FOR RELEASE: DECEMBER 16, 1993
PRINCIPAL DEFENDANTS IN FTC'S FIRST STAMP FRAUD CASE
AGREE TO SETTLE CHARGES OF MISREPRESENTING THE
INVESTMENT POTENTIAL OF STAMPS
World Wide Classics, Inc. and World Wide Classics of
Indiana, Inc., have agreed to settle Federal Trade Commission
charges they misrepresented the investment potential of the
stamps and related philatelic items they sold to consumers
through infomercials and telemarketing. The settlement prohibits
the firms and other corporate and individual defendants from
misrepresenting the investment potential of any stamps or related
items, animated art, or any other investment offering. In
addition, Ronald T. Schaefer, past president and current chairman
of the board of World Wide and World Wide of Indiana, is required
to post a $200,000 performance bond before resuming any
telemarketing activities.
World Wide Classics is located in Mission Viejo, California,
and World Wide of Indiana is based in Indianapolis (collectively
World Wide Classics). Included also in the settlement are:
Schaefer and Associates (S&A); Collectibles Clearinghouse, Inc.,
also known as American and International Stamp Exchange, Inc.
(CCI); and Joyce Eve Schaefer, Ronald Schaefer's wife and an
officer of both firms.
Two additional corporate officers named as defendants in
this case: Janet Alexander, President and CEO of World Wide
Classics and President of World Wide of Indiana; and Christopher
de Jesus, also known as Chris Davis, sales director of World
Wide, have previously settled with the FTC.
- more -
(World Wide Classics settlement--12/16/93)
According to the June 1992 complaint detailing the FTC's
charges, the defendants offered and sold stamps and stamp-related
collectibles to consumers through investment seminars, telephone
solicitations, and written promotional material, by representing
them to be excellent, low-risk investments. The FTC alleged,
however, that the stamps and collectibles sold by World Wide
Classics were neither excellent nor low-risk investments because
the prices they charged were routinely 2-to-10 times higher than
the prices at which they were generally available to retail
purchasers. Moreover, the FTC alleged, certain stamps and
collectibles had not regularly traded at the amounts represented
by the defendants.
World Wide Classics also published the American Classic
Stamps Index ("ACI"), which purportedly measured the price
performance of "blue chip" stamps in the U.S. investment stamp
market, the FTC alleged. The FTC's complaint states that the
defendants represented that they were "market-makers" in the 36
stamps which make up the ACI, and that the stamps in the ACI had
experienced constant upward appreciation in the past 15 years.
The FTC charged, however, that the stamps in the ACI have not
experienced constant upward appreciation and had substantially
depreciated between 1982 and 1992.
When the FTC filed its complaint, the federal court granted
its request to issue a temporary restraining order putting an
immediate halt to the allegedly deceptive practices and freezing
the assets of all the defendants to preserve funds for consumer
redress. The court also appointed a temporary receiver for the
corporations.
In August 1992, the Commission amended its complaint to name
S&A, CCI and Joyce Eve Schaefer, as defendants. The court subse-
quently issued a preliminary order prohibiting Joyce Eve Schaefer
from making the alleged misrepresentations and freezing her
assets.
The settlement prohibits the defendants from, among other
things, misrepresenting the degree of risk involved in the
purchase of stamps and related philatelic items, animated art, or
any other investment offering. It also prohibits them from
falsely representing the appreciation, value, or any other fact
material to a consumer's decision to purchase such investment
offerings, or that stamps in the ACI have constantly appreciated
over a specified time period.
(World Wide Classics settlement--12/16/93)
Further, the settlement prohibits the defendants from
representing that any radio or television advertisement is not a
paid ad, and requires the defendants, in any radio or television
ad that is 15 minutes or longer, to disclose that the program is,
in fact, a paid advertisement.
In addition to posting the $200,000 performance bond before
resuming any telemarketing activity, Ronald Schaefer is required
to disclose, in all sales materials, and all documents sent to
customers as receipts or to acknowledge orders, the following:
"A PERFORMANCE BOND IN THE AMOUNT OF $200,000 IS ON FILE WITH THE
FEDERAL TRADE COMMISSION, WASHINGTON, D.C., FOR THE BENEFIT OF
CONSUMERS WHO MAY HAVE CERTAIN CLAIMS RELATING TO THIS PURCHASE."
The settlement calls for a judgment in the amount of $10
million to be entered against the corporate defendants. The FTC
cannot execute the judgment until the court dismisses the
receiver. After the receiver liquidates the corporate assets, a
plan for distribution to creditors will be submitted to the
court. While such a plan may include consumer redress, if the
Commission finds that redress is impractical, the court may order
all monies to be paid to the U.S. Treasury as a disgorgement
remedy. The Schaefers and S&A also have agreed to relinquish to
the receiver certain ownership interest, title, or claims to
assets of World Wide Classics, Collectibles Clearinghouse, Inc.,
and Schaefer and Associates. The settlement permits the
Schaefers to purchase the inventory of animated art from the
receiver for a specified price.
The FTC filed, and the court approved, the judgment and
order to settle the charges in the U.S. District Court for the
Central District of California, in Los Angeles on Dec. 15. The
Commission vote to file the settlement was 5-0.
NOTE: The final judgment and order for permanent injunction is
for settlement purposes only and does not constitute an admission
of a law violation. The judgment and order are subject to court
approval and have the force of law when signed by the judge.
Copies of the complaint and proposed consent judgment, as
well as prior news releases and other documents associated with
this case are available from the FTC's Public Reference Branch,
Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington,
D.C. 20580; 202-326-2222; TTY for the hearing impaired 202-326-
2502.
(World Wide Classics settlement--12/16/93)
# # #
MEDIA CONTACT: Howard Shapiro, Office of Public Affairs
202-326-2176
STAFF CONTACT: Connie Wagner, Bureau of Consumer Protection
202-326-3309
or
Linda M. Stock, Los Angeles Regional Office
11000 Wilshire Boulevard, Suite 13209
Los Angeles, California 90024
310-575-7890
(Civil Action No.: CV 92-3363 TJH(EEx))
(FTC File No.: x920033)
(wwide-4)