"OPERATION MONEY PIT" Targets Fraudulent Business Opportunity Schemes

FTC, Regional Law Enforcement Officials Announce 14 Cases

For Release

Consumers in four states spent thousands of dollars investing in business opportunities that did not fulfill promises of returning many times the cost of the investments, according to the Federal Trade Commission and state enforcement partners in Texas, Arkansas, Oklahoma and Louisiana. The 14 actions announced today were part of a cooperative, law enforcement "mini-sweep," named "Operation Money Pit," that focused attention on companies that offer fraudulent business opportunities.

"Phony business opportunity deals have several common elements, including false claims about earnings potential," said Jodie Bernstein, director of the FTC's Bureau of Consumer Protection. "If any outfit promises an investment will produce a lot of money for very little effort, consumers should be skeptical. Investors are potentially throwing their money away and the only winners will be these fraudulent operators."

In its Operation Money Pit actions, the FTC charged three companies -- AmeraPress, Inc., Summit Photographix, Inc., and QX International -- with violations of the FTC Act which prohibits unfair and deceptive practices. In one case, the defendants also were charged with violations of the Franchise Rule, which requires franchisors to disclose key information to potential purchasers before completing the sale of the franchise.

AmeraPress, Inc.

In its complaint, the FTC alleges that AmeraPress, which operates principally in Euless, Texas, and two other corporate defendants -- Voxcom, LLC, located in Dallas, and The Home Business Group, which has its principal office in St. George, Utah -- operate together as a common enterprise to promote the sale of purportedly profitable business ventures involving the sale of pre-paid calendars, business cards, trading cards and similar items. The FTC's complaint also names as individual defendants Lawrence R. Biggs, Jr., Kim Crowther, and Donald G. McClellan, who are the companies' principals.

The agency also alleged that the defendants induced purchasers to invest substantial amounts of money by representing at seminars and in follow-up telephone calls that defendants' business ventures would earn investors from $20,000 to $200,000 annually. As a result, individual consumers spent from $1,800 to $10,000 on defendants' products and materials. The FTC charged that, in numerous instances, the consumers did not achieve the level of earnings promised by the defendants.

This week the U.S. District Court for the Northern District of Texas, Fort Worth Division, granted the FTC's request for a temporary restraining order, temporary asset freeze, and the appointment of a temporary receiver in connection with this matter. A hearing for a preliminary injunction has been scheduled. Ultimately, the FTC is seeking a permanent injunction and redress to consumers.

Summit Photographix, Inc.

In its complaint, the FTC alleges that since 1994 defendants Summit Photographix, Inc. of Dallas, Texas, and its two owners, Daniel P. Kondos, and John Lovelace, and two of its officers, Bradley Douglas Highum and Bruce E. Campbell, sold purportedly profitable pre-paid trading card and postcard business ventures to the public. The company invited consumers to attend seminars where it represented that consumers could earn from $3,000 to $10,000 each month by purchasing a Summit business venture, according to the complaint.

Shortly after purchasing the business ventures, consumers received follow-up telephone calls from the defendants during which they were again told that they could make substantial earnings by participating in the group sales programs offered by the defendants. The complaint alleges that the defendants induced investors to purchase significant amounts of products and advertising materials from the defendants. Individual consumers spent from $2,000 to $8,000 on these products and materials.

The complaint alleges that Summit violated the FTC Act by making false and misleading claims about income potential. The FTC also charged the defendants with making false and misleading claims that investors would operate exclusively in a specific geographic territory.

In its complaint, filed in U.S. District Court for the Northern District of Texas, Dallas Division, the FTC asked the court to permanently enjoin the defendants from violating the FTC Act and to award equitable relief, including redress to consumers.

QX International, Inc.

The complaint against Fort Worth, Texas-based QX International and its principal owner, Anthony Francis, was filed on behalf of the FTC by the Department of Justice. The complaint, filed in U.S. District Court for the Northern District of Texas, Dallas Division, alleges that the company promoted its display rack distributorships by falsely claiming that consumers could earn from $4,000 to $10,000 a month by investing $13,000 to $28,000 in a distributorship. The display racks for QX's automotive lubricants and additives were to be placed in retail stores and other commercial outlets for consignment sale. The defendants claimed that QX would provide advertising and marketing assistance consisting of point-of-sale video and audio tapes and a national advertising campaign, which the complaint alleges the company did not provide.

The government also charges that QX used shills or business references who, in fact, had not purchased a distributorship. In addition, the complaint alleges that QX representatives promised consumers that the company would limit the number of distributors in a specific geographic area, but did not do so. The government also alleges that QX violated the Franchise Rule by failing to provide required disclosure documents.

The complaint seeks an injunction against violations of the FTC Act and the Franchise Rule in the promotion and sale of business ventures, distributorships, business opportunities and franchises; monetary civil penalties for violations of the Franchise Rule; and redress to consumers.

State Actions

As part of Operation Money Pit, Attorneys General in Texas, Arkansas, and Louisiana, and the Oklahoma Department of Securities filed seven actions in state courts and initiated four additional investigations.

The Consumer Protection Division of the Texas Attorney General's Office has filed actions against five companies and is continuing two additional investigations as part of Operation Money Pit. Four cases target companies engaged in the marketing of a variety of business opportunities, including vending operations, mobile automobile repair, real estate ventures and automobile brokerage. A fifth action was brought against a business opportunity show promoter. Additionally, the Texas Attorney General is continuing investigations in two similar matters. These seven cases and investigations are being handled by the Attorney General's regional offices in Austin, San Antonio, Houston, Lubbock and Dallas. For additional information concerning these matters, contact Ward Tisdale, Office of the Texas Attorney General, at 512-463-2050.

The Oklahoma Department of Securities initiated an action against two vending companies. Both filings allege violations of the Oklahoma Business Opportunity Sales Act's registration requirements and antifraud provisions. For additional information concerning theseactions, contact Gretchen Harris, General Counsel for the Oklahoma Department of Securities, at 405-280-7700.

Arkansas has initiated an investigation against one company engaged in the marketing of pay telephone businesses. For additional information concerning this matter, contact James DePriest, Office of the Arkansas Attorney General, at 501-682-2341.

The state of Louisiana also participated in the sweep. That state has initiated an investigation of a company engaged in multilevel marketing of coins. For additional information concerning this matter, contact Isabel Wingerter, Chief of Consumer Protection for the Louisiana Department of Justice, at 800-351-4889.

The FTC has devoted significant efforts to educating consumers about how to protect themselves from fraudulent business opportunity scams. For example, the agency recommends that consumers considering business opportunities:

  • Investigate all earnings claims. Talk to others who have purchased the opportunity to see if their experience verifies the claims. Demand to see the company's basis for its claims in writing. Be skeptical in judging whether the claims are backed up.
  • Beware of "shills" or phony references. Don't accept a list of references selected by the company offering the business opportunity as a substitute for a complete list of franchise or business opportunity owners.
  • Ask for the disclosure document if you're investing in a franchise. This document, required by law, should provide detailed information to help you compare one business to another. If the company has no disclosure document, beware!

The FTC Dallas Regional Office conducted these investigations in partnership with law enforcement officials in Texas, Oklahoma, Louisiana, and Arkansas.

The Commission vote to authorize the filing of these complaints was 4-0, with Commissioner Mary L. Azcuenaga not participating.

NOTE: The Commission files a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant has actually violated the law. The case will be decided by the court.

Copies of the FTC's complaints, order,  and consumer education material about the Franchise Rule are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-3128; TDD 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.

General questions about Operation Money Pit

Tom Carter
FTC's Dallas Regional Office
1999 Bryan Street, Suite 2150
Dallas, TX 75201
214-979-9372

AmeraPress, Inc.

(FTC File No. 972 3295, Civil Action No. 4-98CV-0143A)
Gary Kennedy
FTC's Dallas Regional Office
214-979-9379

Summit Photographix, Inc.

(FTC File No. 972 3258, Civil Action No. 3-98CV0449-T)
James Elliott
FTC's Dallas Regional Office
214-979-9373

QX International

 (FTC File No. 962 3040, Civil Action No. 3-98-CV-0453-D)
Susan Arthur
FTC's Dallas Regional Office
214-979-9370

Contact Information

Media Contact:
Michelle Muth
Office of Public Affairs
202-326-2161
Staff Contact: