STATES DISTRICT COURT
Magistrate Judge Seltzer
FEDERAL TRADE COMMISSION, Plaintiff,
DIANE M. JONAS, PAUL A. JONAS,
JAMES W. RAIM, ROBERT BRIAN ROEMER,
STIPULATED FINAL JUDGMENT
Plaintiff Federal Trade Commission (the "FTC" or "Commission") filed a complaint for a permanent injunction and other relief in this matter, pursuant to Sections 13(b) and 19(a) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. 53(b), 57b(a), charging Defendant Richard A. Herbert and others with violations of Section 5 of the FTC Act, 15 U.S.C. 45, and the FTC's Trade Regulation Rule entitled "Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures" (the "Franchise Rule" or "the Rule"), 16 C.F.R. 436. Defendant Herbert and the Commission have agreed to entry of this Stipulated Final Judgment and Order for Permanent Injunction by this Court in order to resolve, without trial, all matters in dispute between them in this action. In accord with the stipulation by Defendant Herbert and the Commission, the Court makes the following findings of fact and conclusions of law:
1. This Court has jurisdiction of the subject matter of this case and over Defendant Herbert.
2. The complaint states a claim upon which relief may be granted against Defendant Herbert under Sections 5, 13(b), and 19 of the FTC Act, 15 U.S.C. 45, 53(b), and 57b. The complaint seeks both permanent injunctive relief and redress for alleged unfair or deceptive acts or practices. The Commission is authorized under Sections 13(b) and 19 of the FTC Act to seek the relief it requested.
3. This Order does not represent a determination by the Court or an admission by Richard A. Herbert that he has engaged and is likely to engage in acts and practices that violate Section 5(a) of the FTC Act, 15 U.S.C. 45(a).
4. The activities of Defendant Herbert, as alleged in the complaint, are or were in or affecting commerce, as defined in 15 U.S.C. 44.
5. Entry of this Order is in the public interest.
6. Defendant Herbert has waived all rights to seek judicial review or otherwise challenge the validity of this Stipulated Final Judgment and Order for Permanent Injunction.
7. Defendant Herbert does not object to entry of a permanent injunction against Market Systems, Ltd., Natural Health Systems, Inc., or Progressive Products, Inc.
8. Defendant Herbert has waived any rights that may arise under the Equal Access to Justice Act, 28 U.S.C. 2412.
9. The Commission's agreement to this Order is expressly premised upon the truthfulness, accuracy, and completeness of the financial statements submitted to the Commission, a copy of which is attached to this Order.
10. No security is required of any agency of the United States for issuance of an injunction. Fed. R. Civ. P. 65(c).
A. "Defendant" means Richard A. Herbert, M.D.
B. "Assets" means any legal or equitable interest in, right to, or claim to, any real or personal property, including but not limited to chattel, goods, instruments, equipment, fixtures, general intangibles, effects, leaseholds, mail or other deliveries, inventory, checks, notes, accounts, credits, receivables, and all cash, wherever located.
C. "Document" is synonymous in meaning and equal in scope to the usage of the term in Federal Rule of Civil Procedure 34(a), and includes writings, drawings, graphs, charts, photographs, phonorecords, computer records, and other data compilations from which information can be obtained, translated, if necessary, through detection devices into reasonably usable form. A draft or non-identical copy is a separate document within the meaning of the term.
D. "Person" means any natural person or any other public or private entity, including any governmental entity, corporation, partnership, unincorporated association, trust, or estate.
E. "Receiver" means Gerald B. Wald or his successor as receiver in this action.
F. "Receivership Defendants" means Business Opportunity Center, Inc., Progressive Products, Inc., Natural Health Systems, Inc., and Market Systems, Ltd.
G. "Alcohol reducing agent" means any product or substance for which an express or implied representation is made that the product or substance will or may reduce or minimize inebriation, blood alcohol levels, or alcohol toxicity, including but not limited to the products or substances known as the "Alcohol Neutralizer," "pueraria," or "Neutrahol."
H. "Business venture" means any written or oral business arrangement, however denominated, whether or not covered by the Franchise Rule, which consists of the payment of any consideration for:
1. the right or means to offer, sell, or distribute goods or services (whether or not identified by a trademark, service mark, trade name, advertising, or other commercial symbol); and
2. more than nominal assistance to any person or entity in connection with or incident to the establishment, maintenance, or operation of a new business or the entry by an existing business into a new line or type of business.
I. "Franchise" and "Franchisee" shall be defined by Section 436.2(a) of the Franchise Rule, 16 C.F.R. 436.2(a), a copy of which is attached to this Order.
Scope of Order
IT IS FURTHER ORDERED that any provision of this Order that is binding upon the Defendant is binding upon him and upon his successors, assigns, officers, agents, servants, employees, attorneys, and those persons in active concert or participation with him who receive actual notice of this Order by personal service or otherwise, whether acting directly or through any corporation, partnership, or other entity or device.
Prohibited Commercial Activities
IT IS FURTHER ORDERED that Defendant hereby is enjoined permanently from --
A. Offering for sale, selling, prescribing, or recommending any alcohol reducing agent;
B. Providing any person engaged in the offering for sale or sale of any alcohol reducing agent with any opinion or analysis concerning the efficacy or safety of the agent or with any opinion or analysis concerning any tests or studies of the agent;
C. Making any material misrepresentation in connection with his offering for sale or selling any product or service, including but not limited to any misrepresentation concerning:
1. the safety or efficacy of the product or service;
2. government review or approval of the product or service; or
3. the results or findings of any tests or studies of the product or service.
D. Offering for sale or selling, or assisting any person in offering for sale or selling, any business venture, but this paragraph shall not preclude Dr. Herbert from engaging in the practice of medicine to the extent such practice is consistent with this Order;
E. Transferring or disclosing to any person or entity (except to the Commission or to the receiver or by Order of this Court) the names, addresses, telephone numbers, social security numbers, account numbers, or other identifying information of any person who purchased or inquired about any alcohol reducing agent or any business venture involving an alcohol reducing agent; and
F. Violating any provision of the Franchise Rule.
Record Keeping and Monitoring
IT IS FURTHER ORDERED that, for a period of five years from the date of entry of this Order,
A. Defendant is hereby restrained and enjoined from failing to create and maintain:
1. records containing the name, address, telephone number, and social security number of each person employed by Defendant in any capacity, that person's job title or position, the date upon which the employee commenced work, and the date and reason for the employee's termination, if applicable;
2. records containing the name, address, and telephone number of each person to whom Defendant sells, invoices, or ships any property, goods, or services;
3. records of the cost of goods or property sold by Defendant and the income and expenses incurred in the sale of any property, good, or service;
4. records of every customer complaint or refund request received by Defendant, which records include,
a. the customer's name, address, telephone number, and the dollar amount paid by the customer;
b. the written complaint, if any, and the date of the complaint or refund request;
c. the basis of the complaint or refund request and the nature and result of any investigation conducted as to the validity of any complaint;
d. each response to the complaint or refund request and the date of the response;
e. any final resolution and the date of resolution; and
f. in the event of a denial of a refund request, the reason for the denial, or if cured, the basis for determining that the complaint has been cured;
B. Defendant is hereby restrained and enjoined from failing to permit representatives of the Federal Trade Commission, for purposes of determining or securing compliance with this Order:
1. access on demand to any office, facility, computer, or computer system in which documents are stored or held that relate to compliance with the terms of this Order or that are created or maintained in compliance with the terms of this Order, for the purpose of inspecting, copying, printing, or downloading the documents; and
2. access, upon written notice at least one business day in advance, to the officers, directors, and employees of any company or other business entity owned, managed, or controlled by Defendant, in whole or in part, for the purpose of interviewing them regarding compliance with this Order. The interviews shall be held at a location reasonably convenient to the Defendant and to the Commission's representatives. Any person interviewed may have counsel present.
Defendant shall provide full access between 8 a.m. and 6 p.m. on any weekday that is not a federal holiday. Defendant shall not restrain or interfere with the Commission for any reason or in any way. Defendant shall allow representatives of the Commission to bring any equipment or supplies necessary to copy documents, to download computer files, or to engage in other activities permitted under this paragraph.
C. Defendant shall provide the Commission an affidavit within thirty (30) days after any change to his home or business addresses, employment, or sources of earned income. Such affidavit also shall include a statement of the nature of each new business, employment, or source of earned income; and a description of his duties and responsibilities in connection with each new business, employment, or source of earned income, provided, however, that the information required by this paragraph shall not include specific medical patient records or information that identifies medical patients of the defendant.
D. Pursuant to Section 604 of the Fair Credit Reporting Act, 15 U.S.C. 1681b, any consumer reporting agency may furnish the Commission or the Receiver with a consumer report concerning Richard A. Herbert or his successors or assigns.
Equitable Monetary Relief
IT IS FURTHER ORDERED that Defendant shall be liable to pay and shall pay $10,000 (ten thousand dollars) to the Receiver within two (2) business days after receipt by Defendant or his attorney of notice of the entry of this Order. Defendant waives any objections to the Commission or the Receiver applying to this Court to enforce compliance with this paragraph of this Order. Proceedings instituted under this paragraph are in addition to, and not in lieu of, any other civil or criminal remedies that may be provided by law, including any other proceedings that the Commission may initiate to enforce this Order. The money paid shall become part of the receivership estate. No portion of money paid or recovered pursuant to this paragraph shall be deemed a payment of any fine, penalty, or punitive assessment. Defendant shall not have any right to contest any decision or action of the Receiver concerning the disbursement or disposition of the funds.
Commission's Right To Reopen
IT IS FURTHER ORDERED that the Commission may request by motion that the Order be reopened for the purpose of modifying the terms of the Order to provide a payment by Defendant in disgorgement to the United States Treasury or for customer refunds if the Commission has evidence that Defendant:
A. Signed a financial statement that was submitted to the Commission or to this Court and that was untruthful, inaccurate, or incomplete or that misrepresented the defendant's assets or liabilities as of the date Defendant signed the statement; or
B. Failed to report assets that were fraudulently conveyed from Defendant to another person; or
C. Violated the temporary restraining order or any preliminary injunction entered in this action by failing to disclose or deliver any asset of any Receivership Defendant to the Receiver.
The Commission's agreement to this Order in reliance
upon the financial statements of Defendant shall not be
deemed a waiver of its right to institute proceedings
under this paragraph, and the Commission shall not be
estopped from instituting proceedings under this
paragraph, because of any notice or knowledge it may have
had at any time prior to the date of entry of this Order
that Defendant committed acts of the kind described in
subparagraph A, B, or C of this paragraph. In the event
of any motion brought under this paragraph, this Order
shall be reopened for the limited purposes set forth
above. This Order shall remain in full force and effect
in all other respects unless otherwise ordered by this
Court. Proceedings instituted under this paragraph are in
addition to, and not in lieu of, any other civil or
criminal remedies that may be provided by law, including
any other proceedings that the Commission may initiate to
enforce this Order.
Notification about this Order
IT IS FURTHER ORDERED that Defendant shall provide a copy of this Order to each of his successors, assigns, officers, agents, servants, employees, and attorneys, and to all persons or entities:
A. Who have participated prior to entry of this Order with him in the offering or selling of any alcohol reducing agent or any business venture involving an alcohol reducing agent or have purchased from him any alcohol reducing agent or any business venture involving an alcohol reducing agent. Such copies shall be provided within three (3) business days after entry of this Order. Within five (5) business days after entry of this Order, Defendant shall provide an affidavit to the Commission stating whether he has complied with this subparagraph.
B. Who after entry of this Order participate with him in the offering for sale or sale of any drug or herbal product. Such copies shall be provided within one (1) business day after the first written or oral communication between Defendant and any such person about the sale or possible sale of any drug or herbal product. Within five (5) business days after such first written or oral communication, Defendant shall provide an affidavit to the Commission stating whether he has complied with this subparagraph and setting forth the name and address of each person or entity to whom a copy of the Order was provided, the date on which the person was provided the copy, the name and address of the person who provided the copy, and the manner of service.
Form of Affidavits
IT IS FURTHER ORDERED that all affidavits by Defendant that are required under this Order shall be in writing and shall be subscribed by Defendant, as true under penalty of perjury and dated, in substantially the following form: "I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. Executed on (date). (Signature)".
IT IS FURTHER ORDERED that any service or notification to --
A. Defendant under this Order shall be complete upon delivery to the last address reported by Defendant to the Commission.
B. The Commission under this Order shall be complete upon delivery to the Associate Director, Division of Marketing Practices, Federal Trade Commission, Sixth Street and Pennsylvania Avenue, N.W., Washington, DC 20580.
IT IS FURTHER ORDERED that the paragraph captions in this Order shall not be considered in interpreting or applying the terms of any paragraph.
IT IS FURTHER ORDERED that, if any provision of this Order, or if the application of any provision to any person or circumstance, is held invalid, the remainder of the Order and the application of the provision to any other person or circumstance shall not be affected by the holding.
Retention of Jurisdiction
IT IS FURTHER ORDERED that this Court retains jurisdiction of this matter for all purposes.
SO ORDERED, at Fort Lauderdale, Broward County, Florida, this _____day of _________, 199__.
The undersigned consent to entry of this Stipulated Permanent Injunction: