United Payphones of America, Inc., and Andrew Marcus, who were charged by the Federal Trade Commission as part of a nationwide crackdown on fraudulent business opportunities, have agreed to pay a $22,000 civil penalty to settle the charges against them. In addition, as part of the settlement with the FTC, they are required to comply with the FTC's Franchise Rule, a pre-purchase disclosure rule designed to give potential franchisees key information about the business, its officers and their legal and financial history, as well as the names and addresses of former and current franchisees.
In a separate settlement, Douglas C. McGlothin and Anthony Simeonov, who did business as International Cigar Consortium, of Scottsdale, Arizona, have agreed to comply with the Franchise Rule when selling their cigar display rack distributorships.
The settlements announced today end the litigation in these cases, which were among 35 cases brought by the FTC and the Department of Justice as part of "Project Biz-illion$," a multi-prong state/federal attack on traditional business opportunity scams. These cases, like most of "Project Biz-illion$" actions, were launched against defendants that advertised in the classified section of daily newspapers to peddle payphone, vending machine, display rack, and work-at-home scams. The defendants made unsupported earnings claims and failed to give consumers critical pre-purchase information about the business opportunities, as required by the FTC's Franchise Rule.
United Payphones of America
According to the FTC, United Payphones, based in Tamarac, Florida, sold payphone vending opportunities. The FTC charged the company and its president with failing to comply with the provisions of the Franchise Rule designed to help potential purchasers protect themselves from false profitability claims. A minimum investment of $1,665 was required for a single payphone, or $13,000 for a start-up package of seven payphones.
Under the consent judgment, United Payphones and Marcus are prohibited from violating the Franchise Rule and from misrepresenting any fact material to a consumer's decision in connection with the sale of business opportunity ventures. The settlement, which required the court's approval, also prohibits the defendants from selling their customer lists, and requires them to pay a $22,000 civil penalty. The settlement also contains various recordkeeping and reporting requirements designed to assist the FTC in monitoring the defendants' compliance.
The Commission vote to approve the settlement was 5-0. The stipulated judgment and order was filed in the U.S. District Court, Southern District of Florida, Ft. Lauderdale Division, by the Department of Justice on behalf of the FTC, and signed by the judge on September18, 2000.
International Cigar Consortium
According to the FTC, International Cigar Consortium sold cigar humidor display rack distributorships. The FTC charged the defendants with failing to comply with the provisions of the Franchise Rule designed to help potential purchasers protect themselves from false profitability claims. A minimum investment of $6,950 was required for 15 humidors and an initial supply of cigars.
Douglas C. McGlothin and Anthony Simeonov are prohibited by the court judgment from violating the Franchise Rule and from misrepresenting any fact material to a consumer's decision in connection with the sale of business opportunity ventures. The settlement also prohibits the defendants from selling their customer lists. The settlement does not require the payment of any funds, but contains provisions that would permit the FTC to reopen the case should the defendants be found to have misrepresented their financial status. The settlement also contains various recordkeeping and reporting requirements designed to assist the FTC in monitoring the defendants' compliance.
The Commission vote to approve the settlement was 5-0. The stipulated judgment and order was filed and approved by the U.S. District Court, District of Arizona, in Phoenix, Arizona, on August 28, 2000.
NOTE: These stipulated judgments and orders are for settlement purposes only and do not constitute an admission by the defendants of a law violation. Consent judgments have the force of law when signed by the judge.
Copies of the stipulated judgments and orders in both cases are available from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 877-FTC-HELP (877-382-4357); TDD for the hearing impaired 1-866-653-4261. Copies of other documents associated with s'Project Biz-illion$" are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.
Office of Public Affairs
Bureau of Consumer Protection
(United Payphones: FTC Matter No. X000044; Civil Action No. 00-6218)
(International Cigar: FTC Matter No. X000037; Civil Action No. 00 0243 PHX EHC)