December 4, 2006 2:38 PM PST

Company accused of selling fake antispyware settles suit

A company accused of selling phony antispyware tools has settled a lawsuit filed by Washington State's attorney general.

White Plains, N.Y.-based Secure Computer has agreed to pay $1 million to settle charges that it violated Washington?s computer spyware law, the attorney general's office said in a statement Monday. The case was the first lawsuit under the law.

Filed in January, the suit accused Secure Computer of marketing software that falsely claimed PCs were infected with spyware, then enticing consumers to pay $49.95 for a program called Spyware Cleaner that claimed to remove it. The suit alleged violations under Washington?s 2005 Computer Spyware Act, federal and state spam laws, and the state Consumer Protection Act.

"This settlement with Secure Computer is a significant victory," Washington Attorney General Rob McKenna said in the statement. "It sends a strong message to Internet businesses that they must promote their products ethically and legally. We won't tolerate deceptive marketing such as scareware that preys on consumers' fears about spyware and online threats."

Spyware and adware have become widely despised for their sneaky distribution tactics, unauthorized data gathering and tying-up of computer processing power. The terms are used to describe software that pops up ads on a PC screen or that logs keystrokes, makes screenshots or tracks a user's Web-surfing habits.

Secure Computer allegedly used deceptive links on search engine Google's site, as well as in pop-up advertising and in spam e-mail for Spyware Cleaner. Additionally, the company was accused of using a Windows feature to pop up warnings on users' PCs, telling them their system had been compromised by spyware, when it had not.

Microsoft had also filed suit against Secure Computer because the company in its advertising implied that its tools came from or were endorsed by Microsoft. A Microsoft representative did not immediately return a call inquiring about the status of that case.

An estimated 1,145 Washington residents who purchased Secure Computer's Spyware Cleaner software and a tool called Popup Padlock are eligible for refunds under the settlement, according to the state attorney general. As part of the settlement, Secure Computer must send e-mail to all Washington customers who purchased the products.

Under the terms of the agreement (click for PDF), Secure Computer and company president Paul Burke agreed to pay $200,000 in civil penalties, $75,000 in restitution for consumers and $725,000 in state attorneys? fees and costs. The agreement does not include an admission or finding of wrongdoing.

Secure Computer stopped selling Spyware Cleaner in January after the suit was filed. Settlements with three other defendants in the case were reached earlier this year.

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