United States District Court
Federal Trade Commission, Plaintiff,
RJB Telcom, Inc., et al., Defendants.
[Public Record Version]
Civil No. 002017 PHX
Plaintiff, Federal Trade Commission ("FTC" or "Commission"), having filed its Complaint for permanent injunction and other relief in this matter, pursuant to Sections 5(a) and Section 13(b) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. §§ 45(a) and 53(b), and the parties having agreed to settle this action without adjudication or admission of any issue of fact or law, therefore, pursuant to stipulation of the parties, it is hereby ORDERED, ADJUDGED, and DECREED as follows:
1. This Court has jurisdiction of the subject matter of this case and of the parties hereto.
2. Venue is proper as to all parties in the District of Arizona under 15 U.S.C. § 53(b), and 28 U.S.C. §§ 1391(b) and (c).
3. The alleged activities of Defendants (as "Defendants" are defined below) are in or affecting commerce, as defined in the FTC Act, 15 U.S.C. § 44.
4. The Complaint states a claim upon which relief may be granted against Defendants under Sections 5 and 13(b) of the Federal Trade Commission Act, 15 U.S.C. §§ 45(a) and 53(b).
5. By agreeing and stipulating to this Order, Defendants make no admission to the truth of plaintiff's allegations and specifically deny them.
6. The Commission and Defendants, by and through their counsel, have agreed that the entry of this Order resolves all matters arising from the allegations in the Complaint in this action. This Order supersedes all prior Orders in this matter.
7. Defendants waive all rights to seek judicial review or otherwise challenge or contest the validity of this Order.
8. Entry of this Order is in the public interest.
1. "Defendants" means Robert J. Botto, Jr., Richard D. Botto, and RJB Telcom, Inc., and each of them, by whatever names each might be known, including, but not limited to, fictitious business names, as well as their successors, assigns, and licensees.
2. "Temporary Receiver" and "Receiver" shall refer to Robb Evans, and his duly authorized representatives, agents and assistants.
3. "Assets" means any legal or equitable interest in, right to, or claim to, any real and personal property, including, but not limited to, chattel, goods, instruments, equipment, fixtures, general intangibles, effects, leaseholds, premises, mail or other deliveries, shares of stock, lists of consumer names, inventory, checks, notes, accounts, credits, receivables, funds, and all cash, wherever located.
4. "Document" is equal in scope and synonymous in meaning with the usage of the term in Federal Rule of Civil Procedure 34(a), and includes writings, drawings, graphs, charts, photographs, audio and video recordings, computer records, and any other data compilations from which information can be obtained and translated, if necessary, into reasonably usable form through detection devices. A draft or non-identical copy is a separate document within the meaning of the term.
5. "Internet" means a worldwide system of linked computer networks that use a common protocol to deliver and receive information. The "Internet" includes, but is not limited to, the following forms of electronic communication: electronic mail, file transfers, the World Wide Web, newsgroups, Internet Relay Chat, audio, and video.
6. "Line subscriber" means an individual or entity who has arranged with a local exchange carrier ("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.
7. "Local Exchange Carrier" or "LEC" means the local telephone company from which a line subscriber receives his or her telephone bill.
8. "Webmaster" means a person who is a member of Defendants' affiliate program, including, but not limited to, the Maximum Cash program, who designs, develops and operates a web site on the Internet that directs potential customers to Defendants' web sites.
9. "World Wide Web" means a system used on the Internet for cross-referencing and retrieving information. A "web site" is a set of electronic documents, usually a home page and subordinate pages, readily viewable on a computer by anyone with access to the Internet, standard software, and knowledge of the Web site's location or address.
10. "Processor" means a person, organization, or entity that provides services to facilitate some aspect of electronic commerce payments, that include but are not limited to billing, reporting, settlement, and operational services involving a merchant, the merchant's bank, and the card holder's bank.
11. "Cardholder" means the authorized holder of a credit or debit card.
12. "Telephone or modem dialer program" means a software program that consumers may download and install, that when executed, dials a telephone number for which a fee is charged.
IT IS FURTHER ORDERED that:
A. In connection with the advertising, promotion, offering, or sale of goods or services by telephone, on or through the Internet, the World Wide Web, any Web site, or otherwise in commerce, Defendants are hereby permanently restrained and enjoined from making, directly or through an intermediary, expressly or by implication, orally or in writing, any misrepresentation of material fact, including but not limited to falsely representing that consumers have purchased or agreed to purchase goods or services from Defendants, and therefore owe money to Defendants; and
B. In any instance where Defendants learn that a consumer has been improperly billed pursuant to the provisions of this Section or Sections II - VI, below, they shall cause the consumer to be credited within five (5) business days.
PROHIBITED BILLING PRACTICES
IT IS FURTHER ORDERED that the Defendants are permanently restrained and enjoined from:
A. Billing or receiving money, or assisting others in billing or receiving money, from a consumer, including charging or debiting that consumer's credit, debit, or checking accounts, without first obtaining the consumer's express verifiable authorization. This authorization shall include at a minimum: (1) the consumer's credit or debit card number; (2) the consumer's credit or debit card expiration date; and (3) the consumer's zip code or postal code;
B. Billing or charging a consumer's credit or debit card account directly, or through the use of a third party processor or licensee, without ensuring that Defendants' full corporate name, or the name of the entity providing the service billed for, is disclosed in the billing descriptor that appears on consumers' credit or debit card statements; and
C. Billing or causing to be billed, or collecting or attempting to collect payment, directly or indirectly, from a line subscriber for any good or service, where the Defendants' sole basis for billing is its possession of the line subscriber's telephone number, whether obtained through Automatic Number Identification (ANI) or through any other means.
PROHIBITED BUSINESS PRACTICES
IT IS FURTHER ORDERED that Defendants are hereby permanently restrained and enjoined from using a telephone or modem dialer program as a means of obtaining compensation from consumers who view their web sites, provided, however, that should there be technological advances that would permit Defendants to obtain express, verifiable authorization that the telephone line-subscriber being charged has agreed to be charged for the product or service in the amount and in the manner set forth in the bill which Defendants have sent or caused to be sent to that line-subscriber, Defendants may move this Court to modify this provision for the purposes of utilizing these advances.
CREDIT AND DEBIT CARD FRAUD DETECTION AND PREVENTION
IT IS FURTHER ORDERED that the Defendants shall employ measures in each and every credit and debit card transaction to detect and prevent credit and debit card fraud in each and every card transaction. These measures shall include at a minimum the items described in Appendix A. Defendants reserve the right to supplement, modify, or replace these measures in order to strengthen their fraud detection, provided that for a period of three years from the date this order is entered either (1) the FTC, after being duly notified by defendants, does not object, within ten days of notification, to the measures proposed by the defendants, or (2) the Court, upon noticed motion, approves the measures.
WEBMASTER FRAUD DETECTION AND PREVENTION REQUIREMENTS
IT IS FURTHER ORDERED that, in order to prevent fraud by their Webmasters, the Defendants shall utilize certain fraud detection measures. These measures shall include at a minimum the items described in Appendix B. Defendants reserve the right to supplement, modify, or replace these measures in order to strengthen their fraud detection, provided that for a period of three years from the date this order is entered either (1) the FTC, after being duly notified by defendants, does not object, within ten days of notification, to the measures proposed by the defendants, or (2) the Court, upon noticed motion, approves the measures.
REQUIRED CONFIRMATIONS AND CANCELLATIONS
IT IS FURTHER ORDERED that Defendants shall send or cause to be sent to every consumer who signs up for any of Defendants' web sites after the date of this Order, an email confirming the consumer's agreement to purchase Defendants' services. The email shall be sent out within forty-eight (48) hours of the consumer's purchase of Defendants' services and must clearly and conspicuously set forth at least the following information: (1) identify the web site from which the services are to be purchased; (2) state the billing method, price, and cancellation policy and procedures for the services; (3) disclose the party which operates the site (e.g., pursuant to a licensing agreement); and (4) disclose the identifier under which the services will be billed. If a consumer signs up for more than one of Defendants' web sites, Defendants shall send or cause to be sent to the consumer a separate email for each web site.
IT IS FURTHER ORDERED that:
A. Defendants shall deposit two hundred fifty thousand dollars ($250,000.00) in cash into an interest bearing escrow account titled in the name of the Federal Trade Commission. The account shall continue for two years from the date this order is signed or March 15, 2001, whichever is sooner. At the conclusion of this time period, any remaining balance in the escrow account, along with accumulated interest, shall be returned to Defendants.
B. The monies currently held in an escrow account at California Bank & Trust pursuant to the preliminary injunction order in this case shall be returned to Defendants along with any interest which has accumulated since the date the account was established. However, prior to return of these monies, $250,000 shall be deducted pursuant to the requirement of Subd. A, above.
C. If this Court holds, pursuant to noticed motion by the Commission, that Defendants have violated any of the provisions of Sections II-VI of this order, or Section X.B, Defendants shall forfeit all rights to the escrow monies, along with such additional relief as the Court may deem necessary and appropriate.
RECORD KEEPING PROVISIONS
IT IS FURTHER ORDERED THAT, for a period of three (3) years from the date of entry of this Order, the Defendants, in connection with any business where they are the majority owner of the business, or control the business, are hereby restrained and enjoined from failing to have such business create, and from failing to have such business retain for a period of three (3) years following the date of such creation, unless otherwise specified:
A. Books, records and accounts that, in reasonable detail, accurately and fairly reflect the cost of goods or services sold, revenues generated, and the disbursement of such revenues;
B. Records accurately reflecting: the name, address, and telephone number of each person employed in any capacity by such business, including as an independent contractor; that person's job title or position; the date upon which the person commenced work; and the date and reason for the person's termination, if applicable; provided that the business subject to this Subsection shall retain such records for a period of two years following the date of each such person's termination.
C. Records containing the names, addresses, phone numbers, E-mail addresses, user names, passwords, dollar amounts paid, quantity of items or services purchased, and description of items or services purchased, for all consumers to whom such business has sold or charged for goods or services;
D. Records that reflect, for every refund request, whether received directly or indirectly or through any third party:
E. Copies of all sales scripts, training materials, advertisements, or other marketing materials utilized; provided that copies of all said sales scripts, training materials, advertisements, or other marketing materials utilized shall be retained for two (2) years after the last date of dissemination of any such materials.
NON-DISCLOSURE OF CONSUMER LISTS
IT IS FURTHER ORDERED that Defendants, and their officers, agents, servants, employees, and attorneys, and all other persons or entities in active concert or participation with them who receive actual notice of this Order by personal service or otherwise are permanently restrained and enjoined from selling, renting, leasing, transferring, or otherwise disclosing the name, address, telephone number, credit card number, bank account number, e-mail address, or other identifying information of any person who paid any money to them, at any time prior to entry of this Order, in connection with the advertising, marketing, sale, or purchase of any product or service in commerce, including through the Internet, the World Wide Web, any web site, that involves charging or debiting consumers' credit card or debit card accounts.
This provision does not apply to customer information involving defendants' publication, Razor Magazine.
IT IS FURTHER ORDERED that:
A. For a period of three (3) years from the date of entry of this Order, the Defendants shall notify the Commission at the address listed in Subd. C, below, of the following: (1) any changes in their business address, residential address or telephone number, within ten (10) days of the date of such change; and (2) any changes in their employment status (including self-employment) within ten (10) days of such change. Such notice shall include the name and address of each business that the Defendants are 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.
B. Beginning three months from the date of the entry of this Order, and continuing thereafter on a quarterly basis, on the first day of the first month of each quarter through June 1, 2004, Defendants shall supply staff of the Federal Trade Commission with a report containing the following information:
The records of items 3-5 above shall be supplied in computer text, in a format which will be mutually agreed upon by the Parties, or, if not, ordered by the Court. The records for items 1, 2, and 6 may be supplied in either computer text or hard text format.
Defendants may, at their discretion, designate any disclosures made pursuant to this Section as confidential. If a disclosure is deemed confidential by defendants, the Commission agrees not to disclose it to third parties unless (1) required to do so by law or by judicial order, or (2) the disclosure is made pursuant to a written request from a law enforcement agency. In any instance where the Commission makes a disclosure of materials designated by Defendants as confidential, it shall advise the party to whom the disclosure is made of the confidentiality of the materials.
C. For the purposes of this Order, the Defendants shall, unless otherwise directed by the Commission's representatives, address all written communications to the Commission to:
D. For the purposes of this Part, "employment" includes the performance of services as an employee, consultant, or independent contractor; and "employers" include any individual or entity for whom any defendant performs services as an employee, consultant, or independent contractor; and
E. For purposes of the compliance reporting required by this Section only, the Commission is authorized to communicate directly with the Defendants, with consent of counsel.
AUTHORITY TO MONITOR COMPLIANCE
IT IS FURTHER ORDERED that the Commission is authorized to monitor Defendants' compliance with this Order for three (3) years by all lawful means, including but not limited to the following:
A. The Commission is authorized, without further leave of court, to obtain discovery from any person in the manner provided by Chapter V of 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 Defendants' compliance with any provision of this Order.
B. The Commission is authorized to use representatives posing as consumers to any defendant, any of defendants' employees, or any other entity managed or controlled in whole or in part by any defendant, without the necessity of identification or prior notice; and
C. 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, Section 5 of the FTC Act, 15 U.S.C. § § 45, 52, the TILA, Regulation Z, or the EFTA.
ACCESS TO BUSINESS PREMISES
IT IS FURTHER ORDERED that, for a period of three (3) years from the date of entry of this Order, for the purpose of further determining compliance with this Order, Defendants shall permit representatives of the Commission, within five (5) business days of receipt of written notice from the Commission to do the following:
A. To have access during normal business hours to any office, or facility storing documents, of any business where the Defendants are the majority owner of the business, or control the business. In providing such access, the Defendants shall permit representatives of the Commission to inspect and copy all documents relevant to any matter contained in this Order and shall permit Commission representatives to remove, for a period of three (3) days, documents relevant to any matter contained in this Order so that the documents may be inspected, inventoried, and copied; and
B. To interview the officers, directors, and employees, including all personnel involved in responding to consumer complaints or inquiries, and all sales personnel, whether designated as employees, consultants, independent contractors or otherwise, of any business to which Subsection A of this Section applies, concerning matters relating to compliance with the terms of this Order. If any of the above-mentioned persons agree to be interviewed, the person interviewed may have counsel present.
Provided further that, upon application of the Commission, and for good cause shown, the Court may enter an ex parte order granting immediate access to Defendants' business premises for the purposes of inspecting and copying all documents relevant to any matter contained in this Order.
ACKNOWLEDGMENT OF RECEIPT OF ORDER BY DEFENDANTS
IT IS FURTHER ORDERED that within five (5) business days after receipt by the Defendants of this Order and the Final Judgment, as entered by the Court, the Defendants shall submit to the Commission at the address proved in Section XI.C herein a truthful sworn statement, in the form shown in Attachment D, that shall acknowledge receipt of both the Final Order and the Final Judgment.
DISTRIBUTION OF ORDER BY DEFENDANTS
IT IS FURTHER ORDERED that, for a period of three (3) years from the date of entry of this Order, the Defendants shall:
A. Provide the notice set forth in Appendix C to, and obtain a signed and dated acknowledgment of receipt of same from, each officer or director, each individual serving in a 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, immediately upon employing or retaining any such persons, for anybusiness where the Defendants are an officer, director, manager or majority owner. Independent contractors or affiliates will receive the notice set forth in Appendix C in lieu of distribution of this Order.
B. Maintain for a period of three (3) years after creation, and upon reasonable notice, make available to representatives of the Commission, the original signed and dated acknowledgments of the receipt of copies of this Order, as required in the previous Subsection.
DISSOLUTION OF RECEIVERSHIP; COMPENSATION OF RECEIVER
IT IS FURTHER ORDERED that:
A. The Receiver shall submit a final report within forty-five (45) days of the date this order is entered. Until that time, the Receiver shall continue to have all the duties and responsibilities set forth in the Stipulated Preliminary Injunction With Appointment of Temporary Receiver And Other Equitable Relief, dated December 1, 2000.
B. The Receiver and all personnel hired by him are entitled to reasonable compensation for performance of their duties pursuant to this provision and pursuant to all previous orders of this Court. Such reasonable compensation shall be immediately paid by Defendants without the need for prior approval by this Court.
C. Upon completion and filing of the final report, the Receiver and his agents, employees, and representatives are discharged and relieved from all duties, liabilities, and responsibilities, and the Receiver's bond is exonerated.
IT IS FURTHER ORDERED that each party shall bear its own costs and attorneys' fees incurred in connection with this action.
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 and 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.
The parties hereby consent to entry of the foregoing Order which shall constitute a final judgment and order in this matter. The parties further stipulate and agree that the entry of the foregoing Order shall constitute a full, complete and final settlement of this action. Defendants waive any rights they may have under the Equal Access to Justice Act, 28 U.S.C. § 2412, as amended by P.L. 104-121, 110 Stat. 847, 863-864 (1996).
SO ORDERED, this _____ day of __________________, 2000, at ____
[Redacted from the Public Record Version]
[Redacted From the Public Record Version]
REQUIRED NOTICE TO PARTIES DESCRIBED IN SECTION XIV
On October 26, 2000, the Federal Trade Commission filed a case in the United States District Court for Arizona against RJB Telcom, Robert J. Botto, Jr., and Richard J. Botto (collectively, "Defendants"), alleging that they have committed unfair and deceptive acts in the marketing of their adult entertainment business. Defendants have denied these allegations.
On , 2001, the parties agreed and stipulated to the entry of a Final Order and Permanent Injunction ("Final Order") which was entered by the Court on . The Final Order contains certain restrictions and prohibitions on Defendants' business practices. Pursuant to the terms of the Final Order, we are setting forth certain provisions which may be relevant to your business dealings with Defendants:
Defendants have agreed to credit within five (5) business days any consumers who have been improperly billed in violation of the provisions of the Final Order.
You may obtain a full copy of the provisions of the Final Order from Defendants or from the United States District Court for Arizona.
Federal Trade Commission, Plaintiff,
RJB Telcom, Inc., et al., Defendants.
CV- No. 00-2017 PHX SRB
I, [Name], hereby state and affirm as follows:
I declare under penalty of perjury under the laws of the United States that the foregoing is true and correct.