UNITED
STATES DISTRICT COURT
Plaintiff, the Federal Trade Commission ("Commission"), for its complaint alleges as follows: 1. The Commission brings this action under Section 13(b) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. § 53(b), to obtain preliminary and permanent injunctive relief, rescission, restitution, disgorgement and other equitable relief to redress purchasers of defendants' employment and scholarship "programs" for the injury resulting from defendants' deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a). JURISDICTION AND VENUE 2. This Court has subject matter jurisdiction over plaintiff's claim pursuant to 28 U.S.C. §§ 1331, 1337(a) and 1345, and 15 U.S.C. §§ 45 (a) and 53(b). 3. Venue in the Western District of Washington is proper under 28 U.S.C. § 1391(b) and (c) and 15 U.S.C. § 53(b). THE PARTIES 4. Plaintiff, the Federal Trade Commission, is an independent agency of the United States Government created by statute. 15 U.S.C. § 41, et seq. The Commission enforces Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), which prohibits unfair or deceptive acts or practices in or affecting commerce. The Commission may initiate federal district court proceedings to enjoin violations of the FTC Act, and to secure such equitable relief as may be appropriate in each case, including consumer restitution and disgorgement. 15 U.S.C. § 53(b). 5. Defendant Progressive Media, Inc. ("PMI"), d/b/a Alaska Employment Services, Student Employment Services, Aztec Group, Cruise Employment Services, International Employment Group, Vertical Employment Group, Resort Employment Services, Casino Employment Group and Student Financial Services, is a Washington corporation with its office and principal place of business at 3513 NE 45th Street, Seattle, Washington. PMI transacts business in the Western District of Washington through the marketing and sale of employment opportunity and scholarship programs to consumers throughout the United States. 6. Defendant Collegiate Communications Group, Inc. ("CCGI") is a Washington corporation with its registered agent's office located at 1501 Fourth Avenue, #2600, Seattle, Washington. CCGI transacts business in the Western District of Washington through the dissemination of advertisements for employment and scholarship programs to consumers throughout the United States. 7. Defendant Matthew Lucas ("Lucas") is a co-founder and director of PMI and PMI's president, treasurer and co-owner. Individually, or in concert with others, Lucas formulates, directs, controls or participates in the acts and practices of PMI alleged below. He resides and transacts business in the Western District of Washington. 8. Defendant Kevin Lustgarten ("Lustgarten") is a director of PMI and PMI's vice-president and secretary. Individually, or in concert with others, Lustgarten formulates, directs, controls or participates in the acts and practices of PMI alleged below. He resides and transacts business in the Western District of Washington. 9. Defendant Mark Buchan ("Buchan") is the president and chairman of the board of directors of CCGI and a co-owner and co-founder of PMI. From 1987 to at least November 1993, Buchan was the president and a member of the board of directors of PMI. Individually, or in concert with others, Buchan formulates, directs, controls or participates in the acts and practices of CCGI alleged below. He resides and transacts business in the Western District of Washington. COMMERCE 10. At all times relevant to this complaint, defendants have maintained a substantial course of trade in or affecting commerce, as "commerce" is defined in Section 4 of the FTC Act, 15 U.S.C. § 44. DEFENDANTS' COURSE OF CONDUCT 11. Since at least 1987, and continuing thereafter, defendants Lucas, Lustgarten and Buchan, through PMI, doing business under various names, and later through PMI and CCGI, have disseminated or caused the dissemination of advertisements offering consumers employment in the Alaskan fishing industry. Since at least 1992, defendants Lucas, Lustgarten and Buchan, through PMI, and later through PMI and CCGI, also have disseminated or caused the dissemination of advertisements offering consumers employment in the cruise ship industry, as well as offering them thousands of dollars worth of free grants and scholarships for college in other advertisements. These advertisements appear in the "Help Wanted" sections of college newspapers; the "Help Wanted" sections of the classified advertisements of national publications such as Rolling Stone and Entertainment Weekly magazines; are printed on postcards that defendant CCGI packages and mails to college bookstores for insertion into students' bookbags with their purchases; and are printed on flyers that are posted on college bulletin boards across the United States. 12. PMI's advertisements for cruise ship employment promise consumers that they can earn $2000 or more each month working on cruise ships or for land tour companies that are currently hiring. PMI's advertisements state that particular types of full-time or seasonal jobs are available that require no experience or special qualifications. 13. Typical statements made in PMI's advertisements for employment on cruise ships or with land tour companies include, but are not limited to, the following: A.
[Complaint Exh. A]. B.
[Complaint Exh. B]. 14. PMI's advertisements for employment in Alaska promise consumers that they can earn as much as $3000 to $6000 each month working in the Alaskan fishing industry, regardless of level of experience or qualifications. PMI's advertisements further represent that the jobs offered through PMI typically will provide consumers with free room, board and transportation. 15. Typical statements made in PMI's advertisements for employment in Alaska include, but are not limited to, the following: A.
[Complaint Exh. C]. B.
[Complaint Exh. D]. 16. PMI's advertisements for scholarships and grants represent that billions of dollars worth of grants and scholarships from independent and private organizations remain unclaimed every year. PMI's advertisements further state that students can receive thousands of dollars' worth of this free grant and scholarship money for each year of college regardless of their grades, income or family income. PMI provides consumers with a toll-free number to obtain further information to get a share of this unclaimed scholarship money. 17. Typical statements made in PMI's advertisements for free scholarships and grants include, but are not limited to, the following statements: A.
[Complaint Exh. E]. B.
[Complaint Exh. F]. C.
[Complaint Exh. F]. D.
[Complaint Exh. F, G and H]. E.
[Complaint Exh. F]. 18. Consumers calling the numbers listed in PMI's advertisements speak with a PMI sales representative regarding the particular "program" in which they are interested. The PMI sales representative then describes the particular "program" advertised and invites callers to enroll. Callers interested in the cruise or Alaska employment "programs" are told that the fee for enrolling is $49.95. Callers interested in the scholarship search "program" are told that the enrollment fee is $69.95. 19. During the telephone sales pitch for employment on a cruise ship, PMI's sales representatives typically represent to callers that they are likely to earn $2000 to $3000 or more a month working for a cruise ship or $5000 to $7000 for the summer working for a land tour company. Callers are further told that the companies will provide free meals, housing and transportation to the various ports of call and that particular types of full-time or seasonal jobs, including but not limited to, casino dealer, bartender, activity director and other customer service jobs are available, regardless of level of experience or qualifications. PMI's representatives tell callers that if they do not find the job of their choice on a cruise ship or with a land tour company through PMI's "program" within twelve months, PMI will refund the fee. PMI's representatives further represent to callers that only six percent of the consumers who purchase the "program" seek refunds. 20. Contrary to defendants' representations, PMI is not offering actual jobs with cruise ships and land tour companies, does not guarantee consumers jobs with such companies, and consumers enrolling in PMI's "program" are not likely to receive the earnings, benefits or types of jobs defendants represented were available. In fact, consumers receive only a paperback book listing the names and addresses of major cruise ship lines and land tour companies, along with a brief description of the companies listed in the book and tips on working in the cruise ship industry. It is entirely up to consumers to contact each company they are interested in for more information and to apply for employment, and in most instances the companies listed in PMI's book are not currently hiring or, if they have available positions, those positions require training, experience and at least a six to nine month long commitment and do not pay the represented salaries or provide the represented benefits. 21. During the sales pitch for employment in the Alaskan fishing industry, PMI's sales representatives typically represent to consumers that they are likely to earn $3000 to $6000 per month, regardless of level of experience or qualifications, and that many of these jobs will provide free or low-cost housing and meals, and will reimburse travel expenses if consumers complete their employment contracts with the fishing company. PMI's sales representatives tell callers that if they do not find the job of their choice in the Alaskan fishing industry through defendants' "program" within twelve months, PMI will refund the fee. PMI's representatives further represent to callers that only six percent of the consumers who purchase the "program" seek refunds. 22. Contrary to defendants' representations, PMI is not offering actual jobs in the Alaskan fishing industry, does not guarantee consumers jobs with such companies, and consumers enrolling in PMI's "program" are not likely to receive the earnings, benefits or types of jobs defendants represented were available. In fact, consumers receive only a paperback book listing the names and addresses of Alaskan fishing companies, fish processing companies and canneries, along with a description of the working conditions in the Alaskan fishing industry. It is entirely up to consumers to contact each company they are interested in for more information and to apply for employment, and in most instances the companies listed in PMI's book are not currently hiring or, if they have available positions, those positions pay only minimum wage salaries, involve extremely harsh working conditions and do not offer the represented benefits. 23. During the sales pitch for free scholarships and grants, PMI's sales representatives typically represent to callers that billions of dollars in scholarships and grants from private and independent organizations are unclaimed each year. PMI's sales representatives further represent to callers that students who enroll in PMI's "program" are likely to receive at least $500 to $2500 from this unclaimed scholarship or grant money each year, regardless of students' grades, income or families' income. PMI's sales representatives tell callers that students enrolled in the "program" will receive at least $300 in this unclaimed grant or scholarship money within twelve months of enrolling in the "program" or PMI will refund the fee. Callers are also told that in most instances, any scholarships or grants received through the "program" will be automatically renewed each year the student is enrolled in school. PMI's representatives further represent to callers that only six percent of the consumers who purchase the "program" seek refunds. 24. Contrary to defendants' representations, billions of dollars of scholarships and grants from private and independent organizations is not available to most students, consumers are not likely to receive unclaimed free scholarships or grants regardless of grades, income or family income, and PMI does not guarantee students free scholarships or grants under the represented terms. In fact, students who enroll in PMI's "program" receive only paperback books listing the names of various private and independent organizations, along with some tips for obtaining scholarships. It is entirely up to consumers to contact each organization they are interested in for more information and, in most instances, students are ineligible for scholarships or grants from the listed organizations or will encounter severe competition for any scholarship or grant they are eligible to receive. 25. Consumers who seek refunds from defendants for any of PMI's advertised "programs" generally do not get a full refund on request. In fact, PMI sends consumers its written refund policy only after consumers pay PMI's fee. PMI's written refund policy requires consumers to satisfy several undisclosed requirements, the effect of which is to discourage consumers from applying for a refund. These requirements include, but are not limited to, the following: (1) consumers must wait at least 90 days before requesting a refund; (2) consumers must return PMI's books in "resalable condition;" (3) consumers must send PMI a description of their job or scholarship hunting efforts and a statement of why they want a refund; and (4) consumers must send PMI copies of cover letters and completed applications to and responses from the companies and organizations listed in PMI's books. DEFENDANTS' VIOLATIONS OF THE FTC ACT 26. Section 5(a) of the FTC Act prohibits deceptive acts or practices in or affecting commerce. COUNT I 27. Paragraphs 1 through 26 are incorporated herein by reference. 28. Through the use of the statements referred to in Paragraphs 13, 15, 19 and 21, and others not specifically set forth herein, defendants have represented, directly or by implication, that consumers who pay the fee to PMI are likely to earn $2000 to $3000 or more a month working for a cruise ship, $5000 to $7000 or more a summer working for a land tour company or $3000 to $6000 or more a month working in the Alaskan fishing industry, regardless of level of experience or qualifications. 29. In truth and in fact, consumers who pay the fee to PMI are not likely to earn $2000 to $3000 or more a month working for a cruise ship, $5000 to $7000 or more a summer working for a land tour company or $3000 to $6000 or more a month working in the Alaskan fishing industry, regardless of level of experience or qualifications. 30. Through the use of statements referred to in Paragraphs 13, 15, 19 and 21, and others not specifically set forth herein, defendants have represented, directly or by implication that they have actual job openings at the salaries and with the benefits defendants represented in their advertisements and telephone sales pitches. 31. In truth and in fact, defendants do not have actual job openings at the salaries and with the benefits defendants represented in their advertisements and telephone sales pitches. 32. Through the use of the statements referred to in Paragraphs 13, 15, 19 and 21, and others not specifically set forth herein, defendants have represented, directly or by implication, that consumers who pay the fee to PMI will be enrolled in a program through which they will obtain an actual job paying $2000 to $3000 or more a month working for a cruise ship, $5000 to $7000 or more a summer working for a land tour company or $3000 to $6000 or more a month working in the Alaskan fishing industry, regardless of level of experience or qualifications. 33. In truth and in fact, consumers who pay the fee to PMI are not enrolled in a program through which they will obtain an actual job paying $2000 to $3000 or more a month working for a cruise ship, $5000 to $7000 or more a summer working for a land tour company or $3000 to $6000 or more a month working in the Alaskan fishing industry, regardless of level of experience or qualifications. 34. Through the use of the statements referred to in Paragraphs 13, 15, 19 and 21, and others not specifically set forth herein, defendants have represented, directly or by implication, that consumers who pay the fee to PMI are likely to obtain certain types of jobs on cruise ships or in the Alaskan fishing industry that provide various benefits, including but not limited to, free or low-cost housing, free meals and transportation. 35. In truth and in fact, consumers who pay the fee to PMI are not likely to obtain those certain types of jobs on cruise ships or in the Alaskan fishing industry that provide various benefits, including but not limited to, free or low-cost housing, free meals and transportation. 36. Therefore, defendants' representations as set forth above are false and misleading and constitute deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a). COUNT II 37. Paragraphs 1 through 36 are incorporated herein by reference. 38. Through the use of statements in Paragraphs 17 and 23, and others not specifically set forth herein, defendants have represented, directly or by implication, that consumers who pay the fee for PMI's scholarship "program" are likely to receive at least $500 to $2500 in scholarships or grants regardless of their grades, income or family income. 39. In truth and in fact, consumers who pay the fee for PMI's scholarship "program" are not likely to receive at least $500 to $2500 in scholarships or grants regardless of their grades, income or family income. 40. Through the use of statements referred to in Paragraphs 17 and 23, and others not specifically set forth herein, defendants have represented, directly or by implication, that consumers who pay the fee to PMI will be enrolled in a program through which they will obtain thousands of dollars in free scholarships or grants, regardless of grades, income or family income. 41. In truth and in fact, consumers who pay the fee to PMI are not enrolled in a program through which they will obtain thousands of dollars in free scholarships or grants, regardless of grades, income or family income. 42. Through the use of statements referred to in Paragraphs 17 and 23, and others not specifically set forth herein, defendants have represented, directly or by implication, that billions of dollars of unclaimed scholarship and grant money are available to consumers through private and independent organizations, regardless of grades, income or family income. 43. In truth and in fact, billions of dollars of unclaimed scholarship and grant money are not available to consumers through private and independent organizations, regardless of grades, income or family income. 44. Therefore, defendants' representations as set forth above are false and misleading and constitute deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a). COUNT III 45. Paragraphs 1 through 44 are incorporated herein by reference. 46. Through the use of statements in Paragraphs 17, 19, 21 and 23, and others not specifically set forth herein, defendants have represented, directly or by implication that PMI will promptly refund its fee to consumers who enroll in one of PMI's "programs" and do not obtain their job of choice or at least $300 in scholarships or grants within twelve months. 47. In truth and in fact, in numerous instances, PMI does not promptly refund its fee to consumers who enroll in one of PMI's "programs" and do not obtain their job of choice or at least $300 in scholarships or grants within twelve months. 48. Therefore, defendants' representations as set forth above are false and misleading and constitute deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a). INJURY 49. Defendants' violations of Section 5 of the FTC Act, as set forth above, have caused and continue to cause substantial injury to consumers. Absent injunctive relief by this Court, defendants are likely to continue to injure consumers. THIS COURT'S POWER TO GRANT RELIEF 50. Section 13(b) of the FTC Act, 15 U.S.C. § 53(b), empowers this Court to issue a permanent injunction against defendants' violations of the FTC Act, and, in the exercise of its equitable jurisdiction, to order such ancillary relief as preliminary injunction, rescission, restitution, disgorgement of profits resulting from defendants' unlawful acts or practices, and other remedial measures. PRAYER FOR RELIEF WHEREFORE the Commission respectfully requests that this Court, as authorized by 15 U.S.C. § 53(b) and pursuant to its own equitable powers:
DATED: ___________, 1996. Respectfully submitted, STEPHEN CALKINS CHARLES A. HARWOOD Joe Lipinsky ATTORNEYS FOR PLAINTIFF |