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FTC Sends Refunds to Consumers Harmed by Scheme Charged with Falsely Promising Federal Jobs

The Federal Trade Commission is mailing 1,897 refund checks to consumers who allegedly were deceived by false promises that they could get federal jobs if they paid for study materials or counseling services to help them pass an exam, even though often there were no exams or jobs. Under settlements reached in December 2010 and March 2012 as part of the FTC’s ongoing efforts to protect consumers in financial distress, the defendants, Government Careers Inc., Jon Coover, Richard Friedberg, and Rimona Friedberg, are permanently banned from selling employment-related products or services.

More than $50,000 is being returned to consumers; payments will be 22.73 percent of their loss. Consumers who receive the checks from the FTC’s refund administrator should cash them within 60 days of the date they were issued. The FTC never requires consumers to pay money or provide information before redress checks can be cashed. Consumers with questions should call the refund administrator, BMC Group, at 1-888-768-2051, or visit www.FTC.gov/refunds.

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.

(Government Careers redress)

California Man Previously Sued by FTC Is Indicted on Criminal Charges for Phony Debt Collection Scam

A federal grand jury has charged a Tracy, California-based man with 21 criminal counts of wire fraud and mail fraud for a fake debt collection scheme. The Federal Trade Commission previously filed civil charges against the man, Kirit Patel, and two companies he controlled, Broadway Global Master Inc. and In-Arabia Solutions Inc.

The grand jury indictment alleges that on 21 occasions between January 2011 and March 2012, Patel sent e-mails, wire transfers, and mail as part of his efforts to defraud consumers.

The criminal case, announced last week by U.S. Attorney for the Eastern District of California Benjamin B. Wagner, followed a civil lawsuit filed by the FTC in April 2012. The FTC alleged that Patel and his two companies fraudulently collected more than $5.2 million from consumers for debts that they either didn’t owe to the defendants or didn’t owe at all, as part of a scheme that involved more than 2.7 million phone calls to at least 600,000 phone numbers. The agency obtained a court order to halt the scheme pending trial. Many of the individuals targeted by the scam were strapped for cash and thought the money they were paying would be applied to loans they owed, according to the FTC.

The FTC’s Criminal Liaison Unit, a special branch set up to ensure that appropriate consumer scams are referred for criminal prosecution, referred the case to the Department of Justice and the Secret Service. The FTC would like to thank both agencies for following up on this matter.

(FYI CLU Broadway Global Masters)

FTC Extends Deadline to Comment on Proposed Modifications to the Children’s Online Privacy Protection Rule Until September 24, 2012

The Federal Trade Commission will extend until September 24, 2012, the deadline for commenting on additional proposed modifications to the Children’s Online Privacy Protection Rule, which gives parents control over what information websites and online services may collect from children under 13.

On August 1, 2012, the Commission published a Supplemental Notice of Proposed Rulemaking seeking comments on proposed modifications to the Children’s Online Privacy Protection Rule with a deadline of September 10, 2012. In response to requests from several organizations, public comments on the Supplemental Notice of Proposed Rulemaking will now be accepted until September 24, 2012. Instructions for submitting comments are found in the Notice. Comments can be submitted electronically by clicking here. The Commission vote approving the extension of the comment period was 5-0.

Marketers of ‘Ab Circle Pro’ Device to Pay as Much as $25 Million in Refunds to Settle FTC Charges

As part of its ongoing efforts to stop over-hyped health claims, the Federal Trade Commission has filed deceptive advertising charges against the marketers of the Ab Circle Pro – an abdominal exercise device – who promised consumers that exercising on the device for just three minutes a day would cause them to lose 10 pounds in two weeks. The defendants have agreed to settlements that provide as much as $25 million – and at least $15 million – depending on the volume of refunds consumers request.

Consumers who bought an Ab Circle Pro can submit a refund claim here.

image of woman working out on Ab Circle Pro According to the FTC, in advertisements, the defendants promised that a three-minute workout on the Ab Circle Pro – a fiberglass disk with stationary handlebars and two knee rests that roll on the edge of the disk, allowing consumers to kneel and rotate side-to-side – was equivalent to doing 100 sit ups. In the infomercial, pitchwoman Jennifer Nicole Lee compared the Ab Circle Pro to a gym workout, saying, “You can either do 30 minutes of abs and cardio or just three minutes a day. The choice is yours.” The infomercial claimed that consumers using the Ab Circle Pro for three minutes a day would “melt inches and pounds,” and featured testimonialists claiming they had lost as much as sixty pounds. Consumers buying through the infomercial typically paid $200 to $250 for the device, while the price for those buying from retailers varied more widely.

Said David Vladeck, Director of the FTC’s Bureau of Consumer Protection, “The FTC reminds marketers that they should think twice before promising a silver-bullet solution to a health problem – whether it involves losing weight or curing cancer. Weight loss is hard work, and telling consumers otherwise is deceptive.”

In addition to multiple versions of the infomercial – which aired more than 10,000 times between March 2009 and May 2010 – the defendants marketed the Ab Circle Pro online, in stores, in one- and two-minute television commercials, and in print advertisements.

The complaint names as defendants Fitness Brands, Inc., Fitness Brands International, Inc., and the two individuals who control them, Michael Casey and David Brodess; Direct Holdings Americas, Inc. and Direct Entertainment Media Group, Inc.; infomercial producer Tara Borakos and two companies she controls, Tara Productions Inc. and New U, Inc.; and Jennifer Nicole Lee and two companies she controls, JNL, Inc. and JNL Worldwide, Inc.

The complaint charges all the defendants except Lee and her companies with making false and/or unsupported claims, including that using the Ab Circle Pro caused rapid or substantial weight and fat loss; resulted in loss of weight, fat, or inches in specific parts of the body, such as the abdomen, hips, buttocks, and thighs; provided fat loss and weight loss equivalent to, or better than, a much longer gym workout; and provided the same rapid and substantial weight loss that people who provided testimonials for the infomercial said they experienced. The complaint also charges the Fitness Brands, Inc. defendants with providing the means to Direct Holdings Americas, Inc. and Direct Entertainment Media Group, Inc. to deceive consumers.

The complaint charges all the defendants with misrepresenting that using the Ab Circle Pro allowed Jennifer Nicole Lee to lose 80 pounds.

The complaint names Reader’s Digest Association, Inc. as a relief defendant, alleging that the company received proceeds of the deceptive advertising from its subsidiaries, Direct Holdings Americas and Direct Entertainment Media Group.

Under the settlements, Lee and the two companies she controls cannot misrepresent that the Ab Circle Pro, any substantially similar device, or any exercise equipment, food, drug, or device contributed to her weight loss. She also cannot endorse any exercise equipment, food, drug, or device unless the endorsement reflects her honest opinion or experience.

The settlements bar all defendants other than Lee and the two companies she controls from claiming that the Ab Circle Pro or any similar device is likely to cause rapid and substantial loss of weight, inches, or fat; is likely to do so in specific areas of the body such as the abdominal area, hips, thighs, and buttocks; or makes a significant contribution to an exercise plan that provides rapid and substantial loss of weight, inches, or fat. The defendants also are prohibited from claiming that the Ab Circle Pro or any similar device, if used for three minutes a day, causes users to lose 10 pounds in two weeks; provides the same exercise benefits as doing 100 sit-ups; or provides weight- or fat-loss benefits that are equivalent or superior to longer workouts on other exercise devices or gym equipment.

The settlements also prohibit all except the Lee defendants from making fat-, inch-, or weight-loss claims for any exercise equipment, food, drug, or device unless such claims are supported by competent and reliable scientific evidence. The defendants further cannot claim that consumers using such products can generally expect to achieve the results claimed by endorsers of the products, unless such claims are supported by competent and reliable evidence.

The settlements bar the Fitness Brands, Inc. defendants from providing others with the means to make any of the representations prohibited above.

Under the settlements, the Fitness Brands, Inc. defendants will pay $1.2 million. Direct Holdings Americas, Inc.; Direct Entertainment Media Group, Inc.; and relief defendant Reader’s Digest will pay $13.8 million – and up to $10 million more, depending on the volume of refund requests.

Consumers should carefully evaluate advertising claims for weight-loss products. For more information, see: Weight Loss & Fitness.

The Commission vote authorizing the staff to file the complaint and approving the proposed consent decree was 5-0. The complaint was filed in the U.S. District Court for the Southern District of Florida on August 22, 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 consent order is for settlement purposes only and does not constitute an admission by the defendant that the law has been violated. Consent orders have the force of law when approved and signed by the District Court judge.

(FTC File No. 1023047)

At FTC’s Request, U.S. Court Hands Down Record $478 Million Judgment Against Marketers of Massive Get-Rich-Quick Infomercial Scams

At the request of the Federal Trade Commission, a U.S. district court ordered the marketers of three get-rich-quick systems, including “John Beck’s Free & Clear Real Estate System,” to pay a record $478 million for deceiving close to one million consumers with phony claims that they could make easy money using their programs. The Order also imposes a lifetime ban that puts three of the defendants permanently out of the infomercial and telemarketing businesses.

The Order comes about four months after the court granted the FTC’s request for summary judgment against the marketers, concluding that they misled consumers using the infomercials for the John Beck program, as well as “John Alexander’s Real Estate Riches in 14 Days,” and “Jeff Paul’s Shortcuts to Internet Millions.” The court found that despite the marketers’ easy-money claims for the systems, which cost $39.95 each, nearly all the consumers who bought them lost money. In addition, the defendants sold personal coaching services, which cost up to $14,995, to consumers who purchased any of the three systems.

The case is part of the FTC’s ongoing efforts to stop scams that prey upon financially distressed consumers. The Order represents the largest litigated judgment ever obtained by the agency.

Jeffrey Klurfeld, Director of the Western Region of the Federal Trade Commission, issued the following statement regarding the Order:

“This huge judgment serves notice to anyone thinking of using phony get-rich-quick schemes to defraud consumers. The FTC will come after you if you violate the law. It’s also a reminder to consumers that they should be skeptical about these types of easy-money claims.”

Consumers Asked DISH Network to Leave Them Alone, But FTC Says Calls Kept Coming

DISH Network, one of the nation’s largest providers of satellite television service, faces a Federal Trade Commission lawsuit alleging that it illegally called millions of consumers who had previously asked telemarketers from the company or its affiliates not to call them again.

The calls allegedly violated provisions of the FTC’s Telemarketing Sales Rule that state that even if a consumer is not on the National Do Not Call Registry, a telemarketer may not call him or her again if the consumer specifically asks to be placed on the company’s own entity-specific do-not-call list.

“We have vigorously enforced the Do Not Call rules and will continue to do so to protect consumers’ right to be left alone in the privacy of their own homes,” said FTC Chairman Jon Leibowitz. “It is particularly disappointing when a well-established, nationally known company – which ought to know better – appears to have flagrantly and illegally made millions of invasive calls to Americans who specifically told DISH Network to leave them alone.”

According to the FTC’s complaint, DISH Network violated the agency’s Telemarketing Sales Rule while calling consumers nationwide in an attempt to sell its satellite television programming. DISH Network makes these telemarketing calls both directly to consumers and via a network of authorized dealers who make calls on its behalf. Specifically, the FTC alleges that DISH has made millions of outbound telephone calls since about September 1, 2007 to consumers who had already told them that they did not want to receive any more telemarketing calls from the company.

The Department of Justice, working on behalf of the FTC, is currently litigating another case against DISH Network for allegedly calling consumers on the National Do Not Call Registry, or causing its dealers to make such calls, in violation of the Telemarketing Sales Rule. Information developed as part of that case was used to bring the new case against Dish Network announced today. In filing the complaint, the FTC aims to stop the illegal calls and is seeking civil penalties for DISH Networks’ numerous alleged telemarketing violations.

Information for Consumers

For more information the FTC’s Do Not Call Registry and telemarketing in general, including entity-specific do-not-call requirements, see the following consumer education publications: Q&A: The National Do Not Call Registry and Straight Talk About Telemarketing. The FTC also reminds consumers that if your number has been on the National Do Not Call Registry for at least 31 days and you receive a call from a telemarketer that you believe is covered by the National Do Not Call Registry, you can file a complaint online or by calling the registry’s toll-free number at 1-888-382-1222 (for TTY, call 1-866-290-4236). To file a complaint, you must know either the name or telephone number of the company that called you, and the date the company called you.

The Commission vote authorizing the staff to file the complaint was 3-0-2, with Commissioners Julie Brill and Maureen Ohlhausen recused. The complaint was filed in the U.S. District Court for the District of Central District of Illinois, Springfield Division, on August 22, 2012.

(FTC File No. 122-3205, Civ. No. 3:12-cv-03221)
(Dish Network II.final)

FTC Updates Telemarketer Fees for the Do Not Call Registry as of October 1, 2012

The Federal Trade Commission has announced updated fees starting on October 1, 2012, for telemarketers accessing phone numbers on the National Do Not Call Registry.

All telemarketers calling consumers in the United States are required to download the numbers on the Do Not Call Registry to ensure they do not call those who have registered their phone numbers. The first five area codes are free, and organizations that are exempt from the Do Not Call rules, such as some charitable organizations, may obtain the entire list for free. Telemarketers must subscribe each year for access to the Registry numbers.

The access fees for the Registry are being increased as required by the Do-Not-Call Registry Fee Extension Act of 2007. Under the Act’s provisions, in fiscal year 2013 (from October 1, 2012 to September 30, 2013), telemarketers will pay $58, an increase of $2, for access to Registry phone numbers in a single area code, up to a maximum charge of $15,962 for all area codes nationwide, an increase from the previous maximum of $15,503. Telemarketers will pay $1 more per area code for numbers they subscribe to receive during the second half of the 12-month subscription period, for a total of $29 per area code.

For consumers who want to add their phone number to the Registry, registration is free and does not expire.

The Commission vote authorizing publication of the Federal Register notice announcing the new fees was 5-0. (FTC File No. P034305; the staff contact is Ami Dziekan, Bureau of Consumer Protection, 202-326-2648.)

(FYI 32.2012.wpd)

FTC Closes Its Investigation Into Facebook’s Proposed Acquisition of Instagram Photo Sharing Program

The Federal Trade Commission has closed its nonpublic investigation of Facebook’s proposed acquisition of Instagram, Inc., without taking any action. Accordingly, the deal may now proceed as proposed.

The Commission vote to close the investigation was 5-0. The closing letters to the companies can be found on the FTC’s website and as a link to this press release. (FTC File No. 121-0121; the staff contact is Christina Perez, 202-326-2048)

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 [email protected], 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.

(FYI 31.2012.wpd)

Puerto Rican Pharmacy Cooperative Settles Price-Fixing Charges

A Puerto Rican cooperative of pharmacy owners, Cooperativa de Farmacias Puertorriquenas, known as “Coopharma,” has agreed to settle Federal Trade Commission charges that it harmed competition by negotiating, entering into, and implementing agreements among its member pharmacies to fix prices on which they contract with insurers and pharmacy benefit managers.

According to the FTC, Coopharma’s actions over the past five years have led to higher prices for Puerto Rico’s health care consumers. In settling the charges, Coopharma has agreed not to engage in such conduct in the future. The case is the latest example of the FTC’s work to protect consumers from higher costs and decreased innovation in the health care sector.

Coopharma consists of approximately 300 pharmacy-owner members who own more than 350 pharmacies in Puerto Rico. Its members represent at least one-third of all pharmacies in Puerto Rico, and have a particularly strong presence on the western side of the island.

The FTC charges that since at least 2007, Coopharma has violated federal antitrust laws by collectively negotiating with more than 10 payers over reimbursement rates, and signing seven single-signature “master contracts” on behalf of its member pharmacies. In addition, the FTC alleges that the threat of collective action by Coopharma members led two payers to pay higher rates to the group’s members through their individual pharmacy contracts. Coopharma’s actions caused substantial harm to Puerto Rican health care consumers, the FTC charges, without any offsetting efficiencies.

The proposed consent order resolves the FTC’s concerns relating to Coopharma’s conduct and is designed to prevent its recurrence. It prohibits Coopharma from entering into or facilitating agreements between or among any pharmacies:

to negotiate on behalf of any pharmacy with any payer;
to refuse to deal or threaten to refuse to deal with any payer;
to include any term, condition, or requirement upon which any pharmacy deals, or is willing to deal, with any payer, including, but not limited, price terms; or
not to deal individually with any payer or not to deal with any payer other than through Coopharma.

The proposed order also prohibits Coopharma from facilitating information exchanges between pharmacies regarding whether, or on what terms to contract with a payer, and it bars attempts to engage in any of the conduct prohibited by the order. It also bars Coopharma from encouraging, suggesting, advising, pressuring, inducing, or trying to induce anyone to engage in the prohibited conduct.

Finally, the proposed order allows payers to terminate their contracts with Coopharma without penalty, and requires Coopharma to notify each pharmacy that provides services through that contract of the termination. It also subjects Coopharma to provisions designed to ensure its compliance with the proposed order, which will expire in 20 years.

The Commission vote to accept the consent agreement and proposed consent order for public comment 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, beginning today and continuing through September 20, 2012, after which the Commission will decide whether to make the proposed consent order final.

Interested parties can submit written comments 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. 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.

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 order 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.

(FTC File No. 101-0079)
(Coopharma.final)

FTC Files Amicus Brief in Federal District Court Opposing Pending Settlement of Class Action Cramming Case Moore v. Verizon Communications, Inc.

The Federal Trade Commission filed an amicus brief in the phone bill cramming case Moore v. Verizon Communications, Inc. (No. 2 CV 09-1823 SBA) before the U.S. District Court for the Northern District of California, opposing a proposed class action settlement of the case because it is not fair, adequate, and reasonable.

The case stems from an allegation by plaintiffs that Verizon, through its third-party billing and collection system, allowed billing aggregators and third-party merchants to defraud its customers by cramming unauthorized charges onto their phone bills. The plaintiffs alleged, among other things, that Verizon failed to ensure that third-party charges were authorized by consumers, that the company relied on third-party merchants for consumer authorizations for billing charges, and that it deceptively described the charges on consumers’ bills.

The proposed settlement potentially would provide two types of payments to victims who were charged without their authorization. Class members can submit a claim to get a $40 flat payment, or file a claim for full reimbursement of all documented unauthorized charges. The latter type of claim is subject to challenge from Verizon, aggregators, and third-party merchants, and consumers who do not submit a claim will receive no compensation.

According to the FTC’s brief, the central problem with the proposed settlement is that class members who don’t opt out of the settlement would be prohibited from asserting any claims against Verizon, billing aggregators, and third-party merchants, and the settlement notice does not inform consumers of this fact. These consumers would waive any ability to recover their losses, the brief states, regardless of whether they received money under the settlement.

In addition, according to the brief, because unauthorized billing – or cramming – is intentionally designed to escape consumers’ notice, most consumers likely have no idea they have wrongfully been billed, and thus may not pay attention to the settlement notice and realize they are entitled to compensation. “This hurdle to class recovery would be bad enough,” the brief states, “but the settlement also contemplates an arduous claims process that creates significant barriers to recovery and a notice that does not clearly inform class members about the breadth of the parties released.”

Finally, the brief states that the proposed settlement could impair the FTC’s ability to provide redress to consumers who have been harmed by unauthorized billing. For instance, consumers in the class action overlap with those allegedly harmed in the FTC’s ongoing contempt case against BSG, the largest aggregator in the country, and one of the entities released by the terms of the settlement. Class members also covered by the FTC’s BSG litigation would be “out of luck” if a court interpreted the release in this case to preclude compensation from the FTC case. “Such a result is particularly troublesome where, as here, the class members have been victims of fraud and the release operates against them regardless of whether they have obtained financial redress for their harm,” the brief concludes.

The FTC vote approving the amicus brief filing was 4-0-1, with Commissioner Maureen Ohlhausen recused. The brief was filed on August 17, 2012 in the U.S. District Court for the Northern District of California. A copy of the filing can be found on the FTC’s website and as a link to this press release. (FTC File No. P024210, Case No. CV 09-1823 SBA; the staff contact is Robin L. Moore, Bureau of Consumer Protection, 202-326-2167.)

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. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

(FYI 29.2012.wpd)

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