The Federal Trade Commission has charged two companies and two individuals with making false and unsubstantiated earnings claims in the telemarketing and sale of a business opportunity program that purports to teach consumers how to make large amounts money quickly and in their spare time by buying and selling privately-held mortgage notes – notes held by individuals rather than financial institutions. The Commission alleges that these business practices violate the FTC Act and the Telemarketing Sales Rule (TSR).
The complaint names John Stefanchik and Beringer Corporation, based in Seattle, Washington, and Scott Christensen and Atlas Marketing, Inc., based in Salt Lake City, Utah, collectively doing business as the Stefanchik Organization. According to the complaint, the defendants charge consumers as much as $5000 to $8000 for “The Stefanchik Program,” which purports to teach consumers how to make large amounts of money quickly by buying and selling privately-held mortgage notes, which defendants commonly refer to as mortgage “paper.” The defendants advertise the program, which includes course materials, in-person seminars, videotapes, audio tapes, and other educational products and services, through direct mail and telemarketers and on the Internet. They represent that consumers can quickly earn $10,000 a month in their spare time if they follow The Stefanchik Program for buying and selling mortgage paper. In addition, the defendants offer to provide consumers with the services of a personal coach who is experienced in mortgage paper transactions and is readily available to help consumers find and complete their own paper transactions. In fact, according to the FTC, virtually no consumers have made any money using the Stefanchik Program, and the personal coaches do not have the promised experience and often are not readily available to consumers.
The FTC’s complaint alleges that, in their direct mail and telemarketing sales pitches, and on their Internet Web site, the defendants make claims such as:
“The easiest way to make $10,000.00 +++ every 30 days
“That’s right! You’ll have $10,000 profit every 30 days
easily . . . from the comfort of your home . . . . in your
spare time . . with no money to start . . . no selling . . .
just like myself and people like you are doing right now!”
The complaint charges that by making such claims the defendants violated the FTC Act and the TSR by falsely representing, in connection with the marketing, offering for sale, or sale of products or services about making money in the mortgage paper business, that:
- Consumers who purchase the defendants’ materials, attend their seminars and workshops, or use their personal coaches, will quickly make large sums of money in their spare time by learning and using the methods taught; and
- The defendants’ personal coaching service is staffed by persons who are experienced in the paper business and are readily available by telephone to assist consumers in finding and completing paper transactions.
The complaint further alleges that the defendants did not possess and rely upon a reasonable basis that substantiated the earnings representations that they made to consumers. The FTC is seeking preliminary and permanent injunctive relief and consumer redress.
The Commission vote authorizing staff to file the complaint was 5-0. The complaint was filed in the U.S. District Court, Western District of Washington, in Seattle, on August 24, 2004.
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.
(FTC File No. 022-3246; Civil Action No. CV 04-1852 RSM)
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