UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA

Magistrate Judge Seltzer

FEDERAL TRADE COMMISSION, Plaintiff,

v.

DIANE M. JONAS, individually and as a principal of The Business Opportunity Center, Inc.;

PAUL A. JONAS, individually;

JAMES W. RAIM, individually and as a partner in Market Systems, Ltd.

ROBERT BRIAN ROEMER, individually and as Treasurer of The Business Opportunity Center, Inc.;

THE BUSINESS OPPORTUNITY CENTER, INC., a Florida corporation, d/b/a The Neutralizer;

MARKET SYSTEMS, LTD., an Illinois partnership;

NATURAL HEALTH SYSTEMS, INC., an Illinois corporation;

PROGRESSIVE PRODUCTS, INC., an Illinois corporation;

TAMI BRENNAN McCLURE, individually and as an officer of Natural Health Systems, Inc., and partner in Market Systems, Ltd.;

PAUL S. JANUS, individually and as an officer of Progressive Products, Inc., and a partner in Market Systems, Ltd.; and

RICHARD A. HERBERT, M.D., individually and as a partner in Market Systems, Ltd.; Defendants.

CIV 95-8429-ZLOCH

FIRST AMENDED COMPLAINT FOR PERMANENT INJUNCTION AND OTHER EQUITABLE RELIEF

Plaintiff Federal Trade Commission ("FTC" or "the Commission") for its complaint alleges:

1. The FTC brings this action under Sections 13(b) and 19 of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. 53(b) and 57b, to secure a permanent injunction, preliminary injunctive relief, rescission of contracts, restitution, disgorgement, appointment of a receiver, and other equitable relief for defendants' unfair or deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. 45(a), 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.

JURISDICTION AND VENUE

2. This Court has jurisdiction over this matter pursuant to 28 U.S.C. 1331, 1337(a), and 1345, and 15 U.S.C. 53(b) and 57b.

3. Venue in the United States District Court for the Southern District of Florida is proper under 28 U.S.C. 1391(b) and (c), and 15 U.S.C. 53(b).

PLAINTIFF

4. Plaintiff Federal Trade Commission is an independent agency of the United States Government created by statute. 15 U.S.C. 41 et seq. The Commission is charged, inter alia, with enforcement of Section 5(a) of the FTC Act, 15 U.S.C. 45(a), which prohibits unfair or deceptive acts or practices in or affecting commerce. The Commission is authorized to initiate federal district court proceedings to enjoin violations of the FTC Act in order to secure such equitable relief as may be appropriate in each case. 15 U.S.C. 53(b) and 57b.

DEFENDANTS

5. Defendant Market Systems, Ltd., is an unincorporated partnership that has manufactured, marketed, or distributed the Alcohol Neutralizer. It has also marketed or sold distributorships or vending machine business ventures to market the Alcohol Neutralizer.

6. Defendant Natural Health Systems, Inc., is an Illinois corporation that markets and distributes the Alcohol Neutralizer. It has also marketed or sold distributorships or vending machine business ventures to market the Alcohol Neutralizer.

7. Defendant Progressive Products, Inc., is an Illinois corporation that is the successor or assign of Market Systems, Ltd., and Natural Health Systems, Inc., for marketing or distributing the Alcohol Neutralizer or a similar product and for marketing or selling distributorships or vending machine business ventures.

8. Defendant Business Opportunity Center, Inc. ("BOC"), a Florida corporation, is a distributor and agent for Market Systems, Ltd., that promotes and sells the Alcohol Neutralizer vending machine business ventures.

9. Defendant James W. Raim is president and a partner of Market Systems, Ltd.

10. Defendant Paul S. Janus is the president of Progressive Products, Inc., and a vice-president and a partner of Market Systems, Ltd.

11. Defendant Tami Brennan McClure is president of Natural Health Systems, Inc., and a partner of Market Systems, Ltd.

12. Defendant Diane M. Jonas is officer and principal owner of Defendant BOC.

13. Defendant Paul A. Jonas is a principal owner of Defendant BOC.

14. Defendant Robert Brian Roemer is treasurer of Defendant BOC and an attorney employed by Defendant BOC.

15. Defendant Richard A. Herbert, M.D., is a physician employed by Defendant Market Systems, Ltd.

16. At all times relevant to this complaint, acting alone or in concert with others, Defendants James W. Raim, Paul S. Janus, Tami Brennan McClure, Diane M. Jonas, Paul A. Jonas, Robert Brian Roemer, and Richard A. Herbert, M.D., have formulated, directed, controlled, or participated in the acts and practices of Market Systems, Ltd., Progressive Products, Inc., Natural Health Systems, Inc., or BOC, including the acts and practices set forth in this complaint.

COMMERCE

17. At all times relevant to this complaint, the defendants have maintained a substantial course of trade in the offering for sale and sale of the Alcohol Neutralizer or of the Alcohol Neutralizer vending machine business venture in or affecting commerce, as "commerce" is defined in Section 4 of the FTC Act, 15 U.S.C. 44.

DEFENDANTS' BUSINESS ACTIVITIES

18. Defendants James W. Raim, Paul S. Janus, and Tami Brennan McClure are at the center of a web of companies and individuals that manufacture, market, and distribute the Alcohol Neutralizer. The "Alcohol Neutralizer" is an herbal capsule that the defendants claim will rapidly lower the amount of alcohol in the blood of people who have been drinking and reduce or minimize inebriation. The defendants target marketing of the product to consumers who fear being arrested for drunk driving. Alcohol Neutralizer is a relatively new product, which was manufactured and first marketed in vending machines by Market Systems, Ltd., or Natural Health Systems, Inc., sometime in early 1994.

19. Defendants Raim, Janus, and McClure, acting through Market Systems, Ltd., or Natural Health Systems, Inc., sell what they purport to be "exclusive" distributorships that in turn market the Alcohol Neutralizer in a variety of ways. Some of their distributors sell directly to consumers through vending machines or catalogues, some sell to retailers, and some sell business ventures to consumers who market the product through vending machines. The distributors purchase the Alcohol Neutralizer for resale through Market Systems, Ltd. or Natural Health Systems, Inc. Defendants Raim, Janus, and McClure, acting through Market Systems, Ltd., or Natural Health Systems, Inc., provide promotional materials for their distributors and exercise control over their distributors' advertising.

20. Defendants Paul A. Jonas and Diane M. Jonas purchased an "exclusive" Alcohol Neutralizer distributorship in late 1994 or early 1995. In January 1995, they incorporated Defendant BOC in Florida as the vehicle for their distributorship. Through Defendant BOC, Paul and Diane Jonas market and sell Alcohol Neutralizer vending machine franchises. BOC's basic franchise package requires a minimum purchase of five vending machines for $4,475.00.

21. In June 1995, Defendants Raim, Janus, or McClure formed a new corporation, Defendant Progressive Products, Inc., as a successor or assign of Market System, Ltd., or Natural Health Systems, Inc. Through Progressive Products, Inc. these defendants plan to market the Alcohol Neutralizer or a similar product under the name "Neutrahol."

22. Defendants Robert Brian Roemer and Richard A. Herbert act as professional references for the Alcohol Neutralizer and the Alcohol Neutralizer business ventures and participate in the deceptive acts or practices set forth in this complaint.

23. By their marketing and promotions of the Alcohol Neutralizer, the defendants widely disseminate written or oral claims that the Neutralizer's ingredients have been approved or are generally recognized as safe by the U.S. Food and Drug Administration ("FDA"), and that an independent medical study conducted by researchers at Harvard Medical School found that a Neutralizer ingredient or ingredients guard against the toxic side effects of alcohol consumption and will rapidly lower one's blood alcohol level.

VIOLATIONS OF SECTION 5 OF THE FTC ACT

24. Section 5(a) of the FTC Act, 15 U.S.C. 45(a), prohibits unfair or deceptive acts or practices in or affecting commerce.

25. Misrepresentations of material fact constitute unfair or deceptive acts or practices prohibited by Section 5(a) of the FTC Act.

COUNT ONE

26. Paragraphs 1 through 25 are incorporated herein by reference.

27. In numerous instances, in connection with the advertising, promotion, marketing, offering for sale, or sale of franchises or business ventures, the defendants have represented, directly or by implication, that the Alcohol Neutralizer or its ingredients are approved or generally recognized as safe ("GRAS") by FDA for use in lowering a person's blood alcohol level and in guarding against the toxic side effects of alcohol consumption.

28. In fact, the FDA has neither approved nor listed as GRAS the Alcohol Neutralizer or any of its ingredients, alone or in combination, for use in lowering a person's blood alcohol level or in guarding against the toxic side effects of alcohol consumption.

29. Therefore, the defendants' representations regarding FDA approval or GRAS listing, as set forth in Paragraph 27 above, were and are false and misleading and constitute deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. 45(a).

COUNT TWO

30. Paragraphs 1 through 25 are incorporated herein by reference.

31. In numerous instances, in connection with the advertising, promotion, marketing, offering for sale, or sale of franchises or business ventures, the defendants have represented, directly or by implication, that an independent medical study by researchers from Harvard Medical School shows that the Alcohol Neutralizer or one or more of its ingredients will guard against toxic side effects of alcohol consumption and, thus, will rapidly lower the amount of alcohol in a person's blood.

32. In fact, the Harvard Medical School study did not show that any ingredient or combination of ingredients in the Alcohol Neutralizer guards against the toxic side effects of alcohol consumption, or that any ingredient or combination of ingredients in the Alcohol Neutralizer will rapidly lower the amount of alcohol in a person's blood.

33. Therefore, the defendants' representations regarding the Harvard Medical School study, as set forth in Paragraph 31 above, were and are false and misleading and constitute deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. 45(a).

THE FRANCHISE RULE

34. The business ventures sold by the defendants are franchises, as "franchise" is defined in Section 436.2(a) of the Franchise Rule, 16 C.F.R. 436.2(a).

35. The Franchise Rule requires a franchisor to provide prospective franchisees with a complete and accurate basic disclosure statement containing twenty categories of information, including information about the history of the franchisor, the terms and conditions under which the franchise operates, and information about other franchisees. 16 C.F.R. 436.1(a)(1) - (a)(20). Disclosure of this information enables a prospective franchisee to assess potential risks involved in the purchase of the franchise.

36. The Franchise Rule additionally requires: (1) that the franchisor have a reasonable basis for any oral, written, or visual earnings or profit representations made by a franchisor to a prospective franchisee, 16 C.F.R. 436.1(b)(2), (c)(2) and (e)(1); (2) that the franchisor provide to prospective franchisees a document containing information substantiating the earnings claim, 16 C.F.R. 436.1(b)-(e); and (3) that the franchisor, in immediate conjunction with any generally disseminated earnings claim, disclose the material basis (or the lack of such basis) for the earnings claim and include a warning that the earnings claim is only an estimate. 16 C.F.R. 436.1(e)(3)-(4).

37. Pursuant to Section 18(d)(3) of the FTC Act, 15 U.S.C. 57a(d)(3), and 16 C.F.R. 436.1, violations of the Franchise Rule constitute unfair or deceptive acts or practices in or affecting commerce, in violation of Section 5(a) of the FTC Act, 15 U.S.C. 45(a).

38. In connection with the promotion of vending machine franchises, the defendants have offered and in many instances have provided to franchisees the services of a person able to secure the sites for the franchisees' vending machines.

39. In the course of offering for sale and selling business ventures, defendants have provided, or represented that they will provide, significant assistance to the purchaser in the purchaser's method of operation.

VIOLATIONS OF THE FRANCHISE RULE

COUNT THREE

40. Paragraphs 1 through 39 are incorporated herein by reference.

41. In numerous instances in connection with the promotion, offering for sale and sale of franchises, as "franchise" is defined in the Rule, 16 C.F.R. 436.2(a), Defendants BOC, Diane Jonas, and Paul Jonas have failed to provide prospective franchisees with specific items of information required by the Franchise Rule, including, but not limited to, a complete and accurate disclosure of the names and addresses of franchisees and of statistical information about the number of franchises terminated, not renewed, and reacquired by the franchisor, in violation of Section 436.1(a)(16) of the Rule (or the alternative requirements of Item 20 of the UFOC); and Section 5 of the FTC Act, 15 U.S.C. 45.

COUNT FOUR

42. Paragraphs 1 through 39 are incorporated herein by reference.

43. In numerous instances in connection with the offering of franchises, as "franchise" is defined in the Rule, 16 C.F.R. 436.2(a), Defendants BOC, Diane Jonas, and Paul Jonas have made earnings claims within the meaning of the Rule, 16 C.F.R. 436.1(b)-(e), but have failed to have a reasonable basis for such claims at the times they were made, or have failed to disclose the information required by the Rule in immediate conjunction with such claims, thereby violating Sections 436.1(b)-(e) of the Rule, 16 C.F.R. 436.1(b)-(e), and Section 5 of the FTC Act, 15 U.S.C. 45.

CONSUMER INJURY

44. Consumers in many areas of the United States who purchase Alcohol Neutralizer distributorships or franchises are likely to suffer substantial monetary loss as a result of defendants' unlawful acts or practices. In addition, consumers who use the Alcohol Neutralizer for the purpose of lowering or minimizing their blood alcohol levels could suffer physical harm. Absent injunctive relief by this Court, defendants are likely to continue to injure consumers and harm the public interest.

THIS COURT'S POWER TO GRANT RELIEF

45. Section 13(b) of the FTC Act, 15 U.S.C. 53(b), empowers this Court to grant injunctive and other equitable relief, including consumer redress, disgorgement, and restitution, to prevent and remedy any violations of any provision of law enforced by the Federal Trade Commission.

46. Section 19 of the FTC Act, 15 U.S.C. 57b, authorizes this Court to grant such relief as the Court finds necessary to prevent or redress injury to consumers or other persons resulting from defendants' violations of the Franchise Rule, including the rescission and reformation of contracts, and the refund of money.

47. This Court, in the exercise of its equitable jurisdiction, may award other equitable relief to prevent or remedy injury or to prevent unjust enrichment resulting from the defendants' law violations.

PRAYER FOR RELIEF

WHEREFORE, plaintiff requests that this Court, as authorized by Sections 13(b) and 19 of the FTC Act, 15 U.S.C. 53(b) and 57b, and pursuant to its own equitable powers:

1. Award plaintiff such preliminary injunctive and equitable relief as may be necessary to avert the likelihood of consumer injury during the pendency of this action and to preserve the possibility of effective final relief;

2. Permanently enjoin the defendants from violating the Franchise Rule and the FTC Act, as alleged herein, in connection with the offering and promotion of the Alcohol Neutralizer or of business ventures, distributorships, business opportunities, and franchises;

3. Award such relief as the Court finds necessary to redress injury to consumers resulting from the defendants' violations of the Franchise Rule and the FTC Act, including but not limited to, rescission of contracts, the refund of monies paid, and the disgorgement of ill-gotten monies; and

4. Award plaintiff the costs of bringing this action, as well as such other and additional relief as the Court may determine to be just and proper.

Respectfully Submitted,

STEPHEN CALKINS
General Counsel

LAWRENCE H. NORTON
Assistant Director
Division of Marketing Practices

_________________________
ARETA L. KUPCHYK
JOHN M. COOK
Federal Trade Commission
Room H-238
6th Street & Pennsylvania Avenue, N.W.
Washington, D.C. 20580
(202) 326-2014, -2056
Attorneys for Plaintiff