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FTC and Illinois Attorney General Charge Illinois-based Companies with Fraudulent Telemarketing And Placing Unwanted Calls
November 26, 2001
A federal court has temporarily ordered a halt to the allegedly fraudulent business practices of three companies and one individual that allegedly operated a massive scheme in Schaumburg, Illinois in which the defendants would charge consumers up to $219.95 for a credit card, but then never provide it. The court has also frozen the defendants’ assets and appointed a receiver to take control of the corporate defendants. More than 1,000 consumers have complained to consumer protection authorities about the defendants’ scheme, which has likely caused millions of dollars of consumer injury, according to the Federal Trade Commission. In addition, the FTC alleges, when the defendants’ telemarketers were told by consumers that they did not wish to receive calls by or on behalf of the defendants, the telemarketers continued to call. The defendants continued their scheme even after the Federal Bureau of Investigation (FBI) executed a search warrant against defendant Rockwell Holdings, Inc. on September 6, 2001, the Commission contends.
The FTC and the State of Illinois filed charges against 1st Financial Solutions, Inc., American Benefits Club, Inc., Rockwell Holdings, Inc., and John F. Boone, doing business under their respective names and various fictitious names, including: “1st Freedom,” “1st Choice Financial Solutions,” and “Card Services.” 1st Financial Solutions and American Benefits Club are both headquartered in Park Ridge, Illinois. Rockwell Holdings is based in Schaumburg, Illinois, and John F. Boone is an officer of Rockwell Holdings.
The complaint alleges the defendants used a network of telemarketers nationwide to offer VISA and MasterCard credit cards to consumers for fees ranging from $99.95 to $219.95. The defendants never provided credit cards or any other extension of credit, according to the complaint. Most of the time, consumers received nothing for their money. Some consumers received either promotional literature touting a membership benefits program, or an “ATTM” debit card – a “stored value card”- that could only be used if the consumer deposited a sufficient amount of money into an account to cover the purchases.
The complaint detailing the charges alleges that the defendants violated the FTC’s Telemarketing Sales Rule (TSR) and the FTC Act by:
In addition, the State of Illinois alleges that the defendants violated the Illinois Consumer Fraud and Deceptive Business Practices Act, as well as the Credit Services Organizations Act, by failing to comply with various registration requirements; failing to post a bond; failing to include certain disclosures in their contracts; charging or receiving fees in advance of completing services; and by making false representations about the services that they provide to consumers.
The FTC and the State of Illinois are ultimately seeking a permanent injunction prohibiting the defendants from any further deceptive practices, as well as money for consumer redress.
Application for approval of proposed divestiture:
February 15, 2002
The Commission has received an application for approval of a proposed divestiture from Valero Energy Corporation (Valero) and Ultramar Diamond Shamrock Corporation (Ultramar). Under the terms of a decision and consent order reached with the FTC and announced on December 18, 2001, the companies agreed to divest certain assets subsequent to Valero’s acquisition of Ultramar. Pursuant to Paragraph II.A. of the decision and order, Valero has petitioned the Commission for approval to divest its “Golden Eagle CARB Refining and Marketing Assets” to Tesoro Petroleum Corporation (Tesoro) and Tesoro’s wholly owned subsidiary, Tesoro Refining and Marketing Company.
Commission approval to extend duration of supply contract:
The Commission has approved the extension of a supply contract in a matter concerning Roche Holdings Ltd. (Roche). Under the terms of a final consent order reached with the FTC in 1998, Roche divested Corange Limited’s (Corange) U.S. and Canadian Retavase business (“Retavase Assets”) to Centocor, Inc. (Centocor). The divestiture was required to settle charges that Roche’s acquisition of Corange would have eliminated competition between the two leading suppliers of cardiac thrombolytic agents (drugs used to dissolve blood clots at the onset of a heart attack).
Pursuant to the terms of the Commission’s order, Centocor has requested an extension of the supply contract for the Retavase Assets to complete the transfer of the divested business from Roche. The FTC’s 1998 settlement with Roche required Roche to contract manufacture a supply of Retavase for the time period it takes Centocor to establish its own manufacturing processes and obtain its own U.S. Food and Drug Administration (FDA) approval to manufacture and sell Retavase in the United States.
Commission approval of independent auditor agreement:
The Commission has approved an independent auditor agreement in a matter concerning Lafarge S.A. (Lafarge) and Blue Circle Industries PLC (Blue Circle). The Commission’s consent order in this matter, announced on June 18, 2001, contained an Order to Hold Separate and Maintain Assets (Hold Separate Order) that required Lafarge and Blue Circle to hold the “Great Lakes Assets” and “Lime Assets” separate from the rest of their operations until Lafarge divested these assets to Commission-approved buyers. After receiving FTC approval, Lafarge divested the “Great Lakes Assets” to S.A. Industrias Votorantim on August 1, 2001, and the “Lime Assets” to Peak Investments, L.L.C. on December 31, 2001.
Under the terms of Paragraph VI of the order, the Commission may appoint William Troutman to serve as the independent auditor for the purpose of monitoring the companies’ compliance with Section IV, which concerns the assets to be divested. Through this action, the FTC indicates that it has reviewed the Auditor Agreement, determined that it is acceptable, and approved it, providing the auditor with all of the rights, powers, and authorities necessary to perform his duties under the order.
Commission approval of amended complaint:
The Commission has approved the filing of an amended complaint in its federal court action against 1st Financial Solutions, Inc., et al. The Commission’s original complaint in this matter, announced on November 26, 2001, alleged that several Illinois defendants offered consumers major credit cards for a hefty advance fee but never delivered the cards. The amended complaint adds two additional individual defendants and 11 new corporate defendants to the case. The amended complaint is available on the FTC’s Web site.
Commission approval of final consent order:
Following a public comment period, the Commission has approved a final consent order in the matter concerning INA-Holding Schaeffler KG and FAG Kugelfischer Georg Schafer AG.
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Illinois-Based Companies Charged with Fraudulent Telemarketing and Placing Unwanted Calls Settle Federal Charges
October 8, 2002
Defendants Agree to a $1 Million Bond and a Ban from Selling Credit-Related Products
The Federal Trade Commission today announced that it, along with the Illinois Attorney General’s office, has reached a settlement with 1st Financial Solutions, Inc., which allegedly used a nationwide network of telemarketers to sell consumers major credit cards, cards that no one ever received. The settlement requires 1st Financial, three individuals and 10 other companies to post a $1 million bond before engaging in telemarketing. The defendants also are banned from selling credit-related programs, products and services. In November 2001, federal authorities filed a complaint against 1st Financial, John F. Boone, Michael Cooper, Robert C. Morgan, and 10 companies – including Rockwell Holding, Inc., and American Benefits Club, Inc. – alleging that they violated the Telemarketing Sales Rule (TSR) and the FTC Act in their marketing of credit cards. The FTC and the Illinois Attorney General’s Office filed the complaint as a joint effort. The settlement resolves the charges of both agencies.
The complaint alleged that the defendants used telemarketers to offer Visa and MasterCard credit cards to consumers for fees ranging from $99.95 to $219.95. The defendants never provided credit cards or any extension of credit, according to the complaint. Most of the time, consumers received nothing at all. Some received either promotional literature offering things like gasoline discounts and auto club memberships, or an “ATM” debit card – a “stored value card” – that consumers could only use if they deposited money into an account to cover the purchase. The complaint also charged that the defendants continued to call consumers that had asked that calls cease, a violation of the TSR. The court issued a temporary restraining order, imposed an asset freeze, and appointed a receiver.
In addition to posting a $1 million bond and banning the defendants from selling credit-related programs, products and services, the stipulated order settling the case prohibits the defendants from claiming that, after paying a fee, consumers would receive major credit cards. The settlement also prohibits the defendants from requesting or receiving a fee in advance of providing consumers with credit cards, in cases where the defendants guaranteed or represented a high likelihood of success in obtaining or arranging extended credit for consumers. Further, the stipulated order prohibits the defendants from violating the TSR’s do-not-call provisions that prohibit a telemarketer from initiating outbound telephone calls to consumers who have said they do not wish to receive such calls. The order also prohibits the defendants from selling their customer lists. Finally, the stipulated order contains various record-keeping requirements to assist the FTC and the Illinois Attorney General in monitoring the defendants’ compliance.