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Intermix, Ex-CEO Settle Spyware Case

The L.A. company will pay $7.5 million to end a suit by New York's attorney general.

October 21, 2005|David Colker | Times Staff Writer

In the first settlement of state charges involving spyware, News Corp.'s Intermix Media Inc. has agreed to pay $7.5 million, New York Atty. Gen. Eliot Spitzer said Thursday.

In addition, the former chief executive of Los Angeles-based Intermix, Brad Greenspan, agreed to pay $750,000.

The New York suit charged that Intermix, which operated more than 40 websites offering free screen savers and other entertainment programs, included hidden spyware in its programs that generated pop-up ads and redirected searches.

"Internet marketing companies have gotten away with unethical and illegal software downloading practices for too long," Spitzer said in a statement. His office brought the suit in April.

"This agreement sends a message that intrusive and deceptive practices will not be tolerated," Spitzer added.

Executives at Intermix and News Corp., which finalized its acquisition of Intermix last month, declined to comment.

Investigators estimated that Intermix programs with hidden spyware or adware had been downloaded 3.7 million times in New York state alone since the company began the practice in 2003, said Assistant Atty. Gen. Justin Brookman.

Brookman said the company settlement, filed Wednesday in New York Supreme Court, included $3.7 million in profit that the company derived worldwide through spyware.

Attorney Linda Goldstein, who represented Intermix, did not return calls seeking comment. She told Associated Press that the company's spyware activities "had been largely ended by the time the investigation began."

But Brookman said that all during the investigation that began in September of last year, Intermix was distributing the programs.

"Even after we notified them of our investigation in December," he said, "the practice of aggressively distributing them to consumers continued."

As part of the settlement, Intermix agreed to no longer distribute spyware.

Greenspan, who founded the company in 1999 and remained with it until October 2003, issued a statement that blamed the current management of Intermix for "ramped up" spyware activity.

"During my tenure at the company," he said, "the adware division was a small part of the business."

But Brookman said Greenspan was the individual most responsible for the company's spyware activities.

"He not only knew about the illegal activity," Brookman said, "but in several instances he directed that it occur."

Shares of News Corp. fell 11 cents Thursday to $15.53.

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