For Release: October 30, 1997
The Federal Trade Commission has asked a federal court to hold the promoters of an illegal internet pyramid scam in contempt of court for failing to pay $2 million in consumer redress and for other violations of a February 1997 settlement agreement with the agency. The Fortuna Alliance pyramid scheme was shut down by court order in May 1996, after the FTC alleged that the pyramid promoters were violating federal law. At the FTC’s request, a federal district court judge issued a temporary restraining order to halt the scam, froze the defendants’ assets and appointed a receiver to run the company, pending trial. The FTC sought a permanent injunction against Fortuna, repatriation of funds it had transferred offshore, and redress for consumers.
Under the 1997 settlement, Fortuna and its principals agreed to provide full refunds of membership fees to consumers who requested a refund. The refunds were to come from Fortuna’s monies frozen by the court in the U.S. and $2.8 million transferred from Antigua. If those monies were insufficient to meet refund requests, defendants were to pay additional money to ensure full refunds for all who sought them. This was in addition to approximately $2.3 million returned to consumers by court order prior to the settlement. Fortuna members have requested over $5 million in refunds, leaving a shortfall of over $2 million that defendants are obliged to pay.
In papers filed with the court today the FTC alleges that the defendants, now operating offshore, have established a "new" organization, "Fortuna Alliance II" on the World Wide Web, with a pitch similar to its original Fortuna site based in Bellingham, Washington. The agency alleges the defendants made false statements by mail and on their new web site to discourage past members from requesting refunds and encourage investment in the new program. Included are false claims that FTC charges and state prosecutions (including Washington and Florida) were dismissed or dropped; inaccurate descriptions of the terms of the original settlement; and personal attacks on the presiding judge -- all in contempt of the agreement. Fortuna also is alleged to have violated the settlement by refusing to provide funds sufficient to meet refund requests, delaying refunds to consumers for months, and by failing to provide information that would allow the agency to ensure compliance with the settlement agreement.
The defendants named by the FTC are Fortuna Alliance, L.L.C., Augustine Delgado, Libby Gustine Welch, and Donald Grant. The contempt motion also names attorney Robert O. Sailer of Redmond, WA. for his role in making misrepresentations about various court actions.
If the judge grants the FTC’s request to hold Fortuna in civil contempt and defendants still refuse to comply, the defendants could be fined, jailed, or both. The FTC asked the court to order the defendants to pay the $2 million shortfall, correct the misrepresentations, turn over to the FTC documents concerning defendants’ current activities and extend the period for investors to request refunds. The FTC has also asked the court’s permission to make partial refund payment immediately to consumers if the defendants do not pay the monies they owe in full.
Copies of the FTC complaint, consent agreement, and motion for contempt are available on the Internet at the FTC’s World Wide Web site at: http://www.ftc.gov/ro/fortuna.htm and also 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 File No. X96 0059)
(Civil Action No. C96-799M)