FTC and New York and Florida Attorneys General Charge The Tax Club’s Telemarketing Scheme with Bilking Consumers Who Were Trying to Launch Home-Based Businesses

The Federal Trade Commission and the New York and Florida Attorneys General charged The Tax Club’s telemarketing operation with deceiving consumers who mistakenly believed its services would help their home-based business succeed.  The agencies seek to end the allegedly illegal practices as part of their continuing efforts to stop scams that target financially strapped consumers.  At their request, a federal court signed an order requiring the defendants to stop their deceptive practices pending further litigation.

According to the complaint, the defendants have taken more than $200 million from consumers across the country since 2008 alone.  They called people who were trying to start a home-based business, falsely claimed affiliation with other companies that already did business with the consumer, and sold products and services they falsely claimed were essential for the business to succeed, such as tax return preparation and individualized tax advice, customized business planning and counseling, and business credit development services.

As alleged in the complaint, after an initial sale, the defendants repeatedly called buyers to sell more purported services.  They typically charged several thousand dollars per service, usually with a large initial fee and smaller monthly payments.  They often convinced buyers to finance the charges if they had insufficient credit or savings and falsely claimed consumers would recoup the cost from earnings and tax deductions.  The defendants allegedly often failed to provide the promised services.  For example, the business planning documents the defendants provided typically were boilerplate and non-specific to the individual consumer, and expert tax and other business-related counseling was typically inaccessible.  Consumers who sought refunds often did not get their money back because the defendants had an unworkable refund policy and pressured consumers not to cancel.

According to the complaint, the defendants relied on lists of potential customers they bought from sellers of work-at-home or other business development services, including those that were the subject of numerous consumer complaints and law enforcement actions.  During sales calls, which typically lasted an hour or more, the defendants’ sales representatives did not disclose promptly that their purpose was to sell something, and often used high-pressure sales tactics and false claims.

The complaint alleges that the defendants falsely claimed affiliation with other companies, misrepresented the cost of their services and consumers’ earnings potential, and falsely claimed to provide specialized business assistance, in violation of the FTC Act.  The defendants also allegedly violated the FTC’s Telemarketing Sale Rule by misrepresenting material facts about their services and failing to disclose promptly to people they called the seller’s identity, the call’s purpose, and the nature of the services.  The complaint also alleges that the defendants violated the consumer protection laws of New York and Florida.

As alleged in the complaint, the enterprise encompasses at least 12 interrelated corporate entities, doing business under dozens of names, controlled by four individuals.  The defendants include The Tax Club Inc., doing business as (d/b/a) Success Merchant Services, Corporate Tax Network, Corporate Credit, and E-Tax Hotline 8882790191; Manhattan Professional Group Inc., d/b/a The Tax Club, Bookeeping Services, Bookkeeping Services, Ikongo, Essential Planning, Corporate Tax Network, Business Document Center, The Success Planning Group, All Access Books, and Vital Payroll; 5410 Inc., d/b/a Internet Marketing Success, The Success Planning Group, Success Planning Group 2, Success Online, Business Credit, Success Merchant Processing, Real Estate Wire, Day Trade Team, Funding Fasttrack, Corporate Credit, Corporate Credit 2, and Prestige Financing Services.

The defendants also include Marble Base Inc., d/b/a Business Resources, Corporate Solutions, Business Success, Business Services, Online Development, and Jade Seek; 6015 LLC, d/b/a Cypress Corp. Services, My Tax Service, and Accounting Group Services; 1800Accountant LLC; Ikongo Inc.; Tahuya Inc.; Visavis Inc.; HB Marketing Services LLC, d/b/a Global Education, Website Services, Cell Phone Coaching, Maverick MM, and Email Cash; Premier Coaching & Consulting LLC, d/b/a Premier Coaching, Website Services, AC Secrets: 8774372521, Automatic Profit System, Advanced Profits, VIP Profits, Automatic Profit System VIP, and Automatic Profit System Advanced; Skorpios Holdings Inc., also known as Skorpios Holding Inc.; Edward B. Johnson, also known as Ted (or Tedd) Johnson; Michael M. Savage;  Brendon A. Pack; and Gary J. Milkwick.  Sandra C. Savage, wife of Michael Savage, is a relief defendant who is not charged with participating in the scheme but allegedly received ill-gotten gains from it.

The Commission vote authorizing staff to file the complaint was 5-0, with Commissioner Rosch voting.  The complaint was filed in the U.S. District Court for the Southern District of New York on January 9, 2013.

The FTC would like to acknowledge the assistance provided by the Better Business Bureau of Utah, the Better Business Bureau Serving Metropolitan New York, the Wisconsin Attorney General’s Office, and the Ohio Attorney General’s Office during the investigation of this case.
To learn more about these kinds of scams, go to the FTC’s Business Opportunity Scams and read articles including Bogus Business Opportunities, Government Job Scams, Work-at-Home Businesses, and Mystery Shopper Scams or go to the FTC’s Telemarketing Scams page.

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 the defendants have actually violated the law.  The case will be decided by the court.

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 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

(FTC File No. 1223071)

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