Prosecutors Take Down Alleged Online Scam

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In an answering-machine message left on ASD's main corporate line, Bowdoin cautioned customers not to panic. "We have some of the best legal minds in the nation working to resolve our issues so we can return to normal operations," said Bowdoin. "Until it is resolved, keep the faith. If God be for us, who can be against us?"

ASD presented itself as an online advertising service akin to the search giant Google (GOOG). But there are significant differences. ASD required people to pay up-front fees to participate in its business, according to the federal complaint. After that, participants could make money by viewing online ads and by persuading other people to participate in ASD's activities.

According to videos promoting ASD and online fliers, participants were told they could make significant profits by submitting a Web site to ASD's advertising service and agreeing to view at least a dozen other ASD Web sites each day for 15 seconds apiece. The cost of "advertising" a site with ASD ranged from $10 to $100,000, or roughly $1 for each ASD member the company guaranteed would see the site.

Attracted by Rebates

For most users, the real allure of ASD wasn't the guaranteed traffic, but the large rebates ASD promised users on their advertising investment, according to the complaint. Pham says users were promised at least 1% returns on their investment per day for viewing others' sites. They also received percentage-based referral fees for bringing in additional users to the service, which varied depending on the amount of their investment, according to the complaint.

Many ASD participants' Web sites appear to be little more than advertisements for ASD and affiliate sites. In fact, in one ASD promotional video, a talking frog tells would-be participants that the Web site is simply a "legal requirement" and that ASD will help users build a Web site, for free, if they don't actually have an online business.

There have been similar online efforts in the past. In 2006, the Securities & Exchange Commission shut down Charlotte (N.C.) company 12DailyPro (BusinessWeek.com, 2/27/06) for defrauding 300,000 people in an allegedly similar fashion. However, ASD is different because early investors who did make money used online videos, blogs, and other Web tools to evangelize about the program and refer others. In some cases, users blasted those who criticized the program as "jealous" and "liars," insisting that the company had to be real because they had received real checks.

"If People See You…They May Trust You"

Pham was so pleased with his paper profits that he created a YouTube video promoting ASD. He enrolled three Web sites in the program, all advertising similar pay for Web surfing sites affiliated with ASD. Though he viewed dozens of sites each day, he never purchased anything. However, he didn't find that worrisome since he had heard from a friend whom he met through another online business that the friend had purchased a colon cleanse treatment from an ASD advertiser site. Pham figured that, by creating a video, he was helping to spread the wealth, as well as increasing his own referral fees. "I am learning about Web 2.0 marketing," he says. "If people see you and that you are a real person, they may trust you and join the business."

ASD officials are now trying to prove that at least some users had legitimate businesses to advertise. In a recording posted on ASD discussion boards, an ASD member asked that users who sold or purchased items through the service e-mail the Attorney General's office. "I have been on my knees to the Lord asking him what should prevail," said the female spokeswoman, identified as founder Bowdoin's daughter. "Any of you that have had results from your advertising or have sold goods and services from your advertising, would you be so kind as to send an e-mail showing it… that will help our legal team document that this is an advertising program."

The courts may ultimately decide whether ASD had anything to do with advertising at all. They'll also decide whether Pham and others get their money back, or if the government keeps the seized funds. Though Pham hopes to be paid, he has resigned himself to losing the money. "I would just write it up as a bad investment," he says. "You take chances, and this is a chance that I took."

With Brian Grow in Atlanta

Holahan is a writer for BusinessWeek.com in New York.