in damages to 27,000 people they ripped off. He also was instrumental in closing a fraud case last August that ''page-jacked'' traffic from sites such as the Harvard Law Review to various pornography sites.

Luehr credits the group's success to several factors. He says that his team is nimble. He can deploy his people as he chooses. And he says the government's experience as a watchdog has prepared it for the Net.

But critics say the operation lacks muscle. ''When complaints come to the FTC, they don't know how to work them,'' says Timothy J. Healy, head of a new 161-person FBI Internet Fraud Complaint Center. Healy says the FTC can't bring criminal charges, and its database could be overshadowed by a more powerful FBI tool. The FBI, he says, will go a step further by analyzing fraud trends and forwarding tips to law enforcement officials. Even Luehr's supporters are troubled by his team's limited resources. ''They've got about eight computers in there,'' says Dallas attorney John G. Fischer of Strasburger & Price, who brought the page-jacking case to the FTC after the FBI passed. ''If this is what we're relying on to police international commerce on the Internet, we're all in trouble.''

Luehr takes criticism in stride--with good reason. No other Internet fraud squad has been as successful. No one else saw as early how the Internet could be a medium for fraud. Just ask the page-jackers.

By DAN CARNEY

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