Operators of a company that used the allure of the Internet to peddle a fraudulent business opportunity have agreed to settle Federal Trade Commission charges that their scheme violated federal laws. The settlement would ban the defendants from operating or promoting any business opportunity, franchise or business venture in the future and would require that they rescind contracts with the consumers who invested in their "business opportunity."
Last February, the FTC filed suit in federal district court against TouchNet, Inc. and TouchTone Telecommunications and Advertising, Inc. The agency charged that TouchNet and its two principals, Malissa Carino and Eric Carino, used ads that claimed investors could earn $15,000 a month by becoming "Internet Consultants." The defendants charged a $3,195 fee for "in depth" training that would allegedly allow consumers to design World Wide Web pages for businesses that could advertise in their "World Virtual City"-- an Internet "mall" site. For their investment, consumers received a "training workshop" that provided no real training and a booklet containing basic Internet information readily available from public sources, according to the FTC's complaint.
Prior to the "Internet Consultant" business, Bellevue, Washington-based TouchNet's principals operated TouchTone and sold two other business opportunities through seminars: a pay-per-call 900 number business venture and a prepaid phone card business. Both business opportunities claimed that inexperienced consumers could make thousands of dollars a month. According to the FTC, few, if any of the purchasers made the income promised in the sales pitch. In addition, the agency charged, the defendants did not provide disclosure documents required by the FTC's Franchise Rule. The Franchise Rule requires a franchisor to provide prospective franchisees with a complete and accurate basic disclosure statement containing 20 categories of information, including information about the history of the franchisor, and the names and addresses of other franchisees. Disclosure of this information enables a prospective franchisee to assess any potential risks involved in the purchase of the franchise. The FTC asked the court for a preliminary injunction to halt the scams, a permanent injunction against future violations, and redress for consumers. On February 18 the court entered a stipulated temporary restraining order halting the conduct, pending trial.
To settle the FTC charges the defendants agreed to be permanently barred from engaging, participating or assisting in the advertising, marketing, promoting or offering for sale of any business opportunity, franchise or business venture operation. In addition, the defendants are prohibited from making false or misleading claims about the income, profits or sales a purchaser can expect using any goods or services the defendants sell. The settlement prohibits the defendants from collecting the balances owed by previous investors and requires that they rescind their contracts with them. Finally, the settlement contains record keeping provisions to allow the agency to monitor compliance.
The Commission vote to accept the stipulated final order and judgment was 4-0. The FTC's Seattle Regional Office handled this matter.
NOTE: A consent judgment is for settlement purposes only and does not constitute an admission of a law violation. Consent judgments carry the force of law when signed by the judge.
Copies of the complaint and stipulated final judgment and order are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TDD 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.