FTC Charges Companies with Making Fraudulent Claims about Government Auctions for Cars, Homes or Jobs

California Law Enforcement Authorities Announce Similar Charges U.S. Postal Inspectors Serve Federal Search Warrants

For Release

Six Santa Barbara, California, companies were charged today by law enforcement agencies with making fraudulent claims about how to obtain government-seized cars or homes for very small amounts of money and how to obtain at-home and government employment. The Federal Trade Commission, the U.S. Postal Inspection Service, the California Attorney's General office and the Tulare County, California, District Attorney's office said that these six companies engage in the deceptive marketing of "how to" guides which make a variety of misrepresentations to induce consumers to pay $50 to $100 or more for auction or business opportunity information. The announcement of the charges against the companies, all based in Santa Barbara, California, is part of "Operation Auction Guides," a law enforcement and consumer education campaign, whose goal is to shut down these fraudulent operations and to inform consumers about the need for caution in dealing with claims like these.

"Ads that claim you can buy a Jaguar at a government auction for $200 are fraudulent," said C. Steven Baker, Director of the FTC's Chicago Regional Office. "Cars and homes are sold at government auctions, but they typically sell for their fair market value. And information about the government's sales programs is available for free on the Internet. Consumers should be very wary of responding to these types of ads."

The U.S. Postal Inspection Service served federal search warrants on the cases being brought by the Office of the California Attorney General and by the Tulare County District Attorney. According to Pamela Prince, U.S. Postal Inspector in the Southern California Division, "The U.S. Postal Inspection Service investigates alleged mail fraud schemes in which the U.S. Mail is an unknowing conduit of what appear to be fraudulent operations. In these Auction Guides investigations, victims report solicitations were mailed nationwide in the form of advertisements in several magazines and newspapers; Auction Guides were often sent via Priority Mail; and in some cases payments were mailed by unwitting victims. In 'Operation Auction Guides' postal inspectors and other task force members are searching for evidence of mail fraud that may exist. No criminal charges have been filed. My advice regarding solicitations received in the mail - Don't be 'mis-guided' by offers that sound too good to be true."

According to the FTC complaints, the Santa Barbara companies all advertise through direct mail or in classified ads which give a toll free number to call. Consumers who call in response to the ads get pitched to purchase printed "guides" for autos and homes for very little money, the complaints allege. If consumers respond to the pitch they are charged between $50 and $100 or more, either on their credit card or through an automatic withdrawal from their checking accounts.

The complaints also state that such "deals" are not available. The guides for automobile auctions that these companies send simply contain general information about the auctions, along with their addresses and telephone numbers. In addition, the complaints allege, government agencies do not commonly seize and sell expensive, high-end vehicles at auctions. Guides for foreclosed properties promise homes for "pennies on the $." Properties sold by government agencies generally get close to their fair market value, the agency's complaints state.

In addition, several of these companies also advertise various employment opportunities, such as government jobs and work-at-home typing. The companies misrepresent that consumers who purchase their guides will get either listings of actual positions that need to be filled or businesses that regularly hire at-home workers. The guides, the agency said, do not contain listings of actual positions.

According to the complaints, each of these companies represents that consumers can simply try the guides and get their money back if not satisfied. But in each case the company adds new conditions, after the sale has been made, that make it very difficult to obtain a refund. In addition, after consumers agree to order one guide, the salesmen frequently mention that one or more other guides will be sent as well -- without obtaining the consumers' assent or revealing that this will entail an additional charge.

The FTC charged four companies with violations of the FTC Act and the Telemarketing Sales Rule. The complaints seek injunctive relief and consumer redress. Each of these complaints charges a combination of one or more of the following claims: (1) misrepresenting that consumers can purchase automobiles and houses at prices substantially below wholesale or fair market value, (2) billing or debiting unauthorized charges to consumers' accounts, (3) doubling the price of the sale by sending additional "guides" without consumers' authorization, (4) failing to disclose material terms and conditions relating to the refund policy, and (5) making specific but unsubstantiated earnings claims to induce sales of the business opportunity offering.

The FTC has charged:

Century Direct Marketing, the largest of the Santa Barbara companies, is a two-fold operation: "Consumer Information Services," through which it markets information about auctions of government-seized cars, and houses that have been foreclosed upon; and New Concept Communications (NCC), through which it markets information about an opportunity to make money distributing information about NCC's long distance telephone service.  

In addition to Century, the complaint charges NCC; Christian Hunter, the founder, president and chief executive officer of both Century and NCC; Antoine Bourdeau and Thomas Adams III, executive vice presidents and co-founders of both Century and NCC; Sven Klein, a senior vice president in both Century and NCC; and Lisa Sultan, vice president and director of customer relations in both Century and NCC with violations of the FTC Act.  

Infodirect, Inc. deceptively marketed information about government auctions and foreclosed properties, the FTC alleged. The complaint charges that Infodirect violated the FTC Act and the Telemarketing Sales Rule. The complaint also names Jason C. McComb, the chief executive officer and a director of Infodirect, and Thomas R. Fletcher, a former officer and director, as defendants.  

Clarendon House, Inc., d/b/a/ National Data Service, and First National Data Group Inc., d/b/a/ National Data Service, promote and sell "how to" guides for $69.95 each (plus shipping and handling). The companies and Peter M. Dearden, the sole shareholder and owner of Clarendon, were charged by the FTC with violations of the FTC Act and the Telemarketing Sales Rule.  

Arlington Press, Inc., d/b/a/ Consumer Data Service, advertises government foreclosed homes and government-seized cars to households throughout the United States via direct mailings. It also places ads for government jobs and at-home typing opportunities in the help wanted sections of newspapers across the country and in national magazines. In addition to Arlington, the complaint charges David T. Umholtz and Wendy J. Foster, officers and directors of Arlington, with violations of the FTC Act and the Telemarketing Sales Rule.

In addition:

The California Attorney General filed a civil action in state court in San Diego against Broughton-Hall and its president Pamela R. Byrne. The complaint alleges defendants engaged in false advertising and unfair business practices and seeks an injunction, restitution and civil penalties.  

According to the Attorney's General office, Broughton Hall, which does business under the names of "Employment Information Center" and "Information Center," places classified ads in newspapers and magazines throughout the United States. The ads are generally under the "Help Wanted," "Employment Services" or "Business Opportunities" headings and promise $30,000 or more per year income potential for reading books or for doing typing or word processing at home. Broughton Hall does not, however, provide employment or employment services, the Attorney's General office said. And consumers who call the company to get a refund are put on hold for as long as an hour, treated rudely, and hung up on.  

The District Attorney of Tulare County, California, filed a case in Tulare County Superior Court titled, "People v. Mathew B. Hyman, Zachary A. Hyman, dba Productive Marketing, LLC; dba Data Information Services." The complaint alleges fraud and deception in the sales of home and auto guides and seeks a temporary restraining order and asset freeze.

The FTC released a new brochure, "Auction Guides: Not So Hot Properties," that contains tips for consumers:

  • Do your homework before you respond to an ad.
  • Look for information about federal government sales programs on the General Services Administration's web site at http://pub.fss.gsa.gov/fbp/howto.html (no period).
  • For information about upcoming sales, check the classified or business sections of national or local newspapers or local radio and television.
  • Contact individual government agencies about their sales programs.

If you are still interested in responding:

  • Get the name of the company and check it out with consumer protection officials in your state and the state where the company is located.
  • Get a written copy of the return policy.
  • Pay by credit card. If you have a problem and you make a good faith effort to work out the problem, you have the right to withhold payment.

In developing "Operation Auction Guides," the FTC acknowledged the assistance of the Better Business Bureau in Santa Barbara, the Santa Barbara District Attorney's office, the Internal Revenue Service, and the Santa Barbara Police Department.

The Commission's Chicago Regional Office conducted the investigations into the Clarendon House and Arlington Press cases. The Los Angeles Regional Office conducted the investigation into InfoDirect. The Commission's Division of Marketing Practices is responsible for the investigation into Century.

To file a Mail Fraud Complaint form about any company or individual, call the Postal Inspection Service at 800-372-8347. You may also send an e-mail message to fraud@uspis.gov and receive the form as an automatic response.

The Commission vote to authorize filing of the complaints was 4-0.

NOTE: The Commission issues 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 issuance of a complaint is not a finding or ruling that the respondent has violated the law. The complaint marks the beginning of a proceeding in which the allegations will be ruled upon after a formal hearing.

Copies of the complaints and the consumer education materials are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); 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.

(Civil Actions Nos: Not available at press time.)
(FTC File No. 982 3549; 982 3577; 982 3615; 982 3631)

Contact Information

FTC Media Contact:
Victoria Streitfeld
Office of Public Affairs
202-326-2718
FTC Staff Contact:
For Century:
Gary L. Ivens
Bureau of Consumer Protection
202-326-2330
Consumer Hotline: 202-326-3339

For Infodirect:
John D. Jacobs
Los Angeles Regional Office
310-824-4343
Consumer Hotline: 310-824-4343

For Arlington and Clarendon:
C. Steven Baker or Russell W. Damtoft
Chicago Regional Office
312-960-5634
Consumer Hotline: 312-960-5602
USPIS Media Contact:
Pamela Prince
U.S. Postal Inspector in the Southern California Division.
818-607-4160 (pager)
AG Media Contact:
Bill Maile
Office of the California Attorney General
916-324-5500
AG Consumer Contact:
Public Inquiry Unit,
Office of the California Attorney General
800-925-5225 (consumer number)
916-322-3360
AG Media Contact:
Barbara Greaver
Deputy District Attorney
Office of the Tulare County District Attorney
209-733-6609 x162
Consumer Hotline for Productive Marketing: 209-730-2556