by Mike Andrew -
SGN Staff Writer
The Federal Trade Commission has intervened in a New Jersey bankruptcy case to prevent the sale of names, addresses, e-mails, and other personal data of subscribers to a magazine catering to Gay teens.
XY magazine, with its companion website XY.com, billed itself as a young Gay men's publication. It ceased publishing in 2007.
XY owner and editor Peter Cummings filed a personal bankruptcy petition in February 2010.
Listing his assets, he claimed only a vehicle worth $1,500 and zero income, saying he is now a graduate student 'living mostly on student loans and small loans from friends and family.'
Cummings said he has "lived with friends," has had "no fixed abode for the last three years," and has even lived in his car.
The only significant asset Cummings listed is the "customer list, personal data, and editorial and back issue files of XY mag and XY.com."
According to the FTC, the magazine had 100,000 subscribers plus photographs and articles submitted by about 3,000 former readers.
The website, meanwhile, had some 1 million users who had submitted names, street addresses, e-mail addresses, personal photos, and online personal profiles.
XY's creditors have hired a lawyer to obtain the personal information held by the magazine and website so it can be sold, with the proceeds going to the creditors.
Shoshana Schiff, a partner with the Trenk law firm representing the court-appointed bankruptcy trustee, told CNET reporters that "Any property listed on the debtor's bankruptcy petition is property of the bankruptcy estate and my client intends to administer those assets for the benefit of creditors."
XY subscribers - many of whom were believed to be minors living with their parents - were protected by receiving their magazines in plain black shrink-wrapped plastic.
Cummings says he believes that giving their personal information to his creditors violates California privacy laws, and the Federal Trade Commission Act, which prohibits deceptive business practices.
In another complication, Cummings former business partners, Martin Shmagin and Peter Larson, filed a claim with the bankruptcy court saying they own XY's remaining assets, and threatening to sue Cummings for fraud if he does not turn over the personal data.
"The ownership dispute has not been resolved," they wrote. "Until resolved, the prospect of litigation as to the ownership of the assets remains outstanding."
The possibility that the personal data of minors might be sold off to satisfy Cummings' debts caused the FTC to intervene.
David Vladeck, the head of the FTC's Bureau of Consumer Protection, wrote to the bankruptcy court and the attorneys representing all parties in the case, that any personal data should be "destroyed" rather than sold.
"Due to the nature of the information, the passage of time, and the closure of the magazine and website in 2007 and 2009, respectively, the continued use of the data may pose privacy risks not reasonably contemplated by subscribers when they provided the data, and not consistent with their course of dealing with the company," Vladeck's letter continued.
The FTC also said that releasing street addresses might unintentionally out former subscribers, even if they no longer resided there.
"With regard to the street addresses collected by XY, many of these were provided by minors living with their parents or others who may have been unaware of their sexual orientation. With the passage of time since the magazine and website's demise, many of these minors may have moved. At the time the website and magazine were operational, minors who moved, especially those concerned about the confidentiality of their subscriptions, were able to go online to update promptly any change of address. Former subscriber expectations, however, have likely changed over the past several years. They do not expect to receive any future communications from XY. The magazine has ceased publication and has been dormant for three years. The website no longer functions, making it impossible to update any changes of address, even if there were an expectation that future communications might occur. Accordingly, any effort to contact former subscribers via mail now carries the risk of unintentionally revealing their sexual orientation to individuals residing at the former subscribers' addresses."
"Data could be sold and re-sold for decades. Customers would have no adequate remedy at law and no way to regain their security," the FTC concluded.
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