The Federal Trade Commission today stepped up its ongoing campaign against scammers who falsely promise guaranteed jobs and opportunities to “be your own boss” to consumers who are struggling with unemployment and diminished incomes as a consequence of the economic downturn.
“Operation Empty Promises,” a multi-agency law enforcement initiative today announced more than 90 enforcement actions, including three new FTC cases and developments in seven other matters, 48 criminal actions by the Department of Justice (many of which involved the assistance of the U.S. Postal Inspection Service), seven additional civil actions by the Postal Inspection Service, and 28 actions by state law enforcement agencies.
In a press conference at the FTC, David Vladeck, Director of the FTC’s Bureau of Consumer Protection, was joined by Tony West, Assistant Attorney General for the Civil Division of the Department of Justice; Greg Campbell, Deputy Chief Inspector of the U.S. Postal Inspection Service; North Carolina Attorney General Roy Cooper; and a California consumer who had bought into a program to start his own Internet business.
“The victims of these frauds are our neighbors – people who are trying to make an honest living,” said David C. Vladeck, Director of the FTC’s Bureau of Consumer Protection. “Under pressure to make ends meet, they risked their limited financial resources in response to the promise of a job, an income – a chance at a profitable home-based business. But these turned out to be empty promises – and the people who counted on them ended up with high levels of frustration and even higher levels of debt.”
Operation Empty Promises: FTC Law Enforcement Actions
The FTC today announced three new law enforcement actions and developments in seven other matters.
Ivy Capital Inc. and 29 co-defendants* allegedly have taken more than $40 million from people who paid thousands of dollars believing Ivy Capital would help them develop their own Internet businesses and earn up to $10,000 per month. According to the FTC’s complaint, Ivy Capital’s telemarketers asked consumers how much credit they had on their credit cards and then talked them into using a substantial portion of their available credit to purchase a business coaching program. But the promised products and services were worthless, the complaint alleged. Ivy Capital’s “expert” coaches lacked the promised knowledge and experience, its website-building software programs did not work properly, and the lawyers and accountants the defendants said would provide assistance were nonexistent. Consumers paid up to $20,000 for a business coaching program and related products and services but got very little in return.
As alleged in the FTC’s complaint, Ivy Capital’s telemarketers called people who responded to e-mail and advertising about work-at-home or Internet business opportunities from companies such as Jennifer Johnson’s Home Job Placement Program and Brent Austin’s Automated Wealth System. The ads originated from fictional companies Ivy Capital created to generate sales leads – potential customers’ names and phone numbers – for its operation. The complaint further alleged that in calls that could last for more than an hour, Ivy Capital’s telemarketers used high-pressure sales and promised consumers they could make thousands of dollars a week working just 5 to 10 hours. Shortly after signing up for the program, consumers received sales calls from companies affiliated with Ivy Capital offering additional business services, including access to credit, expert tax advice, and other services that could cost thousands of dollars in addition to the original fee. Ivy Capital offered a refund program that, in practice, made it difficult for people to get their money back if they cancelled. According to the FTC complaint, some consumers who repeatedly complained to state and federal agencies were offered refunds, but only if they agreed not to publicly disparage the defendants and kept their refunds confidential.
The Ivy Capital defendants allegedly misrepresented their program’s earning potential, misrepresented the goods and services they would provide, and failed to fully disclose and honor their refund policy, in violation of the FTC Act. They allegedly misrepresented their services, failed to fully disclose their refund policy, called telephone numbers on the Do Not Call Registry, and did not pay the fee for accessing the Registry, in violation of the Telemarketing Sales Rule.
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 District of Nevada. On February 22, 2011, the FTC obtained an order that temporarily halted Ivy Capital’s unlawful practices, froze assets, and appointed a receiver to take control of the corporate defendants.
National Sales Group, Anthony J. Newton, Jeremy S. Cooley, and I Life Marketing LLC, also doing business as Executive Sales Network and Certified Sales Jobs, allegedly made false claims to consumers about employment opportunities. According to the FTC’s complaint, they advertised nonexistent sales jobs with good pay and benefits on CareerBuilder.com and other online job boards, and their telemarketers falsely told consumers the company recruited for Fortune 1000 employers and had a unique ability to get them interviewed and hired. The FTC alleged that the defendants charged fees they said covered background checks and other services, and often overcharged, taking $97 from consumers who had agreed to pay $29 or $38. They also charged some consumers recurring fees of $13.71 or more per month without their consent. According to other documents filed in court, the operation has generated more than 17,000 complaints to law enforcement agencies, online forums, and job boards – CareerBuilder.com dropped the company from its website due to complaints – and defrauded consumers of at least $8 million.
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 Northern District of Illinois, Eastern Division. On February 22, 2011, the court temporarily halted the company’s deceptive practices, froze the defendants’ assets, and put the company into receivership. The FTC acknowledges the assistance of the Santa Barbara Police Department, Better Business Bureau of the Tri-Counties, the California Attorney General’s Office, and CareerBuilder.com.
Business Recovery Services LLC and Brian Hessler allegedly telemarketed products and services they falsely claimed would help consumers recover money they had lost to business opportunity and work-at-home operations, selling hundreds of variations of do-it-yourself kits tailored to particular schemes and priced up to $499. The FTC alleged that they violated the Telemarketing Sales Rule by misrepresenting the nature and effectiveness of their services, and accepting advance payments from consumers for recovering money lost in previous telemarketing transactions without waiting seven business days for the consumers to receive the recovered money, as required by the Rule. According to other documents filed in court, consumers lost an estimated total of $1.5 million in this scheme.
The Commission vote authorizing the staff to refer the complaint for civil penalties to the Department of Justice was 5-0. The Department of Justice filed the complaint on behalf of the Commission in U.S. District Court for the District of Arizona in order to bring a permanent halt to these practices. The Department of Justice is also requesting that the court issue a preliminary order to stop the defendants from taking advance fees from consumers for the duration of the case.
Other FTC Cases
In addition to the new cases the FTC is announcing today, the FTC is announcing the shutdown of one operation, and settlements or final court orders to permanently stop six other scams. These actions collectively impose monetary judgments totaling more than $14 million.
Darling Angel Pin Creations Inc., Shelly R. Olson, and Judith C. Mendez allegedly claimed in online and newspaper ads that consumers who bought a starter kit could earn up to $500 per week assembling angel pins, with no experience, special tools, or sewing skills required. Consumers paid up to $45 to get started and sometimes paid hundreds of dollars more for supplies. They could not make any money until the company approved one of their pins, but nearly all pins were rejected regardless of quality. According to the FTC’s complaint, the defendants made false and baseless claims in violation of the FTC Act.
The FTC has obtained a default order against Darling Angel Pin Creations, Inc., that imposes a $3.5 million judgment against the company, and has also agreed to settlements with both Olson and Mendez. The proposed settlement orders would ban Olson and Mendez from selling work-at-home opportunities and prohibit them from misrepresenting any good or service and making claims about the benefits of products without substantiation. The proposed settlement orders would impose a $3.5 million judgment that, according to other documents filed in court, reflects the total amount lost by consumers. The judgment would be suspended when Mendez has paid $2,000 and surrendered the funds in an IRA account, and when Olson has surrendered all funds in her bank accounts. The full judgment would become due immediately if the defendants are found to have misrepresented their financial condition. The Commission vote authorizing the staff to file the proposed consent judgments was 5-0. The documents were filed in the U.S. District Court for the Middle District of Florida, Tampa Division.
Global U.S. Resources, also doing business as American Publishing, American Publications, American Power Publications, ESM Group, and East Shore Marketing Group; and Louis Salatto allegedly misrepresented the earnings potential of their envelope-stuffing operation – one that claims you can earn money by putting circulars into envelopes. According to the FTC’s complaint, consumers who paid a “refundable” fee, typically $40, did not receive the promised income ranging from $1,200 to $4,400 per week. Consumers typically received either nothing or a pamphlet listing other bogus work-at-home opportunities and instructions for marketing them. Those who sought refunds were typically unable to reach anyone at the company and could get refunds only by complaining to a Better Business Bureau or a law enforcement agency.
The court ordered the defendants to pay a $2.2 million judgment that, according to other documents filed in court, reflects the total amount of money lost by more than 50,000 consumers, and banned them from selling work-at-home opportunities. The order also prohibits the defendants from misrepresenting any good or service, and from selling or otherwise benefitting from customers’ personal information, and requires them to properly dispose of customers’ personal information within 30 days. The default order was entered by the U.S. District Court for the District of Connecticut.
The FTC acknowledges the assistance of the U.S. Attorney’s Office for the District of Connecticut, the U.S. Postal Inspection Service, the Office of Attorney General in Connecticut, and the Better Business Bureau serving Connecticut.
U.S. Work Alliance, Inc., doing business as Exam Services; Tyler Franklin Long; and Brenda Long allegedly falsely represented an affiliation with the U.S. Postal Service and claimed postal jobs were available in areas where their ads appeared, in violation of the FTC Act. According to the FTC’s complaint, they also falsely claimed that consumers who used their materials would be more likely to pass the postal exam than others, and that those who passed would be hired. After a trial, the court entered an order requiring U.S. Work Alliance and Tyler Long to pay a $1.6 million judgment that, according to other documents filed in court, reflects the total amount of money lost by consumers. The court order bans the defendants from marketing employment services and prohibits them from making any misrepresentations in advertising their affiliation with or endorsement by any entity, the total cost of services, and the terms of any refund policy. They also are barred from selling or otherwise benefitting from customers’ information, and they must properly dispose of it within 30 days. Brenda Long previously agreed to a consent order, and the claims against her were resolved. The order was entered by the U.S. District Court for the Northern District of Georgia, Atlanta Division.
Preferred Platinum Services Network, LLC, also doing business as Home Based Associate Program, The Postcard Processing Program, and PPSN LLC, and its owners, Philip D. Pestrichello, and Rosalie Florie, allegedly marketed and sold, for a supposed one-time $90 fee, a fraudulent work-at-home opportunity promising consumers they could earn $1 for each postcard they labeled. According to the FTC’s complaint, no consumer earned the promised income, and few, if any, received any income at all. In addition, the defendants did not disclose that each additional batch of postcards would cost consumers an extra fee. The FTC alleged that consumers who tried to cancel their membership or requested a refund were denied. An order entered by the U.S. District Court for the District of New Jersey imposes on the defendants a $1.3 million judgment that, according to other documents filed in court, reflects the amount consumers lost, and bans Pestrichello and Florie from selling work-at-home opportunities. The default order also prohibits the defendants from misrepresenting any good or service and from selling or otherwise benefitting from customers’ personal information, which they must properly dispose of within 30 days.
This case was brought with assistance from the U. S. Attorney’s Office for the Southern District of New York; the Newark, New Jersey Division of the U.S. Postal Inspection Service; the Office of the Attorney General of New Jersey; the Ocean County Department of Consumer Affairs; and the Better Business Bureau of New Jersey. The U.S. Attorney for the Southern District of New York brought criminal charges against Pestrichello and Florie for mail fraud. In December 2010, a federal judge sentenced Pestrichello to 97 months in prison and three years supervised release, and ordered the forfeiture of $1 million and restitution of $88,000. The U.S. Attorney entered into a deferred prosecution agreement with Florie.
Abili-Staff Ltd., Equitron LLC, Pamela Jean Barthuly, and Jorg Wilhelm Becker allegedly sold work-at-home opportunities online, promising that, in exchange for a fee of up to $89.99, consumers would have unlimited, password-protected access to more than 1,000 job listings and get a full refund if they did not get a job. They claimed to be “scam free” and “legitimate,” but according to the FTC’s complaint, Abili-Staff blocked customers from accessing its website before their membership expired, and exaggerated the number of jobs listed. Customers who tried to get a refund got a run-around from the company instead. Under a court order, the defendants are banned from selling work-at-home opportunities and prohibited from misrepresenting any good or service. They also are barred from selling or otherwise benefitting from customers’ personal information, and they must properly dispose of it within 30 days. They will pay about $830,000 of a $3.6 million judgment, the balance of which is suspended due to their inability to pay. The full judgment will be imposed immediately if they are found to have misrepresented their financial condition. According to other documents filed in court, an estimated 75,000 consumers lost a total of more than $3 million in this scheme. The Commission vote authorizing the staff to file the consent judgment was 5-0. The consent judgment was entered by the U.S. District Court for the Western District of Texas, San Antonio Division.
Entertainment Work, Inc., which also operated as Resource Publishing Co. and Resource Publishing of Delaware, and its owners, Jason Arthur Barnes and Racquelle Hart Barnes, allegedly sold trial memberships through a website by falsely telling consumers it listed local jobs as “extras” in movies and television. According to the FTC’s complaint, the website in fact mainly listed jobs that were either out-of-date, unrelated to work as an “extra,” or not local to the consumer. The company also allegedly failed to disclose that consumers would have to pay an extra fee or undertake a burdensome cancellation process to avoid an automatic extension of their trial membership that would cost an extra $80.
Under the settlement agreement, the defendants are banned from marketing employment products or services and prohibited from making misleading claims when advertising or selling any good or service. They also are barred from selling or otherwise benefitting from customers’ personal information, and they must properly dispose of it within 30 days. In addition, they must make appropriate disclosures when selling products through “negative option” transactions, in which the seller interprets consumers’ silence or inaction as permission to charge them. The settlement imposes a judgment of $2.4 million, which reflects the amount consumers paid Entertainment Work. The judgment has been suspended in part based on the defendants’ inability to pay the full amount. The full judgment will be imposed if they are found to have misrepresented their financial condition. The Commission vote authorizing the staff to file the consent judgment was 5-0. Consent The judgment was entered by the U.S. District Court for the Southern District of Florida.
La Asociacion Nacional de Trabajo, also known as L.A.N.D.T., allegedly placed Spanish-language advertising throughout the country and told people who called them that, for a fee of about $25, they could begin earning up to $1,000 per week by working at home assembling products such as keychains. In response to an inquiry by the FTC staff, the company ceased all advertising and sales of its products.
*Ivy Capital Inc. defendants – The defendants are Kyle G. Kirschbaum, John H. Harrison, Steven E. Lyman, Benjamin E. Hoskins, Christopher M. Zelig, Steven J. Sonnenberg, James G. Hanchett, Joshua F. Wickman, Ivy Capital Inc., Fortune Learning System LLC, Fortune Learning LLC, Vianet Inc., Enrich Wealth Group LLC, Business Development Division LLC, Nevada Corporate Division Inc., Nevada Corporate Division LLC, Credit Repair Division Inc., Credit Repair Division LLC, Tax Planning Division LLC, Zyzac Commerce Solutions Inc., 3 Day MBA LLC, The Shipper LLC, doing business as Wholesalematch.com, Global Finance Group LLC and Virtual Profit LLC, Dream Financial, ICI Development Inc., Ivy Capital LLC, Logic Solutions LLC, Oxford Debt Holdings LLC, Revsynergy LLC, and Sell It Vizions LLC. The relief defendants are Cherrytree Holdings LLC, Oxford Financial LLC, S&T Time LLC, Virtucon LLC, Curva LLC, Mowab Inc., Kierston Kirschbaum, Melyna Harrison, Tracy Lyman, and Leanne Hoskins.
FTC Kicks It Up a Notch Against Scams That Target Financially-Strapped Consumers by Steve Rhode
I can always use your help. If you have a tip or information you want to share, you can get it to me confidentially if you click here.