Ten individuals named as defendants in a Federal Trade Commission law enforcement action filed in July 1997 as part of "Project Field of Schemes" have agreed to pay monetary judgments ranging from $76,811 to $11.178 million to settle charges. The FTC had alleged that 27 individual and corporate defendants misrepresented the profit potential, risks, past performance, and viability of the four Internet-related businesses they marketed: Home Net; Enternet Communications; Connectkom Group; and Intellicom Group. The main settling defendants are: Timothy D. Grayson; Brent Morris; Eugene Evangelist; Mark Ericson; Paul Perelman; Mark Nachamkin, also known as Mark Nash; David Z. Diamand; Marc D. Levine, Ira Itskowitz; and Erica Llanos. The defendants, with the exception of Diamand, are banned from any type of telemarketing activities in the future. Diamand is banned from involvement in any investment sales whatsoever. All ten defendants are required to pay monetary judgments.
As part of Project Field of Schemes -- a joint federal-state sweep targeting investment scams -- the FTC had filed charges in federal district court against Intellicom Services, Inc., doing business as Intellicom Group; Connectkom Services, Inc., Enternet 2000, Inc.; World Net Development Group., Inc. Riviera Consulting, Inc.; Granite Consulting, Inc.; Brookside Management, Inc.; Mediatech, Inc.; American Long Distance Corp.; Networld Consulting, Inc.; Perspective Consulting, Inc.; All Administrative Services, Inc.; Prostaff Administrators, Inc.; Support Staff Administrators, Inc.; Frontline Consulting, Inc.; Marc D. Levine, Ira Itskowitz;
Mark Ericson; Paul Perelman, d/b/a Connectkom Group; Mark V. Nachamkin, a/k/a Mark Nash, d/b/a Enternet Communications; James A. Q. Slaton, d/b/a Home Net Partners; Timothy D. Grayson; David Z. Diamand; Eugene Evangelist; Kent Bollenbach; Brent Morris; Erica Llanos; and five relief defendants: Dixon Capital Corporation; Greg Harrington; Chad Harrington; T.L. Laidlaw; and James Leonard.
According to the FTC's complaint, the defendants were part of a group of telemarketers and promoters that pitched high tech investment schemes, offering at least eight different investment offerings. The defendants pitched investments in a company that purportedly would operate live, on-line shopping programs on the Internet (Home Net Partners) and three companies that were supposed to serve as Internet service providers that would offer Internet access to consumers in Chicago, Detroit, Indianapolis, Seattle and New York ( Enternet, Connectkom and Intellicom). The defendants would often "reload" initial investors before the consumers could discover that their first investment had failed.
According to the FTC, defendants Marc Levine and Ira Itskowitz were the kingpins who developed and managed the marketing of these investment offerings. They violated the FTC Act and the Telemarketing Sales Rule by providing the means and instrumentalities used by the telemarketers to commit the fraud and by providing other substantial assistance and support to the telemarketers. Defendants Nachamkin, Perelman, and Ericson served as presidents for the offerings, and Morris, Grayson, Evangelist and Diamand sold all four offerings. Erica Llanos, the scheme's administrator, knowingly provided substantial assistance and support to the telemarketers who engaged in the fraud and knowingly participated in the scheme to defraud consumers.
Specifically, the FTC's complaint charged that the defendants misrepresented:
The individual settlements announced today, which have been approved by the court, resolve the FTC's charges against these defendants. According to the FTC, it is unlikely that the full amounts of the judgments will be collected against most of the defendants. (The case against the other remaining defendants is still pending.)
The settlements with Marc Levine and Ira Itskowitz require them to collectively pay approximately $11 million for consumer redress. The settlements also ban them from any involvement in telemarketing activites and from providing substantial assistance or support to other telemarketers.
The individual settlement against David Diamand permanently bans him from any involvement in the sale of investment opportunities, franchises or business opportunitites. In addition, Diamand is prohibited from falsely representing the experiences of previous purchasers of any product or service; the value, characteristics or nature of any product or service; and any fact material to a person's decision to purchase any product or service. Diamand's settlement also requires him to pay a judgment of $521,549.
The settlements with the other seven individual defendants ban them from telemarketing activities in the future. In addition, they are all prohibited from, among other things, misrepresenting:
In addition, the individual defendants are required to pay the following judgments to be used for consumer redress: Ericson $834,147; Nachamkin $4,550,426; Perelman $1,305,598; Evangelist $1,556,000; Grayson $1,825,800; and Morris $2,258,000. Defendant Erica Llanos is required to pay $76,811 as disgorgement.
The FTC also announced a settlement with relief defendant James M. Leonard, an attorney who provided legal services to the defendants. The FTC alleged that Leonard had received funds and other property derived from payments consumers made to the defendants. The settlement requires that he return money in his possession that he received from the defendants. The settlement also contains a provision that holds him liable for the full amount of any transfers he made or received from the main defendants if he failed to disclose such transfers to the Commission.
Finally, all of the settlements contain various reporting provisions that would assist the FTC in monitoring the defendants' compliance.
The Commission vote to authorize staff to file the individual judgments was 4-0. The Los Angeles Regional Office handled the investigation. The seven Stipulated Final Judgments and Orders against defendants Diamand; Ericson; Nachamkin; Perelman; Evangelist; Grayson; and Morris were filed in the U.S. District Court, Central District of California, in Los Angeles, on December 22, 1998, and approved by the court on December 28, 1998. The settlements with the other four defendants were filed on December 31, 1998 and were approved by the court on January 6, 1999.
NOTE: Consent judgments are for settlement purposes only and do not constitute an admission by the defendants of a law violation. Consent judgments have the force of law when signed by the judge.
Copies of the individual settlements, as well as other documents associated with "Project Field of Schemes" are available from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TDD for the hearing impaired 202-326-2502. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710. Copies of news releases and other materials are also available on the FTC's web site at http://www.ftc.gov
(FTC Matter No. X970056)
(Civil Action No. 97-4572 MMM (Mcx))