UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF FLORIDA
Southern Division

FEDERAL TRADE COMMISSION, Plaintiff,

v.

AMERICAN TELNET, INC., a corporation,
MICHAEL ABRAHAM PARDES, individually
and as an officer of American TelNet, Inc.,
TED LIEBOWITZ, individually
and as an officer of American TelNet, Inc., and
MICHAEL SELF, individually
and as an officer of American TelNet, Inc.,Defendants.

Case No. ________-CIV-_________

STIPULATED FINAL JUDGMENT AND ORDER FOR PERMANENT INJUNCTION AND OTHER EQUITABLE RELIEF BETWEEN PLAINTIFF AND DEFENDANTS AMERICAN TELNET, INC., MICHAEL ABRAHAM PARDES AND TED LIEBOWITZ.

Magistrate Judge _______________

Whereas: Plaintiff, the Federal Trade Commission ("FTC" or "Commission"), commenced this action by filing a Complaint on June 8, 1999; Defendants American TelNet, Inc., Michael Abraham Pardes and Ted Liebowitz waived service of the Summons and Complaint; the parties are represented by the attorneys whose names appear hereafter; and the parties are in agreement to settle the Complaint by entering into this Stipulated Final Judgment and Order for Permanent Injunction and other Equitable Relief ("Order") upon the following terms and conditions, without adjudication of any issue of fact or law and without Defendants American TelNet, Inc., Michael Abraham Pardes and Ted Liebowitz admitting liability for any of the matters alleged in the Complaint;

THEREFORE, on the joint motion of Plaintiff and Defendants, it is hereby ORDERED, ADJUDGED, and DECREED as follows:

SECTION I

FINDINGS

This Court has jurisdiction over the subject matter and the parties.

A. The Complaint states a claim upon which relief may be granted against Defendants ATN, Pardes and Liebowitz under §§ 5(a)(1), 13(b), and 19 of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. §§ 45(a)(1), 53(b), and 57b, and under the 900-Number Rule, 16 C.F.R. Part 308.

B. The activities of Defendants ATN, Pardes and Liebowitz are in or affecting commerce, as defined in the FTC Act, 15 U.S.C. § 44.

C. Entry of this Order is in the public interest.

D. Defendants ATN, Pardes and Liebowitz have waived all rights that may arise under the Equal Access to Justice Act, 28 U.S.C. § 2412, amended by Pub. L. 104-121, 110 Stat. 847, 863-64 (1996).

E. Plaintiff and Defendants ATN, Pardes and Liebowitz, by and through their counsel, have agreed that the entry of this Order resolves all matters of dispute between them arising from the Complaint in this action, up to the date of entry of this Order.

G. Plaintiff and Defendants ATN, Pardes and Liebowitz waive all rights to seek appellate review or otherwise challenge or contest the validity of this Order. Defendants ATN, Pardes and Liebowitz further waive and release any claim Defendant may have against the Commission, its employees, agents, or representatives.

H. This Order does not constitute and shall not be interpreted to constitute an admission by Defendants ATN, Pardes and Liebowitz that they have engaged in violations of any law or regulations including but not limited to the Telephone Disclosure and Dispute Resolution Act of 1992, the 900-Number Rule, or the Federal Trade Commission Act.

DEFINITIONS

I. For the purposes of this Order, the following definitions shall apply:

1. "900-Number Rule" means the FTC's Trade Regulation Rule Pursuant to the Telephone Disclosure and Dispute Resolution Act of 1992, 16 C.F.R. Part 308, as currently promulgated or as it may hereafter be amended, a copy of which is attached hereto as Appendix A and incorporated herein by reference.

2. The term "audiotext service" means any audio information or entertainment service offered over the telephone through any dialing pattern, including, but not limited to, by 900-number and international number dialing patterns.

3. The term "billing entity" has the meaning provided by § 308.7(a)(1) of the 900-Number Rule, 16 C.F.R. § 308.7(a)(1), as currently promulgated or any corresponding provision of 16 C.F.R. Part 308 as the Rule may hereafter be amended.

4. The term "billing error" has the meaning provided by § 308.7(a)(2) of the 900-Number Rule, 16 C.F.R. § 308.7(a)(2), as currently promulgated or any corresponding provision of 16 C.F.R. Part 308 as the Rule may hereafter be amended.

5. The term "billing error notice" means written or oral notice to any Defendant, or any agent thereof, of any billing error, as that term is defined herein, by any consumer or any agent on behalf of any consumer, where the means of delivering the notice complies with the provisions of the 900-Number Rule, 16 C.F.R. §§ 308.7(b) and (c), as currently promulgated or any corresponding provision of 16 C.F.R. Part 308 as the Rule may hereafter be amended.

6. The terms "consumer" and "customer" mean any individual, business, line subscriber or other entity that receives a bill for any audiotext service provided by or through any Defendant, whether or not that individual, business, line subscriber, or other entity actually received such audiotext service or is legally responsible for all or a portion of the bill for such audiotext service.

7. The term "information provider" or "IP" means an individual or entity that offers, sells, promotes, markets or advertises any audiotext service.

8. The term "line subscriber" means an individual or entity that has arranged with a LEC to obtain local telephone service provided through an assigned telephone number, and to be billed for such service on a monthly (or other periodic) basis.

9. The term "local exchange carrier" or "LEC" means the local telephone company from which a line subscriber receives his or her telephone bill.

10. The term "pay-per-call service" has the meaning provided by § 308.2(c) of the 900-Number Rule, 16 C.F.R. § 308.2(c), as currently promulgated or any corresponding provision of 16 C.F.R. Part 308 as the Rule may hereafter be amended.

11. The term "presubscription or comparable arrangement" has the meaning provided by § 308.2(e) of the 900-Number Rule, 16 C.F.R. § 308.2(e), as currently promulgated or any corresponding provision of 16 C.F.R. Part 308 as the Rule may hereafter be amended.

12. The term "service bureau" has the meaning provided by § 308.2(i) of the 900-Number Rule, 16 C.F.R. § 308.2(i), as currently promulgated or any corresponding provision of 16 C.F.R. Part 308 as the Rule may hereafter be amended.

13. The term "LEC block" means a block placed on a consumer's telephone line pursuant to 47 U.S.C. § 228(c).

14. The term "excepted consumer" means a consumer who provides a billing error notice to any Defendant regarding a charge for any audiotext service, and, prior to the date on which the contested services were allegedly accessed, has:

a. Submitted a notice of billing error to any Defendant (or to any other billing entity, vendor, or IP) regarding previous charges for previously accessing a 900-number service, but did not, within ten (10) days of submitting that prior billing error notice, request a LEC block; or
 
b. Received any audiotext service via a number owned, operated, or controlled by any vendor, billing entity, or IP (as demonstrated by the call detail record of such vendor, billing entity, or IP) other than any Defendant and failed:
 
i. to pay an invoice from such vendor, billing entity, or IP: and
 
ii. to submit a notice of billing error to such vendor, billing entity, or IP; or
 
c. Received an invoice for any audiotext service provided through a number owned, operated, or controlled by any Defendant and paid in full without submitting a notice of billing error or otherwise complaining to any Defendant.

15. The term "Defendant Pardes" or "Pardes" means the Defendant Michael Abraham Pardes, individually and as an officer of American TelNet, Inc.

16. The term "Defendant Liebowitz" or "Liebowitz" means the Defendant Ted Liebowitz, individually and as an officer of American TelNet, Inc.

17. The term "Defendant ATN" or "ATN" means the Defendant American TelNet, Inc., a corporation, and American TelNet Billing Services, Inc., a former corporation that was merged with ATN effective January 1, 1997.

18. The term "1994 Consent Decree" means the Consent Decree issued on December 9, 1994, in an action styled, United States v. American TelNet, Inc. et al., Civil No. 94-2551-Nesbitt (S.D. Florida).

SECTION II

IT IS FURTHER ORDERED that, except as otherwise provided in this Order, Defendants ATN, Pardes, Liebowitz, their successors, subsidiaries, affiliates and assigns, and their officers, agents, servants, independent contractors, employees and attorneys and all persons in active concert or participation with any one or more of them who receive actual notice of the 1994 Consent Decree by personal service or otherwise remain subject to all prohibitions, duties, and obligations previously imposed by the 1994 Consent Decree.

SECTION III

IT IS FURTHER ORDERED that:

A. For the purposes of this Section, "Defendants" shall mean Defendants ATN, Pardes, Liebowitz, their successors, subsidiaries, affiliates and assigns, and their officers, agents, servants, independent contractors, employees and attorneys and all persons in active concert or participation with any one or more of them who receive actual notice of this Order by personal service or otherwise.

B. Defendants are hereby permanently enjoined from violating, directly or through any corporation, subsidiary or other entity, any provision of the Federal Trade Commission's 900-Number Rule, 16 C.F.R. Part 308, as currently promulgated or as it may hereafter be amended.

C. Defendants are hereby permanently enjoined from, directly or through any corporation, subsidiary or other entity:

1. Charging any consumer who, during the preamble to any pay-per-call service or program, either
 
a. hangs up within three (3) seconds after a clearly discernible signal or tone indicating the end of the preamble; or
 
b. where the caller is offered an affirmative means of indicating a decision to incur the charges (such as pressing a key on a telephone keypad), hangs up without affirmatively indicating a decision to incur charges; and
 
2. In the case of any consumer who either stays on the line for more than three (3) seconds after a clearly discernible tone or signal, or affirmatively indicates a decision to incur charges, charging for the portion of the preamble required to be free by § 308.5(a) and (b) of the 900-Number Rule, 16 C.F.R. § 308.5(a) and (b), as currently promulgated or any corresponding provision of 16 C.F.R. Part 308 as the Rule may hereafter be amended.

D. Notwithstanding the provisions of § 308.5(i), of the 900-Number Rule, 16 C.F.R. § 308.5(i), as currently promulgated or any corresponding provision of 16 C.F.R. Part 308 as the Rule may hereafter be amended, Defendants are hereby permanently enjoined from offering, directly or through any corporation, subsidiary or other entity, audiotext services through an 800 number, 888 number or other telephone number advertised as or widely understood to be toll-free, in a manner that would result in a fee or charge unless:

1. The cost of such service is billed only to a credit or charge card subject to the dispute resolution requirements of the Truth in Lending Act, 15 U.S.C. §§ 1601 et seq., and Regulation Z, 12 C.F.R. § 226, provided, however, that if the 900-Number Rule is hereafter amended to permit creation of a presubscription agreement (a "presubscription or comparable arrangement") by disclosure of a debit or check card account number, then the cost of such service may be billed to such card; or
 
2. The cost of such service is paid or submitted for payment using a check, draft, or other form of negotiable paper drawn on a consumer's checking, savings, share, or similar account, with that consumer's express verifiable authorization. Such authorization shall be deemed verifiable if any of the following means are employed:
 
a. Express written authorization by the consumer, which may include the consumer's signature on the negotiable instrument; or
 
b. Express oral authorization which is tape recorded and made available upon request to the consumer's bank and which evidences clearly both the consumer's authorization of payment for the services that are the subject of the sales offer and the consumer's receipt of all of the following information:
 
i. The date of the draft(s);
 
ii. The amount of the draft(s);
 
iii. The payor's name:
 
iv. The number of draft payments (if more than one);
 
v. A telephone number for customer inquiry that is answered during normal business hours;
 
vi. The date of the customer's oral authorization;
 
vii. The cost per minute of any call, or if unknown:
 
(1) The maximum possible per-minute charge; or
 
(2) a stated range of possible costs for the call, where the maximum possible per-minute charge is disclosed at least as prominently as any lower estimate of possible charges; or
 
c. Written confirmation of the transaction, sent to the consumer prior to submission for payment of the consumer's check, draft, or other form of negotiable paper, that includes:
 
i. All of the information contained in sub-paragraph (b)(i-vii), above; and
 
ii. The procedures by which the consumer can obtain a refund in the event the confirmation is inaccurate.

E. Defendants are hereby permanently enjoined from failing, directly or through any corporation, subsidiary or other entity, to monitor the advertising practices of all IPs with whom Defendants contract to provide services as a service bureau or billing entity. In order to monitor compliance by such IPs, Defendants shall:

1. Require all IPs, as a condition of conducting further business, to submit each different planned advertisement prior to its dissemination for review by Defendants to determine whether such advertisements comply with § 308.3 of the 900-Number Rule, 16 C.F.R. § 308.3, as currently promulgated or any corresponding provision of 16 C.F.R. Part 308 as the Rule may hereafter be amended, and to send out letters on a quarterly basis requesting such submission from its IPs;
 
2. On a quarterly basis, purchase a representative sample, numbering not less than ten, of print publications in which IPs with whom Defendants contract to provide services as a service bureau or billing entity advertise, to determine whether such advertisements comply with § 308.3 of the 900-Number Rule, 16 C.F.R. § 308.3, as currently promulgated or any corresponding provision of 16 C.F.R. Part 308 as the Rule may hereafter be amended;
 
3. Immediately notify any IP found, through the monitoring program described in sub-paragraphs (1) and (2) above, or through any other means, not to be in compliance with § 308.3 of the 900-Number Rule, 16 C.F.R. § 308.3, as currently promulgated or any corresponding provision of 16 C.F.R. Part 308 as the Rule may hereafter be amended, of its non-compliance, and request that such IP immediately retract and correct the offending advertisement(s);
 
4. Monitor any IP notified pursuant to sub-paragraph (3) above, to determine whether the offending advertisement has been retracted and corrected; and
 
5. Terminate its contractual relationship with any IP that fails to comply with any provisions of § 308.3 of the 900-Number Rule, 16 C.F.R. § 308.3, as currently promulgated or any corresponding provision of 16 C.F.R. Part 308 as the Rule may hereafter be amended, or that fails to immediately retract and correct an offending advertisement, after receiving the notice described in sub-paragraph (3) above.

SECTION IV.

IT IS FURTHER ORDERED that:

A. Defendants ATN, Pardes, Liebowitz, their successors, subsidiaries, affiliates and assigns, and their officers, agents, servants, independent contractors, employees and attorneys, and all persons in active concert or participation with any one or more of them who receive actual notice of this Order by personal service or otherwise, are hereby permanently enjoined from, directly or through any corporation, subsidiary or other entity:

1. Failing, in any advertisement or solicitation to call an international number, to make the following disclosures in a clear and conspicuous manner:
 
a. A statement that "You will begin being charged immediately upon connection of your call";
 
b. A statement that "International long distance telephone charges to [insert country of call termination] apply"; and
 
c. Either:
 
i. A statement that "This call may cost you as much as [insert the maximum possible per-minute charge] per minute"; or
 
ii. A stated range of possible costs per-minute for the call, where the maximum possible per-minute charge is disclosed at least as prominently as any lower estimate of possible charges, and the following statement: "To determine your exact per-minute charges, contact your long distance carrier"; and
 
2. Making any representation that "normal" or "standard" rates apply to international long distance calls.

B. The obligations in this Section supercede all obligations contained in Paragraphs 18 and 20 of the 1994 Consent Decree, as they pertain to international audiotext services, provided, however, that if anything in this Section conflicts with the provisions of the 900-Number Rule, 16 C.F.R. Part 308, as currently promulgated or any corresponding provision of 16 C.F.R. Part 308 as the Rule may hereafter be amended, Defendants shall remain subject to all prohibitions, duties, and obligations imposed by the 900-Number Rule.

SECTION V.

IT IS FURTHER ORDERED that:

A. For the purposes of this Section, "Defendants" shall mean Defendants ATN, Pardes, Liebowitz, their successors, subsidiaries, affiliates and assigns, and their officers, agents, servants, independent contractors, employees and attorneys and all persons in active concert or participation with any one or more of them who receive actual notice of this Order by personal service or otherwise.

B. Defendants are hereby permanently enjoined from representing, expressly or by implication, directly or through any corporation, subsidiary or other entity, that a consumer has a legal obligation to pay any disputed amount for an audiotext service in any instance when Defendants have received from such consumer a billing error notice that: (1) the call or calls accessing the service were made from a telephone line that had a LEC block or an ATN-imposed audiotext services block at the time of the disputed call or calls, (2) the call or calls accessing the service were made from a telephone line that was not assigned to the consumer at the time of the disputed call or calls, or (3) the call or calls accessing the 900-number service were not made by the consumer nor from the telephone of the consumer who was billed for the purchase (e.g., the consumer "denies all knowledge" of the call or calls), unless Defendants first:

1. end to the consumer, via first class mail, any and all written notifications that may be required by § 308.7(d) of the 900-Number Rule as currently promulgated or any corresponding provision of 16 C.F.R. Part 308 as the Rule may hereafter be amended; and
 
2. Determine whether the consumer is an excepted consumer, as defined in this Order; and
 
a. If the consumer is not an excepted consumer, Defendants shall:
 
i. Offer a one-time credit for charges disputed by the consumer, conditioned upon the consumer providing to Defendants a Consumer Declaration, as described below, signed under penalty of perjury;
 
ii. Impose an immediate block of access from such consumer's telephone line to all audiotext services provided by Defendants;
 
iii. Send to the consumer, via first class mail by the end of three business days following receipt of such billing error notice, written notifications, including, but not limited to, the attached "Billing Error Notice Response Letter" (Appendix B) and "Consumer Declaration" (Appendix C);
 
iv. Upon receipt from the consumer of a signed Consumer Declaration, credit the consumer's account for the disputed amount and any related charges; provided, however, that if the consumer fails to return a signed Consumer Declaration within 21 days of the consumer's receipt of the Consumer Declaration, Defendants shall be deemed to have conducted a reasonable investigation and to have informed the consumer of the results thereof; and
 
v. Notify the consumer of the correction or credit within ninety (90) days of receipt of the billing error notice; or
 
b. If the consumer is an excepted consumer, Defendants shall:
 
i. Transmit a written explanation to the consumer, setting forth the reasons why it has determined that the customer is an excepted consumer;
 
ii. Provide copies of documentary evidence of the customer's indebtedness, including, but not limited to, copies of records documenting why the customer is an excepted consumer, and copies of call detail and/or, when available, transport provider records for the currently disputed charges; and
 
iii. Otherwise comply with all prohibitions, duties, and obligations imposed by the 900-Number Rule, 16 C.F.R. Part 308, as currently promulgated or as it may hereafter be amended; or
 
c. If Defendants are unable to determine whether the consumer is an excepted consumer, Defendants shall follow the procedures for non-excepted consumers as set forth in sub-paragraph B(2)(a) above, unless and until the Defendants are able to determine that the consumer is an excepted consumer, at which time Defendants may follow the procedures set forth in sub-paragraph B(2)(b) above.

Provided, however, that Defendants may, upon receipt of a consumer's billing error notice, play for the consumer any voice capture made at the time of the disputed call, and, if, upon hearing the voice capture, the consumer agrees that the billing statement was correct or agrees to withdraw voluntarily the billing error notice, Defendants need not comply with the requirements of this Section.

C. For the purpose of this Section, a one-time credit shall mean a credit for all disputed charges on the consumer's line incurred during the period covered by the bill that contains the disputed charge[s], and during the days that elapse between the end of that billing period and the date on which ATN puts its block in place.

SECTION VI.

IT IS FURTHER ORDERED that:

A. For the purposes of this Section, "Defendants" shall mean Defendants ATN, Pardes, Liebowitz, their successors, subsidiaries, affiliates and assigns, and their officers, agents, servants, independent contractors, employees and attorneys and all persons in active concert or participation with any one or more of them who receive actual notice of this Order by personal service or otherwise.

B. Defendants are hereby permanently enjoined from falsely representing, expressly or by implication, directly or through any corporation, subsidiary or other entity, that:

1. Unpaid audiotext charges will be reported to consumer reporting agencies; or
 
2. Defendants intend to take legal action to collect unpaid audiotext charges.

C. In connection with billing or attempting to collect charges for any audiotext service, defendants are hereby permanently enjoined from reporting or threatening to report, directly or through any corporation, subsidiary or other entity, adverse information to any person or entity because of a consumer's withholding payment of a disputed amount or related charges, unless Defendants have complied with the provisions of Section V. above and the 900-Number Rule, and thereafter, only if Defendants also report to such person or entity that the amount is in dispute and notify the consumer, in writing, of the name and address of each such person or entity to whom Defendants have reported the adverse information on the account.

D. In connection with billing, collecting or attempting to collect charges for any audiotext service, defendants are hereby permanently enjoined from billing, collecting or attempting to collect, directly or through any corporation, subsidiary or other entity, interest or any other amount unless such amount is authorized by the agreement creating the charge, or is permitted by law.

SECTION VII.

IT IS FURTHER ORDERED that:

A. For the purposes of this Section, "Defendants" shall mean Defendants ATN, Pardes, Liebowitz, their successors, subsidiaries, affiliates and assigns, and their officers, agents, servants, independent contractors, employees and attorneys and all persons in active concert or participation with any one or more of them who receive actual notice of this Order by personal service or otherwise.

B. In connection with billing or attempting to collect charges for any audiotext service, when any Defendant receives a notice from a consumer that call(s) accessing an audiotext service were made by a person or persons who criminally entered the consumer's residence or place of business and placed such call(s), such Defendant shall:

1. Immediately notify such consumer that the disputed charges for audiotext service will be credited if within 21 days of the date of such notice the consumer provides Defendants with a copy of a police report pertaining to the criminal trespass; and
 
2. Upon receipt from the consumer of such police report, if sent within the 21 days, credit the consumer's account for the disputed amount and any related charges.

SECTION VIII.

IT IS FURTHER ORDERED that:

A. For the purposes of this Section, "Defendants" shall mean Defendants ATN, Pardes, Liebowitz, their successors, subsidiaries, affiliates and assigns, and their officers, agents, servants, independent contractors, employees and attorneys, and all persons in active concert or participation with any one or more of them who receives actual notice of this Order by personal service or otherwise.

B. Defendants are hereby permanently enjoined from continuing to attempt to collect charges for any audiotext service from any consumer meeting the criteria in subparagraph 1 of this subsection, immediately below, unless Defendants first fulfil the requirements of subparagraph 2 of this subsection.

1. Subsection B, above, pertains to any consumer who has:
 
a. Notified Defendants of a billing error since January 1, 1998;
 
b. Refused to pay all, or a portion, of the contested bill; and
 
c. Asserted that:
 
i. The call or calls assessing the service were made from a telephone line that had a LEC block at the time of the disputed call or calls;
 
ii. The call or calls assessing the service were made from a telephone line that was not assigned to the consumer at the time of the disputed call or calls; or
 
iii. The call or calls accessing the 900-number service were not made by the consumer nor from the telephone of the consumer who was billed for the purchase (e.g., the consumer "denies all knowledge" of the call or calls).
 
2. The actions required by Subsection B, above, are:
 
a. To send the consumer a Billing Error Notice Response Letter (Appendix B) and Consumer Declaration (Appendix C); and
 
b. Give the consumer twenty-one (21) days to complete and return the Consumer Declaration.

C. Provided, however, that if the consumer is an excepted consumer and Defendants have completed a reasonable investigation pursuant to the 900-Number Rule regarding that consumer's billing error notice, Defendants shall not be required to otherwise comply with Subsection B, above.

D. If, within 21 days of receiving it from Defendants, the consumer returns a completed Consumer Declaration attesting to one or more of the criteria set forth in Subsection B.1.(c), above, Defendants shall:

1. Fully credit the unpaid portion of the bill;
 
2. Waive all rights to collect such debt;
 
3. Waive any rights to sell such receivables to any third parties;
 
4. Waive any rights to collect such debts by any third party debt collectors; and
 
5. Notify any billing entity, collection agency, credit reporting agency or any other third person to whom Defendants has reported the alleged indebtedness of any such consumer, that the consumer was improperly billed, and that Defendants are granting the consumer a credit for the full amount of the charges that were contested. Defendants shall provide a copy of any such notice to the consumer.

SECTION IX.

IT IS FURTHER ORDERED that:

A. For the purposes of this Section, "Defendants" shall mean Defendants ATN, Pardes, Liebowitz, their successors, subsidiaries, affiliates and assigns.

B. Defendants shall, within forty-five (45) days of the entry of this Order, provide to the FTC or its designated agent, in an electronic format according to the specifications outlined in Appendix D:

1. Defendants' customer service representative records for consumer complaints and inquiries received by Defendants between January 1, 1997 and the date of entry of this Order;
 
2. Defendants' collections department records, known as the "Numeric Debtors List," including all entries indicating any payment by a customer to ATN between January 1, 1997 and the date of entry of this Order.

C. Defendants shall, within forty-five (45) days of the entry of this Order, provide to the FTC or its designated agent, in both printed form and in an electronic format according to the specifications outlined in Appendix D, a list with the name, address, telephone number, and amount paid by each consumer for whom Defendants' records clearly indicate the consumer:

1. Received an invoice (which had not been previously billed through any LEC) directly from Defendants for audiotext services after December 6, 1994;
 
2. Complained to Defendants, or to any agent thereof except any LEC, about the invoice;
 
3. Paid for services in response to a direct invoice received from Defendants; and
 
4. Has not previously received a refund or credit for such payment.

D. Defendants shall pay Two Million Dollars ($2,000,000) by wire transfer into an account in the name of the FTC and controlled by the FTC or its designated agent ("the redress account"). Defendants shall be jointly and severally liable for payment of such amount. Of that amount:

1. Defendants shall transfer One Million Dollars ($1,000,000) into the redress account within sixty (60) days of the entry of this Order; and
 
2. Defendants shall transfer a total of an additional One Million Dollars ($1,000,000) into the redress account in equal monthly installments on the fifteenth of each month over the course of the remainder of calendar year 1999, commencing in the month following the transfer of the first One Million Dollars ($1,000,000).

E. Defendants shall forgive One Million Dollars ($1,000,000) in outstanding debts, waive all rights to collect such debts, waive all rights to sell such receivables to any third parties, and waive all rights to collect such debts by any third party debt collectors, for consumers defined below. The One Million Dollars ($1,000,000) in write-offs pursuant to this Section shall be given to consumers who:

1. On or after January 1, 1998 through and including December 31, 1998, were billed by a LEC on behalf of Defendants, or by any other billing entity on behalf of Defendants, and
 
2. Provided Defendants with a verbal or written billing error notice that:
 
a. The call or calls accessing the 900-number service were made from a telephone line that had a LEC block at the time of the disputed call or calls;
 
b. The call or calls accessing the 900-number service were made from a telephone line that was not assigned to the consumer who is disputing the call or calls at the time of the disputed call or calls;
 
c. The call or calls accessing the 900-number service were not made by the consumer nor from the telephone of the consumer who was billed for the purchase (e.g., the consumer "denies all knowledge" of the call or calls); or
 
d. The call or calls accessing the 900-number service were made by a person or persons who criminally entered the consumer's place of business or home.

F. The redress fund established pursuant to Subsection D, above, shall be administered by the FTC pursuant to Subsections G and H, below, and all administrative costs associated with providing redress to consumers shall be paid with a portion of said redress fund.

G. The redress fund established by Subsection D, above, shall be administered by the FTC to provide redress, to the extent practicable, to the following classes of consumers:

1. Consumers who, after December 6, 1994:
 
a. Were billed by a LEC, by Defendants, or by any other billing entity on behalf of Defendants;
 
b. Provided Defendants with a verbal or written billing error notice;
 
c. Paid the entire bill, or any portion thereof, unless the consumer first withdrew the billing error pursuant to 308.7(e) of the 900-Number Rule; and
 
d. Have not previously received a full refund.
 
2. Consumers who, after December 6, 1994:
 
a. Received a direct invoice from Defendants for audiotext services;
 
b. Complained to Defendants about the bill;
 
c. Paid for the services without first withdrawing their complaint in writing; and
 
d. Have not previously received a refund or credit for such payment.
 
3. Consumers who, after December 6, 1994:
 
a. Were billed by a LEC on behalf of Defendants, or by any other  billing entity on behalf of Defendants;
 
b. Either stayed on the line for more than three (3) seconds after a clearly discernible tone or signal, or affirmatively indicated a decision to incur charges;
 
c. Were charged for the portion of the preamble which the Defendants are required by § 308.5(b) of the 900-Number Rule to provide free of charge; and
 
d. Paid for the charges, including that portion which the Defendants are required by § 308.5(b) of the 900-Number Rule, 16 C.F.R. § 308.5(b), to provide free of charge.

H. The Commission shall, if practical, propose a plan to the Court to conduct a claims procedure which will:

1. Enable consumers defined in Subsection G, above, to make claims against those funds,
 
2. Provide a means of distributing the funds recovered to those consumers who have approved claims, and
 
3. Provide payment for costs associated with the distribution of funds. Defendants forever disclaim all right, title, and interest in all sums paid.

I. None of the funds referred to in this Section shall be returned to Defendants, their successors, heirs, or assigns; and Defendants hereby surrender all right and title to the funds. If the Commission determines, in its sole discretion, that redress to purchasers is wholly or partially impractical, any funds not so used shall be deposited in the United States Treasury. No portion of any payments under the judgment herein shall be deemed a payment of any fine, penalty, or punitive assessment; and interest will accrue on the judgment at the legal rate.

J. No later than three (3) business days after the date of entry of the Order, Defendants Pardes, Liebowitz, and ATN shall submit to the Commission a truthful sworn statement, in the form of Appendix E attached to this Order, that shall reaffirm and attest to the truthfulness, accuracy, and completeness of the document (designated "Unified Financial Statement") submitted to the Commission by Defendant ATN on February 3, 1999, and attached to this Order as Exhibit 2. The Court's approval of this Order is expressly premised upon the truthfulness, accuracy, and completeness of the Unified Financial Statement referenced above. If, upon motion by the Commission, this Court should find that any Defendant made a material misrepresentation or omission concerning Defendant ATN's financial condition, then the Court shall enter a modified judgment holding that: (1) Defendant ATN is liable to the Commission in the amount of Ten Million Dollars ($10,000,000) less all prior payments for consumer redress made by any Defendants in this action; and (2) Defendant ATN must, within ten (10) days of the date of service of the modified judgment, provide to counsel for the Commission a completed financial disclosure statement attached hereto as Exhibit 1 and copies of Defendant ATN's federal and state tax returns for the two (2) years preceding the date of entry of the modified judgment. In the event that, upon motion by the Commission, the Court modifies this judgment as described in the preceding sentence, then by the stipulation of the Commission and Defendant ATN, the Court finds that Ten Million Dollars ($10,000,000) less all prior payments for consumer redress made by any Defendants in this action will represent the recission amount to be due to consumers from Defendant ATN. The Commission, or any of its designees, may collect said modified judgment.

K. In the event of any default in payment by Defendants into the redress account described in Subsection D, above, which default continues for ten (10) days beyond the due date of payment, the entire unpaid balance, together with interest, as computed pursuant to 28 U.S.C. § 1961 from the date of default to the date of payment, shall immediately become due and payable. Default shall be deemed to have occurred if the Defendants have not fully complied with Subsection D(1) above within sixty (60) days of entry of this Order, or if Defendants have not complied with Subsection D(2) above by making payments on or before the date on which they become due.

L. In order to secure the payment of Defendants' indebtedness to the Commission, within seven (7) days of the entry of this Order by the Court, Defendants shall cause to be transferred to Defendants' counsel, Lewis Rose, Esq., the property described in Exhibit 3. Defendants represent that the value of said property at the time it is transferred is not less than One Million Dollars ($1,000,000), and that there are no liens on the property. Lewis Rose, Esq., shall be the custodian of the property, and shall hold it in escrow and shall not release it until the payment of the Defendants' indebtedness to the Commission is complete.

SECTION X.

IT IS FURTHER ORDERED that Defendants ATN, Pardes, Liebowitz, their successors, subsidiaries, affiliates and assigns, and their officers, agents, servants, independent contractors, employees and attorneys, and all persons in active concert or participation with any one or more of them who receives actual notice of this Order by personal service or otherwise, shall:

A. Forgive all outstanding debts;

B. Waive all rights to collect such debts;

C. Waive all rights to sell such receivables to any third parties; and

D. Waive all rights to collect such debts by any third party debt collectors for any consumer who after December 6, 1994, through and including December 31, 1997, was billed by a LEC on behalf of ATN, or by any other billing entity on behalf of ATN; and provided ATN with a verbal or written billing error notice that:

1. The bill was for a 900-number service accessed from a telephone number that had a LEC block at the time of the disputed call or calls;
 
2. The bill was for a 900-number service accessed from a telephone line that was not assigned to the consumer who is disputing the call or calls at the time of the disputed call or calls;
 
3. The bill was for a 900-number service that was not accessed by the consumer;
 
4. The bill was for a 900-number service that was not accessed from the telephone of the consumer who was billed for the purchase (e.g., the consumer "denies all knowledge" of the call or calls); or
 
5. The bill was for a 900-number service accessed by a person or persons who criminally entered the consumer's place of business or home.

SECTION XI.

IT IS FURTHER ORDERED that Defendants ATN, Pardes, Liebowitz, their successors, subsidiaries, affiliates and assigns, and their officers, agents, servants, independent contractors, employees and attorneys, and all persons in active concert or participation with any one or more of them who receives actual notice of this Order by personal service or otherwise, shall:

A. Forgive all outstanding debts;

B. Waive all rights to collect such debts;

C. Waive all rights to sell such receivables to any third parties; and

D. Waive all rights to collect such debts by any third party debt collectors for any consumer who, according to ATN's records, after December 6, 1994, received an invoice (which had not been previously billed through any LEC) directly from ATN for audiotext services.

SECTION XII.

IT IS FURTHER ORDERED that Defendants ATN, Pardes, Liebowitz, their successors, subsidiaries, affiliates and assigns, and their officers, agents, servants, independent contractors, employees and attorneys, and all persons in active concert or participation with any one or more of them who receive actual notice of this Order by personal service or otherwise, are hereby permanently enjoined from continuing, directly or through any corporation, subsidiary or other entity, to employ, contract with, or provide services, products, or assistance to, for, or on behalf of any person or other entity once Defendants know or should know, either through steps taken pursuant to this Order or otherwise, that such person or entity is or has engaged in conduct prohibited by this Order, except as provided in Section III, Subsection E, above.

SECTION XIII.

IT IS FURTHER ORDERED that Defendants Pardes, and Liebowitz, each of them, shall, within five (5) business days after receipt of this Order as entered by the Court, submit to the Commission a truthful sworn statement, in the form shown on Appendix F, that shall acknowledge receipt of this Order.

SECTION XIV.

IT IS FURTHER ORDERED that:

A. In connection with any business (1) that engages in the advertising, promotion, marketing, offering for sale, sale of, or billing or collection for audiotext services, and (2) that is five percent (5%) or more owned, or directly or indirectly managed, controlled, or operated by Defendants ATN, Pardes or Liebowitz, or any one of them, Defendants shall, within thirty (30) days of the entry of this Order, provide a copy of the redacted Order attached as Appendix G hereto, and the 900-Number Rule, 16 C.F.R. Part 308, as currently promulgated or as it may hereafter be amended, to, and obtain a signed and dated acknowledgment of receipt from, each officer or director, each individual serving in management capacity, all personnel involved in responding to consumer complaints or inquiries, and all sales personnel, whether designated as employees, consultants, independent contractors or otherwise, and shall, within ten (10) days of complying with this paragraph, provide the FTC with an affidavit setting forth the fact and manner of their compliance, including the name and title of each person to whom a copy of the redacted Order has been provided.

B. Defendants ATN, Pardes, Liebowitz, their successors, subsidiaries, affiliates and assigns, shall provide a copy of the redacted Order attached as Appendix G and the 900-Number Rule, 16 C.F.R. Part 308, as currently promulgated or as it may hereafter be amended, free of charge upon the request of any consumer.

SECTION XV.

IT IS FURTHER ORDERED that:

A. For the purposes of this Section, "Defendants" shall mean Defendants ATN, Pardes, Liebowitz, their successors, subsidiaries, affiliates and assigns.

B. For the purposes of this Section, "complaint" means any consumer contact with ATN, oral or written, received directly or through a third party, during the course of which the consumer asserts the existence of a billing error, or requests a full or partial refund or credit or refuses to pay, for any reason whatsoever, for an actual or alleged sale of audiotext services for which that consumer was billed.

C. In connection with any business (1) that engages in the advertising, promotion, marketing, offering for sale, sale of, or billing or collection for audiotext services, and (2) that is five percent (5%) or more owned, or directly or indirectly managed, controlled, or operated by Defendants ATN, Pardes, or Liebowitz or any one of them, Defendants, for a period of five (5) years from the date of entry of this Order, shall create and maintain for a period of at least three (3) years following the date of their creation, and make available to the Federal Trade Commission within thirty (30) days of the date of receipt of a written request, the following records:

1. Copies of all training materials utilized;

2. Records, including call transport records where available from the long distance carrier, containing the telephone numbers, and services utilized, for all consumers to whom such business has sold, invoiced or billed, directly or on directly, any audiotext services;

3. Records indicating the amount and date payments are made directly to Defendant's customer service, collections, or similar departments, rather than through a LEC bill, for all consumers to whom such business has sold, invoiced or billed, directly or indirectly, any audiotext services;

4. Records that reflect, for every consumer complaint actually received by Defendants or through any third-party billing clearinghouse (excluding LECs) with whom ATN contract for customer service:

a. The consumer's name and address (if available);

b. The consumer's telephone number;

c. The dollar amount billed by Defendants to the consumer;

d. A copy of the written complaint, if any;

e. The date of oral complaint[s];

f. The basis of the asserted complaint;

g. The nature and result of any investigation conducted concerning any complaint;

h. Each response and the date of the response;

i. Any final resolution and the date of the resolution; and

j. In the event of a denial of a refund or credit request, the reason for the denial.

5. For each pay-per-call service, audio information service, audio entertainment service, voice conversation service or other audiotext service accessed through a telephone number that Defendants advertise, promote, market, offer for sale, or sell, or for which Defendants attempt to bill and collect:

a. Documents sufficient to identify whether Defendants provided services on a particular date or dates to each such telephone number;

b. Documents sufficient to identify the information provider (IP) assigned to each such telephone number (including the name and business address of each IP, the identity of its owners, and the dates each such number was assigned to each information provider); and

c. A brief description of the service(s), such as "dating," "psychic," or "conversation."

6. A copy (or recording, as applicable) of each different print, television, video, Internet, radio or other advertisement that Defendants prepare, publish, or disseminate, for any and all telephone numbers identified in compliance with subsection C.5., above, including the date(s) during which each advertisement is or was in use;

7. A copy (or recording, as applicable) of each different print, television, video, Internet, radio or other advertisement that Defendants review or monitor in compliance with Section III, Subsection E, above, including the cover date of any print advertisement and the date(s) during which each radio or television advertisement was monitored;

8. A complete recording of and a transcript or script for each different introductory message (preamble) to each telephone number identified in compliance with subsection C.5., above, including the date(s) during which each preamble is or was in use; and

9. Monthly records containing:

a. The total number of customer bills to be included on LEC bills submitted to each different LEC for audiotext services;

b. The total number of written complaints received directly or through third parties with whom ATN contract to provide customer service (excluding local exchange carriers);

c. The total number of telephonic complaints received directly or through third parties (excluding local exchange carriers) with whom ATN contract to provide customer service;

d. The total number of telephonic and written complaints for each of the following categories:

i. Billing error notice -- consumer inquiry requesting additional clarification;

ii. Billing error notice -- consumer denies that call or calls were made by consumer or from consumer's phone or denies any knowledge of the call;

iii. Billing error notice -- consumer asserts that 900-number block was in place at the time of the disputed call;

iv. Billing error notice -- other;

v. Consumer complaint -- unauthorized call or calls from consumer's phone, whether or not the consumer requests a full or partial refund or credit or refuses to pay; or,

vi. Consumer complaint -- other;

e. The total number of complaints forwarded by each of the following sources:

i. Better Business Bureau;

ii. State consumer protection offices (Attorney General, Agriculture or other);

iii. State Public Utility Commission or Public Service Commission or equivalent;

iv. Federal Communications Commission;

v. Federal Trade Commission;

vi. LECs; or

vii. Any other organization; and

f. The total number of call records returned to Defendants by each LEC without payment by the consumer.

D. All written copies maintained by Defendants in compliance with this Section shall be kept in reasonably clear, legible and intelligible form, and all recordings maintained in compliance with this Section shall be kept in reasonably clear, audible and intelligible form, such that a reasonable person could determine, based on review of the copies or recordings, whether Defendants are in compliance with all provisions of the 900-Number Rule as currently promulgated or as it may hereafter be amended and with all provisions of this Order. Failure to maintain copies, or recordings, of such quality shall create a rebuttable presumption that the subject material violated the 900-Number Rule. Defendants can rebut this presumption by showing 1) that reasonable steps were taken to obtain, maintain and provide usable copies and recordings; and 2) other evidence indicating that there has been no violation of the 900-Number Rule.

E. All books, records and accounts required by this Section shall be maintained by Defendants in a manner such that the FTC may readily determine whether Defendants are in compliance with all of the provisions of this Order. This requirement includes, but is not limited to, the following:

1. The records kept in compliance with Subsections C.2., C.3., C.4., C.5. and C.9. of this Section shall be provided to the FTC in an electronic format according to the specifications outlined in Appendix D, or, if this is not possible, in an electronic format to be determined in conjunction with the computer support center of the FTC within 30 days of entry of this Order. Defendants shall have 150 days to establish the electronic records required by this Part of the Order.
 
2. The records kept in compliance with Subsection C.4. above, shall be kept in a format that readily enables the FTC to track any customer from initial billing to final resolution of that bill. Defendants may maintain two (2) separate databases to satisfy this requirement. Each of the pieces of information described in Subparagraphs C.4.(a)-(j) that can be maintained electronically shall be kept in a separate field. The electronic format of the fields shall be maintained in such a manner that allows the databases to be searchable and sortable by ANI.
 
3. The records kept in compliance with Subsections C.5., C.6., C.7. and C.8., above, shall be kept in a format that readily enables the FTC to track which IP is related to each telephone number, advertisement, and preamble.

F. For a period of three (3) years from the date of entry of this Order, Defendants shall provide the Commission, on a bi-annual basis, copies of all monthly records maintained in compliance with Subsection C.9., above.

SECTION XVI.

IT IS FURTHER ORDERED that:

A. For a period of five (5) years from the date of entry of this Order, Defendants Pardes and Liebowitz shall notify the Commission of the following:

1. Any changes in their residence, mailing addresses, and telephone numbers, within ten (10) days of the date of such change;
 
2. Any changes in their employment status (including self-employment) within thirty (30) days of such change. Such notice shall include the name and address of each business with which any such Defendant is affiliated or employed, a statement of the nature of the business, and a statement of the Defendant's duties and responsibilities in connection with the business or employment; and
 
3. Any proposed change in the structure of Defendant American TelNet, Inc., such as creation, incorporation, dissolution, assignment, sale, merger, creation or dissolution of subsidiaries or affiliates, proposed filing of a bankruptcy petition, or change in the corporate name or address, or any other change that may affect compliance obligations arising out of this Order, thirty (30) days prior to the effective date of any proposed change; provided, however, that, with respect to any proposed change in the corporation about which Defendants Pardes, and Liebowitz learns less than thirty (30) days prior to the date such action is to take place, Defendants Pardes and Liebowitz shall notify the Commission as soon as is practicable after learning of such proposed change.

B. One hundred eighty (180) days after the date of entry of this Order, Defendants ATN, Pardes, and Liebowitz and each of them, shall provide a written report to the FTC, sworn to under penalty of perjury, setting forth in detail the manner and form in which they have complied and are complying with this Order. For each Defendant, this report shall include, but not be limited to:

1. The Defendant's then current residence address and telephone number;
 
2. The Defendant's then current employment, business addresses and telephone numbers, a description of the business activities of each such employer, and Defendant's title and responsibilities for each employer;
 
3. A statement describing the manner in which the Defendant has complied and is complying with the provisions of this Order; and
 
4. A copy of each acknowledgment of receipt of the Order obtained by the Defendant pursuant to Section XIV of this Order.

C. Upon written request by a representative of the Commission, Defendants ATN, Pardes and Liebowitz shall submit additional written reports (under oath, if requested) and produce documents on thirty (30) days notice with respect to any conduct subject to this Order.

D. Upon written request by a representative of the Commission, Defendants ATN, Pardes and Liebowitz shall permit Commission staff to interview any employee of Defendants in the presence of counsel for Defendants.

E. For the purposes of this Order, Defendants ATN, Pardes and Liebowitz shall, unless otherwise directed by the Commission's authorized representatives, mail all written notifications to the Commission to:

Associate Director
Division of Marketing Practices
Federal Trade Commission
600 Pennsylvania Ave., NW
Washington, DC 20580

SECTION XVII.

IT IS FURTHER ORDERED that:

A. The Commission is authorized to monitor the Defendants' compliance with this Order by all lawful means, including but not limited to the following means:

1. The Commission is authorized, without further leave of court, to obtain discovery from any person in the manner provided by the Federal Rules of Civil Procedure, Fed. R. Civ. P. 26 - 37, including the use of compulsory process pursuant to Fed. R. Civ. P. 45, for the purpose of monitoring and investigating the Defendants' compliance with any provision of this Order;
 
2. The Commission is authorized to use representatives posing as consumers to monitor Defendants' audiotext services, or the audiotext services of any other entity managed or controlled in whole or in part by Defendants or any of them, without the necessity of identification or prior notice; and are authorized to tape all such transactions; and
 
3. Nothing in this Order shall limit the Commission's lawful use of compulsory process, pursuant to Sections 9 and 20 of the FTC Act, 15 U.S.C. §§ 49, 57b-1, to investigate whether Defendants have violated any provision of this Order, the 900-Number Rule, or Section 5 of the FTC Act, 15 U.S.C. § 45.

B. This Court shall retain jurisdiction of this matter for the purposes of enabling any of the parties to this Order 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 Order, for the enforcement of compliance therewith, or for the punishment of violations thereof.

JUDGMENT IS THEREFORE ENTERED pursuant to all the terms and conditions recited above.

Dated this day of , 19 .

UNITED STATES DISTRICT JUDGE

The parties, by their respective counsel, hereby consent to the terms and conditions of the Order as set forth above and consent to the entry thereof.

FOR THE DEFENDANT:

By:

Lewis Rose, Esquire
D. Reed Freeman, Esquire
Arent Fox Kintner Plotkin & Kahn, PLLC
1050 Connecticut Avenue, NW
Washington, DC 20036
Counsel for Defendants

Michael Abraham Pardes
Individually and as an Officer of
American TelNet

Ted Liebowitz
Individually and as an Officer of
American TelNet

FOR THE FEDERAL TRADE COMMISSION:

Eileen Harrington
Associate Director
Division of Marketing Practices

Allen W. Hile, Jr.
Assistant Director
Division of Marketing Practices

Joanna Crane, Attorney

Frank Gorman, Attorney