JOEL N. BREWER
G. BRENT MICKUM
Federal Trade Commission
601 Pennsylvania Ave., N.W.
Washington, D.C. 20580
Attorneys for Plaintiff
UNITED STATES DISTRICT COURT
FEDERAL TRADE COMMISSION,
AKOA, INC., et al.,
Civ. No. 97-7084 LGB (Mcx)
STIPULATION OF LARRY D. WAYNE TO FINAL JUDGMENT FOR PERMANENT INJUNCTION
Plaintiff, the Federal Trade Commission ("FTC") filed its Amended Complaint against AKOA, Inc., Easyway International, Inc., Rayco, Inc., Jeffrey L. Rayden, Larry D. Wayne, and Edward E. Rayden, all also d/b/a National PC Systems, pursuant to Sections 13(b) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. §§ 53(b), charging Defendants with violations of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a). On September 25, 1997, the Court granted the Plaintiff's ex parte Application for a Temporary Restraining Order with Asset Freeze, Expedited Discovery, Immediate Access, and Appointment of a Temporary Receiver, and ordered Defendants to Show Cause why a preliminary injunction should not issue against them. Plaintiff and defendant Larry D. Wayne subsequently stipulated to a Preliminary Injunction, Appointment of a Permanent Receiver, Continuation of Asset Freeze and Other Relief, which was filed October 20, 1997.
NOW, Plaintiff FTC, by and through its counsel, and defendant Larry D. Wayne, pro se, having stipulated to this Final Judgment for Permanent Injunction ("Judgment") to resolve all matters of dispute between them in this action, without defendant Larry D. Wayne admitting any of the allegations made in the Amended Complaint or admitting that he has violated the FTC Act or any other applicable law, IT IS HEREBY ORDERED, ADJUDGED AND DECREED AS FOLLOWS:
I. PROHIBITED BUSINESS ACTIVITIES
IT IS THEREFORE ORDERED that,
A. In connection with the advertising, offering for sale, promoting, marketing, sale or distribution to consumers of goods, services, or service contracts by mail or by telephone, excluding legal services or contracts for legal services by Defendant, Defendant is hereby permanently restrained and enjoined from:
B. In connection with the advertising, offering for sale, promoting, marketing, sale or distribution to consumers of goods, services, or service contracts by mail or by telephone, Defendant is hereby permanently restrained and enjoined from:
C. In connection with Defendant's providing legal services, the requirements of Paragraph B of this Part shall be deemed satisfied where Defendant's acts are appropriate based on information previously provided to Defendant by his clients and Defendant reasonably believes such information to be true.
II. BOND REQUIREMENT
IT IS FURTHER ORDERED that defendant Larry D. Wayne is permanently restrained from engaging or participating, whether directly, in concert with others, or through any business entity, investment or other device, in the advertising, offering for sale, sale, or distribution of any service contract by mail or by telephone, excluding legal services or contracts for legal services by Defendant, unless and until defendant Larry D. Wayne first obtains a performance bond in the principal sum of one hundred thousand dollars ($100,000).
A. The performance bond shall be an insurance agreement providing surety for financial loss issued by a surety company that holds a Federal Certificate of Authority As Acceptable Surety On Federal Bond and Reinsuring. The surety company issuing the performance bond must be admitted to do business in each state where defendant Larry D. Wayne does business. The performance bond shall cite this Judgment as the subject matter of the bond and shall provide surety thereunder against financial loss resulting from whole or partial failure of performance due, in whole or in part to any violation of Section 5 of the FTC Act, 15 U.S.C. § 45, or this Judgment. Such performance bond shall be executed in favor of the FTC for the benefit of any consumer injured as a result of any violation of Section 5 of the FTC Act, 15 U.S.C. § 45;
B. The bond shall be deemed continuous and remain in full force and effect for a period of three (3) years from the date of entry of this Judgment;
C. The bond required by this Part is in addition to, and not in lieu of, any other bond required by federal, state, or local law;
D. Within ten (10) business days of obtaining the bond required by this Part defendant Larry D. Wayne shall provide a copy to the FTC's Associate Director for Enforcement at the address specified in Part VII;
E. Defendant Larry D. Wayne is restrained from referring to the existence of the performance bond in any advertising, offering for sale, sale, or distribution of any goods or services by mail or by telephone, unless it is also disclosed, clearly and prominently, that the bond is required as a consequence of a lawsuit by the Federal Trade Commission against Defendant Larry D. Wayne alleging that he made material deceptive claims to consumers in the sale of service contracts.
F. The FTC may execute against the performance bond if it demonstrates to this Court by a preponderance of the evidence that, after the effective date of this Judgment, Defendant has violated this Judgment; and
G. Proceedings instituted under this Part are in addition to, and not in lieu of, any other civil or criminal remedies as may be provided by law, including any other proceedings the Commission may initiate to enforce this Judgment.
III. MONETARY JUDGMENT
IT IS FURTHER ORDERED that:
A. A judgment in the amount of ten thousand dollars ($10,000.00) is hereby entered against defendant Larry D. Wayne. Defendant Larry D. Wayne shall pay this judgment in four equal installments to the Receiver herein, Norbert J. Nowicki, Nowicki & Associates, 7424 Jackson Dr., Suite 2, San Diego, CA 92119, by certified checks made payable to "Norbert J. Nowicki." The first payment of $2,500.00 shall be due and owing immediately upon entry of this Judgment; the second installment of $2,500.00 shall be
due and owing ninety (90) days after entry of this Judgment; the third installment of $2,500.00 shall be due and owing one hundred eighty (180) days after entry of this Judgment; and the fourth and final installment of $2,500.00 shall be due and owing two-hundred seventy (270) days after entry of this Judgment. The Receiver shall apply these amounts to any unpaid fees of the Receiver, and will pay any unused balance to the FTC for redress to consumers or disgorgement to the United States Treasury, as provided hereafter. In the event of default in any payment, interest as computed under 28 U.S.C. § 1961 shall accrue on the unpaid payment from the date of default until the payment is made.
B. Defendant Larry D. Wayne hereby agrees to the discharge of the unpaid remainder of any debts owed to him by the corporate defendants, and further agrees to pay the unpaid remainder of any debts owed by him to the corporate defendants to the Receiver, and shall promptly execute and tender to the Receiver all papers necessary to effectuate this provision.
C. Except as provided in Parts V and VI of this Judgment, payment by defendant Larry D. Wayne of $10,000.00 and any interest on this amount and discharge and payment of the unpaid remainder of all debts under the terms of this Part shall satisfy all claims for monetary relief against him individually in this action by the FTC.
IV. CLAIMS PROCEDURE
IT IS FURTHER ORDERED that after payment of the monetary judgment by defendant Larry D. Wayne and resolution of this matter as to all the other named defendants, the FTC shall, if practical, develop a claims procedure that will enable consumers who paid the defendants in this matter for computer maintenance service contracts to make claims against those funds, and provide for a means of distributing the funds recovered to the consumers who have approved claims. Defendant Larry D. Wayne forever disclaims all right, title, and interest in all sums paid to the Receiver and the FTC. None of these funds shall be returned to any of the defendants herein, their successors, heirs, or assigns. If the FTC determines, in its sole discretion, that redress to consumers is wholly or partially impractical, or if any portion of the funds used for redress remains unclaimed by consumers after a period for making claims ends, the remainder shall be deposited in the United States Treasury. No portion of any payments under this Judgment shall be deemed a payment of any fine, penalty, or punitive assessment.
V. RIGHT TO REOPEN
IT IS FURTHER ORDERED that the FTC's agreement to this Judgment is expressly premised upon the truthfulness, accuracy, and completeness of the Financial Statement of defendant Larry D. Wayne executed on October 21, 1997. This financial statement contains material information upon which the FTC has relied in negotiating and agreeing to the terms of this Judgment. If, upon motion by the FTC, this Court finds that any of defendant Larry D. Wayne's financial statements was untruthful, inaccurate or incomplete, or materially misrepresented defendant Larry D. Wayne's financial condition or the source of his income or any asset, or the value of any asset, or the purpose for which he is holding any asset, or made any other material misrepresentations or omissions of assets, the FTC may request that the Judgment be reopened for the purpose of modifying the terms of the Judgment to provide a payment of up to $100,000.00 by defendant Larry D. Wayne in redress to consumers or disgorgement to the United States Treasury; provided, however, that in all other respects this Judgment shall remain in full force and effect unless otherwise ordered by this Court; and, provided further, that proceedings instituted under this Part are in addition to, and not in lieu of, any other civil or criminal remedies that may be provided by law, including any other proceedings that the FTC may initiate to enforce this Judgment. Defendant Larry D. Wayne waives any right to contest any of the allegations in Plaintiff's Amended Complaint in any action by Plaintiff to enforce this Part, but not in any action by any other party.
VI. COSTS AND ATTORNEY FEES
IT IS FURTHER ORDERED as follows:
A. Except as set forth in Part III and in this Part, each party to this Judgment shall bear its own costs and attorney fees incurred in connection with this action; provided, however, in the event Plaintiff initiates proceedings to enforce the provisions of this Judgment, and, provided further, the Court determines that Defendant has violated any term or provision of this Judgment, defendant Larry D. Wayne shall pay the costs and attorney fees incurred by Plaintiff in connection with proceedings to enforce this Judgment against him; and,
B. Notwithstanding any other provision of this Judgment, defendant Larry D. Wayne agrees that, if he fails to meet the payment obligations set forth in Part III, he shall pay the costs and attorneys fees incurred by the FTC and its agents or the Receiver and his agents in any attempts to collect amounts due any of them pursuant to this Judgment. Defendant Larry D. Wayne further agrees that the facts as alleged in the Amended Complaint shall be taken as true in any subsequent litigation filed by the FTC to enforce its rights under Part III, including but not limited to a nondischargeability complaint in any subsequent bankruptcy proceeding.
VII. NOTICE OF AFFILIATION OR CHANGE IN STATUS
IT IS FURTHER ORDERED that, for a period of three (3) years from the entry of this Judgment, defendant Larry D. Wayne shall promptly give written notice to the Associate Director for Enforcement, Federal Trade Commission, Washington, D.C. 20580, of:
A. Any change in his employment status (including self-employment), within ten (10) days of such change. Such notice shall include the name and address of each business that he is affiliated with or employed by, a statement of the nature of the business, and a statement of his duties and responsibilities in connection with the business or employment; and,
B. Any proposed change in the structure of any business entity owned or controlled in whole or in part by defendant Larry D. Wayne, such as creation, incorporation, dissolution, assignment, sale, creation or dissolution of subsidiaries, or any other change that may affect compliance obligations arising out of this Judgment, thirty (30) days prior to the effective date of any proposed change.
C. The requirements of Paragraph A of this Part shall not be construed to require Defendant Larry D. Wayne to divulge any information protected by his clients' attorney-client privilege.
VIII. MAINTENANCE OF BUSINESS RECORDS
IT IS FURTHER ORDERED that, for a period of three (3) years from the entry of this Judgment, in connection with the advertising, promoting, offering for sale, sale, or distribution of any goods, services, or service contracts by mail or telephone, excluding legal services or contracts for legal services by Defendant, Defendant shall create and maintain:
A. Records containing the name, address, telephone number, and Social Security number of each person employed by Defendant in any capacity, that person's job title or position, the date upon which the employee commenced work, and the date and reason for the employee's termination, if applicable;
B. Records containing the names, addresses, and telephone numbers, and all written or tape-recorded communications with consumers to whom Defendant, whether directly or through any business entity or other device, sells, invoices, or ships goods or services;
C. Records and accounts that, in reasonable detail, accurately and fairly reflect the income, disbursements, transactions, and use of monies by Defendant;
D. Records of every written or oral consumer complaint or refund request received by Defendant, including the following:
IX. MONITORING OF BUSINESS PRACTICES
IT IS FURTHER ORDERED that, for purposes of securing compliance with this Judgment, for a period of three (3) years from the entry of this Judgment, in connection with any business owned or controlled in whole or in part by defendant Larry D. Wayne, Defendant shall:
A. Within five (5) days after receipt of a written request, permit representatives of Plaintiff access during normal business hours to any office or facility in which Defendant stores or holds documents and records, to inspect and copy any such documents and records in Defendant's possession or control, including all documents and records Defendants are required by Part VIII to maintain;
B. Permit representatives of Plaintiff, within five (5) business days after receipt of a written request, to interview the officers, directors, or employees of any such business, subject to the reasonable convenience of the Defendant and the person to be interviewed, and without restraint or interference from Defendant, at a location reasonably convenient to the person to be interviewed, Defendant, and Plaintiff; provided, however, that such officers, directors or employees may have counsel present;
C. Produce documents requested by Plaintiff within five (5) business days of receipt of such request;
D. Permit representatives of Plaintiff to depose any officers, directors, or employees of any such business within ten (10) business days of receipt of such request; and,
E. Permit representatives of Plaintiff immediate access upon demand to any premises or facilities owned, occupied, or controlled by Defendant to determine compliance with the Judgment.
X. DISTRIBUTION TO DESIGNATED INDIVIDUALS
IT IS FURTHER ORDERED that, for a period of three (3) years from the date of entry of this Judgment, defendant Larry D. Wayne shall:
A. Immediately provide a copy of this Judgment to, and obtain a signed and dated acknowledgment of receipt of the same from, each officer, director, managing agent, supervisory employee, or independent contractor, in any company or other business entity directly or indirectly owned, operated, or controlled by defendant Larry D. Wayne, in whole or in part, that engages in the advertising, promoting, marketing, offering for sale, sale, or distribution of goods, services, or service contracts by mail or by telephone, excluding legal services or contracts for legal services by Defendant, and to each officer, director, and managing agent of any company or other business entity that engages in the advertising, offering for sale, sale, or distribution of goods, services or service contracts by mail or by telephone at which defendant Larry D. Wayne is employed; and,
B. Maintain, and upon reasonable notice make available to any representative of Plaintiff, the original and dated acknowledgments of the receipts required by this Part.
XI. LIFTING ASSET FREEZE AND RECEIVERSHIP
IT IS FURTHER ORDERED that, upon entry of this Judgment and payment to the Receiver by defendant Larry D. Wayne of the first installment of the monetary judgment set forth in Part III, the Stipulation and Order for Preliminary Injunction, Appointment of a Permanent Receiver, Continuation of Asset Freeze and Other Relief, filed on October 20, 1997, shall be and hereby is lifted in its entirety as to defendant Larry D. Wayne only. Defendant Larry D. Wayne shall indemnify and hold harmless the Receiver from all claims for acts or omissions occurring during the receivership, except for those acts or omissions resulting from wilful misconduct.
XII. RETENTION OF JURISDICTION
IT IS FURTHER ORDERED that this Court shall retain jurisdiction of this matter for the purpose of enabling the parties to apply to the Court at any time for such further orders or directives as may be necessary or appropriate for the interpretation or modification of this Judgment, for the enforcement of compliance therewith, or the punishment of violations thereof.
XIII. WAIVER OF CLAIMS
Defendant Larry D. Wayne waives all claims under the Equal Access to Justice Act, 28 U.S.C. § 2412, as amended by Pub. L. No. 104-121, 110 Stat. 847, 863-64 (1996), and all rights to seek judicial review or otherwise to challenge or contest the validity of this Judgment, or the temporary or preliminary orders entered in this proceeding, and further waives and releases any claim he may have against the FTC, the Receiver, or their employees, agents or representatives, except as provided in Part XI.
There being no just reason for delay, the Clerk of the Court is hereby directed to enter this Judgment.
SO ORDERED, this day of , 1998, at .
LOURDES G. BAIRD
The parties listed below hereby stipulate and agree to entry of the foregoing Judgment, which shall constitute the Final Judgment in this action as to the undersigned.
SIGNED AND STIPULATED BY: FEDERAL TRADE COMMISSION
Dated: , 1998
ELAINE D. KOLISH
ELENA I. PAOLI
Attorneys for Plaintiff
Dated: , 1997
LARRY D. WAYNE, pro se