Florida Company That Sold Cigar and Humidor Business Opportunities Settles FTC Charges

Nationwide Premium Cigar Distributors Corporation (Nationwide Premium), based in Hallandale, Florida, and its president, Alvin Blish, have agreed to settle Federal Trade Commission charges that they failed to provide the pre-sale disclosures required by the FTC's Franchise Rule to prospective purchasers of their cigar and humidor business opportunities. The Department of Justice (DOJ), at the request of the FTC, filed a suit against the defendants in June 2002 as part of "Project Busted Opportunity," a nationwide crackdown on fraudulent work-at-home and business opportunities. The settlement prohibits the defendants from violating the Franchise Rule and making false and misleading representations in connection with the sale of business opportunities. In addition, the settlement contains a $90,000 judgment, which will be suspended upon payment of $5,000, based on Blish's ability to pay.

"Project Busted Opportunity" was a law enforcement sweep launched by the FTC, the DOJ, and 17 state law enforcement agencies targeting fraudulent work-at-home business opportunities. In this case, Nationwide Premium sold cigar and humidor business opportunities to franchisees for a package price that included cigars, humidors, cigar cutters, point-of-sale material, and initial advice from the defendants. According to the FTC, the defendants' representatives advised potential distributors to use a locating company that supposedly guaranteed that consumers would achieve four cigar sales per day per location. The FTC alleged that the defendants solicited prospective franchisees by placing ads in newspapers with statements such as: "AAA COHIBA CIGAR ROUTE, Route Need Local Dist./ 48 Locations $5k Per Week/Potential." When prospective customers called in response to the ads, Nationwide Premium employees made similar earnings claims. The FTC's complaint alleged that the defendants did not provide prospective purchasers with an earnings claim document containing written substantiation for the claims made, as required by the Franchise Rule. The complaint also alleged that the defendants failed to provide prospective purchasers with a basic disclosure document that included the names, addresses, and telephone numbers of prior purchasers, as required by the Rule to help potential purchasers protect themselves from false profitability claims.

The settlement announced today prohibits the defendants from misrepresenting any fact affecting a consumer's decision to purchase any goods or services. Specifically, the settlement prohibits the defendants from misrepresenting:

• the income or profit that a purchaser is likely to achieve;
  
• the income or profit actually achieved by prior purchasers;
  
• the length of time likely for a purchaser to recoup the entire purchase price or investment;
  
• the independence or authenticity of any third party references provided to potential purchasers;
  
• the amount of competition within, or a purchaser's territorial rights to, any geographic territory; and
  
• the availability of profitable locations in a purchaser's geographic area.

The order also prohibits the defendants from selling their customer lists.

The settlement contains a $90,000 judgment against Alvin Blish, with all but $5,000 suspended based upon his ability to pay. If the court finds later that Blish misrepresented his financial condition, the $90,000 will be due immediately. Finally, the settlement contains various recordkeeping provisions to assist the FTC in monitoring the defendants' compliance.

The Commission vote to authorize the staff to file the proposed stipulated judgment and order was 5-0. It was filed in the U.S. District Court, Southern District of Florida, and entered by the judge on May 13, 2003.

NOTE: This stipulated judgment and order is for settlement purposes only and does not constitute an admission by the defendants of a law violation. A stipulated judgment and order has the force of law when signed by the judge.

Copies of the stipulated judgment and order, as well as other documents pertaining to "Project Busted Opportunity," 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, 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 hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

(FTC Matter No. X020090)
(Civil Action No. 02-60811-CIV-MARRA/SELTZER)