A federal district court in New York has frozen the assets of Pathway Merchandising, Inc., Four Vend, Inc., doing business as IV Vend, IV Vending, Inc., For Vend and For Vend Incorporate, and their principal officers, Evan Blumstein and Kenneth Finney, who were charged by the Federal Trade Commission with engaging in deceptive practices in the sale of their vending machine business opportunities. The asset freeze is intended to preserve the defendants' funds if the court orders them to pay redress to purchasers of their business opportunities at the conclusion of the FTC case.
According to the FTC's complaint, the defendants sold and promoted vending machine business opportunities to consumers nationwide. The complaint alleges that the defendants misrepresented that prospective purchasers were likely to earn substantial income from the business, such as "net $50K" per year, when, in fact, consumers reportedly earned little or no income from the business opportunity. In addition, the complaint alleges that the defendants failed to provide prospective purchasers with basic disclosure and earnings claim documents, denying prospective purchasers the opportunity to review critical information about the defendants and their business opportunity prior to investing.
The defendants offered vending machine packages ranging in price from $7,995 to $20,000. Included in the purchase price were candy-dispensing vending machines and marketing displays to place on top or beside the machines. The defendants promised prospective purchasers that they would earn four profitable incomes per machine: income from candy sales, commissions from leads generated from low-interest credit card or pre-paid phone card applications, and ballot-box entries to win a vacation. The defendants advertised that prospective purchasers would net "$50,000 per year, $48,000 per year, or $150 to $250 per machine per month" from the business.
The complaint alleges that the defendants violated the FTC Act by misrepresenting the earnings potential of the business opportunity, and violated the FTC's Franchise Rule by failing to provide prospective franchisees with a basic disclosure document; failing to provide purchasers with the required earnings claim document; and failing to disclose, in immediate conjunction with these claims, information required by the Franchise Rule.
In addition to the asset freeze, the court order temporarily bars the defendants, pending a hearing, from engaging in the challenged practices.
The Commission vote to authorize staff to file the complaint in federal court was 5-0. It was filed in the U.S. District Court for the Southern District of New York, in New York City, on October 9, 2001 under seal. The seal was lifted on October 16, 2001. The FTC's East Central Region - Cleveland handled the investigation.
NOTE: This stipulated judgment and order is for settlement purposes only and does 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 legal documents associated with these cases 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. 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 in English or Spanish (bilingual counselors are available to take complaints), 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 complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to thousands of civil and criminal law enforcement agencies in the U.S. and abroad.
( FTC File No. 012 3088)
(Civil Action No. 01-CIV-8987)