UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE

Plaintiff, the Federal Trade Commission ("FTC"), has previously applied for a finding of that Fortuna Alliance, L.L.C. ("Fortuna"), Augustine Delgado, Libby Gustine Welch, and Donald R. Grant ("defendants") are in civil contempt as the result of violations of the Stipulated Final Judgment and Order as to Certain Defendants (the "Final Order") entered in this proceeding on February 24, 1997, and has renewed that application since this Court's subsequent Order of January 6, 1998 ("Compliance Order"). This Court has carefully reviewed all pleadings and arguments relating to those allegations and on that basis enters the following relief.

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

Defendants have wilfully failed to make payments sufficient to pay refunds to consumers as required by Section III of the Final Order and as required by the Compliance Order. Augustine Delgado, individually and as the person who directs and controls Fortuna and its successors, and Fortuna, are adjudged in civil contempt of the Final Order and Compliance Order until all payments are made in full. Delgado is also in civil contempt for failing to report his new employment, in violation of Final Order § XII.

I. FINDINGS AND RELIEF FOR DEFAULT IN PAYMENTS

1. Since receiving the Redress Contractor's report of October 20, 1997, defendants have known that the Redress Contractor approved 9,750 claims, in amounts totalling $5,115,547, and that $2,024,411 in additional funds were needed to pay all refunds in full.

2. Under ¶¶ 4-6 of the Compliance Order, defendants were required to identify all challenged claims, and document the bases for those challenges, no later than January 15, 1998, and to pay to the Redress Contractor the full amount of any claims that remained unchallenged, together with unchallenged portions of claims, by February 15, 1998. Under those provisions, $4,252,798.13 in consumer refunds were due on February 15, based on Fortuna's challenge list of January 19. Therefore, the deficiency due to be paid by February 15 was $1,152,716.83 (total refunds due minus the funds then available to the Redress). Fortuna and its successors, under Augustine Delgado's direction and control, failed to make this payment and therefore violated the Compliance Order.

3. Fortuna's revised challenge list of February 24, 1998, brought the total amount approved for refunds up to $5,021,789.78. Therefore, the total deficiency due to be paid by March 24 under the 30-day provisions of the Compliance Order was $1,921,708.48. Fortuna and its successors, under Augustine Delgado's direction and control, failed to make this payment and therefore violated the Compliance Order.

4. Based on the Redress Contractor's review and adjustment of claim amounts since October 20, 1997, including its review of approved claim amounts challenged by Fortuna and by the FTC and other claim adjustments supported by substantial evidence, the total amount of refunds due now, as reflected in the Redress Contractor's April 23, 1998, report, is $5,150,286. With additional administrative costs as projected by the Redress Contractor and crediting accrued interest, the total deficiency due to be paid by Fortuna is now $2,022,009. (The $2,000 decrease since October 1997 is due to accrued interest.)

5. Defendants' challenges to claims approved by the Redress Contractor in October 1997 made no significant difference in the end result. Defendants benefitted by their delay in payment in that they had the use of funds properly due consumers. This delay substantially harmed consumers who had to wait months for their refunds and then received only 60% of the money they were due.

6. Therefore, defendants are liable for the full amount of the current deficiency, $2,022,009 plus interest accrued on that amount since October 20, 1997, and shall pay that amount in full within five days of entry of this order. Plaintiff may use all remedies available for collection of this judgment amount, in addition to those imposed by this Court for contempt.

II. INJUNCTIVE RELIEF PENDING FULL PAYMENT

Defendants, whether acting directly or through any business, entity, corporation, subsidiary, division, or other device, are hereby prohibited from advertising, promoting, offering for sale, or selling any "chain or pyramid marketing program" as defined in the Final Order, and any other marketing or investment program, in or affecting commerce, as "commerce" is defined in the FTC Act, until such time as they demonstrate to this Court that they have made payment in full to the Redress Contractor of the amount described above. This provision shall be treated as injunctive relief for the purposes of Fed R. Civ. Pro. 65.

III. COMPLETION OF REFUND CLAIMS PROCESS

The "challenge process" described in the Compliance Order is terminated. If the defendants pay all or substantially all of the outstanding deficiency, the Redress Contractor shall distribute those funds in accordance with the Final Order. While that deficiency remains substantially unpaid, the FTC is authorized to direct the Redress Contractor in distributing any remaining funds, after allowing for the Redress Contractor's administrative expenses, to consumers in any manner the FTC, in its sole discretion, finds reasonable and practicable. This may include, but is not limited to, further pro rata distributions to claimants, distributions to late claimants, and distributions to adjust any errors that might be found in existing claims.

SO ORDERED, this day of , 1998.

Walter T. McGovern
U.S. District Court Judge

Presented by:

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Randall H. Brook, Attorney for Plaintiff FTC