A U.S. District Court judge ordered a Twinsburg, Ohio company to pay nearly $1.6 million in consumer redress and banned the company's president from further involvement with business opportunities and franchises in response to charges brought by the Federal Trade Commission. The agency charged that the firm, International Computer Concepts, Inc., a franchisor of computer software display-rack business, and Larry Schumaker, its president, misrepresented the potential earnings of franchise buyers and used shills as references, among other violations of the FTC's Franchise Rule. The order also imposes a permanent injunction against the defendants.
ICCI sells franchises consisting of display racks that hold computer disks, which contain programs, bearing the defendants' trade name "ICC" and "Accusoft" the predecessor name. These racks are designed to be placed in retail stores.
The FTC's Franchise Rule requires franchise sellers to give potential buyers a detailed disclosure document containing information about the business, including the cost of operating the franchise, the terms and conditions under which the franchise operates, and the background and experience of the key franchise executives. If franchise sellers choose to make claims about earnings potential for franchisees, they must have a reasonable basis for the claims, and must provide a document to potential franchisees substantiating them.
The court found, as charged in the FTC complaint against ICCI, that it made false and misleading claims. For example, in addition to misleading claims about earnings, ICCI misled consumers by saying that buyers of ICCI franchises would receive exclusive territories where no other franchisees would be allowed to place ICCI display racks, and that ICCI would provide refunds of at least 80 percent on disks returned for any reason. The court also ordered ICCI and Schumaker to pay $1.6 million in refunds to consumers. It is not certain that they have assets available to satisfy the court's order, however.
The court ruled that "the Commission's evidence...amply demonstrates [corporate] liability"... and the "defendants offered no evidence or case law to contradict [FTC] findings."
The judgement was granted and signed October 24, 1995 by Judge Paul R. Matia of U.S. District Court for the Northern District of Ohio, Eastern Division.
On August 17, 1994, the FTC filed its complaint against ICCI, Larry Schumaker and Helen Schumaker, also known as Helen Negrich. Thereafter, the Commission won a court order temporarily halting the defendants from engaging in the alleged illegal practices. Helen Schumaker settled charges associated with her role in the alleged violations of the Franchise Rule in August 1995.
The FTC's Chicago Regional Office handled the investigation. The Postal Inspection Service and the Ohio Attorney General's Office provided the FTC with assistance.
Copies of the earlier press releases outlining the entire charges and all documents associated with this case are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired, 1-866-653-4261. To find out the latest news as it is announced, call the FTC's NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the Internet at the FTC's World Wide Web Site at: http://www.ftc.gov
(FTC File No. X940071)
(Civil Action No. 5:94CV1678)