For Release: February 6, 2001
Ameritel Payphone Distributors, Inc., based in Miami, Florida, and its owner, Roy Barnett Goodman, targeted by the Federal Trade Commission as part of a nationwide crackdown on fraudulent business opportunities, have agreed to pay $40,000 to settle the charges against them. As part of the settlement with the FTC, they are required to comply with the FTC's Franchise Rule, a pre-purchase disclosure rule designed to give potential franchisees key information about the business, its officers and their legal and financial history, as well as the names and addresses of former and current franchisees.
The settlement announced today ends the litigation in this case, which was among 35 cases brought by the FTC and the Department of Justice as part of "Project Biz-illion$," a multi-prong state/federal attack on traditional business opportunity scams. This case, like most "Project Biz-illion$" actions, was launched against defendants that advertised in the classified section of daily newspapers to peddle payphone, vending machine, display rack, or work-at-home business opportunities scams. The defendants made unsupported earnings claims and failed to give consumers critical pre-purchase information about the business opportunity, as required by the FTC's Franchise Rule.
According to the FTC, Ameritel Payphone Distributors sold payphone business opportunities. The FTC charged the company and its owner with making false and misleading claims about the earnings that could be realized, the availability of local, profitable payphone locations, and the inclusion of such locations as part of the business venture. The FTC also charged them with failing to comply with the provisions of the Franchise Rule designed to help potential purchasers protect themselves from false profitability claims. An investment for three payphones was about $4,500. The defendants' advertisements often included estimates of potential earnings of up to $200,000 per year.
Under the consent judgment, Ameritel Payphone Distributors and Goodman are prohibited from misrepresenting any fact material to a consumer's purchasing decision in connection with the sale of business opportunity ventures. The settlement, which required the court's approval, also prohibits the defendants from misrepresenting that a purchaser would earn in excess of a specified amount, or would be provided profitable locations for the payphones. The settlement also prohibits the defendants from violating or assisting others to violate the Franchise Rule. Specifically, the defendants are prohibited from failing to provide prospective franchisees with a complete and accurate basic disclosure document or an earnings claim document as required by the Rule, and from making any earnings claims or projections without having a reasonable basis for the claims or projections at the time they are made.
In addition, the settlement requires the defendants to pay $40,000 in consumer redress with an avalanche clause which would require them to pay $8 million if they are found to have made omissions or misrepresentations about their financial condition. Finally, the settlement contains various recordkeeping and reporting requirements designed to assist the FTC in monitoring the defendants' compliance.
The Commission vote authorizing staff to file the settlement was 5-0. The stipulated judgment and order for permanent injunction was filed in the U.S. District Court for the Southern District of Florida, Miami Division, on January 31, 2001, and approved by the court.
NOTE: This stipulated judgment and order is for settlement purposes only and does not constitute an admission by the defendant of a law violation. Consent judgments have the force of law when signed by the judge.
Copies of the news release, the stipulated judgment and other documents associated with "Project Biz-illion$" 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 also are available from the FTC's web site at http://www.ftc.gov To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710. The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the online complaint form. The FTC enters Internet, telemarketing and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies worldwide.
(FTC Matter No. X000012)
(Civil Action No. 00-0514 Civ. GOLD/SIMONTON)