Two Fort Wayne-based telemarketers charged by the Federal Trade Commission with deceptively convincing small businesses they owe money for unordered advertisements in publications purported to be affiliated with "civic" or "charitable" organizations have agreed to settle the allegations. The charges were brought as part of "Operation Missed Giving," a sweeping nationwide campaign against fraudulent fundraising coordinated by the Federal Trade Commission, 40 states, and the American Association of Retired Persons (AARP). The joint initiative targeted telephone fundraisers who misrepresented ties with police departments, fire fighters, veterans groups, childrens' health organizations, and other community organizations. Named as defendants by the FTC in two separate complaints were T.E.M.M. Marketing, Inc., and Rodney L. Turner, Brian A. Edwards, and Michael D. Merryman, all officers of the company; and Tri-State Advertising Unlimited, Inc., company officer Jerome Anthony Wilkins, and Daryl Allen Bender. The settlements in these two cases permanently ban the individual defendants -- except Bender -- from selling advertisements in, or soliciting donations for, any publication. An order settling the allegations against Daryl Bender was filed with the court in April 1999.
The 1998 complaints allege that the defendants misrepresented to small businesses that they had previously ordered or authorized the advertisements, that their booklets enjoyed a widespread distribution in the businesses' local communities, and that advertising proceeds would support a local, civic purpose. The complaints further allege that T.E.M.M. and Tri-State falsely claimed that payment for an advertisement constituted a donation. In both cases, according to the complaints, the small businesses often faced repeated billings for more ads -- whether authorized or not -- and aggressive collection tactics for unauthorized invoices, including threats that the bill would be turned over to a collection agency.
Each of the settlements permanently prohibits the individual defendants from engaging or participating -- either directly or with others -- in the advertising, offering for sale, sale or distribution of any advertising or publication. The defendants in the T.E.M.M. case also would be prohibited from engaging or participating in asking for or collecting donations to any publication, program or organization. The defendants in the Tri-State case similarly would be prohibited from soliciting donations.
The settlements also prohibit the defendants from using any aliases, pen names or otherwise misrepresenting their true identity in the course of business dealings or in publicly filed documents. Further, they are prohibited from selling, renting or otherwise disclosing any identifying information about any customer who purchased advertisements from them.
The respective settlements contain admissions by defendants Jerome Wilkins, Rodney L. Turner, Brian A. Edwards, and Michael D. Merryman, that each had formulated, directed, controlled or participated in the acts and practices of the corporate defendants, including the acts and practices set forth in the FTC's complaints.
The settlement with T.E.M.M. Marketing, and defendants Turner, Edwards, and Merryman requires the individuals to pay $67,500 in consumer redress. In the Tri-State settlement, defendant Wilkins is required to pay $530,000, the estimated amount of consumer injury.
The settlements contain recordkeeping requirements designed to assist the FTC in monitoring the defendants' compliance.
The two settlements were filed in the U.S. District Court for the Northern District of Indiana, Fort Wayne Division, and were subject to the court's approval. The Commission vote to file the settlement in the Tri-State matter was 4-0. The Commission vote to file the settlement in the T.E.M.M. case was 4-0. In each case, Commissioner Orson Swindle issued a separate statement in which he dissented from permanent bans on charitable fundraising. He stated that the bans were overbroad because banning charitable fundraising is not reasonably related to preventing violations that are the same or similar to the violations alleged in the complaints.
Commissioner Swindle also stated that because charitable fundraising is fully-protected speech under the First Amendment, the public interest would have been better served had the Commission imposed less restrictive alternatives than permanent bans on non-misleading, fully-protected speech.
In statements responding to Commissioner Swindle's dissent in each case, FTC Chairman Robert Pitofsky, joined by Commissioners Sheila F. Anthony and Mozelle W. Thompson, disagreed that the bans imposed on the defendants are overbroad. In their statements, the Commissioners wrote that strong relief was appropriate under the facts in both cases. The Commissioners wrote they are mindful that imposing bans may prohibit truthful, non-deceptive speech. "But, examining the facts of each case, we on occasion have concluded that a ban is the most appropriate way to ensure that consumers are protected in the future. Sometimes where the underlying conduct has been so serious and injurious to consumers, significant fencing-in relief...is appropriate and necessary," according to the statement in the T.E.M.M. Marketing case.
NOTE: The stipulated final judgments are for settlement purposes only and do not constitute an admission by the defendants of a law violation. The judgments have the force of law when signed by the judge.
Copies of the judgments, the Commissioners' statements, and a number of other documents relating to "Operation Phony Philanthropy" 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; 877-FTC-HELP (877-382-4357); 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.
(FTC File Nos.: Tri-State - X990003; T.E.M.M. -X990002)
(Civil Action Nos: Tri-State - 1:98CV0302; T.E.M.M. - 1:98CV0300)