Two Colorado-based companies that marketed business opportunities for display racks featuring CD-ROM products have agreed to settle Federal Trade Commission charges against them. The settlement would bar the companies and their principal officers from offering or assisting others to market any franchise or business venture in the future, and require their principals to pay $20,000 into a consumer redress fund. The fund will be supplemented by liquidation of the defendants' assets now frozen under a court order obtained by the FTC. The defendants - - Mackie Services, Inc. and Panoramic Multimedia, Inc., Randy Prefer and Stanley L. Katz, of Littleton, Colorado -- allegedly ran a scheme that was among the nearly 100 operations targeted by federal and state law-enforcement officials in the "Project Telesweep" crackdown on business opportunity fraud last July.
The FTC charged in the case that the defendants overstated both the earnings potential of investors in their display-rack distributorships and the value of the CD-ROM titles they supplied to franchisees. The defendants also used phony references, the FTC charged. In addition, the defendants allegedly failed to provide potential franchisees with important financial and other information about the franchise, its officers and current and past franchisees, as required by the FTC's Franchise Rule. Another rule violation alleged in the FTC complaint in this case was the defendants' failure to provide franchisees with a document substantiating their earnings claims.
According to the FTC complaint, the defendants pitched their distributorships to consumers in the United States, Canada and Puerto Rico, charging between $8,000 and $40,000. They allegedly promised investors that they could earn $25,000 to $100,000 per year, the FTC said.
The defendants have signed a proposed consent judgment to settle these charges. If approved by the court, the judgment would permanently enjoin the Mackie, Panoramic, Prefer and Katz from participating, or assisting others to participate, in any capacity in the promotion or sale of any franchise or business venture. Prefer and Katz also would be prohibited from assuming false names or otherwise misrepresenting their true identities in the course of any business dealings. Prefer and Katz are both liable for the $20,000 redress payment included in the settlement.
The settlement also contemplates that Andrew C. Snyder, the court-appointed receiver obtained by the FTC in this case, will remain the receiver over the companies, with authority to manage all funds and properties. He will liquidate the assets frozen by the court after the FTC first filed charges in the case, and those proceeds will be added to the redress account for possible distribution to the defendants' franchisees.
The Commission vote to approve the proposed consent judgment for filing in court was 5-0. It was filed Feb. 9 in U.S. District Court for the District of Colorado, in Denver. This case was investigated by the FTC's Denver Regional Office.
NOTE: This consent judgement is for settlement purposes only and does not constitute an admission by the defendant of a law violation. Consent judgments have the force of law when signed by the judge.
The FTC has published free brochures for consumers considering investments in vending machine and display rack distributorships, or other franchise opportunities. Copies of "Business Opportunity Scams: Vending Machines and Display Racks," "Franchises and Business Opportunities," and "Shopping at a Franchise Exposition," as well as the proposed consent judgment in 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
(FTC File No. X950046)
(Civil Action No. 95-K-1708)