Magazine, Prize Telemarketer Settles FTC Charges; Lifetime Ban on Magazine Sales and Prize Promotions

The owner of a telemarketing company whose employees conned consumers by telling them they had won a valuable prize, and then convinced them to "redeem" their prize by sending money, has agreed to settle Federal Trade Commission charges that his fraudulent practices violated federal laws. The agreement to settle the charges imposes a lifetime ban on any magazine sales or prize promotions activities by Robert Flarida, President of Mag-Topia, Inc, a Santa Ana-based company.

On May 19, 1997, the FTC filed a complaint in U. S. District Court charging that Flarida and his firm, Mag-Topia, operated from a telemarketing "boiler room" from which telemarketers told consumers they had won one of four prizes -- a "big screen" television, a "diamond" watch, claimed to be worth over $1,000, an automobile or a cash award of thousands of dollars. The company required consumers to send between $250 and $900 in "processing fees" by overnight mail in order to receive their "valuable award." Most consumers received no prize. Those who did received a watch worth less than $100 and magazine order forms. Consumers -- many of them elderly -- who tried to cancel or stop payment on their checks, were harassed and threatened by the Mag-Topia agents. The FTC alleged that the company misrepresented to consumers that they had won valuable prizes worth more than the amount consumers paid to "participate" in the promotion, failed to disclose the odds of receiving a particular prize and failed to disclose that no purchase is necessary to win a prize, in violation of the FTC Act and the Telemarketing Sales Rule.

The proposed agreement to settle the FTC charges would ban Flarida from magazine sales and prize promotions for life and would bar him from selling or giving away his "customer" lists to anyone, including other telemarketers. It also bars any misrepresentations in the sale of any goods or services and bars violations of the Telemarketing Sales Rule. In addition, Flarida will pay restitution to consumers or disgorgement of ill-gotten gains in the amount of $22,850.

Finally, the agreement contains certain record keeping provisions to allow the FTC to monitor compliance with the agreement.

The Commission vote to accept the proposed consent decree was 4-0.

The proposed consent decree was filed in U. S. District Court for the Central District of California at Santa Ana, signed by the Judge on October 14, and entered by the court October 20, 1997.

NOTE: This consent decree is for settlement purposes only and does not constitute an admission by the defendant of a law violation. Consent decrees have the force of law when signed by the judge.

Copies of the complaint, consent decree and consumer publications, "Do The Math: Magazine Subscription Scams Don’t Add Up" and "Facts for Consumers: Magazine Subscription Scams" are available on the Internet at the FTC’s World Wide Web site at: http://www.ftc.gov and 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 NewsPhone recording at 202-326-2710.

(FTC File No. X97 0057)
(Civil Action No. 97-447AHS)