Markets Wired

Prohibited from Making False Earnings Claims, Similar Deceptions in the Future

An operation that was charged with deceptively marketing candy vending machine business opportunities will give back $122,000 to consumers who invested in it. The Federal Trade Commission charged that the operation lured consumers by falsely promising big incomes and prime locations for the machines, and hiring shills to reinforce the earnings claims.

The operation advertised that consumers could make “$1,710 per week” after buying its candy vending machine business opportunities and promised “prime locations” that had already been secured. Prices ranged from $7,000 to $59,000, and were supposed to include everything needed to start a business: vending machines; a recommended, professional locator service; and support to launch the business. The FTC’s complaint charged the operation made false earnings claims and deceptive representations about available locations, provided phony references, and did not provide complete and accurate required disclosure documents.

The orders announced today settle the charges against all of the defendants: Harvey Frank Milner, Richard M. Norcross, and Richard D. Norcross, as well as the companies – Route Wizard, Inc.; Liberty Routes, Inc.; Ready Routes, Inc.; RouteCrafters, Inc.; Ca$h Route$, Inc.; NovaStar Vending, Inc.; and Alliance Locating Co., Inc.

The orders prohibit the defendants from misrepresenting any business venture and prohibit false earnings claims or misrepresentations about locations. The orders prohibit the use of shills and prohibit the defendants from violating the Franchise Rule or the Business Opportunity Rule, including failing to provide a complete and accurate disclosure document to consumers, and failing to have a reasonable basis for any earnings claims.

Harvey Frank Milner and his wife, Janice Wood-Milner, will give up $42,000 – the total amount of money that they received from the scheme. Richard M. Norcross and his wife, Summer L. Norcross, will pay $30,000, based on their financial disclosures. Richard D. Norcross and his wife, Sasikant L. Norcross, will pay $50,000, also based on their financial disclosures. The wives of the defendants are not accused of wrongdoing, but have allegedly received ill-gotten gains and do not have a legitimate claim to them.

The orders for Richard M. Norcross, Richard D. Norcross, and the corporate defendants entered a judgment of $3,382,070.61 – the total amount consumers paid – against them, which is suspended, based on sworn financial disclosure documents. The order for Sasikant L. Norcross enters a judgement of $113,445 – the total amount she received – against her, which is also suspended. The suspended judgment amounts will be due in full, minus any payments already made by other defendants, if a defendant lied about his or her financial status.

The Commission vote to authorize staff to file the stipulated final orders was 5-0. The stipulated final orders for permanent injunction were filed in the U.S. District Court for the Southern District of Alabama.

NOTE: These stipulated final orders are for settlement purposes only and do not constitute an admission by the defendants of a law violation. A stipulated final order requires approval by the court and has the force of law when signed by the judge.

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 1,600 civil and criminal law enforcement agencies in the U.S. and abroad. For free information on a variety of consumer topics, click http://www.ftc.gov/bcp/consumer.shtm.

Commission Clarification: On July 9, 2007, the Federal Trade Commission began issuing refund checks to certain customers of USA Immigration Services. The letter accompanying those checks stated that consumers received a check because they paid the defendants for “green card” lottery assistance services. The letter should have stated that consumers received a check because, sometime between January 2001 and October 2003 they: 1) paid the defendants for “green card” lottery assistance services; 2) paid the defendants for passport, international drivers license, or other travel-related documents and services; or 3) paid the defendants for immigration forms, citizenship applications, temporary visas, permanent visas, affidavits of support, or other residency-related documents and services.

Those consumers who recently received a refund check did so because, according to records obtained from USA Immigration Services, they purchased some service from USA Immigration Services between January 2001 and October 2003.

Case Background

On October 1, 2003, the FTC filed a lawsuit against USA Immigration Services and its operators alleging that they misled consumers into believing the defendants were affiliated with the United States government, and that for a fee they could help consumers register through the Diversity Visa (or green card) lottery for a chance to apply for a permanent resident visa (green card). In addition to green card lottery services, USA Immigration Services allegedly sold several other travel and residency related documents and services to United States citizens and to non-citizens.

USA Immigration Services purported to assist U.S. citizens with passports and passport-renewal services, international drivers licenses, and other travel related documents and services. USA Immigration Services purported to assist non-citizens with immigration forms, citizenship applications, temporary visas, permanent visas, affidavits of support, and other residency related documents and services. According to the FTC, the defendants had no connection to the federal government and misled consumers in a variety of ways about the services they claimed to provide.

For more information, consumers can call the FTC’s redress contractor at 1-877-265-3429. (FTC File No. X040001, Civil Action No. 03-CV-2031-HHK; see press releases dated November 10, 2003 and July 23, 2004.)

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.

Three federal agencies and two associations of state regulators will cooperate in an innovative pilot project to conduct targeted consumer-protection compliance reviews of selected non-depository lenders with significant subprime mortgage operations.

The collaborative state/federal pilot is scheduled to begin in the fourth quarter of this year and will focus on non-depository subsidiaries of bank and thrift holding companies, as well as mortgage brokers doing business with, or working for, these entities. Additionally, the states will conduct coordinated examinations of independent state-licensed subprime lenders and their associated mortgage brokers. The agencies will select a sample of entities under their respective supervisory or other authorities for review or investigation. The agencies will also share information about the reviews and investigations, take action as appropriate, collaborate on the lessons learned, and seek ways to better cooperate in ensuring effective and consistent reviews of these institutions.

The agencies collaborating on the effort are the Board of Governors of the Federal Reserve System, the Office of Thrift Supervision, the Federal Trade Commission, and state agencies represented by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators. By joining together in applying a coordinated review program, the regulatory agencies will be better positioned to evaluate and more consistently assess subprime mortgage lending practices across a broad range of mortgage lenders and other participants within the industry.

The agencies will evaluate the companies’ underwriting standards, as well as senior management oversight of the risk-management practices used for ensuring compliance with state and federal consumer protection regulations and laws, including the Home Mortgage Disclosure Act, the Equal Credit Opportunity Act, the Truth in Lending Act, the Real Estate Settlement Procedures Act, the Federal Trade Commission Act, and the Home Ownership and Equity Protection Act. The agencies will initiate appropriate corrective or enforcement action as warranted by the findings of the reviews or investigations.

At the conclusion of the reviews, the agencies will analyze the results and determine whether the project is to be continued. If so, the agencies will determine the focus of future reviews at that time.

The Federal Trade Commission, together with other members of the Organization for Economic Cooperation and Development (OECD), today adopted a Recommendation on Consumer Dispute Resolution and Redress. The OECD recommendation offers a framework for governments and businesses to help consumers resolve disputes and settle claims, both for individual consumers and groups of consumers, and offers mechanisms for getting money back for wronged consumers. It recommends that national consumer protection agencies have legal authority to obtain and facilitate redress on behalf of consumer victims. The OECD is a 30-nation forum that promotes economic growth, trade, and development.

The OECD recommendation offers principles for domestic and cross-border disputes, and addresses both real world and online commerce. It also contains specific principles for member countries to make cross-border dispute resolution and redress more effective, including participating in international and regional consumer complaint, advice, and referral networks; expanding the awareness of justice system participants, including the judiciary, law enforcement officials, and other government officials, as to the needs of foreign consumers who have been harmed by domestic wrongdoers; encouraging greater use of technology to facilitate resolution of cross-border disputes; taking steps to minimize legal barriers to consumer dispute resolution and redress mechanisms outside the consumer’s country; and developing multi- and bi-lateral arrangements to improve international judicial co-operation in the recovery of foreign assets and the enforcement of judgments in appropriate cross-border cases. The recommendation also calls for the private sector to work cooperatively in developing consumer dispute resolution and redress mechanisms.

The recommendation is one of several OECD recommendations aimed at protecting consumers in the evolving global marketplace. It builds on the OECD’s 1999 Guidelines for Consumer Protection in the Context of Electronic Commerce, and the OECD’s 2003 Guidelines for Protecting Consumers from Fraudulent and Deceptive Practices Across Borders. The earlier two recommendations recognized the importance of effective dispute resolution and redress mechanisms and called for the development of effective cross-border redress systems. The FTC hosted a workshop on this topic in 2005.

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 1,600 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.

The Federal Trade Commission and the Department of Health and Human Services will host a forum, “Weighing In: A Check-Up on Marketing, Self-Regulation, and Childhood Obesity,” to review progress in implementing self-regulatory and educational initiatives to combat childhood obesity.

 

WHO:	Opening Remarks by: FTC Chairman Deborah Platt Majoras Other speakers listed on the event agenda, available at: http://www.ftc.gov/bcp/workshops/childobesity/agenda.pdf
WHEN:	Wednesday, July 18, 2007 9:00 a.m. until 5:00 p.m.
WHERE:	FTC Conference Center 601 New Jersey Avenue NW Washington, DC 20580
PRESS CONTACT:	Jackie Dizdul, FTC Public Affairs 202-326-2180, 202-746-1578

 

A wireless hotspot is available for Internet access at the Conference Center.

The forum will be Web cast. Reporters who wish to cover the event, but who cannot attend, can click here.

Commission approval of petition to reopen and set aside order: The Commission has approved a petition from Bruno’s Supermarkets to reopen and modify the final FTC decision and order in the matter of Koninklijke Ahold N.V. (Ahold) and Bruno’s Supermarkets, Inc. (Bruno’s), Docket No. C-4027. As detailed in the petition, a copy of which can be found on the FTC’s Web site as a link to this press release, Bruno’s requested that the Commission reopen and terminate the order, dated January 16, 2002, as it applies to Bruno’s, BI-LO, LLC and their ultimate parent entity, Lone Star Fund V (U.S.), L.P. (Lone Star).

Under the order, Ahold, a global food service distributor and retailer headquartered in the Netherlands, was permitted to acquire all of the outstanding voting stock of Bruno’s, a large supermarket chain in the southeastern United States, provided that it met certain conditions. Specifically, among other things, the order required Ahold to divest two BI-LO supermarkets, located in Milledgeville and Sandersville, Georgia, to Kroger and Winn-Dixie, respectively. Under the order, among other things, for 10 years from the date the order became final, Ahold also had to notify the Commission before acquiring any supermarkets (or supermarket interests) in Baldwin and Washington counties, Georgia.

On July 21, 2006, the Commission reopened and modified the FTC order in this matter in response to Ahold’s petition requesting the Commission to reopen and set aside the order as it applied to Ahold. The Commission set aside the order as to Ahold based on Ahold’s showing that it had sold all of its interests in BI-LO Holdings, LLC to Lone Star U.S. Acquisitions on January 31, 2005. Included within BI-LO Holdings was Bruno’s, the remaining respondent under the order. As a result of the sale to Lone Star, Ahold no longer owned or operated supermarkets in Baldwin and Washington Counties, Georgia.

Subsequently, Bruno’s sold some of its supermarkets, including the two stores in Baldwin and Washington Counties, Georgia to C&S Wholesale Grocers, Inc. and thus no longer owns or operates supermarkets in those counties. Consequently, Bruno’s (and Lone Star) have requested that the Commission vacate the order as it relates to Bruno’s. By a vote of 5-0, the Commission has now approved that request. (FTC File No. 011-0247, Docket No. C-4027; the staff contact is Elizabeth A. Piotrowski, Bureau of Competition, 202-326-2623; see press release dated December 7, 2001; April 18, 2006; July 25, 2006; and April 12, 2007.)

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.

WHAT: A two-day conference that will bring together experts from the business, government, and technology sectors, consumer advocates, and academics to explore consumer protection issues surrounding spam, phishing and malware. The agenda and a list of participants can be found at
http://www.ftc.gov/bcp/workshops/spamsummit/agenda.shtm WHO: FTC Chairman Deborah Platt Majoras and distinguished panelists WHERE: FTC Conference Center
601 New Jersey Avenue NW
Washington, DC 20580 WHEN: July 11 and 12, 2007, 9AM until 5 PM CONTACT: FTC Office of Public Affairs
202-326-2180

Petitions for approval of proposed divestiture: The Commission has received two petitions from Service Corporation International (SCI) and Alderwoods Group, Inc. seeking approval of a proposed divestiture related to SCI’s recent acquisition of Alderwoods. In the FTC’s consent agreement and order allowing the transaction to proceed with conditions, SCI and Alderwoods were required to divest a range of funeral home and cemetery services companies. Through the petitions, public versions of which can be found on the Commission’s Web site as a link to this press release, the companies have requested approval to divest Lee Funeral Home in Manassas, Virginia, to Found, LLC; and Evergreen Memorial Chapel in Anchorage, Alaska; Evergreen’s Eagle River Funeral Home in Eagle River, Alaska; and Alaska Cremation Center in Anchorage, Alaska, to Janssen Funeral Homes, Inc. and Janssen-Eastman Properties, LLC.

The FTC is seeking public comments on the proposed divestitures for 30 days, until August 6, 2007, after which it will decide whether to approve it. Comments should be sent to: FTC, Office of the Secretary, 600 Pennsylvania Ave., N.W., Washington, DC 20580. (FTC File No. 061-0156, Docket No. C-4174; the staff contact is Elizabeth A. Piotrowski, Bureau of Competition, 202-326-2623, see press release dated November 22, 2006.)

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.

In the case against the cross-border advance-fee telemarketing scheme known as Centurion Financial Benefits, a federal district court – acting at the request of the Federal Trade Commission – has entered several additional orders against participants in the scam. The FTC today announced the court has entered final orders requiring the corporate defendants and Robert Houttuin to halt their illegal cross-border telemarketing and barring them from violating the Commission’s Telemarketing Sales Rule (TSR). These orders contain monetary judgments of nearly $10 million.

The FTC also announced today that the court has held individual defendant Frank Bellissimo and non-party Ira Rubin in contempt of court for their operation of another telemarketing scam in violation of a preliminary injunction entered earlier in this matter.

The FTC’s Complaint

According to the FTC’s complaint, filed in September 2005, since at least 2004, the defendants used outbound telemarketing to contact consumers in the United States, falsely offering major credit cards, such as MasterCard and Visa, to people who agreed to have the defendants electronically debit their bank accounts for an advance fee of $249. The defendants typically claimed that the credit cards would have a $2,000 credit limit, zero percent interest, and no annual fees, and often targeted their offers at consumers with poor credit histories. Consumers who provided their bank account information did not receive a major credit card, but instead were sent an application for either a “stored value card” or “cash card” that had no line of credit associated with it and could be used only if the consumer first transferred funds onto the card.

The complaint named the following entities as defendants, both individually and as corporate officers: Sean Somma aka Sean Soma, individually and as an officer of corporate defendants Centurion Financial Benefits LLC and 1629936 Ontario Ltd, also d/b/a Spectra Financial Benefits; Antonio Marchese aka Tony Marchese, individually and as an officer of corporate defendant 1644738 Ontario Ltd., also d/b/a Sureway Beneficial, Simple Choice Benefits, and Oxford Financial Benefits; Tony Andreopoulos, individually and as an officer of corporate defendants American Getaway Vacations Inc., Credence Travel Processing Inc., and Topstar Media Inc., also d/b/a Integra Financial Benefits; and Dennis Andreopoulos, individually and as an officer of corporate defendants American Getaway Vacations Inc. and Topstar Media Inc., also d/b/a Integra Financial Benefits.

The complaint also charged Centurion Financial Benefits LLC; 1629936 Ontario Ltd., also d/b/a Centurion Financial Benefits; 1644738 Ontario Ltd, d/b/a Integra Financial Benefits; American Getaway Vacations Inc., also d/b/a Integra Financial Benefits; Credence Travel Processing Inc., d/b/a Integra Financial Benefits; and Topstar Media Inc., also d/b/a Integra Financial Benefits. The FTC filed an amended complaint in December 2006, adding the following corporate and individual defendants to the case: 1648534 Ontario Ltd., d/b/a Sureway Beneficial; 1652242 Ontario Ltd., d/b/a Oxford Financial Alliance and Oxford Financial Benefits; 1656324 Ontario Ltd., d/b/a Simple Choice Financial Benefits; 1466827 Ontario Ltd., d/b/a ESI Employment Solutions, Inc.; 6347738 Canada Inc., d/b/a ESI Contact Inc.; 1571816 Ontario Ltd, d/b/a RNR Holdings and Vu Com Communications; Frank Bellissimo; Robert J. Houttuin; Catreena Alexandra Marchewka; and Sylvain Cholette.

Dennis Andreopoulos later was voluntarily dismissed as a defendant, and on May 9, 2007, the Commission announced a settlement with three defendants – Soma, Marchese, and Cholette. Litigation continues against defendants Tony Andreopoulos and Catreena Marchewka.

The Final Orders

The final orders announced today concern all thirteen of the corporate defendants as well as individual defendant Robert Houttuin. These orders bar Houttuin and the corporate defendants from: 1) making, or assisting anyone else in making, any false or misleading statements concerning any fact material to a consumer’s decision to buy any program, product, or service; and 2) violating, or helping anyone else to violate the TSR. The orders also hold Houttuin and the corporate defendants jointly and severally liable for $9.89 million (the total amount of consumer injury associated with their scam), freeze their assets until they have satisfied this judgment, and bar them from selling their customer lists. Finally, the orders contain provisions designed to ensure future compliance with the FTC Act and the orders themselves.

The Contempt Order

In an order entered May 23, 2007, the court held individual defendant Frank Bellissimo and non-party Ira Rubin in contempt of court. The court entered a preliminary injunction in January 2006, shortly after the FTC filed its initial case. Among other things, the preliminary injunction freezes the defendants’ assets and prohibits them from engaging in deceptive conduct. The injunction also prohibits third parties like Rubin who receive notice of the order from assisting the defendants in violating it. Rubin was notified of this order, and was therefore bound by it.

In papers submitted to the court, the FTC demonstrated that just a few months after entry of the preliminary injunction, Bellissimo began a new telemarketing venture that falsely promised consumers they would receive at least $5,000 in government grants in exchange for an application fee of several hundred dollars. Rubin withdrew these fees from consumers’ bank accounts. In total, Rubin took approximately $657,648 from consumers on behalf of Bellissimo’s grants scam, transferred over $550,000 of these funds to Bellissimo, and kept the rest in fees for himself. Rubin and his employees also provided “customer service” for the grants scam and even edited sales scripts used by Bellissimo’s telemarketers. Consumers received nothing of value — much less a $5,000 “grant” — in exchange for the fees that Rubin deducted from their bank accounts and passed along to Bellissimo. The court found that this conduct violated the preliminary injunction.

The court ordered Bellissimo and Rubin to return the $657,648 that they took from U.S. consumers victimized by their grants scam, and it imposed a fine of $5,000 per day for each day the amount remains unpaid. Finally, the court has barred Bellissimo from engaging in the sale or promotion of any product or service to consumers in the United States.

Law Enforcement Assistance

The FTC appreciates the considerable assistance of several U.S. and Canadian law enforcement partners, including the Toronto Strategic Partnership, in conducting this investigation. In addition to the FTC, the Toronto Partnership is composed of the U.S. Postal Inspection Service, Canada’s Competition Bureau, the Toronto Police Service Fraud Squad’s Telemarketing Section, the Ontario Provincial Police Anti-Rackets Section, the Ontario Ministry of Government Services, the Royal Canadian Mounted Police, and the United Kingdom’s Office of Fair Trading.

Assistance also was provided by the Alberta Partnership Against Cross-Border Fraud. The Alberta Partnership consists of the FTC, Alberta Government Services, the Calgary Police Service, Canada’s Competition Bureau, the Edmonton Police Service, the Royal Canadian Mounted Police, and the U.S. Postal Inspection Service. The FTC alleged that part of the Centurion telemarketing took place in Calgary, Alberta.

Shortly after the Commission filed its complaint in September 2005, Canadian authorities executed search warrants on the telemarketing boiler rooms in Toronto and Calgary used to perpetrate the scam and brought criminal charges against the scam’s principals. See
http://www.competitionbureau.gc.ca/internet/index.cfm?itemID=1949&lg=e and
http://www.gov.calgary.ab.ca/citybeat/public/2005/09/release.20050927_141328_9398_0. On June 18, 2007, Robert Houttuin and Frank Bellissimo pleaded guilty to criminal charges in Canada. They will be sentenced in November 2007.

Copies of the 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, DC 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to more than 1,600 civil and criminal law enforcement agencies in the U.S. and abroad.

Commission approval of final consent orders: Following a public comment period, the Commission has approved a final consent order in the matter concerning DirectRevenue, LLC, et al. The Commission vote approving the final consent order and authorizing the staff to issue letters to the commenters of record was 4-1, with Commissioner Jon Leibowitz voting no and issuing a dissenting statement. (FTC File No. 052-3131; the staff contact is Mamie Kresses, Bureau of Consumer Protection, 202-326-2070; see press release dated February 16, 2007.)

Following a public comment period, the Commission has approved a final consent order in the matter concerning Sony BMG Music Entertainment. The Commission vote
approving the final consent order and authorizing the staff to issue letters to the commenters of record was 5-0. (FTC File No. 062-3019; the staff contact is Matthew Daynard, Bureau of Consumer Protection, 202-326-3291; see press release dated January 30, 2007.)

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.