Business Opportunity Promoters Settle FTC Charges

Innovative Productions, based in Dallas, Texas, and its owner, Shane D. Walls, have agreed to a court order prohibiting them from making false or misleading claims about income, profit or sales volume in connection with the sale of any type of work-at-home business opportunity, as part of a settlement with the Federal Trade Commission. In addition, they agreed to refund money to consumers who were taken in by their envelope stuffing business opportunity scheme.

The FTC filed a complaint against Innovative Productions and Walls in February 2000, as part of "Project Biz-illion$." This nationwide project was a multi-pronged attack on traditional business opportunity scams that bilk hundreds of thousands of consumers out of tens of millions of dollars a year. The FTC, the Department of Justice and law enforcement officials from 29 states filed over 68 cases against fraudulent business opportunity promoters, many of whom used the classified section of the newspaper and the Internet to peddle pay phone and vending machine routes and work-at-home schemes. These schemes typically promise low up-front fees and high earnings for at-home or part-time work.

According to the FTC's complaint, the defendants placed ads in weekly newspapers, offering consumers, in exchange for a one-time payment of approximately $40, the chance to make $4 for every envelope stuffed. The ads stated: "1000 Envelopes = $4000," deceptively representing that defendants would pay consumers for stuffing envelopes. In reality, the FTC alleged, consumers could make money only by enticing others to pay $4 for information about the Innovative Productions program. Although Innovative Productions advertised that success with its program was "guaranteed," the FTC alleged, consumers were rarely able to satisfy the company's requirements for obtaining a refund.

The settlement announced today, which was approved by the court, ends the litigation. The settlement prohibits the defendants from making false or misleading statements in connection with the promotion or sale of any "work-at-home" opportunity. Specifically, the order prohibits misrepresentations that a purchaser will make a substantial amount of money; that the defendants will pay purchasers for stuffing envelopes; or that refunds will be provided under certain conditions or upon request. In addition, the defendants are prohibited from making any false or misleading representation about the income or sales volume a purchaser can expect, the success achieved by others, the length of time required to recoup the purchaser's initial investment, the assistance the defendants will provide, or the terms and conditions of any refunds or guarantees of profitability.

The settlement requires the defendants to return any payments received from consumers from February 11, 2000, to the date of entry of the final judgment, August 16, 2000. In addition, the defendants must make a full refund to any consumer who submits a written refund request and who purchased the defendants' envelope stuffing opportunity between February 11, 1997 and February 11, 2000. Further, the order contains an avalanche clause for $194,000, that the defendants would have to pay in the event the court finds they made material misrepresentations concerning their assets.

The settlement requires the defendants to maintain business records concerning any future work-at-home business opportunity they may offer. Finally, the order contains various recordkeeping provisions to assist the FTC in monitoring the defendants' compliance.

The Commission vote to authorize staff to file the stipulated final judgment was 5-0.

The stipulated final judgment was filed in the U.S. District Court for the Northern District of Texas, Dallas Division, on August 15, 2000, and entered on August 16, 2000.

NOTE: This stipulated final 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.

The FTC has a consumer brochure, Could "Biz Opp" Offers Be Out for Your Coffers?, with tips on how to spot and avoid business opportunity scams. Copies of the brochure are available from the FTC's Consumer Response Center or at www.ftc.gov/bizop If consumers suspect a business opportunity promotion is fraudulent, they can file a complaint with the FTC's Consumer Response Center by calling toll-free 1-877-FTC-HELP (382-4357).

Copies of the consumer brochure and other documents associated with "Project Biz-illion$" 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 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 877-FTC-HELP (877-382-4357); TDD for the hearing impaired 1-866-653-4261. Copies of the stipulated final judgment will be available shortly. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

Media Contact:

Brenda Mack

Office of Public Affairs

202-326-2182
 

Staff Contact:

Judith Shepherd or Susan Arthur

Southwest Region -Dallas

214-979-9383 or 214-979-9370

(FTC Matter No. X000026)
(Civil Action No. 3:00-CV-0312-D)