The Federal Trade Commission, the Department of Justice and law enforcement officials from 29 states today announced Project Biz-illion$, a multi-pronged attack on traditional business opportunity scams that bilk hundreds of thousands of consumers out of tens of millions of dollars a year.
The FTC, the Office of Consumer Litigation of the Department of Justice, state attorneys general and state securities officials have filed over 68 cases against fraudulent business opportunity promoters, many of whom are using the classified section of the daily newspaper and the Internet to peddle pay phone and vending machine routes and work-at-home schemes like medical billing opportunities. These schemes typically promise high earnings. According to the regulators, however, they rarely pan out, and instead, can cost consumers thousands of dollars.
Because many business opportunity offers are pitched to consumers via the classifieds, the FTC and its enforcement partners also announced a partnership with more than 105 newspapers (see attached list) that have voluntarily agreed to run a classified of their own -- one that tells consumers what to look for in a notice for a legitimate business opportunity. The notices refer readers to more complete information from both the FTC and the appropriate state agencies (available at www.ftc.gov/bizop). More than 85 of the newspapers participating in "Project Classified," as this partnership is known, also have agreed to use their best efforts to screen out potentially deceptive ads, including those that make earnings claims without incorporating a disclosure in the ad about the number and percentage of prior purchasers who have made as much as the promotion claims.
"It's very gratifying that so many newspaper publishers across the country have accepted our invitation to join this partnership to educate consumers about business opportunity fraud," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection. "They are helping us reach consumers exactly when the would-be entrepreneur is focused on the opportunity."\
According to Bernstein, the ads generally make promises like these:
"MEDICAL BILLING. Work From Home-Full or Part Time. From $24K to $50K+ per year. Home Computer Required. CALL NOW!"
"OWN PAYPHONES. $10K plus monthly potential,"
"1000 Envelopes=$4000. From Home! $4 per envelope you stuff GUARANTEED!
FREE info. Call now;" and
"HERSHEY AND NABISCO VENDING - High weekly income potential. Work 6-8 hrs./wk. Secured and guaranteed locations. $7,000 investment required."
The 68 law enforcement actions announced today include 13 actions filed by the FTC in federal district court alleging that the defendants made false representations about potential earnings, and misrepresented other key aspects of the business opportunities they promoted. In 9 of these cases, the FTC successfully sought and obtained a temporary restraining order with a court-ordered freeze of the defendants assets to preserve funds to provide monetary redress to injured consumers.
Seven of these complaints also allege that the defendants violated the FTC's Franchise Rule by failing to provide potential purchasers with pre-sale disclosure and earning claim documents. The FTC's Franchise Rule requires sellers of franchises and many business opportunity ventures to provide potential purchasers with a complete and accurate "basic disclosure document" containing 20 categories of information, including information identifying current and former franchisees. The Rule also requires that sellers who make claims about actual or potential earnings provide written substantiation for those claims.
The Department of Justice filed an additional 22 complaints for the FTC in federal court as part of Project Biz-illion$. These cases seek civil penalties from business opportunity sellers who failed to provide disclosures required by the Franchise Rule, including required substantiation for sales claims about potential earnings.
The FTC's state partners filed the remaining 33 state court and administrative actions in the enforcement sweep. These state law enforcement agencies -- including the Alabama Attorney General's Office, Arkansas Attorney General's Office, California Attorney General's Office, Connecticut Department of Banking, Florida Attorney General's Office, Florida Department of Agriculture and Consumer Services, Hawaii Department of Commerce and Consumer Affairs, Iowa Securities Bureau, Illinois Securities Department, Indiana Attorney General's Office, Kansas Attorney General's Office, Kentucky Attorney General's Office, Maryland Attorney General's Office, Michigan Attorney General's Office, Mississippi Attorney General's Office, Nebraska Department of Banking, State of New Jersey Division of Consumer Affairs, North Carolina Attorney General's Office, Nevada Attorney General's Office, New Mexico Attorney General's Office, North Dakota Attorney General's Office, Ohio Attorney General's Office, Oklahoma Department of Securities, Pennsylvania Attorney General's Office, South Dakota Division of Securities, Tennessee Attorney General's Office, Tennessee Division of Consumer Affairs, Texas Attorney General's Office, Virginia Attorney General's Office, Washington State Securities Division, and Wisconsin Bureau of Consumer Protection -- also announced that they filed more than 150 actions in 1999 against business opportunity sellers and pyramid scheme promoters.
In addition to the participating state agencies listed above, the FTC wishes to thank the following agencies for their invaluable assistance: Better Business Bureau of Los Angeles, Boca Raton (Florida) Police Department, County of Orange Boiler Room Apprehension Task Force ("COBRA"), County of Los Angeles Boilerroom And Telemarketing ("BAT") Task Force, Florida Office of the Comptroller, Los Angeles FBI Office, Office of the U.S. Attorney for the Central District of California, and the United States Postal Inspection Service (Southern California Division and the Cheyenne, Wyoming, Dallas, Texas, and Pittsburgh, Pennsylvania offices).
The FTC has a new consumer brochure, Could 'Biz Opp' Offers Be Out for Your Coffers?, with tips on how to spot and avoid these scams. Copies of the brochure are available from the FTC's Consumer Response Center or at www.ftc.gov/bizop. If consumers suspect a business opportunity promotion is fraudulent, they can file a complaint with the FTC's Consumer Response Center by calling toll-free 1-877-FTC-HELP (382-4357). The FTC also has a booklet for classified ad managers, Screening Ads: A Guide for the Media.
The Commission vote to authorize staff to file 13 complaints in the appropriate federal district courts was 5-0 and the Commission vote to refer 22 cases to the Department of Justice for filing was also 5-0.
NOTE: The Commission authorizes the filing of a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant actually has violated the law. The case will be decided by the court.
Copies of the 35 complaints filed by the FTC and DOJ 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.
(See attached list of cases)
List of FTC Cases
FTC v. Advanced Public Communications Corp., Michael Portman and Michael Davis (S.D. Fla.) (FTC Matter No. 002-3065).
FTC v. American Universal Vending Corp. d/b/a Universal Vending, Inc., 466733 Ontario Ltd., d/b/a Universal Vending, Inc., Ontario Corporation Number 1337481, d/b/a Universal Payphone Systems, Inc., George Katsoulakis, a/k/a Constantin Katsoulakis, and George Kats (W.D.N.Y.) (FTC Matter No. 002-3014).
FTC v. Ameritel Payphone Distributors, Inc., and Roy B. Goodman (S.D. Fla.) (FTC Matter No. 002-3028).
FTC v. AMP Publications, Inc., Computer & Web Publications, Inc., Ranjit Narayan, d/b/a Nationwide Financial Publications, Inc., and Ana Keilty (C.D. Cal.) (FTC Matter No. 002-3043).
FTC v. Vaughn Williams, III, Encore Networking Services, John S. Dickson, aka Charley Yates, and Warner Green d/b/a Warner Communications Systems & Company (C.D. Cal.) (FTC Matter No. 002-3080).
FTC v. Home Professions, Inc., d/b/a Nationwide Medical Billing, Telesalescenter.Com, d/b/a Home Professions and ProClaim Software, and Michael Petok. (C.D. Cal.) (FTC Matter No. 002-3026).
FTC v. Innovative Productions and Shane D. Walls (N.D. Tex.) (FTC Matter No. 002-3017).
FTC v. Marketing and Vending Concepts, L.L.C. and Michael Cavallo (S.D.N.Y.) (FTC Matter No. 002-3081).
FTC v. Mediworks, Inc, United Medical Associates, Robert D. Seals, Tate Stringer and Corey Dixon, d/b/a Medipros (C.D. Cal.) (FTC Matter No. 992-3285).
FTC v. MegaKing, Inc., Bizz Ad Advertising, Inc., and Richard Goodman (S.D. Fla.) (FTC Matter No. 002-3031).
FTC v. Star Publishing Group, Inc., d/b/a National Consumer Services and Kent Hopkins (D. Wyo.) (FTC Matter No. 992-3254).
FTC v. Target Vending Systems, L.L.C., East West Vending Systems, Inc. and Barry Richman, and Martha Gillen (S.D.N.Y,) (FTC Matter No. 002-3019).
FTC v.Transworld Enterprises, Inc., b/d/a ATM Int'l., Mark Goldstein, a/k/a Mark Davis, and James A. Mackey, Jr. (S.D. Fla.) (FTC Matter No. 992-3083)
List of FTC Cases Filed by DOJ
United States v. American Coin-Op Services, Daryl J. Chase, and Craig J. Schieder (N.D.N.Y.)
United States v. Astratel, Inc., Eugene Rega, and Don Manfredonia.(S.D. Fla.).
United States v. Automatic Merchandising Corp. and Alan R. Manning (S.D. Fla.)
United States v. Cigar Factory Outlet, Inc., Osvaldo Padilla, Monica L. Feinstein, and Bruce Feinstein (S.D. Fla.)
United States v. Cigar Manufacturers Outlet, Inc., Jose Ernesto San Martin, and Peter Dilon (S.D. Fla.)
United States v. Discount Manufacturing, Inc. and Karl Marx (S.D. Fla.)
United States v. Elite Business Designs, Inc., and James MacArthur (N.D.N.Y.)
United States v. Emily Water & Beverage Co., Inc., Tammy Hankins, and Nick LaBruzzo, (W.D. Mo.)
United States v. Galaxies, Inc. and M.W. Walley (D. Del.)
United States v. Great Pacific Vending Corp and Collie Wainer (C.D. Cal.)
United States v. Greeting Card Depot, Inc., William Moran and Robert Runte (S.D. Fla.)
United States v. Douglas Clarence McGlothin and Anthony Simeonov, d/b/a International Cigar Consortium (D. Ariz.)
United States v. Jumping Java Coffee, Inc. and Mitchell Berman (S.D. Fla.)
United States v. National Vending Consultants, Inc., Patrick Abeyta, Jr. and Debra Abeyta (D. N.M.)
United States v. North American Marketing Systems, Inc. and Patrick Wherley (D. Colo.)
United States v. Old Dominican Tobaccos, Inc. and Neil Young (S.D. Fla.)
United States v. K. V. Hill and James D. Carter, d/b/a Southeastern Photo Supply (N.D. Ala.)
United States v. 21st Century Systems, Inc. and Sara R. Miller (S.D. Fla.)
United States v. United Payphones of America, Inc. and Andrew Marcus (S.D. Fla.)
United States v. Vending Communications, Inc., Interactive Communications Services, Inc. and Alberto J. Susi (S.D. Fla.).
United States v. Worldwide Coffee, Inc., Jeffrey M. Salley, and Terri Salley (S.D. Fla.)
United States v. World Wide Vending Corp. and Robin Lafer (S.D. Fla.)
List of State Agency Press Contacts
|Alabama||Alabama Attorney General's Office||Joy Patterson||(334) 242-7491||(334) 242-7458|
|Arkansas||Arkansas Attorney General's Office||Michael Teague||(501) 682-0517||(501) 682-8084|
|California||California Office of the Attorney General||Nathan Barankin||(916) 324-5500||(916) 327-7892|
|Connecticut||Department of Banking, Securities and Business Investments Division||Greg Futoma||(860) 240-8171||(860) 240-8178|
|Florida||Florida Attorney General's Office||Joe Bizzaro||(850) 487-0984||(850) 487-2564|
|Florida||Florida Department of Agriculture and Consumer Services||Liz Compton||(850) 922-7913||(850) 922-4936|
|Hawaii||State of Hawaii Department of Commerce and Consumer Affairs||Ryan Usijima||(808) 586-2740||(808) 586-3977|
|Illinois||Illinois Sectretary of State, Securities Department||Dave Druker||(312) 814-1506||(312) 814-3393|
|Indiana||Indiana Office of the Attorney General||Sheri Miller||(317) 232-6309||(317) 232-7979|
|Iowa||Iowa Securities Bureau||Tammy Augustus||(515) 281-4441||(515) 281-6467|
|Kansas||Office of the Kansas Attorney General, Consumer Protection Division||Mary Horsch||(785) 296-2215||(785) 296-6296|
|Kentucky||Attorney General of Kentucky, Consumer Protection Division||Corey Bellamy||(502) 696-5642||(502) 573-8317|
|Maryland||Office of the Attorney General of Maryland, Securities Division||Sean Caine||(410) 576-6357||(410) 576-7003|
|Michigan||Department of the Attorney General, Consumer Protection Division||Chris Dewitt||(517) 373-8060||(517) 335-4213|
|Mississippi||Mississippi Attorney General's Office, Consumer Protection||Kimberly Herring||(601) 359-4230||(601) 359-4231|
|Nebraska||Nebraska Department of Banking and Finance||Karen Reynolds||(402) 471-3445||(402) 471-3062|
|Nevada||Office of the Attorney General, Bureau of Consumer Protection||Steve George||(775) 687-3512||(775) 687-5798|
|New Jersey||Division of Consumer Affairs, State of New Jersey||Genene Morris||(973) 504-6594||(973) 648-3539|
|New Mexico||Office of the Attorney General, State of New Mexico||Sam Thompson||(505) 827-9488||(505) 827-5826|
|North Carolina||North Carolina Attorney General's Office||Kristine Lanning||(919) 716-6020||(919) 716-6050|
|North Dakota||Office of the Attorney General, Consumer Protection Division||June Veit||(701) 328-2210||(701) 328-2226|
|Ohio||Ohio Attorney General's Office||Jen Detwiler||(614) 466-3840||(614) 752-5083|
|Oklahoma||Oklahoma Department of Securities||Irving L. Faught||(405) 280-7700||(405) 280-7742|
|Pennsylvania||Bureau of Consumer Protection,Office of Attorney General||Barbara Petito||(717) 787-5211||(717) 787-8242|
|South Dakota||Department of Commerce and Regulation, Division of Securities||Mr. Gail Sheppick||(605) 773-4823||(605) 773-5953|
|Tennessee||Tennessee Office of the Attorney General||Miranda Safer||(615) 741-4737||(615) 532-4994|
|Tennessee||Tennessee Division of Consumer Affairs||Marilyn Elam||(615) 741-1900||(615) 532-6934|
|Texas||Texas Office of the Attorney General||Mark Heckmann||(512) 463-2050||(512) 475-4433|
|Virginia||Virginia Attorney General's Office||David Botkins||(804) 786-3518||(804) 786-1991|
|Washington||Department of Financial Institutions, Securities Division||Deborah Bortner||(360) 902-8797||(360) 586-5068|
|Wisconsin||Department of Agriculture, Trade & Consumer Protection||Glen Lloyd||(608) 224-5007||(608) 224-4939|
List of Newspapers in "Project Classified" Partnership
Advertiser Tribune (Tiffin, Ohio)
The Alpena News (Michigan)
Angler Independent (North Carolina)
The Arizona Republic (Phoenix, Arizona)
Baker City Herald (Oregon)
Bangor Daily News (Maine)
The Beaufort Gazette (South Carolina)
Bella Vista Weekly Vista (Arkansas)
The Benton County Daily Record (Arkansas)
The Bolivar Commercial (Cleveland, Mississippi)
Bowling Green Daily News (Kentucky)
Bradenton Herald (Florida)
The Brazosport Facts (Clute, Texas)
Burlington County Times (Willingboro, New Jersey)
Cabot Star-Herald (Arkansas)
Cadillac Evening News (Michigan)
The Californian (Salinas, California)
Carlisle Independent (Arkansas)
Charlevoix Courier (Michigan)
Clovis News Journal (New Mexico)
Cour d'Alene Press (Idaho)
Creston News Advertiser (Iowa)
The Daily Ardmorite (Oklahoma)
The Daily Leader (Brookhaven, Mississippi)
Daily News (Los Angeles, California)
The Daily Record (Dunn, North Carolina)
The Daily Reporter (Coldwater, Michigan)
Dalnart Daily Texan
Dayton Daily News (Ohio)
Decatur Herald (Arkansas)
The Delaware Gazette (Ohio)
The Democrat (Senatobia, Mississippi)
The Denver Post (Colorado)
The Duncan Banner (Oklahoma)
Erie Daily Times (Pennsylvania)
Erie Times News (Pennsylvania)
The Everest World (Kansas)
Exerter News Letter (New Hampshire)
The Express Times (Easton, Pennsylvania)
Finger Lakes Times (Geneva, New York)
The Free Press (Mankato, Minnesota)
The Gainesville Sun (Florida)
The Galion Inquirer (Ohio)
Gentry Courier-Journal (Arkansas)
Gering Courier (Nebraska)
Gravette News Herald (Arkansas)
Greenville Herald Banner (Texas)
Hampton Union (New Hampshire)
Harnett County News (North Carolina)
The Herald News (New Jersey)
The Hiawatha Daily World (Kansas)
The Huntsville Item (Texas)
Idaho Press-Tribune (Nampa, Idaho)
Jacksonville Patriot (Arkansas)
Journal-Advocate (Sterling, Colorado)
The Journal Standard (Freeport, Illinois)
The Kerrville Daily Times (Texas)
The Kilgore News-Herald (Texas)
The Leader (Illinois)
Lee's Summit Tribune (Kansas)
Lewiston Morning Tribune (Idaho)
Lonoke Democrat (Arkansas)
Lubbock Avalanche-Journal (Texas)
The Macomb Daily (Mt. Clemens, Michigan)
The Mail Tribune (Medford, Oregon)
The Milwaukee Journal Sentinel (Wisconsin)
Moline Dispatch (Illinois)
The Monroe Evening News (Michigan)
Moundsville Daily Echo (West Virginia)
The Mountain Press (Sevierville, Tennessee)
Murray Ledger & Times (Kentucky)
The Newport Daily News (Rhode Island)
News-Press (Ft. Myers, Florida)
Ocala Star-Banner (Florida)
The Olathe Daily News (Kansas)
The Ottawa Herald (Kansas)
Paris Beacon-News (Illinois)
The Paris Post-Intelligencer (Tennessee)
Petoskey News-Review (Michigan)
Portales News Tribune (New Mexico)
Portsmouth Herald (New Hampshire)
The Post Register (Idaho Falls, Idaho)
The Press Enterprise (Riverside, California)
Quay County Sun (New Mexico)
The Record (Hackensack, New Jersey)
The Recorder (Greenfield, Massachusetts)
The Rochester Sentinel (Indiana)
Rockingham News (New Hampshire)
Rock Island Argus (Illinois)
The Rogers Hometown News (Arkansas)
The Sampson Independent (Clinton, North Carolina)
Savannah Morning News (Georgia)
Seminole Herald (Sanford, Florida)
Sidney Daily Sun (Nebraska)
The Shelbyville News (Indiana)
Sherwood Voice (Arkansas)
Siloam Springs Herald-Leader (Arkansas)
South Bend Tribune (Indiana)
Southeast Missourian (Cape Girardeau, Missouri)
Sun Journal (New Bern, North Carolina)
The Telegraph (Hudson, New Hampshire)
Telegraph-Herald (Dubuque, Iowa)
The Tribune (Ft. Pierce, Florida)
The Victoria Advocate (Texas)
The Wichita Eagle (Kansas)
The Winchester Sun (Kentucky)