FCC License Investment Scheme Defendants Settle FTC Charges

For Release

Two additional defendants in a massive scheme to sell Federal Communications Commission's (FCC) Specialized Mobile Radio (SMR) licenses as "low risk, high return" investments have agreed to settle Federal Trade Commission charges that the scam was fraudulent. The settlements bar misrepresentations about FCC licenses and investments; require certain disclosures in any future sales of FCC licenses; and require the defendants to relinquish the FCC licenses they acquired as employees and officers of the corporate defendants. The final judgments were entered by District Judge Jed Rakoff of the Southern District of New York on November 20, 1997.

In January 1994, the FTC brought charges against Metropolitan Communications Corp.; Columbia Communications Services Corp.; Nationwide Digital Data Corp.; Stephens Sinclair, Ltd.; and Meehan Marketing Group, Inc., as well as a number of individuals, including Michael Flaherty and Sheldon Weaver, whose settlements are announced today. The FTC alleged that the companies charged consumers $7,000 each for license application preparation services based on promises about high earnings and low risk of the initial investment, among other false claims. Investors could have applied directly to the government without the "application preparation services" for about $200. The defendants marketed their services for the licensing program through telemarketing, program-length infomercials, and written promotional materials. Flaherty appeared in an infomercial as an "industry consultant," and was later President of Stephens Sinclair. In the second phase of the scheme, consumers paid about $8,000 per unit to purchase partnership interests in an entity promising to build systems to offer mobile telephone service to the public in competition with cellular systems, again based on false and misleading claims, the FTC alleged. Weaver was an administrator in this stage of the operation.

Other defendants in this case have previously settled FTC charges. In August 1997, the firm's principal, Sheldon Jackler, and Joan Orth, a sales representative, agreed to pay more than $1.6 million in consumer redress. Meehan Marketing Group, Inc., its principals and its top producing salesman settled the FTC charges in 1994, paying $205,000 for consumer redress. The settlements announced today conclude the Commission's case.

The settlement of the FTC charges will permanently bar Flaherty and Weaver from misrepresenting any aspect of FCC licenses and investments in the future. In addition, both will be required to relinquish FCC licenses they acquired as employees and officers of the firms. Both will be subject to certain record keeping provisions to allow the Commission to monitor compliance.

The Commission vote to approve the proposed consent judgments was 3-0 with Commissioner Sheila F. Anthony not participating.

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

Copies of the complaint and consent judgments will be available on the Internet at the FTC's World Wide Web site at: http://www.ftc.gov and also 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.

(Civil Action No. 94 Civ. 0142 (JSR))

(FTC File No. X94 0024)

Contact Information

Media Contact:
Claudia Bourne Farrell or Brenda A. Mack
Office of Public Affairs
202-326-2181 or 202-326-2182
Staff Contact:
Stephen Gurwitz
Bureau of Consumer Protection
202-326-3272