A federal district court judge has upheld Federal Trade Commission charges against a husband and wife who ran a scholarship search service scam that defrauded consumers of over $6 million. The court found that Donna and David Levy orchestrated the fraudulent practices used by Career Assistance Planning also known as College Assistance Planning (CAP), thereby duping tens of thousands of students and their parents into paying for services the company failed to provide. The judge granted the FTC's request for summary judgment, ordered the Levys to pay over $6 million in consumer redress and also ordered them to post a $6 million performance bond before engaging in any telemarketing activity in the future.
The FTC filed its complaint against CAP, David Chaim Levy, Donna M. Levy and Becky Burch Settles in August 1996 in the federal district court in Atlanta. (Becky Settles signed a settlement agreement with the FTC that was entered by the court in February 1997.)
The defendants sent millions of postcards stating that recipients who called a toll-free number would receive information on free college scholarships. In subsequent telephone conversations, CAP telemarketers often claimed that the company had a 60 to 80 percent success rate in obtaining scholarships for its customers. The defendants offered a full refund of their $299 fee for students who did not receive at least $1000 in scholarship money. The defendants also often convinced consumers to give their credit card or bank account number, assuring them that it would not use the account information without the consumer's "final authorization." The FTC alleged that the defendants routinely debited many consumers' checking accounts or charged their credit accounts without authorization.
The district court, in entering summary judgment against David and Donna Levy, found that the Levys were responsible for CAP's fraudulent conduct. The court observed that CAP had received over 2,500 consumer complaints, many from consumers who did not receive scholarships or the refunds that the defendants promised.
The FTC’s case against CAP and the Levys is a part of "Project $cholar$cam," a major law-enforcement and consumer education campaign targeting scam artists who promise "free money for college," charging from $10 to $400 for their services.
The court's final order permanently prohibits Donna and David Levy from making numerous false representations about any future scholarship search service. The defendants also are prohibited from engaging in any future telemarketing activities unless they each first obtain a $6 million performance bond. The court order bars the defendants from misstating how a consumer's bank account or credit information would be used and from withdrawing money from a consumer's checking accounts or billing charges to their credit cards without first obtaining express written authorization from the consumer.
The court also has ordered the Levys to pay $6,087,036 in consumer redress. The Commission will make its best efforts to collect this money, but there is no guarantee that the Levy defendants will pay the sum they owe. If the Commission determines that redress is impractical, any funds collected will be deposited into the U.S. Treasury as a disgorgement remedy. Finally, the court's order contains various reporting provisions that will assist the FTC in monitoring the defendants' compliance.
The judge granted the FTC's motion for summary judgment (without trial) and entered the order on September 19, 1997. The final judgment and order was filed in the U.S. District Court for the Northern District of Georgia, Atlanta Division.
The FTC received tremendous assistance in this case from the Broward Sheriff's Office, the Georgia Governor's Office of Consumer Affairs, the Better Business Bureaus of South Florida and Atlanta and the Oregon Attorney General's Office.
Copies of the final judgment and order for permanent injunction, a free package of consumer information from the FTC on how to identify a fraudulent scholarship search service, and other documents associated with this case are available from the FTC's web site at: http://www.ftc.gov and also from 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 FTC news as it is announced, call the FTC's NewsPhone recording at 202-326-2710.
Bureau of Consumer Protection
Gregg Shapiro, 202-326-3549
James Reilly Dolan, 202-326-3292
(FTC File No. X960089)
(Civil Action No. 1:96-CV-2187-MHS)