Five companies and three individuals behind an allegedly fraudulent scheme to pitch consumers' investments in a plan to market and distribute Direct Broadcast Satellite (DBS) television programming in certain areas of Georgia have agreed to pay a total of more than $700,000, much of which should be returned to injured consumers, as part of settlements reached with the Federal Trade Commission. The FTC had charged that the defendants falsely represented the investment opportunity as a "low-risk," "instant income" venture, and falsely told some investors that they already had acquired the rights to market DBS programming transmitted by DIRECTV, Inc. The settlements would permanently prohibit the defendants from misrepresenting any investment opportunity in the future, and require the individual defendants to post a performance bond before engaging in any future telemarketing activities.
DBS technology allows consumers with a satellite dish, a decoder box and a remote control device to receive video and sound programming directly in their homes. DIRECTV Inc. is the largest provider of DBS programming in the United States.
In April 1995, the FTC brought charges against Satellite Broadcasting Corporation, of Irvine, California; Satellite Systems, Inc., Satellite Broadcasting Royalty Trust, and company officers T. Michael Haws and Joe Champion, also known as Allan Wells. In May 1995, the FTC added charges against PAL Financial Services, Inc., Media Management, Inc. (MMI), and Lonny Remmers, the president of both these firms, all based in Santa Ana, California.
According to the FTC's complaints detailing the charges, the defendants made numerous false claims about their rights to market DIRECTV programming in one or more rural Georgia counties, including:
According to the FTC's complaints, the defendants solicited consumers to invest $10,000 to $25,000 each and represented that investors would receive quarterly income distributions derived from DIRECTV subscriber fees.
Upon filing of the first FTC complaint, the court issued a temporary restraining order prohibiting the named defendants from engaging in the challenged scheme, freezing their assets and appointing a temporary receiver to manage the corporate defendants. Subsequently, the court entered preliminary injunctions continuing the asset freezes and conduct prohibitions pending the outcome of a trial on the FTC charges. Because MMI allegedly acted in concert with the original defendants, the asset freeze was extended to it as well.
The settlement with defendants Satellite Broadcasting Corporation, Satellite Systems, Inc., Satellite Broadcasting Royalty Trust, and Media Management, Inc. permanently prohibit them from misrepresenting that they have acquired, or are likely to acquire, the rights to market and distribute DBS service, or that any investment offering is an excellent or low-risk investment. The settlement also requiresthat these defendants pay $583,231, which, if practicable, will be used for consumer redress.
The settlement with defendants T. Michael Haws, Lonny Remmers and PAL Financial Services, Inc., contains similar conduct prohibitions. In addition, the settlement would require defendants Haws, Remmers and PAL to post -- for 10 years -- a performance bond in the amount of $150,000 for the benefit of consumers who may be injured if the defendants engage in future fraudulent telemarketing activities. Finally, the settlement requires the payment of $130,000 or $150,000, depending on how quickly the defendants pay, to be used for consumer redress.
The settlement with Joseph Champion, a/k/a Allan Wells, prohibits representations as alleged in the complaint and requires Champion to pay $5,797 to be used for consumer redress. Further, Champion is required, for 10 years, to post a performance bond in the amount of $50,000 before engaging in future telemarketing.
The FTC filed the three settlements in the in the U.S. District Court for the Central District of California, in Los Angeles, on Jan. 16. The settlements require the court's approval, and they were entered on Jan. 19. The Commission vote to file the settlements was 5-0.
NOTE: The final judgments and orders are for settlement purposes only and do not constitute admissions by the defendants of law violations. The judgments have the force of law when signed by the judge.
Copies of the final judgments and orders, as well as other documents associated with this case, are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY 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. FTC news releases and other materials also are available on the Internet at the FTC's World Wide Web site at: http://www.ftc.gov
(SBC, SBRT, SSI, Champion - Civil Action No. SACV-95-336 (LHM)(EEx))
(MMI, Haws, Remmers, PAL - Civil Action No. SACV-95-473 (LHM)(EEx))
(FTC File No. 950034)