FTC Accepts Settlement with Final Defendant in “Pre-Approved” Credit Card Scam
August 16, 2004
Settlement Reached with Defendant Paul Schroeder in First Capital Case
The Federal Trade Commission has approved a settlement with Paul Schroeder, the last of seven defendants to face FTC litigation in conjunction with First Capital Consumers Group. According to the settlement, Schroeder is required to transfer two houses and various bank accounts, altogether worth an estimated $1.8 million, to the FTC. The settlement also contains a monetary judgment of more than $8.27 million in restitution, applicable to all the defendants, that is suspended in Schroeder’s case because of the transfer of property and bank accounts. Schroeder also will be banned from telemarketing and selling credit services, assisting others in these activities, violating the Telemarketing Sales Rule, and providing misleading purchasing information to consumers. On July 28, 2004, a U.S. district court judge entered the settlement.
According to the FTC’s complaint, First Capital Consumers Group, also operating as US Guardian United Consumers, Trans America United Benefits Group, Transglobal National Consumers Group, and First Guardian National Benefits, operated a fraudulent pre-approved credit card scam based in Toronto, Canada that targeted U.S. consumers with poor credit histories. It advertised a pre-approved credit card, from MasterCard or Visa, with no annual fee and a credit limit as high as $2,500. A one-time processing and membership fee of between $189 and $219 dollars was deducted electronically from the customer’s bank account.
The FTC charged that consumers who registered with First Capital never received a credit card. Instead, Schroeder would send some customers various coupons and discount offers for cell phones, credit, magazines, legal services, prescription programs, satellite systems, car loans, and travel. Other customers received a stored-value card that required them to deposit money before using it.
The FTC alleges that Schroeder was aware that customers were not receiving their credit cards. In addition to First Capital, his largest client, Schroeder provided similar services for other fraudulent Canadian telemarketers, such as Titanium Blue, Consumer Service Center, Laurentian Financial, National Benefits Services, Liberty Benefits, FirstStar, Nor Am, NorMed, US Benefits, and United Financial.
The six other defendants in the First Capital case were two Canadian corporations and the four owners of First Capital: David Dalglish, Leslie Anderson, Lloyd Prudenza, and Mark Lennox. The FTC settled with Anderson on February 4, 2004, and he paid $250,000 in consumer redress. The remaining five defendants received two bans and a monetary judgement equivalent to First Capital’s net sales, or $8.27 million. The FTC brought this matter with assistance from the members of the Toronto Strategic Partnership, a cross-border fraud law enforcement effort that includes, in addition to the FTC, Canada’s Competition Bureau, the Ontario Provincial Police Anti-Rackets, the Toronto Police Service Fraud Squad, the Ontario Ministry of Consumer and Business Services, the United States Postal Inspection Service, and the Ohio Attorney General’s Office.
The FTC also received substantial assistance and extensive cooperation with this case from the United States Attorney’s Office for the District of Maryland and United States Postal Inspection Service. The United States Attorney’s Office for the District of Maryland previously filed a civil forfeiture action against the properties that are the subject of the FTC settlement. In addition, the United States Attorney’s Office for the Southern District of Illinois previously announced the arrest by Canadian authorities under extradition warrants of the four Canadian individual defendants based upon a criminal complaint charging each of the defendants with conspiracy, mail fraud, and wire fraud. Furthermore, in October 2002, charges were made under Canada’s Competition Act and the Canadian Criminal Code by the Competition Bureau and Toronto Police Service against the same four Canadian individual Defendants. In December 2003 those charges were stayed against all the accused subject to the extradition hearings in the case brought by the United States Attorney’s Office for the Southern District of Illinois.