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FTC Settlement Bans Marketer from Timeshare Business, Telemarketing

The owner of a telemarketing operation that deceived consumers who were trying to sell their timeshare properties is permanently banned from the timeshare resale and rental business, and from all telemarketing, under a settlement with the Federal Trade Commission. The settlement followed a court ruling that the company violated the FTC Act and Telemarketing Sales Rule (TSR). The case is part of the FTC’s ongoing effort to crack down on con artists who use fraud and deception to take advantage of consumers in financial distress.

According to the FTC’s March 2011 complaint, Vacation Property Services, Inc., made tens of thousands of unsolicited telemarketing calls to timeshare owners falsely claiming that they already had, or could quickly find, buyers for the owners’ timeshares. The defendants demanded that consumers pay a large up-front fee to facilitate the sale. The FTC’s complaint charged Vacation Property Services, Inc. and its manager and owner, Albert M. Wilson, with violating the FTC Act and the Telemarketing Sales Rule by misrepresenting the company’s refund policy and the existence of potential buyers. The complaint also charged the defendants with calling hundreds of thousands of consumers whose phone numbers are on the FTC’s Do Not Call Registry.

In May, the United States District Court for the Middle District of Florida entered a summary judgment order against Vacation Property Services, Inc. and Wilson. The court held that the company deceived consumers into paying large up-front fees by claiming that it had buyers lined up or would find buyers to purchase consumers’ timeshare properties, and that it had violated the TSR by calling telephone numbers listed on the National Do Not Call Registry. The court held that there were genuine issues of material fact with respect to whether Wilson had sufficient knowledge of Vacation Property Services’ misstatements and illegal calls such that he could be held financially liable for the illegal conduct. The court also held that the company and Wilson failed to pay the required fees to access the Registry.

The settlement order announced today resolves the FTC’s remaining claims against Wilson. The order permanently bans him from all telemarketing and from participating in the timeshare resale and rental business. It also prohibits him from misrepresenting material facts about any goods or services, and from selling or otherwise benefitting from consumers’ personal information.

The order imposes a judgment of more than $4.2 million, which will be suspended when Wilson has surrendered $120,000, a 2002 Porsche 911, a Spectre Sportfish boat, and his interest in Vacation Property Services. The full judgment will become due immediately if Wilson is found to have misrepresented his financial condition to the FTC. Charges against the other defendants in this case were resolved in a settlement order announced in April.

To avoid pitfalls when selling a timeshare unit, read the FTC’s Selling a Timeshare Through a Reseller: Contract Caveats, and Time and Time Again: Buying and Selling Timeshares and Vacation Plans.

The Commission vote approving the proposed settlement order against Wilson was 4-0-1 with Commissioner Ohlhausen abstaining. The order was entered by the U.S. District Court for the Middle District of Florida, Tampa Division, on August 23, 2012.

NOTE: This settlement order is for settlement purposes only and does not constitute an admission by the defendant that the law has been violated. Settlement orders have the force of law when approved and signed by a District Court judge.

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 Order Restores Competition in Market for Magnesium Plates for Photoengraving

Magnesium Elektron, a leader in the production of magnesium plates used for photoengraving, has settled Federal Trade Commission charges that its acquisition of rival plate manufacturer Revere Graphics Worldwide, Inc. was anticompetitive and a violation of the antitrust laws. The proposed order resolves the FTC’s allegations, and restores the competition eliminated by the merger by requiring Magnesium Elektron to sell necessary intellectual property and technical know-how used to manufacture magnesium plates for photoengraving applications to Kansas-based Universal Engraving.

The FTC’s complaint alleges that Magnesium Elektron’s acquisition of Revere violated the FTC Act and Section 7 of the Clayton Act. In September 2007, Magnesium Elektron acquired the worldwide assets of Revere for approximately $15 million. According to the FTC, the companies were the only two manufacturers and sellers of magnesium plates for photoengraving in the world at that time. Photoengraving is a process used to produce printing plates by photographic means.

The proposed consent order is designed to remedy the anticompetitive effects of the acquisition by requiring Magnesium Elektron to sell technology and know-how used to manufacture magnesium plates for photoengraving to Universal Engraving. While Universal Engraving does not currently manufacture or sell magnesium plates, it is uniquely positioned to become an effective competitor in this market because it already sells other metals used in the photoengraving process to customers affected by the merger.

The proposed order also contains provisions to help ensure that the divestiture to Universal Engraving is successful. It requires Magnesium Elektron to initially supply Universal Engraving with magnesium plates, allowing Universal to immediately enter the market in competition with Magnesium Elektron. It also requires Magnesium Elektron, for a period of time, to provide Universal Engraving with the technical assistance it may need to manufacture and sell magnesium plates for photoengraving. Finally, the proposed order provides Universal Engraving with access to chemicals that are used and sold with magnesium plates for photoengraving applications.

The Commission’s vote approving the complaint and proposed settlement order was 5-0. The order will be subject to public comment for 30 days, until November 13, 2012, after which the Commission will decide whether to make it final. Comments should be sent to: FTC, Office of the Secretary, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. Comments can be submitted electronically.

NOTE: The Commission issues 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 issuance of a complaint is not a finding or ruling that the respondent has violated the law. A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $16,000.

The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to antitrust{at}ftc{dot}gov, or write to the Office of Policy and Coordination, Bureau of Competition, Federal Trade Commission, 601 New Jersey Ave., Room 7117, Washington, DC 20580. To learn more about the Bureau of Competition, read Competition Counts. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

(FTC File No. 091-0094)

Statement by FTC Chairman Jon Leibowitz on Gasoline Price Spikes in California

Federal Trade Commission Chairman Jon Leibowitz issued the following statement regarding the recent spike in gasoline prices in California:

“The Commission is keenly aware of recent gasoline price spikes in California, and fully appreciates the strain that high gasoline prices place on individual consumers who have less money for other necessities, and on the economy as a whole. We are committed to ensuring competitive energy markets through the enforcement of the antitrust laws, and the new authority Congress gave us to address manipulative practices. We will remain vigilant in our oversight responsibility, and if we see a violation of the laws that we enforce, we won’t hesitate to act.”

FTC Acts to Halt Medical Plan Scheme that Targeted Vulnerable Consumers

The Federal Trade Commission charged a telemarketing operation with bilking millions of dollars from thousands of consumers by tricking them into buying what they believed was comprehensive health insurance, when in fact they had paid for something decidedly less. At the FTC’s request, a federal court stopped the defendants from marketing or selling any products or services related to medical discount plans or health-related insured benefits, pending resolution of the case.

“The FTC is committed to cracking down on those who prey on vulnerable consumers, including the unemployed, uninsured, and consumers with pre-existing medical conditions, by falsely claiming to offer coverage that is generally accepted by medical providers across the nation,” said David Vladeck, Director of the FTC’s Bureau of Consumer Protection.

According to the FTC’s complaint, the defendants contacted consumers who had submitted their contact information to websites that purported to offer quotes and plan information from health insurance companies. They charged consumers an initial fee ranging from $50 to several hundred dollars, and a monthly fee ranging from $40 to $1,000. But instead of providing comprehensive health insurance, the defendants sold consumers membership in an obscure “trade association” called Independent Association of Businesses or IAB, that provides purported discounts on services, including golf, travel, and limited health care services, and some type of insurance benefits, such as hospitalization and disability insurance.

In recent instances, the defendants behind the telemarketing scheme allegedly falsely stated that their medical benefits plan is affiliated with state-sanctioned healthcare programs, or that it is a qualified health insurance plan under the Patient Protection and Affordable Care Act.

The FTC complaint alleged that the defendants’ telemarketers called hundreds of thousands of telephone numbers on the National Do Not Call Registry and did not pay the required fee for access to numbers listed on the Registry. They also allegedly failed to promptly connect consumers to a sales representative and delivered prerecorded messages to consumers who had not agreed in writing to receive such calls. The telemarketers also failed to clearly disclose the seller’s identity or inform consumers that they were selling association memberships, and repeatedly called consumers who had told them to stop calling, according to the complaint.

The defendants who sold the supposed health insurance are IAB Marketing Associates LP, Independent Association of Businesses, HealthCorp International Inc., JW Marketing Designs LLC, International Marketing Agencies LP, International Marketing Management, LLC, and Wood LLC, each also doing business as IAB, and the individuals who controlled them, James C. Wood and his sons, Michael J. Wood and Michael J. Wood, and his brother, Gary D. Wood. Their co-defendants, who ran IAB’s largest telemarketing operation, include Health Service Providers Inc., Magnolia Health Management Corporation, Magnolia Technologies Corporation, and Fav Marketing Inc., each also doing business as Health Service Providers, and the individuals who controlled them, Roy D. Hamilton and his wife, Judy M. Hamilton. The defendants are charged with violating the FTC Act and the FTC’s Telemarketing Sales Rule.

The complaint stated that in a similar case in August 2011, the FTC and the State of Tennessee charged several defendants with fraudulently marketing bogus medical plans, which led to a shutdown of United States Benefits (USB), a Nashville, Tennessee, telemarketing company. As stated in the complaint announced today, evidence in that case showed that USB was a key telemarketer of the IAB “plan” that generated millions of dollars for the defendants who controlled IAB.

The Commission vote authorizing the staff to file the complaint was 5-0. The complaint was filed in the U.S. District Court for the Southern District of Florida.

To learn more about these kinds of scams, read the FTC’s Medical Discount Plans and Is It Really Health Insurance? Making Sure You Get What You Pay For.

The FTC will host a summit on October 18, 2012, in Washington, DC, to examine the issues surrounding the robocall problem. The summit will be open to the public, and will include members of law enforcement, the telemarketing and telecommunications industry, consumer groups, and other stakeholders. It will focus on exploring innovations that could potentially be used to trace robocalls, prevent wrongdoers from faking caller ID data, and stop illegal calls. See the draft agenda for more information about the summit.

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.

FTC Settlements Require Equifax to Forfeit Money Made by Allegedly Improperly Selling Information about Millions of Consumers Who Were Late on Their Mortgages

One of the largest U.S. consumer reporting agencies, Equifax Information Services LLC, has agreed to settle Federal Trade Commission charges that it improperly sold lists of consumers who were late on their mortgage payments. In two separate actions, both Equifax and the companies that allegedly bought and resold the information from it will pay a total of nearly $1.6 million to resolve charges that they violated the FTC Act and the Fair Credit Reporting Act (FCRA).

The two settlements are part of the FTC’s ongoing efforts to protect consumers in financial distress and to protect consumer privacy. Equifax will pay $393,000 to resolve allegations that its inadequate procedures led to the sale of lists of consumer information to firms that should not have received them. According to the FTC, Equifax sold more than 17,000 prescreened lists of consumers to companies including Direct Lending Source, Inc., which subsequently resold some lists to third parties, who used their data to pitch loan modification and debt relief services to people in financial distress.

As part of a separate settlement, Direct Lending Source will pay a $1.2 million civil penalty,and will be barred from using or selling prescreened lists without a permissible purpose, or in connection with solicitations for debt relief or mortgage assistance relief products or services.

The FTC’s Complaints

The FTC alleged that between January 2008 and early 2010, Equifax sold Direct Lending and its affiliates lists of people who met selected criteria – known as prescreened lists. According to the agency’s complaint, the lists contained information about millions of consumers, including sensitive information such as credit scores and whether they were 30, 60, or 90 days late on their mortgage payments.

According to the FTC, neither Direct Lending nor its affiliates, Bailey & Associates Advertising, Inc. and Virtual Lending Source, LLC, had a legally permissible purpose to obtain the prescreened lists. Under the FCRA, the only permissible purpose for obtaining a prescreened list is to make “firm offers of credit or insurance” – which are offers that will be honored if consumers meet pre-selected criteria. Using a prescreened list for general marketing purposes is not allowed. The FTC charged that Direct Lending sold the information to third parties that then used it to market products to consumers in financial distress, including companies that have been the subject of law enforcement investigations.

The FTC alleged that, in addition to providing the lists to entities without a permissible purpose and having inadequate procedures to prevent this from happening, Equifax failed to properly investigate when it learned Direct Lending was violating Equifax’s internal policies on prescreening. The FTC also alleged that Equifax knew or should have known that in many cases Direct Lending resold the lists without telling Equifax who would end up using the information. Despite these failures, the FTC alleged Equifax continued selling prescreened lists to Direct Lending. The FTC alleged that Equifax’s failure to employ appropriate measures to control access to sensitive consumer information was unfair, in violation of Section 5 of the FTC Act.

Direct Lending and its affiliates and principals allegedly violated the FTC Act and the FCRA by: 1) obtaining prescreened lists without having a permissible purpose; 2) reselling the reports without disclosing to the consumer reporting agency that provided them who the end users would be; 3) failing to maintain reasonable procedures to ensure that prospective users had a permissible purpose to get them; 4) to the extent that firm offers of credit were made, failing to maintain a record of the criteria used to select consumers for these offers; and 5) failing to employ appropriate measures to control access to sensitive consumer financial information.

The Proposed Equifax Settlement

In addition to requiring the payment of $393,000, the proposed settlement with Equifax prohibits the company from:

furnishing prescreened lists to anyone that it does not have reason to believe has a permissible purpose to receive them;
failing to maintain reasonable procedures to limit the furnishing of prescreened lists to anyone except those who have a permissible purpose to receive them; and
selling prescreened lists in connection with offers for debt relief products or services and mortgage assistance relief products and services, when advance fees are charged, with limited exceptions.

The Direct Lending Settlement

The court order settling the FTC’s charges against the Direct Lending defendants imposes a $1.2 million civil penalty and prohibits them from:

using or obtaining consumer reports without a permissible purpose;
using or selling consumer reports in connection with solicitations for debt relief or mortgage assistance relief products or services offered by entities that charge advance fees;
failing to disclose to the consumer reporting agency that originally furnishes the report the identity of the end user of the report, and each permissible purpose for which the report is being provided to an end user; and
failing to establish and comply with reasonable procedures designed to ensure that a report is resold only for a purpose for which it has been furnished.

The Commission vote to approve the consent agreement package containing the proposed settlement order with Equifax was 5-0. The FTC will publish a description of the consent agreement package in the Federal Register shortly. The agreement will be subject to public comment for 30 days, until November 9, 2012, after which the Commission will decide whether to make the proposed consent order final.

Interested parties can submit written comments on the proposed Equifax settlement order electronically or in paper form by following the instructions in the “Invitation To Comment” part of the “Supplementary Information” section.

Comments can be submitted electronically by clicking here. Comments in paper form should be mailed or delivered to: Federal Trade Commission, Office of the Secretary, Room H-113 (Annex D), 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC is requesting that any comment filed in paper form near the end of the public comment period be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions.

The Commission vote to approve the settlement order against the Direct Lending defendants and refer the case to the Department of Justice for filing was 5-0. The complaint was filed by Department of Justice on October 9, 2012, in the U.S. District Court for the Southern District of California. The settlement will become final when signed by the judge, and is not subject to public comment.

The Direct Lending defendants include Direct Lending Source, Inc.; Bailey & Associates Advertising, Inc.; Virtual Lending Source, LLC; Robert M. Bailey, Jr., individually and as an officer of the corporate defendants; and Linda Giordano, individually and as an officer of the corporate defendants.

Information for Consumers

For information about debt relief, tax relief, and mortgage assistance relief services, see Money Matters: Debt Relief Services, Mortgage Assistance Relief Scams: Another Potential Stress for Homeowners in Distress, and Tax Relief Companies – More Pain Than Gain?

NOTE: The Commission issues an administrative 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 respondent has actually violated the law. A consent agreement is for settlement purposes only and does not constitute an admission by the respondent that the law has been violated. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $16,000.

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. The complaint is not a finding or ruling that the defendant has actually violated the law. This consent judgment is for settlement purposes only and does not constitute an admission by the defendant of a law violation. Consent judgments have the force of law when signed by the District Court judge.

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.

(Civ. No. 3:12-cv-02441)

FTC Cracks Down on Phony Mortgage Relief Schemes

The Federal Trade Commission has filed three separate suits in federal court to halt the allegedly deceptive tactics of three operations that preyed on distressed homeowners by falsely claiming they could save their homes from foreclosure, and then charging them thousands of dollars up-front, while delivering little or no help and often driving them deeper into debt.

“With many homeowners still struggling to hold onto their homes, the FTC takes a hard line against con artists who are seeking their next victim,” said Jon Leibowitz, Chairman of the Federal Trade Commission.

Leibowitz appeared with U.S. Attorney General Eric Holder, FBI Associate Deputy Director Kevin Perkins, and HUD Secretary Shaun Donovan, and announced the FTC cases as part of the Distressed Homeowner Initiative, a federal effort to stop predatory foreclosure rescue, mortgage modification, short sales, and bankruptcy schemes that target distressed homeowners.

Since 2008, the FTC has brought more than 40 cases against companies peddling fraudulent mortgage relief schemes, that caused hundreds of millions of dollars in consumer injury. These law enforcement actions have helped tens of thousands of consumers who were victims of these scams, and have prevented tens of thousands more from becoming victims.

In November 2010, the FTC issued the Mortgage Assistance Relief Services (MARS) Rule, which provided new protections and banned mortgage foreclosure rescue and loan modification services from collecting fees until homeowners have a written offer from their lender or servicer that they deem acceptable.

In all three cases announced today, the FTC took action against defendants who allegedly peddled bogus mortgage relief services, in violation of the FTC Act and the MARS Rule. The agency also charged that two of the operations violated the Telemarketing Sales Rule.

Prime Legal Plans/Reaching U Network. The FTC alleged that from at least mid-2010, the defendants behind this scheme marketed mortgage relief services in English and Spanish, including under the names “Reaching U Network,” and “American Legal Plans.” They allegedly told consumers who were in debt that attorneys would review their mortgage loan documents to see if their lenders complied with state and federal mortgage laws, and would use the resulting “forensic audit” information to help save their homes and negotiate more favorable mortgage terms. The defendants told consumers that “80 percent of mortgages contain some fraud,” and “Our network attorneys have helped hundreds of Americans stay in their homes,” according to the FTC complaint.

But instead of helping consumers, the defendants charged them up to $750 a month, while little or nothing was done to save their homes from foreclosure, and running an operation that a court found was “permeated with illegal practices” , according to the FTC.

The FTC alleged that on company websites, the defendants would falsely claim to be a “private charity working for struggling consumers that can’t afford legal representation.” When responding to consumers who called the toll-free number on the websites, and when cold-calling consumers, including those listed on the Do Not Call registry, the defendants routinely failed to provide the disclosures required by the MARS Rule, collected up-front fees, and misrepresented the results that consumers could expect, according to the complaint. The FTC charged that the defendants violated the Telemarketing Sales Rule, the FTC Act, and the MARS Rule by: calling consumers whose numbers were listed on the Do Not Call Registry; not paying the required annual fee to access the Registry; misrepresenting that they would get mortgage modifications to make consumers’ payments significantly more affordable and help prevent foreclosure, and that they would use so-called forensic audits to do this; misrepresenting the amount of time it would take to get results; failing to provide required disclosures about mortgage modification relief; and collecting advance fees.

A federal judge granted the FTC’s request for a temporary restraining order and ordered a freeze of the defendants’ assets and the appointment of a receiver. The preliminary injunction hearing is scheduled for October 11, 2012.

American Mortgage Consulting Group. The FTC alleged that since early 2011, the defendants claimed a phony affiliation with the U.S. government, pretended to be attorneys, and promised to substantially lower monthly mortgage payments in exchange for an up-front fee ranging from $1,495 to $4,495. Along with two companies he controls – American Mortgage Consulting Group, LLC and Home Guardian Management Solutions, LLC – defendant Mark Nagy Atalla allegedly violated “nearly every provision of the Mortgage Assistance Relief Services Rule.”

The defendants telemarketed mortgage relief services to consumers nationwide, often stating that they were paid by the federal government to assist homeowners and obtain so-called “Home Saver” grants from the government to reduce consumers’ up-front fees, according to the FTC’s complaint. They also allegedly proclaimed themselves to be “a California Professional Legal Team,” sent documents to consumers from their so-called “Legal Department,” and referred to their operation in e-mails as a “law office.”

The defendants claimed they were virtually certain they could obtain loan modifications for their clients, and that the clients would receive a full refund if that did not happen, even though they did little or nothing to help consumers and they failed to provide refunds, according to the FTC.

Also, in violation of the MARS Rule, the defendants allegedly told consumers to stop communicating with their lenders, and failed to disclose that:

consumers would only have to pay the defendants if they accepted the terms of the mortgage assistance the defendants obtained from their lenders;
the defendants are not associated with the government and their services are not approved by the government or the consumer’s lender; and
even if a consumer used the defendants’ services, the lender may not agree to change the terms of the consumer’s loan.

By their actions, the defendants diverted consumers in danger of losing their homes from pursuing authentic, government-affiliated programs, and duped them into paying thousands of dollars based on false promises and misrepresentations, according to the complaint.

A federal judge granted the FTC’s request for a temporary restraining order and preliminary injunction, froze the defendants’ assets, and appointed a receiver.

Expense Management America. Presenting themselves as the solution to all the consumer’s financial problems, the defendants have cold-called thousands of U.S. consumers from their call center in Montreal since at least mid-2010, including those whose numbers were registered on the Do Not Call Registry, according to the FTC complaint.

Whether the consumer was struggling with a mortgage, credit card debt, student loans, car payments, or a poor credit score, the defendants charged an up-front fee of $2,200 to $10,000 that they claimed was being used to pay off debts, according to the complaint. The defendants allegedly claimed that their relationships with lenders and their ability to negotiate on behalf of large groups of consumers made it possible to substantially reduce their payments. But according to the FTC, the defendants failed to produce any of the promised results.

The defendants – Expense Management America, six affiliated companies, and five individuals, who operated in Canada and the United States – also used a series of websites that lured consumers to call them, according to the complaint. After pitching consumers by phone, the defendants allegedly would send brochures and financial documents to consumers via e-mail, and obtain their authorization to withdraw funds from their checking accounts. One brochure, the Expense Management Guide, explicitly told consumers they must follow the “Golden Rule,” which was to cease communicating with their creditors and let the defendants do the talking:

“Sometimes [creditors will] go to extremes in an attempt to force you into an agreement by saying things such as ‘We’ve never heard of E.M.A.’ Or ‘We don’t deal with them.’ … Sometimes [creditors] even break the law. Don’t be fooled by them. Let E.M.A. do the talking!” The FTC charged that the defendants violated the Telemarketing Sales Rule, the FTC Act, and the MARS Rule by: falsely claiming they could secure more affordable payments and reduce the principal on consumers’ loans; making deceptive claims about the price and material aspects of debt relief and other goods and services; charging advance fees for debt relief; calling consumers whose phone numbers are listed on the Do Not Call Registry; telling consumers not to communicate with their lenders; and failing to make the disclosures required by the MARS Rule.

For consumer information about avoiding mortgage and foreclosure rescue scams, see Your Home at the FTC website Money Matters.

The Prime Legal Plans/Reaching U Network complaint names as defendants: Prime Legal Plans, LLC; Consumer Legal Plans LLC (Nevada); Consumer Legal Plans, LLC (Wyoming); Frontier Legal Plans LLC, 123 Save A Home, Inc.; American Hardship LLC; Back Office Support Systems LLC; Consumer Acquisition Network, LLC; Legal Servicing and Billing Partners LLC; Lazaro Dinh; Kim Landolfi; Derek Radzikowski; Andrew Primavera; Christopher Edwards; and Jason Desmond. The complaint also names The 2007 San Lazaro Irrevocable Life Insurance Trust and its trustee, Maria Soltura, as relief defendants.

The Expense Management America complaint names as defendants: E.M.A. Nationwide, Inc., also doing business as EMA and Expense Management America; New Life Financial Solutions, Inc., also d/b/a New Life Financial, and New Life Financial Services; 1UC Inc., also d/b/a 1st United Consultants, and First United Consultants; 7242701 Canada Inc.; 7242697 Canada Inc.; 7246293 Canada Inc., 7246421 Canada Inc.; James Benhaim, a/k/a Jimmy Benhaim; Daniel Michaels, a/k/a Dan Michaels, a/k/a Dan Michles; Phillip Hee Min Kwon, a/k/a Phillip H. Kwon; Joseph Shamolian; and Nissim N. Ohayon.

The FTC would like to thank the California Bar Association for its valuable assistance in bringing the action announced today against American Mortgage Consulting Group.

The FTC would like to acknowledge the Royal Canadian Mounted Police and the Centre of Operations Linked to Telemarketing Fraud (Project COLT) for their valuable assistance in bringing the action announced today against Expense Management America. Launched in 1998, Project COLT combats telemarketing-related crime, and includes members of the Royal Canadian Mounted Police, Sureté du Québec, Service de Police de la Ville de Montréal, Canada Border Services Agency, Competition Bureau of Canada, Canada Post, U.S. Homeland Security (U.S. Immigration and Customs Enforcement and the U.S. Secret Service), the U.S. Postal Inspection Service, the Federal Trade Commission, and the Federal Bureau of Investigation. Since its inception, Project COLT has recovered $22 million for victims of telemarketing fraud.

The Commission votes authorizing the staff to file the complaints and seek temporary restraining orders against defendants in the Prime Legal Plans/Reaching U Network, Expense Management America, and Home Guardian Solutions cases were all 5-0. The FTC filed the Prime Legal Plans/Reaching U Network complaint and request for a temporary restraining order in the U.S. District Court for the Southern District of Florida, and the court entered the documents on September 24, 2012. The preliminary injunction hearing is scheduled for October 11, 2012. The agency filed the American Mortgage Consulting complaint and request for a temporary restraining order in the U.S. District Court for the Central District of California, Southern Division, and they were entered by the court on September 18, 2012. The agency filed the American Mortgage Consulting complaint and request for a temporary restraining order and preliminary injunction in the U.S. District Court for the Central District of California, Southern Division, on September 18, 2012. The TRO was entered by the court the same day, and the preliminary injunction was entered on October 1. The FTC filed Expense Management America complaint in the U.S. District Court for the Northern District of Ohio on September 25, 2012.

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 defendant has actually violated the law. The cases will be decided by the court.

FTC Submits Amicus Brief Explaining that Drug Companies Use No-Authorized Generic Agreements to Delay Generic Competition

The Federal Trade Commission filed an amicus brief in the U.S. District Court for the District of New Jersey stating that an agreement by a branded drug company not to launch an authorized generic (AG) drug “provides a convenient method for branded drug firms to pay generic patent challengers for agreeing to delay entry.”

In a “no-AG” agreement, the branded firm, as part of the patent litigation settlement, agrees that it will not launch its own generic alternative when the first generic begins to compete. Since the introduction of the branded AG would cut into the revenues of a competing generic product, a no-AG commitment can induce the generic firm to delay entry of its product to the market. Thus, the Commission concludes, a no-AG commitment is legally sufficient to trigger a rebuttable presumption of illegality under the law of the Third Circuit.

The Commission filed its brief to more fully explain the role of authorized generics, and to share the empirical results of its studies on the issue of AGs and no-AG commitments. The FTC filed its brief in the case of Lamictal Direct Purchaser Antitrust Litigation. In the case, the private plaintiffs alleged that branded drug firm GlaxoSmithKline (GSK) paid Teva Pharmaceuticals to delay entry by promising not to compete with authorized generic versions of the drug Lamictal. A question before the District Court is whether this no-AG commitment qualifies as a reverse payment, thus triggering a rebuttable presumption of illegality under the law, as laid out in a recent court ruling involving the drug K-Dur.

In the K-Dur case, the U.S. Court of Appeals for the Third Circuit adopted the position of both the FTC and the U.S. Department of Justice, holding that a court considering an antitrust challenge to a drug patent litigation settlement “must treat any payment from a patent holder to a generic patent challenger who agrees to delay entry into the market as prima facie evidence of an unreasonable restraint of trade.”

The brief filed in the current case explains that the FTC’s comprehensive study of authorized generic drugs concluded that a no-AG commitment is a method for branded drug firms to pay generic patent challengers for agreeing to delay entry. It also presents data collected by the FTC over an eight-year period that indicates that treating no-AG commitments as payments will not prevent all patent settlements. The FTC has for years opposed anticompetitive pay-for-delay patent litigation settlements.

The Commission vote approving the filing of the amicus brief was 5-0. It was filed with the court on October 5, 2012. (FTC File No. P072104, Master File No. 12-995 (WHW-MCA); the staff contact is Saralisa Brau, Bureau of Competition, 202-326-2774).

FTC Seeks Public Comment on Kinder Morgan’s Application to Sell Pipeline Assets

The Federal Trade Commission is seeking public comment on an application by energy company Kinder Morgan, Inc. requesting FTC approval for the company to sell certain natural gas pipeline and other assets to Tallgrass Energy Partners, LP.

Kinder is required to sell Kinder Morgan Interstate Gas Transmission LLC, its interest in the Rockies Express Pipeline, Trailblazer Pipeline Company LLC, as well as other assets, by an FTC order settling charges that Kinder Morgan’s recent acquisition of El Paso Corporation would have otherwise been anticompetitive.

According to the application, the sale of the pipelines and other assets to Tallgrass would resolve FTC concerns that the acquisition as originally proposed would substantially lessen competition in the markets for pipeline transportation and processing of natural gas in the Rocky Mountains region. In doing so, the application states, the proposed sale would satisfy the requirements of the FTC order.

Public comments on the application may be submitted until November 7, 2012. Written comments should be sent to: FTC Office of the Secretary, 600 Pennsylvania Ave., N.W., Washington, DC 20580. Comments can also be filed electronically. The Commission will decide whether to approve the sale after the expiration of the public comment period. Copies of the application also can be found on the FTC’s website and as a link to this press release. (FTC File No 121-0014, Docket No. C-4355; the staff contact is Elizabeth A. Piotrowski, Bureau of Competition, 202-326-2623; see press release dated May 5, 2012)

FTC Puts Conditions on UHS’s Proposed Acquisition of Ascend Health Corporation

Hospital management company Universal Health Services, Inc. will sell an acute inpatient psychiatric facility in the El Paso, Texas/Santa Teresa, New Mexico area to settle Federal Trade Commission charges that UHS’s proposed acquisition of Ascend Health Corporation would be anticompetitive. The settlement is the latest example of the FTC’s work to protect consumers from anticompetitive acquisitions and higher health care costs.

On June 3, 2012, UHS, headquartered in King of Prussia, Pennsylvania, agreed to acquire Ascend, headquartered in New York, New York, in a deal valued at approximately $517 million. UHS owns or operates 25 general acute care hospitals and 198 behavioral health facilities in 36 states, Washington, DC, Puerto Rico, and the U.S. Virgin Islands. It is one of the largest hospital management companies in the country, with 2011 revenues of $7.5 billion.

Ascend owns or operates nine behavioral health facilities in Arizona, Oregon, Texas, Utah, and Washington State, including seven acute inpatient psychiatric hospitals, a substance abuse residential treatment center, and an addiction treatment center.

According to the FTC, the acute inpatient psychiatric facilities owned by both UHS and Ascend provide for the diagnosis, treatment, and care of patients deemed to be a threat to themselves or others, or who are unable to perform basic life functions due to an acute psychiatric condition. Acute inpatient psychiatric care is a distinct relevant product market, as other levels of care are not substitutes for it. The relevant geographic market for such facilities is local in nature, with most residents of El Paso and Santa Teresa receiving care from facilities located in the area.

The FTC’s complaint charges that UHS’s proposed acquisition of Ascend would be anticompetitive and would violate federal antitrust laws. As proposed, the deal allegedly would lead to a virtual monopoly in the provision of acute inpatient psychiatric services to commercially insured patients in the El Paso/Santa Teresa area. The complaint alleges that the deal would eliminate competition in the local market between UHS and Ascend, which has benefitted local consumers through lower health care costs, higher quality of care, and improved services.

The FTC contends that the proposed acquisition likely would cause anticompetitive harm by allowing UHS to raise the reimbursement rates it negotiates with commercial insurance plans for acute inpatient psychiatric services. These higher costs ultimately would be borne by consumers, in the form of higher insurance premiums, co-pays, and other out-of-pocket costs. Finally, the complaint alleges that the lost competition would reduce UHS’s incentive to provide better service and patient care.

To resolve these competitive concerns, the proposed order settling the FTC’s charges focuses on the El Paso/Santa Teresa area and requires UHS to sell its Peak Behavioral Health Services facility within six months to an FTC-approved buyer. UHS will acquire UBH of El Paso, an Ascend facility, when the merger closes.

In addition, to ensure that the Peak assets are able to attract a buyer that can effectively compete with UHS after the sale, the proposed order allows the Commission to require a second UHS hospital, Mesilla Valley Hospital in Las Cruces, New Mexico, to be sold together with Peak if Peak alone is not divested to an approved buyer within six months. UHS also is required to keep the Peak assets separate and apart from its other operations and to maintain both Peak and Mesilla Valley as viable operations pending a sale.

The Commission vote approving the complaint and proposed settlement order was 5-0. The order will be subject to public comment for 30 days, until November 7, 2012, after which the Commission will decide whether to make it final. Comments should be sent to: FTC, Office of the Secretary, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. Comments can be submitted electronically.

FTC Announces Agenda for Robocall Summit on October 18, 2012

The Federal Trade Commission today announced the agenda for its upcoming Robocall Summit, which will be held in Washington, DC, on October 18, 2012. FTC Chairman Jon Leibowitz will provide opening remarks, and will be joined at the event by experts in the fields of law enforcement, telemarketing and telecommunications.

During the last two years the FTC has stopped companies responsible for billions of robocalls that offered everything from fraudulent credit card services and so-called auto warranty protection to grant procurement programs. But the number of robocall complaints continues to rise as new technologies enable telemarketers to autodial thousands of phone calls every minute that display false or misleading caller ID information for an incredibly low cost.

The Robocall Summit will explore innovations designed to trace robocalls, prevent wrongdoers from faking caller ID data, and stop unwanted calls. The event will include a report on the current state of robocall technology and the industry, along with a discussion of the laws surrounding the use of robocalls, including how they are enforced, enforcement limitations, and what this means for consumers. The afternoon sessions will focus on developing solutions to the problem of illegal robocalls, including panels on caller ID spoofing and call authentication, data mining and anomaly detection, and call-blocking. The Summit, which will be webcast, will close with a special announcement by Bureau of Consumer Protection Director David Vladeck.

The workshop is free and open to the public. It will be held at the FTC’s satellite conference center at 601 New Jersey Ave., NW, Washington, DC. Pre-registration is encouraged because seating is limited. To pre-register, send an email containing your name and organization to [email protected].

Day-of registration for the conference will begin at 8:15 am on the 18th. Please arrive at the FTC 30 minutes before the event, and bring a valid government issued photo ID. The security processing will include a metal detector and X-ray screening of all hand carried items.

FTC staff will live-tweet the Robocall Summit. The agency’s Twitter handle is @FTC. If you watch the webcast and want to submit questions to participants online, tweet questions with the hashtag #FTCrobo. You may also submit questions via the FTC’s Facebook page at www.facebook.com/federaltradecommission.

FTC Robocall Summit
9:00 am	Welcome – Chairman Jon Leibowitz FTC Chairman Jon Leibowitz
Morning Focus: Where We Are Today
9:15-10:05 am	The Network: What is the current state of telephonic technology? Steven M. Bellovin, Chief Technology Officer, Federal Trade Commission Henning Schulzrinne, Chief Technology Officer, Federal Communications Commission
10:10-11:00 am	The Industry: How have technological changes affected the telecommunications industry, including entities that want to make automated calls? Moderator: Roberto Anguizola, Assistant Director, FTC Division of Marketing Practices Kevin Rupy, Senior Director Law & Policy, US Telecom David Diggs, Vice President, Wireless Internet Development, CTIA Brad Herrmann, Founder & President, Call-Em-All
11:15-12:20 pm	The Law: What is the law surrounding robocalls? How is it enforced? What are the limitations and challenges? What does all of this mean for consumers? Moderator: Lois Greisman, Associate Director, FTC Division of Marketing Practices Greg Zoeller, Indiana Attorney General Will Maxson, Program Manager for Do Not Call Enforcement, FTC Eric Bash, Associate Chief, FCC Enforcement Bureau
Afternoon Focus: Developing Solutions
1:20-2:40 pm	Caller ID Spoofing and Call Authentication Technology Moderator: Kati Daffan, Staff Attorney, FTC Division of Marketing Practices Henning Schulzrinne, Chief Technology Officer, FCC Adam Panagia, Director, AT&T Network Fraud Investigations Patrick Cox, CEO, TrustID Vijay A. Balasubramaniyan, CEO & Co-founder, Pindrop Security
2:45-3:15 pm	Data Mining and Anomaly Detection David Belanger, Senior Research Fellow, Stevens Institute of Technology, AT&T Labs Chief Scientist (retired)
3:30-4:40 pm	Call-Blocking Technology Moderator: Bikram Bandy, Staff Attorney, FTC Division of Marketing Practices Andrew Whitt, Director of Network Operations & Corporate Technology, Verizon Communications Jeff Stalnaker, President & Co-founder, PrivacyStar Matt Stein, Senior Vice President, Network, Technology & Planning, Primus Telecommunications Canada Inc
4:45 pm	Announcement – BCP Director David Vladeck

Information for Consumers

The FTC also recently issued tips for consumers, as well as two new consumer education videos explaining robocalls and describing what consumers should do when they receive one. See ftc.gov/robocalls for more information.

Privacy Act Statement

Pre-registration for this event is voluntary. The FTC will use your information, such as name and affiliation, to estimate and understand our audience better and to prepare name tags and check-in lists as required for building security. If you do not pre-register, we may be unable to accommodate you, and it may take longer to get through building security.

The FTC Act and other laws that the FTC administers permit us to ask for this information in order to manage and administer this event. Under the Freedom of Information Act or other laws, the FTC may be required to disclose this information to outside organizations and individuals. The FTC may also routinely use the information in other ways described in the FTC’s system of records notice and appendix for contact lists, which we maintain and safeguard under the Privacy Act of 1974. To learn more about how the FTC handles and protects the information we collect, see our Privacy Policy.

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.

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