ALBANY, N.Y. – The former chief executive of a company accused of secretly installing adware and spyware on millions of home computers agreed to pay $750,000 in penalties after an investigation, New York Attorney General Eliot Spitzer (search) said Thursday.
In April, Spitzer sued Los Angeles-based Intermix Media Inc. (search), saying the company was responsible for sending software tens of millions of times on computers across the country and three million times in New York.
Adware and spyware deliver nuisance pop-up advertisements and can slow and crash personal computers. Spitzer said such programs are fraudulent and threaten to discourage e-commerce.
Shortly after filing the suit, Spitzer's office began investigating Intermix's founder and former CEO Brad Greenspan (search), Spitzer spokesman Brad Maione said.
Greenspan, 32, served as CEO of Intermix from July 2002 to October 2003. Investigators said he directed employees to bundle adware with other free programs and to make the software difficult to remove.
"This agreement sends a message that intrusive and deceptive practices will not be tolerated," Spitzer said.
Greenspan did not admit to any wrongdoing in the settlement. In a statement, he blamed the company's current management for increasing the amount of adware attached to Intermix's offerings and with deceiving investigators.
"My departure from Intermix in 2003 preceded the focus of the New York attorney general's investigation on Intermix' practices beginning in late 2004," he said. "During my tenure at the company, the adware division was a small part of the business ... I continue to stand by my statements that it was the current Intermix Management team that ramped up the company's adware-download program aggressively during the investigation by the New York attorney general and misrepresented the status of the adware pop-up product."
Intermix runs a collection of Web sites featuring quizzes, games and jokes that it packages for advertisers. It also owns MySpace.com (search), the popular social-networking site.
Spitzer said that Intermix's agreement to pay $7.5 million in penalties over three years and stop distributing adware programs was approved by state Supreme Court Judge Judith Gische.
Intermix "is pleased to put this historical matter behind us," said Linda Goldstein, an attorney representing the company. "This was activity in the company's past and to a large extent had been largely ended by the time the investigation began."
Assistant Attorney General Kenneth Dreifach disputed those assertions, saying Intermix continued to attach spyware to its programs well into 2005.
"Our investigation began in September 2004 and we found numerous examples of programs" bundled with spyware, he said. "We contacted them in December and we were fairly surprised they went ahead with these egregious practices. It continued essentially to the eve of our suit."
Software also agreed to pay $35,000 to end an investigation by the attorney general's office of its bundling of adware with free screensavers without providing notice to consumers, Spitzer's office said.
News Corp., the media conglomerate controlled by Rupert Murdoch, last month completed its purchase of Intermix for $580 million in cash.
FOXNews.com is a division of FOX News Channel, which is owned and operated by News Corporation.