“Surplus Goods” Scam Duped Consumers
Two persons have agreed to settle Federal Trade Commission charges for their roles in a fraudulent business opportunity scheme targeted in early 2005 as part of “Project Biz Opp Flop,” a crackdown on violations of the FTC’s Franchise Rule, which requires that prospective franchisees must be given a full disclosure document about business opportunities they are offered, and Section 5(a) of the FTC Act, which prohibits unfair and deceptive acts or practices affecting commerce.
Jennifer Lynn Klotthor and her sister, Jaime L. Klotthor, a/k/a Jaime Valentine, were involved with the deceptive practices of World Traders Association Inc., a Nevada corporation, and several other corporate and individual defendants. According to a complaint filed by the FTC in January 2005, the defendants made false and deceptive promises to franchise purchasers who paid as much as $8,000 in return for access to overstocked merchandise, expert training in the surplus goods industry, and substantial income.
Under stipulated judgments and orders for permanent injunction proposed by the FTC, the defendants are permanently prohibited from being involved in any aspect of commerce in business ventures. Jaime Klotthor, however, may work for such a company, provided that her duties do not involve accounts connected with these ventures, and provided that the company is not engaged in commerce in discounted or surplus goods. The defendants also are permanently prohibited from making misrepresentations in connection with the sale of any goods or services.
Judgments representing the amounts of consumer injury attributed to the two defendants – more than $12 million for Jennifer Klotthor and more than $1.8 million for Jaime Klotthor – will be suspended due to their inability to pay. The judgments will be imposed if they are found to have misrepresented their financial condition. The proposed orders also provide that if a judgment is entered against any of the other defendants, these defendants and the others will share joint and several liability.
The Commission vote authorizing the filing of the stipulated judgments and orders forpermanent injunction was 5-0. The orders were filed in the U.S. District Court for the Central District of California, Western Division, on February 16.
NOTE: A stipulated final order is for settlement purposes only and does not constitute an admission by the defendant of law violations. A stipulated final order requires approval by the court and has the force of law when signed by the judge.
Copies of the stipulated final orders are available from the FTC’s Web site at http://www.ftc.gov and from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database help consumers spot, stop, and avoid them. To file a complaint in English or Spanish, or to get free information on any of available to more than 1,600 civil and criminal law enforcement agencies in the U.S. and abroad.
Office of Public Affairs
Bureau of Consumer Protection
(FTC File No. X05-0021)