The Federal Trade Commission has asked a federal court to issue a contempt order against BlueHippo, a company that collected more than $15 million from consumers based on claims that it would finance their purchases of new computers, but delivered neither the financing nor the financed computers, in violation of a 2008 court order. The FTC alleged that less than one percent of consumers who signed up with BlueHippo received the financed computers they applied for, and undisclosed conditions to redeem “store credits” were rigged to discourage consumers from using them.

In a contempt motion lodged with the court today, the FTC charged that BlueHippo has flouted a settlement reached with the agency last year, continuing to deceive thousands of financially strapped consumers with phony promises that it would help them purchase a computer even if they have credit problems. The FTC also is asking the court to order BlueHippo to compensate injured consumers and bar BlueHippo from similar conduct in the future.

“Years of broken promises by BlueHippo have left consumers seeing red,” said FTC Chairman Jon Leibowitz. “We’re putting companies like this on notice: If you mistreat consumers and thumb your nose at the courts, we will hold you accountable.”

The FTC reached a settlement with Baltimore-based BlueHippo in April 2008 that required the company to pay $3.5 million for consumer redress and barred the defendants from further deceiving customers. According to the FTC’s 2008 complaint, BlueHippo Funding, LLC and affiliate BlueHippo Capital, LLC offered to extend credit to consumers to finance purchases of personal computers and other consumer electronics with down payments of $99 to $124, and a year of weekly or bi-weekly payments ranging from $36 to $88. BlueHippo promised to deliver the product once the consumer made 13 weekly payments. But most consumers did not receive the computers they ordered in the time promised, even after they had made 13 weeks of payments, the Commission alleged. The Commission charged that BlueHippo’s marketing tactics were deceptive, and violated the FTC Act and other federal credit statutes.

Even after this settlement order was entered by the court, BlueHippo continued to deceive consumers, according to the FTC. The company aggressively marketed itself as a computer finance company and spent the rest of 2008 signing up customers and taking their money, but failing to provide them with financed computers. The FTC’s contempt motion alleges that between April and December of 2008, more than 35,000 customers contracted for BlueHippo’s computer financing deal. But the company provided, at most, a single financed computer, failing to provide financed computers even for 2,477 customers who managed to meet the companies’ conditions. Complaints about the company poured into the Better Business Bureau. On top of all that, BlueHippo failed to submit a report to the FTC showing how it was complying with the settlement, as required by the order.

Finally, in April, 2009, after the FTC notified the court that BlueHippo was violating the settlement, the company began ordering thousands of computers. Even so, the FTC alleges that BlueHippo failed to order computers for 1,015 of the 2,477 consumers who had qualified for financing by making 13 consecutive payments and completing the required paperwork. For the 1,462 consumers who finally received a computer, BlueHippo did not even order – let alone ship – the computers within the three- to four-week time frame the company had advertised. On average, it took about six months between the time these consumers qualified for their computers and the time BlueHippo ordered the machines, according to the FTC’s contempt motion.

The FTC’s contempt motion also charged that BlueHippo failed to disclose key aspects of its refund policy. In particular, the company promised that while consumers who canceled their order after seven days could not obtain cash refunds, they could get “store credit,” which could be used to buy desktop computers, laptops, monitors, software, and televisions. But it failed to tell consumers that they would have to send a money order to cover undisclosed shipping and handling fees, as well as taxes, even if they had more than enough store credit to cover these costs – and that they could only order one item at a time.

The contempt motion against defendants BlueHippo Funding, LLC; BlueHippo Capital, LLC; and Joseph Rensin was filed in the U.S. District Court for the Southern District of New York.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

Read the original FTC press release here along with related documents

Attorney Failed to Turn Over Proceeds from Defendants’ Business Opportunity Involving Sale of Internet Kiosks to Consumers.

The Federal Trade Commission has filed civil contempt charges against an attorney who represented the marketers of an “Internet kiosk” business opportunity that turned out to be nothing more than a Ponzi scheme.

In its contempt action, the Commission charged that the attorney representing defendants in the case flouted a March 2009 federal court order that required him to turn over $238,300 to the FTC. The court had previously had determined that money given to the attorney as a retainer for his work on the case derived from the defendants’ proceeds from their illegal scheme. The court found that the FTC was entitled to that money, so that it could be used to reimburse victims of the scam.

In the March 2009 order, the court also imposed an $18.9 million judgment against the operators of the scam – Network Services Depot, Charles Castro, and several other defendants. The judgment upheld FTC charges that the defendants violated the FTC Act and the agency’s Franchise Rule by duping hundreds of consumers into buying Internet kiosk business opportunities with false promises of lucrative earnings. The judgment paved the way for the FTC to distribute more than $2 million to victims.

The civil contempt action against Jeffrey S. Benice and his law firm, Jeffrey S. Benice, a Professional Law Corporation, was filed in the U.S. District Court for the District of Nevada.

Copies of the March 2009 order and other court documents are available from the FTC’s Web site at http://www.ftc.gov/ and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

Read the full press release here along with related documents.

Related: FTC Press Release about the 18.9 million dollar judgement 

Company Also Required to Implement Comprehensive Anti-Fraud Program and to Monitor its Agents

MoneyGram International, Inc., the second-largest money transfer service in the United States, will pay $18 million in consumer redress to settle FTC charges that the company allowed its money transfer system to be used by fraudulent telemarketers to bilk U.S. consumers out of tens of millions of dollars. MoneyGram also will be required to implement a comprehensive anti-fraud and agent-monitoring program.

The FTC charged that between 2004 and 2008, MoneyGram agents helped fraudulent telemarketers and other con artists who tricked U.S. consumers into wiring more than $84 million within the United States and to Canada – after these consumers were falsely told they had won a lottery, were hired for a secret shopper program, or were guaranteed loans. The $84 million in losses is based on consumer complaints to MoneyGram – actual consumer losses likely are much higher.

The FTC charged that MoneyGram knew that its system was being used to defraud people but did very little about it, and that in some cases its agents in Canada actually participated in these schemes. According to the FTC’s complaint, MoneyGram knew, or avoided knowing, that about 131 of its more than 1,200 agents accounted for more than 95 percent of the fraud complaints it received in 2008 regarding money transfers to Canada; a similarly small number of agents was responsible for more than 96 percent of all fraud complaints to the company in 2006.

“Money transfer services have a responsibility to make sure their systems don’t become conduits to rip people off,” said David C. Vladeck, Director of the FTC’s Bureau of Consumer Protection. “In this case, MoneyGram not only ducked this responsibility, but also looked the other way while its agents took part in the scams.”

Minneapolis, Minnesota-based MoneyGram operates through a worldwide network of approximately 180,000 agent locations in 190 countries and territories. In its complaint, the FTC charged that in recent years this network has increasingly been used by telemarketing scammers to prey on U.S. consumers. Con artists prefer to use money transfer services because they can pick up transferred money immediately, the payments are often untraceable, and victimized consumers have no chargeback rights or other recourse.

In 2007, 72 percent of all complaints received by the FTC involving Canadian-based fraud reported using money transfer services to make payments. According to a recent FTC survey cited in the complaint, at least 79 percent of all MoneyGram transfers of $1,000 or more from the United States to Canada over a four-month period in 2007 were fraud-induced. The Commission’s complaint further stated that based on the more than 20,600 fraud complaints MoneyGram itself received, U.S. consumers lost more than $44 million to cross-border money-transfer frauds between 2004 and 2008 alone. When combined with losses reported by U.S. consumers on money transfers within the United States, that number grows to $84 million.

In many of the scams that used MoneyGram’s money transfer system, the con artists used counterfeit checks to induce consumers to send money back by wire transfer. The most prevalent of these scams were lottery or prize schemes in which consumers were told they had won thousands of dollars and just had to pay a fee for “taxes,” “customs,” or “insurance” to a third-party to collect their winnings. Consumers paid the fee using MoneyGram, but received nothing. In another scheme, telemarketers told consumers they were guaranteed loans, regardless of their credit score. All they had to do was pay “insurance,” “paperwork,” or “processing” fees to complete the transaction. Consumers who sent funds using a money transfer service got nothing in return.

In mystery shopping scams, the con artists called U.S. consumers or sent them a piece of direct mail in which they claimed to be hiring consumers to visit stores such as Wal-Mart to evaluate MoneyGram money transfer operations. The con artists sent consumers a cashier’s check, telling them to deposit it in their checking account and then send most of the money back using a money transfer at Wal-Mart. When the counterfeit checks bounced, consumers realized they had lost the money they transferred. By this time, however, the money transfer agents had already received and paid out the money, often either without checking IDs or by using fake drivers license information.

The FTC’s complaint alleges that MoneyGram ignored warnings from law enforcement officials and even its own employees that widespread fraud was being conducted over its network, claiming that proposals to deal with the problem were too costly and were not the company’s responsibility. The company even discouraged its employees from enforcing its own fraud prevention policies or taking action against suspicious or corrupt agents. Some employees who raised concerns were disciplined or fired, the FTC charged.

In addition, at least 65 of MoneyGram’s Canadian agents have been charged by Canadian or U.S. law enforcers with, or are currently being investigated for, colluding in fraud schemes that used the MoneyGram system.

The complaint charges MoneyGram with violating both the FTC Act and the FTC’s Telemarketing Sales Rule by helping sellers or telemarketers who it knew – or consciously avoided knowing – were violating federal law, and for not taking adequate steps to prevent fraud.

The agreed-upon court order settling the FTC’s charges bars MoneyGram from knowingly providing substantial help or support to any sellers or telemarketers that are violating the Telemarketing Sales Rule and requires it to implement a comprehensive anti-fraud program. Under the anti-fraud program, MoneyGram must conduct background checks on prospective agents; educate and train its employees about consumer fraud; institute agent monitoring; and discipline agents who don’t comply with the rules. The order also requires MoneyGram to provide a clear and conspicuous fraud warning on the front of all its money transfer forms. The order’s conduct provisions apply to all MoneyGram money transfers sent worldwide from either the United States or Canada.

The order contains monitoring and discipline provisions that will ensure MoneyGram is properly training, monitoring, and taking actions to address problems related to its agents. To do this, the order requires MoneyGram to develop and maintain a system for receiving consumer complaints and data, and to provide that information to the FTC upon request. MoneyGram also must take all reasonable steps to identify agents that are involved in fraud. It must review its transaction data to identify any unusual or suspicious activity by its agents and fire any agent who it believes may be participating in fraudulent activities. It also must fire or suspend any agent who has not taken appropriate steps to stop fraudulent money transfers.

Finally, MoneyGram will pay the Commission $18 million, which will be used to provide redress to consumers.

Consumer Education

The FTC has a new Consumer Alert, available on its Web site athttp://ftc.gov/bcp/edu/pubs/consumer/alerts/alt034.shtm, titled “Money Transfers Can Be Risky Business.” It includes useful information on how consumers can avoid telemarketing and money transfer fraud, including the following tips. Don’t wire money to:

• someone you don’t know, in the U.S. or in a foreign country;
• someone claiming to be a relative in the midst of a crisis and who wants to keep the
  request for money a secret;
• someone who says a money transfer is the only form of payment that’s acceptable; or
• someone who asks you to deposit a check and send some of the money back.

Consumers interested in the process of redress administration should call 202-326-3755.

The FTC’s case was investigated with the assistance of the Toronto Strategic Partnership, Project Colt, Project Emptor, and the U.S. Postal Inspection Service. Additional assistance was provided by the Durham Regional Police Service, Ontario, Canada, and the Canadian Anti-Fraud Call Centre (PhoneBusters).

The Toronto Strategic Partnership includes the FTC, the U.S. Postal Inspection Service, Competition Bureau Canada, the Toronto Police Service Fraud Squad – Mass Marketing Section, the Ontario Provincial Police Anti-Rackets Section, the Ontario Ministry of Consumer Services, the Royal Canadian Mounted Police, and the United Kingdom's Office of Fair Trading. Project Colt includes the FTC, the Royal Canadian Mounted Police, Surete du Quebec, City of Montreal Police Service, Canada Border Services Agency, Competition Bureau Canada, U.S. Homeland Security, U.S. Postal Inspection Service, and the Federal Bureau of Investigation. Project Emptor includes the FTC, the Business Practices and Consumer Protection Authority of British Columbia, the Royal Canadian Mounted Police, Competition Bureau Canada, the Federal Bureau of Investigation, and the U.S. Postal Inspection Service.

The Commission vote approving the complaint and proposed consent order was 3-0, with Commissioner Pamela Jones Harbour recused. The complaint and order were filed on October 19, 2009, in the U.S. District Court for the Northern District of Illinois, Eastern Division.

NOTE: The Commission authorizes the filing of a complaint when it has “reason to believe” that the law has or is being violated, and it appears to the Commission that a proceeding is in the public interest. A complaint is not a finding or ruling that the defendants have actually violated the law. A stipulated court order is for settlement purposes only and does not necessarily constitute an admission by the defendants of a law violation. Stipulated orders have the force of law when signed by the judge.

Copies of the complaint and stipulated order are available from the FTC’s Web site athttp://www.ftc.gov and from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,700 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

Click here for the original FTC press release, supporting documentation, and consumer tips

10/5/2009 FTC Press Release:

Changes Affect Testimonial Advertisements, Bloggers, Celebrity Endorsements
The Federal Trade Commission today announced that it has approved final revisions to the guidance it gives to advertisers on how to keep their endorsement and testimonial ads in line with the FTC Act.

The notice incorporates several changes to the FTC’s Guides Concerning the Use of Endorsements and Testimonials in Advertising, which address endorsements by consumers, experts, organizations, and celebrities, as well as the disclosure of important connections between advertisers and endorsers. The Guides were last updated in 1980.

Under the revised Guides, advertisements that feature a consumer and convey his or her experience with a product or service as typical when that is not the case will be required to clearly disclose the results that consumers can generally expect. In contrast to the 1980 version of the Guides – which allowed advertisers to describe unusual results in a testimonial as long as they included a disclaimer such as “results not typical” – the revised Guides no longer contain this safe harbor.

The revised Guides also add new examples to illustrate the long standing principle that “material connections” (sometimes payments or free products) between advertisers and endorsers – connections that consumers would not expect – must be disclosed. These examples address what constitutes an endorsement when the message is conveyed by bloggers or other “word-of-mouth” marketers. The revised Guides specify that while decisions will be reached on a case-by-case basis, the post of a blogger who receives cash or in-kind payment to review a product is considered an endorsement. Thus, bloggers who make an endorsement must disclose the material connections they share with the seller of the product or service. Likewise, if a company refers in an advertisement to the findings of a research organization that conducted research sponsored by the company, the advertisement must disclose the connection between the advertiser and the research organization. And a paid endorsement – like any other advertisement – is deceptive if it makes false or misleading claims.

Celebrity endorsers also are addressed in the revised Guides. While the 1980 Guides did not explicitly state that endorsers as well as advertisers could be liable under the FTC Act for statements they make in an endorsement, the revised Guides reflect Commission case law and clearly state that both advertisers and endorsers may be liable for false or unsubstantiated claims made in an endorsement – or for failure to disclose material connections between the advertiser and endorsers. The revised Guides also make it clear that celebrities have a duty to disclose their relationships with advertisers when making endorsements outside the context of traditional ads, such as on talk shows or in social media.

The Guides are administrative interpretations of the law intended to help advertisers comply with the Federal Trade Commission Act; they are not binding law themselves. In any law enforcement action challenging the allegedly deceptive use of testimonials or endorsements, the Commission would have the burden of proving that the challenged conduct violates the FTC Act.

The Commission vote approving issuance of the Federal Register notice detailing the changes was 4-0. The notice will be published in the Federal Register shortly, and is available now on the FTC’s Web site as a link to this press release. Copies also are available from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,700 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

MEDIA CONTACT:
Betsy Lordan
Office of Public Affairs
202-326-3707
STAFF CONTACT:
Richard Cleland
Bureau of Consumer Protection
202-326-3088
(FTC File No. P034520)
(endorsement testimonial guide.wpd)

The original release with full text in PDF format can be found here.

It's somewhat interesting to me to break down the analysis and reaction to the release by different groups (although obviously even these can be broken down much further):

Legal sites discussing the FTC release:

• Law.com Legal Blog Watch: The FTC Blog Rules: Overbroad or Overblown?
• Eric Goldman's Technology and Marketing Law Blog – Do the FTC's New Endorsement/Testimonial Rules Violate 47 USC 230?
• David Johnson's Digital Media Law Blog: Bloggers and Advertisers Beware: FTC Rules on Sponsored Endorsements Create Major Risks for "Word of Mouth" Advertising
• Mike Young Internet Law and Business Blog: FTC New Rule: Bloggers Must Disclose Compensation

News Sites discussing the release:

• Wall Street Journal – UPDATE: FTC Toughens Endorsement Rules For Celebrities, Bloggers
• Associated Press: FTC: Bloggers, testimonials need better disclosure
• CNET News: Yes, new FTC guidelines extend to Facebook fan pages
• MSNBC – FTC: Bloggers must disclose freebies on reviews

 Consumer Advocacy sites discussing the release:

• Consumer Reports – Bloggers Who Shill Must Also Tell (note: I find it somewhat strange that Consumer Reports sees no irony in the fact that they are mixing judgements with data in this headline).

Sites more critical of the new regulations

• BuzzMachine – FTC Regulates Our Speech
• EdRants.com – Interview with the FTC’s Richard Cleland
• Slate – The FTC's Mad Power Grab

Advertising and Marketing Organizations discussing the new FTC regulations

• Adage Discussion on the New Regulations
• Media Post – FTC Clamps Down On Ad Testimonials

Internet Marketers discussing the FTC release:

• Warrior Forum - Discussion on Final Endorsements and Testimonial Guidelines
• Alex Sysoef at HowToSpoter – FTC Attacks Affiliate Bloggers
• Frank Kern – FTC Declares Shenanigans On All Kinds of Stuff

Telemarketers Must Obtain Prior Written Approval from Consumers Who Want to Receive Such Calls

Beginning September 1, 2009, prerecorded commercial telemarketing calls to consumers – commonly known as robocalls – will be prohibited, unless the telemarketer has obtained permission in writing from consumers who want to receive such calls, the Federal Trade Commission announced today.

“American consumers have made it crystal clear that few things annoy them more than the billions of commercial telemarketing robocalls they receive every year,” said Jon Leibowitz, Chairman of the FTC. “Starting September 1, this bombardment of prerecorded pitches, senseless solicitations, and malicious marketing will be illegal. If consumers think they’re being harassed by robocallers, they need to let us know, and we will go after them.”

The new requirement is part of amendments to the agency’s Telemarketing Sales Rule (TSR) that were announced a year ago. After September 1, sellers and telemarketers who transmit prerecorded messages to consumers who have not agreed in writing to accept such messages will face penalties of up to $16,000 per call.

The rule amendments going into effect on September 1 do not prohibit calls that deliver purely “informational” recorded messages – those that notify recipients, for example, that their flight has been cancelled, an appliance they ordered will be delivered at a certain time, or that their child’s school opening is delayed. Such calls are not covered by the TSR, as long as they do not attempt to interest consumers in the sale of any goods or services. For the same reason, the rule amendments also do not apply to calls concerning collection of debts where the calls do not seek to promote the sale of any goods or services.

In addition, calls not covered by the TSR – including those from politicians, banks, telephone carriers, and most charitable organizations – are not covered by the new prohibition. The new prohibition on prerecorded messages does not apply to certain healthcare messages. The new rule prohibits telemarketing robocalls to consumers whether or not they previously have done business with the seller.

Under a previous rule that took effect on December 1, 2008, telemarketing robocall messages by businesses covered by the TSR must tell consumers how to opt-out of further calls at the start of the message, and provide an automated opt-out mechanism that is voice or keypress-activated. Prerecorded messages left on answering machines must also provide a toll-free number that connects to the automated opt-out mechanism.

After September 1, consumers who receive prerecorded telemarketing calls but have not agreed to get them should file a complaint with the Commission, either on the ftc.gov Web site or by calling 1-877-FTC-HELP.

The Commission’s 2008 press release announcing the changes to the TSR’s prerecorded telemarketing provisions and a link to the related Federal Register notice can be found on the FTC’s Web site at:http://www2.ftc.gov/opa/2008/08/tsr.shtm.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

Click here for the original press release and additional documents.

Court Orders Bar All Illegal Telemarketing Activities

Four deceptive telemarketing operations targeted by the Federal Trade Commission have agreed to abandon the illegal tactics they allegedly used to scam consumers – such as charging for products that were never ordered, making bogus claims about their products, and harassing consumers with unwanted phone calls – under settlements with the FTC announced today.

Defendants responsible for the four telemarketing operations, which were sued by the FTC last year as part of the largest telemarketing fraud sweep ever coordinated by the agency, have signed court orders barring them from these and other illegal practices. The law enforcement sweep, “Operation Tele-PHONEY,” included 13 FTC complaints against unscrupulous telemarketers who allegedly defrauded more than 500,000 consumers, resulting in losses of more than $100 million. With the settlements announced today, all defendants in nine of the 13 “Tele-PHONEY” cases have settled the FTC’s charges, and courts have permanently prohibited the telemarketers’ illegal activity. In one other “Tele-PHONEY” complaint, the FTC said today it has added 15 new defendants, and a court has preliminarily barred the illegal conduct of 10 of them.

Combined with the actions brought by other agencies, the “Tele-PHONEY” sweep encompassed more than 180 cases, including both civil and criminal actions in the U.S. and Canada (see press release at: http://www.ftc.gov/opa/2008/05/telephoney.shtm). In many of the FTC actions, federal courts temporarily froze the defendants’ assets and suspended their operations pending trial soon after the complaints were filed.

In the complaints resulting in the settlements announced today, the FTC charged that:

Montreal-based Med Provisions operated a bogus online pharmacy that sold sham “membership packages” to elderly consumers for $389. The defendants claimed their online pharmacy could save customers 30 percent to 50 percent on prescription drug costs, and offered a 30-day money-back “guarantee.” But according to the FTC, consumers who ordered the package got either nothing, or a prescription drug card that turned out to be worthless. Consumers did not get refunds.

Steven Breitling/ICS Financial Firm used phony loan offers to bilk consumers out of $75 each. Consumers received a direct mailing from ICS Financial “guaranteeing” them a loan of between $2,000 and $5,000. Those who responded were contacted by telemarketers, who told them that to get their loan they first had to pay a $75 consulting fee and sign a contract. Consumers who paid the fee never received any loans, and many never heard from the company again, according to the complaint.

City West Advantage, Inc. d/b/a Unified Services allegedly deceived consumers into disclosing their bank account information, and then charged them about $149 without their permission. The defendants called consumers and told them they had won a $1,000 shopping spree or other “free gift,” and that the bank account information they provided would be used to charge them $1.95 for shipping and handling. Consumers who hesitated were called back repeatedly and harassed by telemarketers, even after consumers asked them to stop calling. Consumers who provided their financial information were charged approximately $149 without their consent.

Direct Connection Consulting, Inc., et al. allegedly billed consumers for products they never agreed to buy after bombarding them with a confusing sales pitch over the phone. The defendants contacted consumers with promises of free gift cards, gas cards, or free resort vacations. The telemarketers often read their pitch so fast that consumers didn’t understand or realize they were agreeing to pay for products or services. Consumers who understood the pitch were told that they would not be billed, since they did not provide their billing information. However, although consumers did not know it, the telemarketers already had their billing information and charged their credit cards or debited their bank accounts, without providing the “free” goods or the services they promised.

The four settlements announced today against 16 defendants contain judgments totaling more than $27.6 million, although large portions have been suspended by the courts due to the defendants’ inability to pay. Each of the settlements includes provisions that bar the defendants from further deceiving consumers and restrict the way they do business in the future. In the case of Direct Connection Consulting, Inc., the settlement order also bans JoAnn R. “Jody” Winter, the co-owner and officer of the corporate defendants, from telemarketing of any kind. All the other defendants in this case settled the FTC’s charges in March 2009 (see press release at http://www.ftc.gov/opa/2009/04/suretouch.shtm).

The Commission vote to approve the agreed-upon final order in each case was 4-0. The orders were filed in: 1) The U.S. District Court for the Northern District of Ohio (Med Provisions); 2) The U.S. District Court for the Western District of Oklahoma (Steven Breitling/ICS Financial Firm); 3) The U.S. District Court for the District of Nevada (Publishers Business Services, Unified Services); and 4) The U.S. District Court for the Northern District of Georgia, Atlanta Division (Direct Connection Consulting, Inc.). All orders have been entered by the respective courts.

Amended Complaint in NHS Systems, Inc.

The FTC also has added 15 new defendants to its complaint against NHS Systems, Inc., another company targeted in Operation Tele-PHONEY, and the court has preliminarily stopped the illegal practices of 10 of those defendants. The Order prohibits the 10 new defendants from telemarketing or charging a consumer’s bank account. The other five new defendants had been preliminarily ordered to stop their alleged illegal activity in 2008. The FTC has charged that this operation called consumers and misled them to believe that the defendants were affiliated with U.S. government agencies.

The defendants deceived consumers into providing bank account information, which was then used to bill them for enrollment in a “discount health care program” to which they never agreed. The FTC charged that the 15 defendants were part of the original operation or worked to continue the scheme in a new guise, even after the court ordered a halt to the operation in May and June 2008. Most of the defendants were part of the original scheme and worked to continue the new scheme.

The new defendants include: 1) PHS Enterprises, Inc.; 2) 6676529 Canada, Inc.; 3) Nicole Bertrand; 4) Barry Kirstein; 5) a person using the name “Dannie Boie;” 6) First Step Management, Inc.; 7) Gold Dot, Inc.; Linke Jn Paul; 9) Tasha Jn Paul; 10) Nevada Business Solutions, Inc.; 11) Interface Management, Inc.; 12) Beginning Again, Inc.; 13) Plus Health Savings, Inc.; 14) Physicians Health Systems, Inc.; and 15) Health Management, LLC.

The Commission vote approving the amended complaint was 4-0. The amended complaint was filed in the U.S. District Court for the Eastern District of Pennsylvania on July 6, 2009, and the court entered a temporary restraining order on July 9, 2009, and a preliminary injunction on July 24, 2009.

NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that a defendant has violated the law. Stipulated final orders are for settlement purposes only and do not constitute an admission by the defendant of a law violation. Stipulated final orders require approval by the court and have the force of law when signed by the judge.

Copies of the four stipulated final orders and amended complaint are available from the FTC’s Web site at http://www.ftc.gov and from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, click: http://www.ftc.gov/ftc/complaint.shtm or call 1-877-382-4357. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to more than 1,700 civil and criminal law enforcement agencies in the U.S. and abroad. For free information on a variety of consumer topics, click http://ftc.gov/bcp/consumer.shtm.

Click here for the original release and additional documents

A federal district court has ordered the marketers of two dietary supplements – "Supreme Greens" and "Coral Calcium" – who claimed the products would cure ailments ranging from cancer and Parkinson’s disease to heart disease and autoimmune diseases to pay nearly $70 million for deceiving consumers about the products’ effectiveness and safety. The court also froze the assets of some of the defendants.

In July 2008, the court found that infomercial pitchman Donald W. Barrett and his affiliates deceptively touted the supplement Supreme Greens to treat, cure, or prevent cancer, heart disease, diabetes, and arthritis. Barrett also deceptively claimed that the product could cause dramatic weight loss and could safely be taken by children, pregnant women, and people on medication. In addition, Barrett marketed a second dietary supplement, Coral Calcium, which the court found he and the other defendants deceptively claimed could treat cancer, Parkinson’s disease, heart disease, and autoimmune diseases; could be absorbed in greater quantity and more quickly than other calcium products; and could be completely absorbed by the body. Barrett also wrongfully claimed that scientific research had proven calcium supplements could prevent, reverse, or cure cancer in humans.

The Federal Trade Commission charged Barrett, his associate Robert Maihos, and two
companies they control – Direct Marketing Concepts, Inc. and ITV Direct, Inc. – with making these unlawful claims regarding Supreme Greens and Coral Calcium, and with making unauthorized credit and debit charges. The FTC also charged three other defendants – Allen Stern and two companies he controls – with deceptively marketing Coral Calcium.

The court froze the assets of Barrett, Maihos, Direct Marketing Concepts, and ITV Direct and ordered them to pay $48.2 million for consumer refunds. The court also barred them from making deceptive claims about Supreme Greens and Coral Calcium; misrepresenting that scientific research validated their claims; making any health, performance, or efficacy claims about any food, drug, dietary supplement, cosmetic, or device unless such claims are true, non-misleading and substantiated by competent and reliable scientific evidence; failing to disclose that promotional programming is, in fact, a paid advertisement; and billing consumers or charging their credit or debit cards on an ongoing basis without their consent.

The U.S. District Court for the District of Massachusetts ordered Stern, King Media, Inc., and Triad ML Marketing, Inc. to pay $20.4 million for consumer refunds. The court barred them
from making deceptive claims about Coral Calcium; misrepresenting that scientific research validated their claims; and making any health, performance, or efficacy claims about any food, drug, dietary supplement, cosmetic, or device unless they are true, non-misleading, and substantiated by competent and reliable scientific evidence.

Copies of the court’s decisions and final orders are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

MEDIA CONTACT:
Betsy Lordan
Office of Public Affairs
202-326-3707
STAFF CONTACT:
Edward Glennon
Bureau of Consumer Protection
202-326-3126

(DMC NR.wpd)
(FTC File No. 023 3138)

Click here for the original FTC press release and additional documents

The Commission has reopened the public comment period for the review of its Rule Concerning the Use of Prenotification Negative Option Plans at the request of an organization and state and local governments seeking additional time. The public comment period has been extended for 60 days, until October 13, 2009. Information on how and where to submit comments can be found in a new Federal Register notice on the Commission’s Web site.

The vote approving the extension of the public comment period was 4-0. (FTC File No. P064202; the staff contacts are Robin R. Spector, Bureau of Consumer Protection, 202-326-3740, and Matthew Wilshire, Bureau of Consumer Protection, 202-326-2976; see press release dated May 11, 2009, at http://www.ftc.gov/opa/2009/05/budget.shtm.)

Copies of the documents mentioned in this release are available from the FTC’s Web site at http://www.ftc.gov and from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. Call toll-free: 1-877-FTC-HELP.

MEDIA CONTACT:

Office of Public Affairs
202-326-2161

(FYI 39.2009.wpd)

Click here for full text and related documents

'Guaranteed' Jobs Never Materialized

A U.S. district court has halted a phony job placement operation that allegedly stole money from job seekers by promising them full-time work, with benefits, that never materialized, the Federal Trade Commission announced today.

The court shut down the job placement operation until a hearing on a preliminary injunction can be held, and froze its assets. According to a complaint filed by the FTC, the scam took out ads in local newspapers around the United States. The ads urged job seekers to call an 800 number, where they got a pitch from telemarketers urging them to provide information about their work histories and to pay a placement fee that ranged from $89 to $195.

The FTC complaint charges that the defendants misled consumers by guaranteeing that they would land jobs making at least $25,000 a year if they paid the placement fee and provided the work history information. Consumers who did this did not get the promised jobs, however. Their repeated efforts to follow up with the defendants or ask for a refund were fruitless.

The Florida-based defendants charged in the case are Career Hotline, Inc., and its principal, Susan Bright, who also does business as Unique Flowers.

The Commission vote authorizing the complaint against the defendants was 4-0. The complaint was filed with the request for a temporary restraining order and entered by the U.S. District Court for the Middle District of Florida Tampa Division on August 4, 2009. The court unsealed the complaint and temporary restraining order on August 10, 2009.

The FTC appreciates the assistance of the Pinellas County Office of Justice and Consumer Services, the Pinellas County Sheriff’s Office, and the Office of the Attorney General of Ohio.

NOTE: The Commission authorizes the filing of a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. A complaint is not a finding or ruling that the defendants have actually violated the law.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

MEDIA CONTACT:

Betsy Lordan
Office of Public Affairs
202-326-3707

STAFF CONTACT:

David C. Fix
Bureau of Consumer Protection
202-326-3298

Arturo DeCastro
Bureau of Consumer Protection
202-326-2747

(FTC File No. 092-3161)
(Career Hotline NR.wpd)

Click here for the full CareerHotline press release and related documents

To rectify this egregious error, I am posting the link to the recent FTC complaint along with the original WorkAtHomeTruth.cocm series of Rebate Processing parody songs…

Federal Trade Commission v. Make You Famous Consulting, Inc. dba A Penbrook Productions, Penbrook Productions, and Process from Home, and Michael Allen Brooks (United States District Court District for the Central District of California, Southern Division)

Civil Action No. 09-CV-04579
FTC File No.   092 3122

Click here to view the original complaint filed against Penbrook Productions

Rebate Processor Parody Videos from WorkAtHomeTruth:

"I Want to Be a Rebate Processor"

Heartfelt song about one mans quest to achieve the American dream of becoming a rebate processor from home and earning that easy money.

Angela Penbrook Love Song

The truth comes out. The man is not on a quest to become a rebate processor, but in fact is seeking forgiveness from the woman he left long ago.

The Battle of Angela Penbrook

Angela Penbrook and Angel Stevens duke it out for the honor of being the number 1 work at home consultant in America. Much to their horror, John Jacobs – a man with a name suspiciously similar to that of one from a childhood song – is about to stake HIS claim as well as the number 1 work at home consultant in America. Chaos and wackiness ensues…

Full lyrics of "The Battle of Angela Penbrook" and a written transcription of the historical documents can be found at: The Battle of Angela Penbrook at Squidoo.com

Historical Annotations of the Battle Of Angela Penbrook

SiteReviewAuthority and the Legend of Chairman

Dr. Richard Stera – a.k.a. "Chairman" was instrumental in the rise of the Rebate Processor phenomenon.