Two Santa Barbara, California, companies have agreed to settle Federal Trade Commission charges that they made fraudulent claims about how to obtain government-seized cars and homes for small fractions of their real worth and how to obtain at-home and government employment. The Commission had alleged that these companies, as well as two others, engaged in the deceptive marketing of "how to" guides in which they made a variety of misrepresentations to induce consumers to pay $50 to $100 or more for auction or business opportunity information. As part of the settlements, the two companies will be required to pay over $4 million in consumer redress.
According to the FTC complaints, the companies advertised through direct mail and in classified ads that invited consumers to call a toll-free number. Consumers who called in response to the ads got pitched to purchase printed "guides" that purportedly would help them purchase autos and homes for very little money. The complaints alleged that such "deals" were not generally available. The complaints also alleged that government agencies do not commonly seize and sell expensive, high-end vehicles at auctions. According to the complaints, the automobile auction guides that these companies sent simply contained general information about the auctions, along with the addresses and telephone numbers of auction houses around the country. The companies' advertisements for foreclosed properties promised homes for "pennies on the $." In fact, however, the complaints alleged that properties sold by government agencies generally are sold at close to their fair market values.
In addition, the companies also advertised various employment opportunities, such as government jobs and work-at-home typing. The companies represented that consumers who purchased their guides would get either listings of actual positions that need to be filled or businesses that regularly hire at-home workers. The guides, the agency said, did not include listings of actual positions.
The FTC complaints charged the companies with violations of the FTC Act and the Telemarketing Sales Rule. The complaints sought injunctive relief and consumer redress. At the Commission's request, temporary restraining orders were entered against both companies in November, 1998.
The settlement for Clarendon House, Inc., d/b/a/ First National Data Group, Inc., Peter M. Dearden, and Ellen H. Stewart, permanently prohibits the defendants from violating the FTC Act and the Telemarketing Sales Rule. The order enjoins the defendants from making material misrepresentations about any product they sell. The defendants will have to post a bond if they engage in telemarketing. The settlement requires a payment of $3,955,000 in consumer redress.
The settlement for Arlington Press, Inc., d/b/a/ Consumer Data Service, Golden West Advertising, Inc., and David T. Umholtz, Wendy J. Foster, and George W. Umholz, permanently prohibits the defendants from violating the FTC Act and the Telemarketing Sales Rule. It also requires that a performance bond be posted if the company or its officers wish to engage in telemarketing. The proposed order also requires the defendants to pay $54,200 in consumer redress. In addition, David and Geroge Umholtz must turn over to the Commission for resale three vintage Jaguars that may be worth as much as $90,000. These vehicles will be sold, with the proceeds being added to the consumer redress fund.
The settlements also contain various recordkeeping provisions designed to assist the FTC in monitoring the defendants' compliance with the orders.
The Commission vote approving the filing of the settlements was 4-0.
The stipulated judgments were entered in the U.S. District Court, Central District of California in Los Angeles on April 13 and 14, 1999. Both matters were handled by the FTC's Chicago Regional Office.
NOTE: These stipulated judgments are for settlement purposes only and do not constitute admissions by the defendants of law violations. Consent judgments are subject to approval by the court and have the force of law when signed by the judge.
Copies of the news release and complaints are available from the FTC's web site at: http://www.ftc.gov and also 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 1-866-653-4261. Copies of the settlements will be available shortly. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710. Consumers may obtain information about both cases by calling (312) 960-5602.
(FTC Matters No. X990010 [Clarendon] and X990008 [Arlington])
(Civil Action Nos. 98-9262 WMB (AJWx) [Clarendon] and 98-9260 MMM (CWx) [Arlington])