UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE

FEDERAL TRADE COMMISSION,
Plaintiff,

v.

FORTUNA ALLIANCE, L.L.C., et al.,
Defendants.

Civ. No. C96-799M

ORDER

Plaintiff, the Federal Trade Commission ("FTC"), has alleged that Fortuna Alliance, L.L.C., Augustine Delgado, Libby Gustine Welch, and Donald R. Grant ("defendants"), and attorney Robert O. Sailer, have violated the Stipulated Final Judgment and Order as to Certain Defendants (the "Final Order") entered in this proceeding on February 24, 1997 and are in contempt. Defendants and Mr. Sailer have denied these allegations. This Court has carefully reviewed all pleadings and arguments made at hearings held on December 4 and 17, 1997.

The FTC's application for an order finding the above-named defendants and attorney Robert O. Sailer in civil contempt is denied. This does not mean that there were or were not order violations. No order in that respect has yet been entered. Based on the evidence and arguments presented, this Court finds that entry of the following order requiring compliance with the Final Order is warranted.

IT IS HEREBY ORDERED, ADJUDGED, AND DECREED AS FOLLOWS:

  1. Defendants shall provide a complete list of all claims that they approve for payment, in computer-readable form consistent with the format used by the Redress Contractor, to the FTC and to the Redress Contractor by January 9, 1998. This Court finds that Fortuna Premier and Ambassador membership fees, as well as Elite membership fees, are eligible for refunds under § III of the Final Order. Defendants' request for a separate hearing on this issue is denied. Therefore, defendants shall include on the list of approved claims all claims previously challenged only on the basis that they related to Premier or Ambassador memberships.
  2. Upon receipt from defendants of the list of approved claims pursuant to ¶ 1 above, the Redress Contractor is authorized to make pro rata payments from funds then held by the Redress Contractor to the claimants included within that list. Payments to other claimants will not be made until defendants have approved those claims or the process for challenging and determining those claims (described below) is complete. The initial pro rata calculation shall be based on the assumption that all $5,166,347 called for by the Redress Contractor's October 20, 1997, report (FTC Exhibit 7) may ultimately be approved, to ensure that members whose claims are resolved and paid later receive the same percentage of the total claimed amount as do those whose claims are approved by defendants by January 9, 1998.
  3. The deficiency resulting from the difference between the dollar amount held by the Redress Contractor for the payment of refund claims and the dollar amount of claims approved by defendants by January 9, 1998, shall be paid by defendants to the Redress Contractor by February 2, 1998.
  4. Defendants shall identify all challenged claims, and document the basis for those challenges, to the Redress Contractor and the FTC, in printed and computer-readable form (consistent with the format used by the Redress Contractor), no later than January 15, 1998. Any claims omitted from the list of approved claims pursuant to ¶ 1 that are not challenged in this manner, and the unchallenged portion of any claim where the challenge is asserted as to only a portion of the claim, shall be deemed approved.
  5. During the period from January 15 to January 30, 1998, the FTC, the Redress Contractor, and the defendants shall work cooperatively to resolve all challenged claims. Any challenges that the defendants and the FTC are unable to resolve shall be addressed in a report to be filed with this Court no later than January 30, 1998. If necessary, a further hearing to resolve those challenges which the parties have been unable to resolve will be held during the week of February 2, 1998.
  6. By February 15, 1998, defendants shall pay to the Redress Contractor the full amount of any remaining unchallenged claims and unchallenged portions of claims (as described in ¶ 4 above). By March 2, 1998, defendants shall pay all claims added to the approved list by negotiation prior to January 30 (as described in ¶ 5 above).
  7. Within 30 days of the Court's order approving any challenged claims which the parties were unable to resolve cooperatively, the defendants shall pay to the Redress

Contractor funds sufficient to pay, in full, all claims which were approved by the Court following hearing. If there are any funds left in the redress fund at the conclusion of the redress program, the Redress Contractor will refund those funds to Fortuna Alliance, L.L.C.

  1. Defendants Augustine Delgado and Fortuna Alliance, L.L.C. shall, within 30 days of entry of this order, provide the FTC with the following documents:
  1. Copies of all "form" communications (including mass mailings of any sort, broadcast flyers, and newsletters) sent by Augustine Delgado or Fortuna Alliance, L.L.C., or at or under his or its direction or approval, to Fortuna Alliance I or II members or prospective members from February 25, 1997, to the present.
  2. Copies of all refund requests made directly to Fortuna (as opposed to the Redress Contractor) since entry of the Order and copies of all Fortuna responses to those requests.
  3. Copies of all advertising or promotional material sent by Mr. Delgado or Fortuna Alliance, L.L.C., or any attorney for either of them, or at or under its or any of their direction or approval, in connection with any marketing or investment program, to any (1) publicist, advertising or public relations agent or agency, (2) any print or broadcast media or (3) any print or broadcast media reporter, from February 25, 1997, to the present.
  4. Copies of all documents offered or distributed through Fortuna Alliance's (I or II) Fax On Demand service from February 25, 1997, to the present; and copies of all CD-ROMs, videotapes, or audiotapes offered or distributed by Fortuna Alliance, L.L.C., or Augustine Delgado, or at or under its or his direction or approval, in connection with promotion of any marketing or investment program, to the extent that scripts or transcriptions of the CD-ROMs, videotapes, or audiotapes exist.
  5. A sample form of the "member statements," and a sample form of "Family Tree Report" (referred to in Fortuna's September 1997 "Replies to Frequently Asked Questions"), if different, sent to members of Fortuna Alliance from February 25, 1997, to the present.
  6. Copies of all materials (e.g., registration packets, information kits, and other paper hand-outs) distributed generally to registrants at either the 1997 Antigua or Aruba conferences.
  7. Copies of all transcripts and audio tapes of conference calls distributed to the membership of Fortuna Alliance in connection with advertising or promotion of any marketing or investment program at any time from February 25, 1997, to the present.
  1. To the extent that any statements, or any "Family Tree Reports" (see ¶ 8.e above), sent to members of Fortuna Alliance after entry of the Final Order, show "co-op account activity" that might or would have taken place at any time, or show any other statements of estimated, predicted, or hypothetical profits or earnings, defendants Augustine Delgado and Fortuna Alliance, L.L.C. shall provide to the Court for in camera review copies of these statements. If there are more than 500 of these statements, the number of statements copied and submitted for review may be limited by agreement of the parties to reduce the burden on the parties and this Court. If on the basis of its in camera review the Court should preliminarily determine that the documents fall within the scope of Section X of the Final Order, the Court may schedule a hearing.
  2. Defendants and Mr. Sailer shall not make any misrepresentations, directly or by implication, that the FTC case against defendants was dismissed, that any charges against defendants were dropped, that this Court or the Final Order determined that any prior or prospective practices of Fortuna were legal or legitimate, or that Fortuna won this case.
  3. Defendants and Mr. Sailer shall not make any misrepresentations, directly or by implication, that any state case or enforcement action against any, or all, of the defendants or their members or agents was, or were, dismissed or that charges were dropped.
  4. All notices and copies of documents required of defendants by this order shall be made to the following address:

Regional Director
Federal Trade Commission
915 Second Avenue, Suite 2896
Seattle, Washington 98174

SO ORDERED, this 6th day of January, 1998.

Walter T. McGovern
U.S. District Court Judge

 


Last Modified: Monday, 25-Jun-2007 16:49:00 EDT