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FTC Charges Telemarketing Network with Selling Bogus Advance-Fee Credit Card Packages

FTC Charges Telemarketing Network with Selling Bogus Advance-Fee Credit Card Packages

January 17, 2003

The Federal Trade Commission has filed charges against seven corporations and nine individuals, the Assail Telemarketing Network, for engaging in deceptive and unfair activities in the marketing of advance-fee credit card packages under the names Advantage Capital, Capital First, and Premier One. The Commission alleges that the defendants operate an advance-fee credit card scam through a network of boiler rooms, Canadian front men, and outsourced fulfillment and customer service centers. According to the FTC, the scam targets people with poor credit histories, offering credit cards that never materialize, while upselling various benefit packages through an incomprehensible, computer-generated “verification” tape.

On January 9, 2003, the court temporarily halted the defendants’ operation, froze their assets, and appointed a receiver to take over the corporate defendants.

The complaint names: Assail, Inc., headquartered in St. George, Utah, its president, Kyle Kimoto, and two of its officers, Cliff Dunn, and Mike Henriksen; Infinium, Inc., Market-Reps.com, Inc., headquartered in Cedar City, Utah, and their president Brian Schofield; Specialty Outsourcing Solutions, Inc., headquartered in Waco, Texas, and its officers, Jay Lankford, and Lee Murphy; Summit Communications International, Inc., purportedly headquartered in Carson City, Nevada, and doing business as Advantage Capital, and its president, Matthew Ho; Capital First Benefits, Inc., headquartered in Miami, Florida, and its president, Ben Lee; and Premier One Benefits, Inc., based in Idaho Falls, Idaho, and its president, Johnson Salanga.

The FTC alleges that the defendants telemarketed various products and services to U.S. consumers, or provided substantial assistance, facilitation, or support to the telemarketers or sellers of such products or services. Assail, Infinium, and Market-Reps.com provide telemarketing and other services through their own boilerrooms and employees, and through dozens of contract boiler rooms in the United States, Canada, India, and Caribbean countries.

According to the FTC, the scam works as follows: the defendants contact consumers with poor credit records, refer to their purported prior applications for credit, and tell them that they are now guaranteed to receive a credit card. The credit card packages are often sold under the names of Advantage Capital, Capital First, and Premier One. In fact, the defendants do not provide credit cards to consumers. Instead, they use an incomprehensible, digitally recorded “verification” process to conceal that the proffered credit card is actually a “benefit” package that includes an application for a stored value “pay as you go”card. After consumers submit the application, even this card also fails to materialize. In addition, the defendants slip in multiple “upsells” of expensive and dubious products at the end of the verification process. The defendants then debit consumers’ bank accounts for the upsells, sometimes with additional recurring monthly charges, without the consumers’ authorization. The FTC alleges that consumers commonly incur debits against their bank accounts for approximately $174 for the “credit card” package and an additional $50-$100 for each upsell.

The FTC alleges that when consumers try to cancel their purchases and prevent further debits, they are frequently met with a well-orchestrated “customer service” scheme designed to frustrate consumers’ attempts to obtain refunds and cancellations. Even when consumers are successful in canceling some of their debits, the defendants often fail to cancel future debits for other products purportedly purchased during the telemarketing call. As a result, consumers’ accounts are later debited for additional sales about which they were not aware.

The complaint alleges that the defendants violated the FTC Act, the Telemarketing Sales Rule, and Gramm-Leach-Bliley Act by:

  • making deceptive misrepresentations and engaging in unfair billing practices;
  • assisting and facilitating others in fraudulently inducing consumers to pay for goods or services, and requesting payment upfront for the goods or services; and
  • obtaining bank account numbers from consumers by means of false, fictitious or fraudulent representations.

FTC Press Release

International Telemarketing Network Ordered To Stop Marketing Bogus Advance-Fee Credit Card Packages

February 27, 2003

An international telemarketing network will continue to be barred from illegally marketing advance-fee credit card packages under a preliminary injunction entered by the U.S. District Court in Waco, Texas. The Federal Trade Commission has alleged that the network enabled fraudulent sellers in the United States to hide behind bogus Canadian front men as they telemarketed illegally through boiler rooms running from the Caribbean, United States, Canada and India. The order continues safeguards imposed by the court in an earlier temporary restraining order, and also extends the court-appointed receiver’s control over certain corporate defendants to include the personal assets of Kyle Kimoto, president of Assail, Inc. and an alleged leader of the scheme.

Numerous law enforcement agencies and private organizations provided substantial assistance that enabled the FTC to unravel this complex telemarketing network. Among these groups special credit must be given to the Better Business Bureaus of Reno, Nevada; Idaho Falls, Idaho; and Southeast Florida. All three BBB’s provided the FTC with information about the hundreds of complaints they received after the defendants opened mail drops in their locations that pretended to be the sellers’ places of business. Officials of the Consumer Services Investigation Division in British Columbia, Canada; the Florida Department of Banking and Finance; and the Attorney General’s offices of Iowa, Idaho, and Nevada also helped to reveal the falsity of these alleged Florida, Idaho, and Nevada businesses. In fact, the FTC has alleged that the sellers, and their Canadian officers, were elaborate “fronts,” created by defendant Assail, Inc. to hide the fraud. Officials of MasterCard International, Dun & Bradstreet, and other businesses also provided valuable information to support the FTC’s allegations that the defendants’ claimed connections to legitimate businesses were false.

The court entered three preliminary injunctions – the result of one group of defendants contesting the FTC’s allegations, while two groups agreed to the entry of separate orders. The court entered a litigated preliminary injunction order against the first group of defendants: Assail, Inc., headquartered in St. George, Utah, its president, Kyle Kimoto, and two of its officers, Cliff Dunn and Mike Henriksen; Summit Communications International, Inc., purportedly headquartered in Carson City, Nevada, and doing business as Advantage Capital, and its president, Matthew Ho; Capital First Benefits, Inc., purportedly headquartered in Miami, Florida, and its president, Ben Lee; and Premier One Benefits, Inc., purportedly based in Idaho Falls, Idaho, and its president, Johnson Salanga. The order freezes the assets of all defendants and places the assets of the corporations and the personal assets of Kyle Kimoto under the control of Robb Evans and Associates, the court-appointed receiver.

The other two groups of defendants agreed to the entry of stipulated preliminary injunctions. The first order against Infinium, Inc., and Market-Reps.com, Inc., headquartered in Cedar City, Utah, and their president Brian Schofield, freezes the defendants’ assets and places the receiver in control of the corporate assets. The second order, against Specialty Outsourcing Solutions, Inc., headquartered in Waco, Texas, and its officers, Jay Lankford and Lee Murphy freezes the assets of the defendants, but does not place the defendants into receivership.

FTC Press Release

International Telemarketing Network That Sold Bogus Advance-Fee Credit Card Packages Banned from Telemarketing

September 25, 2003

Kyle Kimoto, the chief architect of an illicit international telemarketing network, has agreed to the terms of a federal court order to settle Federal Trade Commission charges that his telemarketing scheme violated federal laws. The FTC alleged that the Assail Telemarketing Network, which was orchestrated by Kimoto through his company Assail, Inc., perpetrated widespread telemarketing fraud including a massive scam involving advance-fee credit card packages under the names Advantage Capital, Capital First, and Premier One. The settlement permanently bans Kimoto and Assail, Inc. from engaging in any telemarketing activities in the future. In addition, several other key defendants in this ongoing case also have settled with the Commission.

The FTC filed three separate settlements against: (1) Assail, Inc., based in St. George, Utah, and its president, Kyle Kimoto (collectively the Assail Order); (2) Infinium, Inc., based in Cedar City, Utah, Market-Rep.com, Inc., doing business as Market-Reps.com, Inc., and their president, Brian Schofield (collectively the Infinium Order); and (3) Specialty Outsourcing Solutions, Ltd., based in Waco, Texas, and its officers, Jay Lankford and H. Lee Murphy (collectively the SOS Order).

In January 2003, the FTC filed a complaint against the defendants alleging that they violated the FTC Act by operating an advance-fee credit card scam through a network of boiler rooms, Canadian front men, and outsourced fulfillment and customer service centers. The Commission alleged that the defendants targeted consumers with poor credit histories, offering credit cards that never materialized, while upselling various benefit packages through an incomprehensible, computer-generated “verification” tape. According to the FTC’s complaint, the defendants telemarketed various products and services to U.S. consumers, or provided substantial assistance or support to the telemarketers or sellers of such products or services. They maintained their own boiler rooms and kept contract boiler rooms in the United States, Canada, India, and the Caribbean, the FTC alleged.

The stipulated orders permanently ban the Assail defendants and the Infinium defendants from engaging in any future telemarketing of any kind. The orders also prohibit the settling defendants from:

  • Misrepresenting that they are associated with any credit card company or financial institution, or that they can guarantee a consumer a credit card, improve a consumer’s credit, or give consumers discounts on products or services;
  • Conducting any unauthorized billing of consumers;
  • Obtaining consumers’ personal information by pretending to verify a consumer’s financial information; and
  • Selling their customer lists.

Additionally, the Assail Order requires Kimoto to turn over to the Commission virtually all of his assets, including his home, his vehicles, and nearly all of his personal property. The Order also imposes a $106 million suspended judgment against Kimoto that will be triggered if the court finds: (1) that he has failed to disclose to the Commission any material asset on his sworn financial statements, or (2) that he ever receives any assets derived from his fraudulent activities.

The stipulated order against the Infinium defendants requires payment of $200,000 by Brian Schofield and contains a suspended $18 million judgment, which would be payable in full if the court finds that he made any material misrepresentations on his sworn financial statements. Like Assail, Inc., the Infinium defendant companies have ceased operation and are in the process of being liquidated, with all proceeds going to the Commission.

The SOS Order requires the transfer of $512,000 in assets and contains a $4 million avalanche clause.

Also, the FTC amended its complaint to include Joel Best, the former vice president of Assail, Inc. The FTC alleges that Best contributed substantially to the fraudulent advance-fee credit card scheme perpetrated by the company. The Commission dismissed its complaint against Ben Lee, president of Capital First, and Johnson Salanga, president of Premier One, after finding reason to believe they did not play a role in the scheme.

FTC Press Release

Announced Actions for February 13, 2004

February 13, 2004

Commission authorization of the staff to file amended complaint: The Commission has authorized the staff to file an amended complaint in the matter currently pending against Assail, Inc., et al. The original complaint alleged that the defendants perpetrated widespread telemarketing fraud, including a massive scam involving advance-fee credit card packages, under the names Advantage Capital, Capital First, and Premier One. Through the action announced today, the FTC has added Lawrence Silverman as a defendant and Lamar Holdings, Inc. as a relief defendant in this matter. The Commission vote authorizing the staff to file the amended complaint was 5-0. (FTC File No. X030021; staff contact is Robert S. Kaye, Bureau of Consumer Protection, 202-326-2215; see press release dated September 25, 2003).

FTC Press Release

International Telemarketing Network Defendants Banned from Telemarketing

January 24, 2005

Defendants Sold Bogus Advance-Fee Credit Card Packages; $106 Million Judgment Entered Against Lead Defendant; Associate Who Helped Hide Proceeds Incarcerated

Officers of a company that directed an international telemarketing network that defrauded hundreds of thousands of consumers through the deceptive telemarketing of bogus advance-fee credit cards are banned from telemarketing for life as part of federal court orders settling Federal Trade Commission charges. Another alleged leader of this massive scam, who has a prior history involving telemarketing fraud, also agreed to a lifetime telemarketing ban.

The Assail Telemarketing Network engaged in more than $100 million in deceptive telemarketing sales, including the sale of hundreds of thousands of fraudulent advance-fee credit card packages using names such as Advantage Capital, Capital First, and Premier One. The FTC alleged in its complaint that the defendants operated the advance-fee credit card scam through a network of telemarketing boiler rooms, Canadian front men, and outsourced fulfillment and customer service centers. The FTC alleged that the defendants’ telemarketers contacted consumers with poor credit records and told them that they were guaranteed to receive a MasterCard for an advance fee.

Consumers, however, did not receive a MasterCard or any other legitimate payment device. The FTC’s complaint alleged that the defendants maintained their own telemarketing boiler rooms and also kept contract boiler rooms in the United States, Canada, India, and the Caribbean.

Today, the FTC announces settlements with four of the individuals responsible for the scheme. Three of these settlements are with officers of Assail, Inc.: Joel Best, Vice President; Michael Henriksen, Chief Financial Officer; and Clifford Dunn, General Manager. The fourth settlement is with Lawrence Silverman, who the FTC alleged played a critical role creating the deceptive corporate structure of the scheme, and his company, relief defendant Lamar Holdings, Inc. (Lamar). The FTC alleged that each of these defendants played important roles in planning and implementing the scam. The settlements with each of the individual defendants permanently bans them from engaging in any telemarketing activities in the future and also contain monetary judgments.

The settlements with Assail officers Dunn, Best, and Henriksen contain a suspended $30 million judgment, which would be payable in full if the court finds that they have made any material misrepresentations on sworn financial statements submitted to the FTC. The settlement with Silverman, who was previously prosecuted in the State of Florida and placed on probation in connection with his involvement in a prior telemarketing fraud, includes a $50 million suspended monetary judgment and $1.9 million disgorgement order, which will be triggered if he is found to have misrepresented his or Lamar’s financial condition. The settlement with Lamar also contains a $1.9 million suspended judgment to account for the $1.9 million in proceeds traceable to Silverman that were deposited with Lamar.

In addition to the telemarketing bans, all of the stipulated orders announced today prohibit the defendants from:

  • Making false or misleading representations in connection with the sale of any good or service;

  • Misrepresenting that they are associated with any credit card company, bank, or financial institution, or that they can guarantee a consumer a credit card, improve a consumer’s credit, or give consumers discounts on products or services;

  • Conducting any unauthorized billing of consumers;

  • Obtaining consumers’ personal information by pretending to verify a consumer’s financial information; and 

  • Selling their customer lists.

Finally, each of the orders contains various record-keeping provisions to assist the FTC in monitoring the defendants’ compliance.

These settlements were finalized shortly after the court entered a $106 million judgment against Assail, Inc. and its President, Kyle Kimoto. The $106 million judgment was entered after the court found that Kimoto concealed more than $3 million from the FTC that he should have disclosed as part of his settlement with the FTC. The court also recently incarcerated an associate of Kimoto, James Fales, for civil contempt for his actions in assisting Kimoto to conceal some of those assets by transferring them overseas, including an effort to buy diamonds in South Africa. Two other associates of Kimoto, Richard Fritzler, Sr. and Richard Friztler II, along with their company, Nevada Corporate Services, Inc., avoided a contempt hearing by agreeing to pay $300,000 that the FTC alleged they had received for helping Kimoto hide these funds.

The settlements announced today end the litigation against the named defendants in this massive scam. In total, 13 individuals or entities are under lifetime telemarketing bans, including Assail Inc., its four officers, a major telemarketing boiler room operator and his companies, the three front companies, a Canadian facilitator, and Silverman.

FTC Press Release

Complaint
Ex Parte Temporary Restraining Order
Stipulated Preliminary Injunction Order
Stipulated Preliminary Injunction Order (2)
Preliminary Injunction Order
Final Monetary Judgement
Second Amended Complaint
Stipulated Order for Permanent Injunction
Stipulated Order for Permanent Injunction and Monetary Judgment
Stipulated Order for Permanent Injunction Monetary Judgment and Disgorgement Order
Stipulated Order for Permanent Injunction and Monetary Judgment (2)
Stipulated Order for Permanent Injunction and Monetary Judgment (3)
Stipulated Order for Permanent Injunction and Monetary Judgment (4)

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