UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION

FEDERAL TRADE COMMISSION, and
STATE OF ARKANSAS
ex rel. WINSTON BRYANT, ATTORNEY GENERAL,
Plaintiffs,

v.

SURECHEK SYSTEMS, INC., d/b/a CONSUMER CREDIT CORP., and CONSUMER CREDIT DEVELOPMENT CORP., a Georgia corporation;

DOUGLAS S. DERICKSON, individually and as an officer of SureCheK Systems, Inc., d/b/a Consumer Credit Corp., and Consumer Credit Development Corp.; and

STEVE LOVERN, individually and as an officer of SureCheK Systems, Inc., Consumer Credit Development Corp.,
Defendants.

CIVIL ACTION NO.

PLAINTIFFS' MEMORANDUM OF LAW IN SUPPORT OF MOTION FOR
EX PARTE TEMPORARY RESTRAINING ORDER WITH
ASSET FREEZE AND OTHER EQUITABLE RELIEF

TABLE OF CONTENTS

I. INTRODUCTION 1

II. THE PARTIES 2

Federal Trade Commission 2
The State of Arkansas. 3
SureCheK Systems, Inc. 4
Douglas S. Derickson 4
Steve Lovern 5

III. DEFENDANTS' BUSINESS PRACTICES 5

IV. THIS COURT HAS THE AUTHORITY TO GRANT THE RELIEF REQUESTED 12

V. THE EVIDENCE PRESENTED JUSTIFIES ENTRY OF A TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION 14

A. The Plaintiffs Have Demonstrated a Likelihood of Success on the Merits 15

1. The Defendants Have Violated Section 5 of the FTC Act 15
2. The Defendants Have Violated the Telemarketing Sales Rule 16
3. The Individual Defendants are Liable 20

B. The Balance of Public Equities Mandates Preliminary Injunctive Relief 21

C. An Asset Freeze, Access to the Defendants' Business Premises, and Expedited Discovery are Necessary to Preserve Effective Final Relief 22

D. The Proposed Temporary Restraining Order Should Be Entered Ex Parte 24

IV. CONCLUSION 25

TABLE OF AUTHORITIES

Cases

Carroll v. Princess Anne, 393 U.S. 175 (1968) 25

CFTC v. Hunt, 591 F.2d 1211 (7th Cir.), cert. denied, 442 U.S. 921 (1979) 24

Donovan v. United States Postal Serv., 530 F.Supp. 894 (D.D.C. 1981) 13

Fed. Sav. & Loan Ins. Corp. v. Sahni, 868 F.2d 1096 (9th Cir. 1989) 24

FTC v. Amy Travel Service, Inc., 875 F.2d 564 (7th Cir.), cert. denied, 493 U.S. 954 (1989) 13, 21, 23

FTC v. Atlantex Associates, 1987-2 Trade Cas. (CCH)  67,788 (S.D. Fla. 1987), aff'd, 872 F.2d 966 (11th Cir. 1989) 15, 21

FTC v. Career Assistance Planning, Inc., No. 1:96-CV-2187-MHS (N.D. Ga. August 27, 1996) 13

FTC v. Career Information Services, Inc., No. 1:96-CV-1464-ODE (N.D. Ga. June 13, 1996) 13

FTC v. Claude A. Blanc, Jr., No. 2:92-CV-129-WCO (N.D. Ga. June 16, 1992) 14

FTC v. Elders Grain, Inc., 868 F.2d 901 (7th Cir. 1989) 13

FTC v. Gem Merchandising Corp., 87 F.3d 466 (11th Cir. 1996) 3

FTC v. Georgia Export International Co., No. 1:96-CV-2906-ODE (N.D. Ga. November 4, 1996) 13

FTC v. H.N. Singer, Inc., 668 F.2d 1107 (9th Cir. 1982) 12, 13, 23

FTC v. Jordan Ashley, Inc., 1994-1 Trade Cas. (CCH)  70,570 (S.D. Fla. 1994) 15, 21

FTC v. Marquette, Inc., No. 1:95-CV-1749-RLV (N.D. Ga. July 10, 1995) 13

FTC v. Southwest Sunsites, Inc., 665 F.2d 711(5th Cir.) cert denied, 456 U.S. 973 (1982) 13, 24

FTC v. Transworld Courier Services, Inc., No. 1:90-CV-1635-RHH (N.D. Ga. 1990) 14

FTC v. U.S. Oil & Gas Corp., 748 F.2d 1431 (11th Cir. 1984) 3, 13

FTC v. United Consumer Services, Inc., No. 1:94-CV-3164-CAM (N.D. Ga. Nov. 30, 1994) 14

FTC v. University Health Inc., 938 F.2d 1206 (11th Cir. 1991) 12

FTC v. Windward Marketing, Ltd., No. 1:96-CV-0615-FMH (N.D. Ga. March 12, 1996) 13

FTC v. World Travel Vacation Brokers, Inc., 861 F.2d 1020 (7th Cir. 1988) 12, 15, 23, 24

FTC v. World Wide Factors, Ltd., 882 F.2d 344 (9th Cir. 1989) 13, 15, 22, 24

Gresham v. Windrush Partners, Ltd., 730 F.2d 1417 (11th Cir.), cert. denied sub nom. Windrush Partners, Ltd. v. Metro Fair Housing Servs., 469 U.S. 882 (1984) 22

In re Vuitton et Fils S.A. 606 F.2d 1 (2d Cir. 1979) 13, 25

Levi Strauss & Co. v. Sunrise Intern. Trading, Inc., 51 F.3d 982 (11th Cir. 1995) 23

Mitchell v. DeMario Jewelry, 361 U.S. 288 (1960) 13

Removatron International Corp., 111 F.T.C. 206 (1988), aff'd , 884 F. 2d 1489 (1st Cir. 1989) 15

SEC v. Management Dynamics, 515 F.2d 801 (2d Cir. 1975) 15

Standard Educations, Inc. v. FTC, 475 F.2d 401 (D.C. Cir.) cert denied, 414 U.S. 828 (1973) 20

Thompson Medical Co., 104 F.T.C. 648 (1984), aff'd, 791 F. 2d 189 (D.C. Cir. 1986), cert. denied, 479 U.S. 1086 (1987) 15

United States v. Diapulse Corp. of Am., 457 F.2d 25 (2d Cir. 1972) 22

Statutes and Rules

Federal Trade Commission Act, 15 U.S.C. 41 et seq. 2, 3, 24

Section 5 of the FTC Act, 15 U.S.C. 45(a) 1, 2, 15
Section 13(b) of the FTC Act, 15 U.S.C. 53(b) 3, 12, 13, 14, 15, 21, 24
Section 19(b) of the FTC Act, 15 U.S.C.  57(b) 13

Fed. R. Civ. P. 65(b) 2, 13, 24, 25

Telemarketing Sales Rule, 16 C.F.R. Part 310 1,3, 17, 20, 24

16 C.F.R.  310.2 17
16 C.F.R.  310.3(a)(1)(i-ii) 18
16 C.F.R.  310.3(a)(2)(i) 17
16 C.F.R.  310.3(a)(3) 18, 19
16 C.F.R.  310.3(b)(3) 19
16 C.F.R.  310.4(a)(4) 17

60 Fed. Reg. 43842 17, 18

Telemarketing and Consumer Fraud and Abuse Prevention Act, 15 U.S.C.  6101 et seq. 3, 16

15 U.S.C.  6102(c) 3
15 U.S.C.  6103 3, 14
15 U.S.C.  6105 3

Legislative History

S. Rep. No. 130, 103d Cong., 2d Sess. 15-16, reprinted in 1994 U.S. Code Cong. & Admin. News 1776 14

I. INTRODUCTION The Federal Trade Commission ("Commission" or "FTC") and the State of Arkansas, by and through its Attorney General, bring this action to halt Defendants' violations of the Telemarketing Sales Rule, 16 C.F.R. Part 310, which prohibits deceptive and abusive practices in the telemarketing of goods and services. (A copy of the Rule is included in Volume 4). The FTC also brings this action to halt and redress Defendants' violations of Section 5(a) of the FTC Act, which prohibits unfair or deceptive practices in or affecting commerce. 15 U.S.C.  45(a).

Since early 1996, Defendant SureCheK Systems, Inc., doing business as Consumer Credit Corporation and Consumer Credit Development Corporation (hereinafter collectively referred to as "CCC"), and its principals, Douglas S. Derickson and Steve Lovern, have been engaged in a deceptive scheme to defraud thousands of consumers nationwide through the telemarketing of advance fee credit cards. CCC offers consumers, by telephone, a major unsecured credit card, such as a Visa or MasterCard, regardless of their past credit history, in return for an advance fee ranging from $79.95 to $130.00. The fee is represented as a one-time processing fee.

During these calls, Defendants persuade consumers to divulge their checking account information. CCC withdraws the fees from the consumers' checking accounts on unsigned bank drafts and thereafter deposits the fees into its own bank account. Many consumers report that the withdrawals are made without their authorization. After the fees are withdrawn, however, most consumers do not receive the promised credit cards. Even those few consumers who have received credit cards do so only after paying additional fees that were never disclosed by CCC in its initial sales solicitation. CCC not only does its own telemarketing, but it has also contracted with, and provided substantial assistance and support to, numerous other telemarketing operations who solicit business on behalf of CCC, in CCC's name.

The pervasiveness of Defendants' fraudulent practices is evidenced by approximately 225 complaints against CCC received by Plaintiffs. (Ex. 19). The scope of consumer injury from CCC's fraudulent business practices is substantial. It is estimated that the total loss to consumers is approximately $2 million in less than 18 months. The Defendants have demonstrated a propensity to flout the law. Thus, if provided with advance notice of this lawsuit, there is a cognizable risk that Defendants would destroy documents and dissipate or conceal assets, which would undermine severely the Court's ability to provide effective final relief to injured consumers.

Therefore, Plaintiffs move, pursuant to Fed R. Civ. P. 65(b), for the issuance of an ex parte temporary restraining order, with an asset freeze to preserve assets for consumer redress, expedited discovery, immediate access to Defendants' business premises, and an order to show cause why a preliminary injunction should not issue. Such relief is critical to bring an immediate halt to Defendants' egregious fraud, to preserve the status quo, and to protect any fraudulently obtained assets pending a hearing on preliminary injunctive relief. Only an order including the requested relief will prevent the destruction of documents, preserve assets for consumer redress, and prevent further injury to consumers by halting the Defendants' deceptive practices.

II. THE PARTIES

Plaintiff, Federal Trade Commission, is an independent agency of the United States government created by the FTC Act. 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 and deceptive acts and practices in or affecting commerce. The Commission also enforces the Telemarketing Sales Rule, 16 C.F.R. Part 310, promulgated pursuant to the Telemarketing and Consumer Fraud and Abuse Prevention Act, 15 U.S.C. 6101 et seq. The Commission is authorized by Section 13(b) of the FTC Act, 15 U.S.C. 53(b), to initiate federal district court proceedings to enjoin violations of the FTC Act or any other provision of law enforced by the Commission, including violations of the Telemarketing Sales Rule, in order to obtain consumer redress and to secure such equitable relief as may be appropriate in each case. 15 U.S.C.  53(b), 57b, 6102(c), 6105(b). FTC v. Gem Merchandising Corp., 87 F.3d 466, 468-69 (11th Cir. 1996); FTC v. U.S. Oil & Gas Corp., 748 F.2d 1431, 1434 (11th Cir. 1984).

Plaintiff, State of Arkansas, is one of the fifty sovereign states of the United States. Winston Bryant is the duly elected Attorney General acting for plaintiff, and brings this action in his official capacity. The State of Arkansas is empowered by Section 6103 of the Telemarketing Fraud and Abuse Prevention Act, 15 U.S.C.  6103, to bring actions in federal district court whenever it has reason to believe that the interests of the residents of Arkansas have been or are being threatened or adversely affected because any person has engaged or is engaging in a pattern or practice that violates the Telemarketing Sales Rule. The State of Arkansas is authorized to initiate federal district court proceedings to enjoin telemarketing activities that violate the Commission's Telemarketing Sales Rule, and, in each such case, to obtain damages, restitution, and other compensation on behalf of residents of the State of Arkansas, and to obtain such other relief as the court may deem appropriate. 15 U.S.C.  6103(a).

Defendant, SureCheK Systems, Inc., is a Georgia corporation with its principal place of business located at 5430 Jimmy Carter Blvd., Norcross, GA 30093.(1) SureCheK was incorporated on December 30, 1994. (Ex. 2). Douglas Derickson is the President, and Steve Lovern is the Vice President of the corporation. (Ex. 3). At various times, SureCheK has operated using the fictitious names Consumer Credit Corp. and Consumer Credit Development Corp. (Ex. 4; Ex. 16; Ex. 32 at  4 & 11).(2) CCC has employed between 10 and 20 employees. (Exs. 3 & 5). It is estimated that over the past 18 months CCC's gross sales volume was approximately $2 million.(3)

Defendant, Douglas S. Derickson ("Derickson"), is the president, CEO and principal owner of the corporate Defendant. (Ex. 2; Ex. 3; Ex. 26 at  22). Defendant Derickson resides and transacts business in the Northern District of Georgia.(4) (Ex. 2). Acting alone or in concert with others, Derickson has formulated, directed, controlled or participated in the acts and practices set forth in the Complaint. For example, he solicited telemarketers to sell his advance fee credit card (Ex. 17 at  10-12); opened the corporate bank accounts and is the sole signatory thereon (Ex. 4); applied for the business license (Ex. 3); and contracted for an 800 number for CCC. (Ex. 17 at  3). Likewise, at least one CCC customer service employee reported to a consumer that Derickson was her supervisor and the owner of CCC. (Ex.26 at  21).

Defendant, Steve Lovern ("Lovern"), is the vice president of CCC.(5) (Ex. 3). Defendant Lovern resides and transacts or has transacted business in the Northern District of Georgia.(6) (Ex. 3). Acting alone or in concert with others, Lovern has formulated, directed, controlled or participated in the acts and practices set forth in the Complaint. Lovern is also a sole proprietor of a related entity doing business as SEL International or SEL Corporation ("SEL"). (Ex. 6).(7) According to follow-up letters sent by SEL to CCC customers and signed by Steve Lovern, SEL's address is 5430 Jimmy Carter Blvd., Suite 230, Norcross, GA. 30093, (Ex. 13) located upstairs from CCC's offices. CCC's mail is sometimes delivered to SEL's address and the employees walk back and forth between the two office suites. (Ex. 14 at  7).

III. DEFENDANTS' BUSINESS PRACTICES

Since early 1996, the Defendants have engaged in a scheme to defraud consumers throughout the United States through the telemarketing of advance fee credit cards.(8) Telemarketers calling from, or on behalf of,(9) CCC contact consumers and tell them that they are offering members of their community an unsecured Visa or MasterCard with absolutely no security deposit, regardless of past credit history. (Exs. 8-10). The consumers are led to believe that they are guaranteed to receive a major credit card or that there is a high likelihood that they will receive a major credit card through CCC. (Ex. 20 at  2; Ex. 22 at  2; Ex. 23 at  2,5; Ex. 24 at  2; Ex. 25 at  2; Ex. 27 at 2; Ex. 28 at 2; Ex. 29 at  2; Ex. 30 at  2; Ex. 31 at  3; Ex. 32 at  2; Ex. 33 at  2; Ex. 34 at  2; Ex. 35 at  2; Ex. 38 at  2; Ex. 39 at  2; Ex. 40 at  2; Ex. 41 at  3; Ex. 42 at  2; Ex. 43 at  2; Ex. 44 at  2; Ex. 46 at  2; Ex. 48 at  2; Ex. 49 at  2; Ex. 50 at  2; Ex. 51 at  2; Ex. 52 at  2; Ex. 53 at  2; Ex. 54 at  2; Ex. 55 at  2; Ex. 56 at  2; Ex. 57 at  2; Ex. 58 at  2; Ex. 59 at  2; Ex. 60 at  2; Ex. 61 at  2; Ex. 62 at  2; Ex. 63 at  2; Ex. 64 at  2; Ex. 65 at  2; Ex. 66 at  2).

Consumers are told that, in order to receive the major credit card, they will have to pay a "one-time fee" ranging from $79.95 to $130.00. (See scripts, Exs. 8-9; Ex. 22 at  2; Ex. 24 at  5; Ex. 25 at  2; Ex. 27 at  2; Ex. 33 at  2; Ex. 34 at  5; Ex. 35 at  2; Ex. 42 at  2). Further, the consumers are generally told that the advance fee is for the major credit card and other purported "benefits," including membership in Defendants' U.S. Gold & Diamond Exchange catalog promotion.(10) Although consumers are generally told about this jewelry catalog promotion(11), the primary focus of the sales call is the credit card offer. (Exs. 20-63). Consumers consistently stated that they would not have permitted CCC to withdraw money from their checking accounts to merely become a member of the U.S. Gold & Diamond Exchange. (Ex. 20 at  4; Ex. 24 at  6; Ex. 27 at  5; Ex. 28 at  4; Ex. 30 at  4; Ex. 34 at  12; Ex. 39 at  4; Ex. 42 at  5,7; Ex. 54 at  2; Ex. 56 at 3). These consumers were interested in receiving the promised credit cards.

During the course of the sales calls, consumers are told that a credit card application is being taken over the telephone. As part of the application process, consumers are asked a series of qualifying questions, often including whether they: (1) are at least 18 years of age; (2) have a valid social security number; (3) have lived and worked at the same place for a minimum of six months; (4) have an annual household income of at least $18,000; (5) have no bankruptcy or liens filed in past 12 months; and (6) have a valid checking account. If the consumers answer all questions affirmatively, they are told that they qualify for CCC's credit card promotion and are often asked whether they would prefer a Visa or MasterCard. (Exs. 8-10; Ex. 24 at 2; Ex. 25 at  2; Ex. 27 at  3; Ex. 30 at  3; Ex. 32 at  2; Ex. 38 at  2; Ex. 39 at  2; Ex. 41 at  6; Ex. 42 at  3).

In addition, consumers are persuaded to divulge their checking account information, including their account number. (Exs. 8-10; Ex. 20 at 3; Ex. 21 at  3; Ex. 24 at  2; Ex. 29 at  3; Ex. 31 at  4; Ex. 34 at  2; Ex. 36 at  2; Ex. 41 at  7; Ex. 46 at  3-4; Ex. 49 at  4; Ex. 50 at  3; Ex. 51 at  4; Ex. 53 at  3; Ex. 55 at  3; Ex. 58 at  3; Ex. 59 at  4; Ex. 65 at  3). To secure payment of the fee, CCC utilizes demand drafts whereby funds are withdrawn from consumers' checking accounts without the consumers' signatures on the negotiable instruments. Thereafter, the fee is deposited into a bank account belonging to SureCheK/Consumer Credit Corporation. (See bank drafts attached to Ex. 23; Ex. 24; Ex. 26; Ex. 43). In numerous instances, consumers have complained that the withdrawals were made without their express authorization or knowledge. (Ex. 20 at  3,5; Ex. 21 at  5-6; Ex. 22 at  7; Ex. 28 at   7-8; Ex. 29 at  5, 7-8; Ex. 30 at  8; Ex. 34 at  3-4, 8; Ex. 36 at  4; Ex. 37 at  5; Ex. 38 at  3-5; Ex. 40 at  4-5; Ex. 41 at  7-9; Ex. 43 at   3-5, 8; Ex. 44 at  5; Ex. 45 at 2-5; Ex. 46 at 3, 6; Ex. 47 at  7; Ex. 48 at  4,6; Ex. 50 at  3; Ex. 56 at 4-5 Ex. 58 at 3-4; Ex. 60 at 3-5; Ex. 62 at  3; Ex. 65 at 3-4). At least 50 of the approximately 225 written complaints received by the Commission allege some form of unauthorized withdrawals. (see summary chart of consumer complaints, Ex. 19).

After the funds are withdrawn from their checking accounts, consumers receive post-sale confirmation materials from CCC assuring them that they will be receiving a Visa or MasterCard, as well as describing the other "benefits" they will be receiving. (Exs. 11-12). Consumers are led to believe during the sales call that they have already been approved for a major credit card. However, weeks or months after paying the fees, consumers become aware that, in order to receive the promised credit cards, they will have to pay additional fees and meet additional credit requirements. The fact that consumers are not yet approved and that they have to complete an additional application, which must be screened based upon the bank's own credit criteria, is not disclosed to the consumers before CCC debits the funds. (Ex. 20 at 7-10; Ex. 25 at 8; Ex. 31 at 9-10). Several consumers reported that when they received the application they found out that they did not meet the bank's credit criteria even though they had been told by CCC that they qualified for the credit card. (Ex. 24 at 10; Ex. 32 at  9-10; Ex.39 at  8-11).

Moreover, the fact that the consumers will have to pay additional fees if they are ultimately approved is never disclosed to consumers at the time of the initial sales call. (Ex. 22 at  11, 13; Ex. 26 at 8; Ex. 29 at 11-12; Ex. 31 at  9-10; Ex. 32 at 9; Ex. 34 at  13; Ex. 38 at 8-9; Ex. 39 at  8; Ex. 42 at 8-9). For example, after waiting months and not receiving the promised credit cards, many CCC consumers were sent a follow-up letter from SEL. The letter from SEL stated that the company had previously received the consumer's information regarding the application for an unsecured Visa and apologized for the delays in processing. (Ex. 13). Enclosed with the SEL letter was generally a credit card application for the consumer to complete and return, along with additional documentation so that the consumer could get the credit card that was promised. Furthermore, the letter from SEL revealed a previously undisclosed additional $100 processing fee and an additional $50 annual fee. (Ex. 13; Ex. 20 at  8-9; Ex. 24; Ex. 29 at  11-12; Ex. 31 at  9-10; Ex. 34 at 13; Ex. 38 at  8-9).

In virtually every instance, the consumers were assured that they would receive a major credit card. However, only a small percentage of the consumers actually ever received a credit card, though they were all charged the advance fee by CCC.(12) Those few consumers who did, in fact, receive a credit card from CCC were required to pay additional fees to receive the cards or were offered secured credit cards. (Ex. 49 at  8; Ex. 64 at  5-6).

Many consumers complained to CCC about their dealings with the company and requested a refund of their money. Most were not given satisfaction. (Ex. 1 at pg 2). Consumers who sought refunds were blocked at every turn and experienced seemingly endless frustration. Many consumers reported calling CCC's telephone numbers and leaving numerous messages that were not returned. Those who were able to speak with a customer service representative were told to send copies of documents in order to receive their refunds; they did so without success. Other consumers reported being told that their refund checks were in the mail, but never received their refunds. (Ex. 19; Ex. 20 at  6, 11; Ex. 22 at  9-13; Ex. 23 at  8-13; Ex. 26 at  10-22; Ex. 27 at 7-17; Ex. 29 at  8-9, 14-15; Ex. 30 at  10-15; Ex. 31 at  11; Ex. 32 at  10, 12-16; Ex. 34 at  14-15; Ex. 35 at  10-11; Ex. 37 at  7; Ex. 41 at 10-22; Ex. 42 at  10-12; Ex. 43 at  9-12; Ex. 55 at  7; Ex. 57 at  5; Ex. 59 at  7). According to a BBB report on CCC, "this company did not respond to the Bureau's request for background information necessary to assist a consumer in making an informed decision. This company has not responded to all consumer complaints brought to its attention by the Bureau or has not made all adjustments as promised to the consumer." (Ex. 1). Only a few consumers received a refund from CCC, and then only after a third-party such as an AG's Office intervened. (Ex. 19; Ex. 21 at  7-9; Ex. 39 at  11-14). Most of the consumers paid their hard-earned money to CCC and got nothing in return.

For example, consumer Richard Gonzalez reported that, prior to the money being withdrawn from his checking account, he informed the CCC representative that he wanted to cancel his participation in CCC's credit card promotion. Mr. Gonzalez's checking account was nevertheless debited without his authorization more than six weeks after he canceled. He called the company to complain and had a hard time getting through to actually speak with someone. When Mr. Gonzalez finally spoke with someone, he was told to write a letter to the company to request a refund of his $79.95. He wrote two letters, but did not get a refund. Mr. Gonzalez then spoke with a representative named Marilyn who promised to get him a refund. She told him that she would send him a form to fill out to request his refund; however, he never received the form. On at least one other occasion, Marilyn put Mr. Gonzalez on hold for at least five to ten minutes before he finally hung up. Thereafter, Mr. Gonzalez received a letter from SEL addressed to "Richard CANCEL Gonzales." (His middle name is not "CANCEL.") Enclosed with the letter from SEL was an application for a credit card issued by Ocean Independent Bank. In order to get the credit card that was originally promised, he was required to pay an additional $100 processing fee, which had never been disclosed, and, if approved, an annual fee would be charged by the bank. After many phone calls and letters to CCC about getting his money back, he decided to contact the Better Business Bureau to help him recover his money. Mr. Gonzalez has not received a refund of his money from CCC nor has he received a credit card. (Ex. 29)

CCC targeted those who could least afford to lose money to an advance fee scam -- those with credit problems. These consumers were generally excited to have been selected to receive the major credit card being offered by CCC and were particularly vulnerable to this deceptive scheme. (Ex. 24 at  2; Ex. 26 at  4; Ex. 33 at  6; Ex. 35 at  4; Ex. 39 at  3; Ex. 41 at  3). The Defendants preyed on their vulnerabilities.

IV. THIS COURT HAS THE AUTHORITY TO GRANT THE RELIEF REQUESTED

Section 13(b) of the FTC Act, 15 U.S.C.  53(b), permits the Commission to bring suit in federal district court when it has reason to believe that a party is violating "any provision of law" enforced by the Commission, including Section 5(a) of the FTC Act and the Telemarketing Sales Rule. The second proviso of Section 13(b) provides that "in proper cases the Commission may seek, and after proper proof, the court may issue, a permanent injunction." A common fraud case such as this one clearly qualifies as a "proper case" under Section 13(b). "Proper proof" means that the Court need make only a "preliminary assessment" of whether the FTC "likely will prevail" on the merits. See, FTC v. University Health Inc., 938 F. 2d 1206, 1218 (11th Cir. 1991). Courts have routinely held that it is appropriate to invoke the remedies of Section 13(b) in cases where there is evidence of persistent and ongoing deception. FTC v. World Travel Vacation Brokers, Inc., 861 F.2d 1020, 1026-28 (7th Cir. 1988); FTC v. H.N. Singer, Inc., 668 F.2d 1107, 1111 (9th Cir. 1982).Section 13(b) empowers courts to exercise the full breadth of their equitable authority:

Congress, when it gave the district court authority to grant a permanent injunction against violations of any provisions of law enforced by the Commission, also gave the district court authority to grant any ancillary relief necessary to accomplish complete justice because it did not limit that traditional equitable power explicitly or by necessary and inescapable inference.

U.S. Oil & Gas, 748 F.2d at 1434 (quoting H.N. Singer, 668 F.2d at 1113); see also FTC v. Elders Grain, Inc., 868 F.2d 901, 907 (7th Cir. 1989); FTC v. Amy Travel Serv., Inc., 875 F.2d 564, 571-72 (7th Cir.), cert. denied, 493 U.S. 954 (1989); FTC v. Southwest Sunsites, Inc., 665 F.2d 711, 718 (5th Cir.), cert. denied, 456 U.S. 973 (1982). "[T]his Court's inherent equitable powers may be employed to issue a preliminary injunction, including a freeze of assets, during the pendency of an action for permanent injunctive relief." U.S. Oil & Gas, 748 F.2d at 1434. Because the public interest is implicated, this Court's equitable powers "assume an even broader and more flexible character." Donovan v. U.S. Postal Serv., 530 F. Supp. 894, 900 (D.D.C. 1981) (quoting Mitchell v. DeMario Jewelry, 361 U.S. 288, 291 [1960]); see also FTC v. World Wide Factors, Ltd., 882 F.2d 344, 347 (9th Cir. 1989).

Section 19(b) of the FTC Act also authorizes this Court to grant such equitable relief as it finds necessary to redress injury to consumers resulting from violations of the Telemarketing Sales Rule. 15 U.S.C.  57b(b). To bring an immediate halt to unlawful, injurious trade practices and to preserve the availability of effective final relief, the district court may issue an ex parte temporary restraining order. Fed. R. Civ. P. 65(b); see In re Vuitton et Fils S.A., 606 F.2d 1, 3-4 (2d Cir. 1979). Courts in this district and elsewhere repeatedly have granted ex parte restraining orders to the Commission pursuant to Section 13(b) of the FTC Act.(13) As the legislative history of the FTC Act Amendments of 1994 reflects, Congress has re-emphasized the Commission's authority to obtain ex parte relief: "Section 13 of the FTC Act authorizes the FTC to file suit to enjoin any violation of the FTC [Act]. The FTC can go into court ex parte to obtain an order freezing assets, and is also able to obtain consumer redress." S. Rep. No. 130, 103d Cong., 2d Sess. 15-16, reprinted in 1994 U.S.C.C.A.N. 1776, 1790-91.

Section 4(a) of the Telemarketing Act, 15 U.S.C.  6103(a), authorizes the Court to grant to the State of Arkansas, on behalf of its residents, injunctive and other equitable relief, including damages, restitution, other compensation, and such further relief as the Court deems appropriate.

V. THE EVIDENCE PRESENTED JUSTIFIES ENTRY OF A TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION

The Plaintiffs have submitted overwhelming evidence in this matter, including numerous consumer and third-party declarations and a summary of approximately 225 consumer complaints, which establish the Defendants' systematic and well-orchestrated fraud. Section 13(b) of the FTC Act was designed to combat such abuses. This Section authorizes the issuance of a temporary restraining order or a preliminary injunction "[u]pon a proper showing that, weighing the equities and considering the Commission's likelihood of ultimate success, such action would be in the public interest." 15 U.S.C.  53(b). The Commission has more than met this burden.

Since the FTC acts as "a statutory guardian charged with safeguarding the public interest," SEC v. Management Dynamics, Inc., 515 F.2d 801, 808 (2d Cir. 1975), the standard for preliminary injunctive relief in Section 13(b) differs from that typically applied to private litigants. In contrast to the stringent four-prong test for evaluating a traditional request for injunctive relief, a Court in a Section 13(b) action must (1) determine the likelihood that the FTC ultimately will succeed on the merits and (2) balance the equities. Irreparable injury is presumed from the alleged violations of law. World Wide Factors, 882 F.2d at 346; World Travel Vacation Brokers, 861 F.2d at 1029.

A. The Plaintiffs Have Demonstrated a Likelihood of Success on the Merits.

1. The Defendants Have Violated Section 5 of the FTC Act.

The evidence filed in support of this motion, including consumer declarations, sales pitches, and other materials submitted to this Court, demonstrate the various ways the Defendants repeatedly violate Section 5(a) of the FTC Act, which prohibits "unfair or deceptive acts or practices in or affecting commerce." 15 U.S.C.  45(a), as alleged in Count One of the Complaint. An act or practice is deceptive under Section 5(a) if it involves a material misrepresentation or omission that is likely to mislead consumers acting reasonably under the circumstances. FTC v. Jordan Ashley, Inc., 1994-1 Trade Cas. (CCH)  70,570 at 72,096 (S.D. Fla. 1994); FTC v. Atlantex Assocs., 1987-2 Trade Cas. (CCH)  67,788 at 59,252 (S.D. Fla. 1987), aff'd, 872 F.2d 966 (11th Cir. 1989). Express claims, or deliberately-made implied claims, used to induce the purchase of a particular product or service are presumed to be material. Thompson Medical Co., 104 F.T.C. 648, 816 (1984), aff'd, 791 F.2d 189 (D.C. Cir. 1986), cert. denied, 479 U.S. 1086 (1987); Jordan Ashley, 1994-1 Trade Cas. at 72,096. Moreover, any representations concerning the price of a product or service are presumptively material. Removatron Int'l Corp., 111 F.T.C. 206, 309 (1988), (citing Thompson Medical, 104 F.T.C. at 817.), aff'd, 884 F.2d 1489 (1st Cir. 1989).

As demonstrated in Section III of this memorandum, CCC and its principals, Derickson and Lovern, are engaged in a blatant, orchestrated swindle. Through their telemarketing operation, the Defendants often expressly stated and often deliberately implied that consumers would receive an unsecured credit card in return for the one-time payment of an advance fee. This representation is central to the transaction and obviously material. This representation is false and is likely to, and in fact did, mislead consumers because they paid their money to CCC and, in most cases, did not receive the promised credit cards. (Exs. 20-66).

CCC does not have the ability to issue credit cards. According to Joe Majka, Regional Director of Visa USA- Fraud Control, only Visa card issuing banks and those entities registered as Independent Sales Organizations may offer Visa credit cards to consumers. CCC is not registered as an Independent Sales Organization with Visa. (Ex. 18; see also, Ex. 25 at  9; Ex. 39 at  13). Therefore, CCC's express or implied guarantee of a credit card is false and misleading. Furthermore, Defendants demonstrate their propensity for fraud by engaging in the insidious practice of making unauthorized withdrawals from consumers' accounts and refusing to make refunds.

2. The Defendants Have Violated the Telemarketing Sales Rule.

On August 16, 1994, the President signed into law the Telemarketing and Consumer Fraud and Abuse Prevention Act, 15 U.S.C.  6101, et seq. This Act directed the Commission to prescribe regulations prohibiting deceptive and abusive telemarketing acts or practices. The Telemarketing Sales Rule, 16 C.F.R. Part 310, became effective on December 31, 1995. (The Rule, 16 C.F.R. Part 310 can be found at 60 Fed. Reg. 43842, 43864-43868 (August 23, 1995), included in Volume 4).

In connection with telemarketing transactions, the Defendants have offered, and arranged for others to provide credit cards to consumers in exchange for advance fees. Likewise, Defendants have initiated and received telephone calls to and from customers throughout the United States. Thus, Defendants are "sellers" and "telemarketers" engaged in "telemarketing" under the Rule. 16 C.F.R.  310.2(r), (t) & (u). The Defendants have used interstate telephone calls to induce consumers to pay a fee for unsecured credit cards, and, in so doing, have violated the Telemarketing Sales Rule.

The Telemarketing Sales Rule prohibits telemarketers and sellers from requesting or receiving payment of any fee or consideration in advance of obtaining or arranging an extension of credit when the seller or telemarketer has guaranteed or represented a high likelihood of success in obtaining or arranging an extension of credit. 16 C.F.R.  310.4(a)(4). Defendants offer to thousands of consumers an unsecured credit card for a one-time fee, which is debited from the consumers' bank accounts and deposited into CCC's account. Thus, Defendants requested and received the fees in advance of obtaining or arranging for the extension of credit (i.e., the promised credit cards), in violation of this section as alleged in Count Two of the Complaint. (Ex. 20; Exs. 22-25; Exs. 27-35; Exs. 37-44; Ex. 46; Exs. 48-63; Exs. 65-66).

The Telemarketing Sales Rule also prohibits telemarketers and sellers from misrepresenting the total costs to purchase, receive, or use goods or services that are the subject of the sales offer. 16 C.F.R.  310.3(a)(2)(i). The Defendants misrepresented the total cost to purchase or receive the credit card they were offering by leading consumers to believe that they would receive a major credit card if they paid a one-time fee. This fee was represented as the total cost to receive the credit card. This was not true. Of the more than 275 consumers who filed complaints or were interviewed by Plaintiffs, none who paid the one-time processing fee disclosed by CCC in the sales call received an unsecured credit card as promised, without paying additional fees to a card issuing bank. (Ex.12; Ex. 13; Ex. 19; Exs. 20-66 and applications attached to Exs. 22 & 31; DePriest Dec. at  8). Thus, the Defendants have violated 16 C.F.R.  310.3(a)(2)(i) as alleged in Count Three of the Complaint.

In addition, the Telemarketing Sales Rule requires telemarketers and sellers to disclose, in a clear and conspicuous manner, the total costs to purchase, receive, or use any goods or services that are the subject of the sales offer, and all material restrictions, limitations or conditions regarding the goods or services that are the subject of a sales offer. 16 C.F.R.  310.3(a)(1)(i) and (ii). The Telemarketing Sales Rule's Statement of Basis and Purpose explains that "[t]he Commission intends that the disclosures be made before the consumer sends funds to a seller or telemarketer or divulges to a telemarketer or seller credit card or bank account information. Thus, a telemarketer or seller who fails to provide the disclosures until the consumer's payment information is in hand violates the Rule." 60 Fed. Reg. 43842, 43852 (Aug. 23, 1995). The Defendants failed to disclose the total costs to consumers to receive their credit cards. 16 C.F.R.  310.3(a)(1)(ii). Disclosure of the total fee is not made before the consumer divulges to the telemarketer his or her bank account information. (Ex. 22 at 11, 13; Ex. 26 at  8; Ex. 29 11-12; Ex. 31 at 9-10; Ex. 32 at   9; Ex. 34 at   13; Ex. 38 at 8-9; Ex. 39 at  8; Ex. 42 at 8-9). Likewise, Defendants failed to disclose all material restrictions, limitations, or conditions regarding receipt of credit cards. 16 C.F.R.  310.3(a)(1)(ii). Defendants failed to disclose to consumers that they must complete an additional application and be approved by a card issuing bank, based upon that bank's own credit criteria. (Ex. 20 7-10; Ex. 24 at  10; Ex. 25 at  8; Ex. 31 at 9-10; Ex. 32 at 9-10; 18 at 9-10). Thus, Defendants violated 16 C.F.R.  310.3(a)(1)(I) and (ii) as alleged in Count Four of the Complaint.

Furthermore, the Defendants violated Section 310.3(a)(3) of the Telemarketing Sales Rule by obtaining or submitting for payment a demand draft on a consumer's bank account without that consumer's "express verifiable authorization." Numerous consumers have complained that the withdrawals from their checking accounts were made without their consent or knowledge. (Ex. 20 at  3, 5; Ex. 21 at  5-6; Ex. 22 at  7; Ex. 28 at   7-8; Ex. 29 at  5, 7-8; Ex. 30 at  8; Ex. 34 at  3-4, 8; Ex. 36 at  4; Ex. 37 at  5; Ex. 38 at  3-5; Ex. 40 at  4-5; Ex. 41 at   7-9; Ex. 43 at   3-5, 8; Ex. 44 at  5; Ex. 45 at 2-5; Ex. 46 at 3, 6; Ex. 47 at  7; Ex. 48 at  4, 6; Ex. 50 at  3; Ex. 56 at 4-5; Ex. 58 at  3-4; Ex. 60 at 3-4; Ex. 62 at  3; Ex. 65 at 3-4; Ex. 19). These consumers could not have given their "express verifiable authorization." Thus, Defendants violated 16 C.F.R.  310.3(a)(3) as alleged in Count Five of the Complaint.

Finally, the Telemarketing Sales Rule prohibits any person from providing substantial assistance or support to any seller or telemarketer when that person knows or consciously avoids knowing that the seller or telemarketer is engaged in any act or practice in violation of the Telemarketing Sales Rule. In this case, Defendants have provided substantial assistance and support to over 30 third-party telemarketers. (Ex. 15; Ex.16 at  6; Ex. 17 at 11-14). CCC provided scripts, leads, promotional materials, and customer service needed by the telemarketers to solicit consumers on behalf of CCC's advance fee credit card scheme. (See attachments to Exs. 15 & 17). The third-party telemarketers, using CCC's name, scripts, and leads, engaged in the same fraudulent telemarketing practices as those engaged in by CCC. (Ex. 15 at 5-8; Ex. 17 at 11-14). The Defendants further assist and facilitate these third-party telemarketers by processing and depositing the consumers' unsigned bank drafts. (Ex. 16; Ex. 17 at  12). CCC knew or consciously avoided knowing that the third-party telemarketers were engaged in violations of the Telemarketing Sales Rule. CCC provided the scripts and other materials, and thus knew what the telemarketers were representing to the consumers. (See scripts, internal memos, and applications provided by CCC to Orion & Assoc., a third-party telemarketer, Ex. 15 at  5-8; see also, Ex. 17 at 11-14, including solicitation package and leads for third-party telemarketers). The telemarketers were selling on behalf of CCC and making the same misrepresentations that CCC was making to consumers. Thus, Defendants violated 16 U.S.C.  310.3(b) as alleged in Count Six of the Complaint.

3. The Individual Defendants are Liable.

Individual Defendants are directly liable for their own violations of Section 5 of the FTC Act and the Telemarketing Sales Rule. They are also liable for the corporate Defendants' violations if the Plaintiffs demonstrate that: (1) the corporate Defendants violated the FTC Act or Telemarketing Sales Rule; (2) the individual Defendants participated directly in the wrongful acts or practices or the individual Defendants had authority to control the corporate Defendants;(14) and (3) the individual Defendants had some knowledge of the wrongful acts or practices.(15) Jordan Ashley, 1994-1 Trade Cas. at 72,096 (citing Amy Travel, 875 F.2d at 573).

The Plaintiffs have submitted substantial evidence showing that the individual Defendants knew or should have known of, or have recklessly disregarded, the misrepresentations and unauthorized debits being made by the corporate Defendants. The unlawful practices at issue in this case constitute the core of the Defendants' fraudulent operation. Derickson and Lovern are sole owners and listed officers of the corporate Defendant. Derickson represents himself as a person with control and responsibility for the day-to-day operations of CCC with direct control over scripts and telemarketers. (Ex. 5; Ex.17; Ex. 26 at  21). These individuals either participate directly in the wrongful acts or have the authority to control the acts and practices of the corporate Defendant. In addition, Derickson and Lovern knew of the wrongful acts or practices through their direct participation in those practices.

B. The Balance of Equities Mandates Preliminary Injunctive Relief.

The Plaintiffs have not only established the likelihood of success on the merits, but have also satisfied the second prong for obtaining a preliminary injunction under Section 13(b) of the FTC Act by showing that the public equities mandate preliminary injunctive relief. The Plaintiffs have sustained this burden through substantial evidence showing that Defendants are engaged in a scheme to defraud consumers. Consumer injury from Defendants' scheme is large and growing. Evidence indicates that the Defendants are continuing their operation. Defendants thus continue to injure the public through promises of credit cards and unauthorized debits. Absent the injunctive relief sought here, Defendants' ongoing illegal conduct will continue unabated.

The victims in this case, who apparently number in the thousands, are people who have had credit problems in the past or who have recently been turned down for credit. (Ex. 17 at pg. 13; Ex. 24 at  2; Ex. 26 at  4; Ex. 33 at  6; Ex. 35 at  4; Ex. 39 at  3; Ex. 41 at  3). Credit is essential in today's society, and thus these victims are vulnerable to a scheme that promises them a major unsecured credit card -- even for a fee.

In addition, in weighing the equities in a statutory enforcement action, the Court may presume irreparable injury. Gresham v. Windrush Partners, Ltd., 730 F.2d 1417, 1423 (11th Cir.), cert. denied sub nom., Windrush Partners, Ltd. v. Metro Fair Housing Servs., 469 U.S. 882 (1984); World Wide Factors, 882 F.2d at 347. Giving due weight to the public interest, the balance of hardships tips decidedly in the Plaintiffs' direction. The Defendants "can have no vested interest in a business activity found to be illegal." United States v. Diapulse Corp. of Am., 457 F.2d 25, 29 (2d Cir. 1972). Any hardship that a preliminary injunction and asset freeze imposes on Defendants is temporary and outweighed by the public interest in preserving assets for redress to consumers.

C. An Asset Freeze, Access to the Defendants' Business Premises, and Expedited Discovery are Necessary to Preserve Effective Final Relief.

As part of the permanent relief, the Plaintiffs seek redress for the consumers who have likely lost millions of dollars to the Defendants. To ensure the possibility of such relief, the proposed temporary restraining order is designed to preserve the status quo, pending a hearing on preliminary injunctive relief. Consistent with orders of this Court in similar cases, (see n.13), the order would: (1) require that Defendants immediately cease their deceptive sales practices; (2) freeze all assets of each Defendant; and (3) allow expedited discovery of Defendants, including immediate access to their business premises.

Where, as here, Defendants' business operations are permeated by fraud, there is a strong likelihood that assets will be dissipated or documents destroyed during the pendency of this action causing irreparable injury to the Plaintiffs' ability to obtain relief for consumers. The Eleventh Circuit recently noted the importance of asset freezes in cases that seek equitable final remedies. "A request for equitable relief invokes the district court's inherent equitable powers to order preliminary relief, including an asset freeze, in order to assure the availability of permanent relief." Levi Strauss & Co. v. Sunrise Int'l Trading, Inc., 51 F.3d 982, 987 (11th Cir. 1995). Courts in this jurisdiction have thus ordered, ex parte, the freezing of assets and other ancillary relief in circumstances similar to those found here.(16) A freeze of the individual and corporate Defendants' assets is essential to prevent the dissipation or waste of assets during the pendency of this litigation. See Singer, 668 F.2d at 1113 (asset freeze appropriate when Commission objective is "to obtain restitution of moneys fraudulently obtained"). Courts have, accordingly, ordered assets frozen on the basis of pervasive fraudulent activities. In addition to freezing corporate assets, courts have frozen individual Defendants' assets where the individual Defendants directly participated in the deceptive activity and had actual or constructive knowledge of the deceptive nature of the practices in which they were engaged. Amy Travel, 875 F.2d at 574-76; World Travel Vacation Brokers, 861 F.2d at 1031. Notably, a court may impose an asset freeze based on the mere possibility of dissipation of assets. Federal Sav. & Loan Ins. Corp. v. Sahni, 868 F.2d 1096, 1097 (9th Cir. 1989).

A freeze of the individual and corporate Defendants' assets is essential to prevent the dissipation of assets during the pendency of this litigation. By temporarily and preliminarily enjoining the Defendants' illegal practices, this Court will effectuate Congress' intent in enacting Section 13(b). World Travel Vacation Brokers, 861 F.2d at 1028 (in enacting Section 13(b), Congress intended to serve the public interest by protecting consumers from the effects of deceptive trade practices "as quickly as possible"); see also, Southwest Sunsites, 665 F.2d at 719. Because harm to the public interest is presumed in a statutory enforcement action such as this one, World Wide Factors, 882 F.2d at 346, a preliminary injunction is a particularly appropriate remedy where the Commission shows "some reasonable likelihood of future violations." CFTC v. Hunt, 591 F.2d 1211, 1220 (7th Cir.), cert. denied, 442 U.S. 921 (1979). Past misconduct is "highly suggestive of the likelihood of future violations," especially where there is a pattern of misrepresentations as opposed to an isolated occurrence. Id. The Defendants' past fraudulent conduct indicates a reasonable likelihood of future violations of the FTC Act and the Telemarketing Sales Rule.

The TRO sought by Plaintiffs also grants Plaintiffs immediate access to the Defendants' business premises for the purpose of locating assets and relevant documents. Immediate access is needed to protect such evidence against destruction. Inventorying and copying of documents would help to ensure that the Commission can ultimately determine: (1) the full scope of the Defendants' law violations; (2) the identities of injured consumers; (3) the total amount of consumer injury; and (4) the nature, extent, and location of the Defendants' assets.

D. The Proposed Temporary Restraining Order Should Be Entered Ex Parte

Finally, the Plaintiffs request that the proposed restraining order be entered ex parte. Federal Rule of Civil Procedure 65(b) permits this Court to enter ex parte orders upon a clear showing that "immediate and irreparable injury, loss, or damage will result" if notice is given. Proper circumstances for ex parte relief include situations where notice would "render fruitless further prosecution of the action." In re Vuitton et Fils, 606 F.2d at 5 (2d Cir. 1979) (quoting Carroll v. Princess Anne, 393 U.S. 175, 180 (1968)). As is set forth in detail in the Rule 65(b) declarations of counsel, notice to Defendants would cause irreparable injury. The Defendants have shown such a disdain for the law that an ex parte temporary restraining order is necessary. Only through such an extraordinary measure can the Court prevent otherwise likely destruction of documents and secretion of assets -- both of which would jeopardize the possibility of final effective relief for consumers.

VI. CONCLUSION

Unless stopped immediately, the Defendants will continue to defraud consumers nationwide in their telemarketing scam. The Federal Trade Commission and the State of Arkansas request that this Court, therefore, issue the requested ex parte temporary restraining order.

Respectfully submitted,

___________________________
Cindy A. Liebes (Georgia Bar No. 451976)

Ronald E. Laitsch
Federal Trade Commission
Atlanta Regional Office
60 Forsyth St., Suite 5M35
Atlanta, GA 30303
(404) 656-1359

______________________________
James DePriest
Senior Assistant Attorney General
Arkansas Attorney General's Office
323 Center Street, Suite 200
Little Rock, AR 72201
(501) 682-6150

Endnotes

1. SureCheK/CCC's offices are located on the first floor and the telemarketing phone-room is located on the second floor, of the office complex. Based upon recent surveillance by FTC investigators, the company continues to operate at this address. (Ex.14  5-7).

2. According to the Georgia Secretary of State's Office, Consumer Credit Development Corp. is not incorporated. Likewise, the Consumer Credit Corp. that is the subject of this brief is not incorporated, although there is an unrelated incorporated entity known as Consumer Credit Corp., that has different principals and a different business address. (Ex. 14 at  9-10).

3. The sales volume was gleaned from CCC's corporate banking records subpoenaed from Central Bank & Trust in Little Rock, Arkansas, and from NationsBank in Atlanta, Georgia. These banking records cover the period January 1996 until April 1997.

4. Derickson resides at 619 Hearth Place, Lawrenceville, GA.

5. A Dun & Bradstreet report, dated April 17, 1997, indicates that, according to Derickson, Steve Lovern is the owner and Derickson is the manager of CCC. (Ex. 6).

6. Lovern's last known address was 2915 Lake Ridge, Dunwoody,, GA 30338.

7. A search of the Georgia Secretary of State's records indicates that SEL is not incorporated. (Ex. 14 at  9).

8. Copies of three scripts used by CCC, at various time periods, are attached as Exs. 8-10. As misleading as these scripts appear on their face, the actual telemarketing sales presentations to consumers were far more deceptive, often lasting 20 to 30 minutes (Ex. 24 at  3; Ex. 42 at  5; Ex. 50 at  2), and focusing almost exclusively on the credit card offer. (See consumer declarations Exs. 20-66).

9. CCC not only does its own telemarketing, but it also contracted with, and provided substantial assistance or support, including scripts, leads, and customer service to, numerous other telemarketing operations who solicited business on behalf of CCC, using CCC's name. (Ex. 16; Ex. 17 at  10-12; Ex. 15; DePriest Dec. at  6).

10. The U.S. Gold & Diamond Exchange is an interrelated business owned by Derickson. (Ex. 7). The U.S. Gold & Diamond Exchange is part of CCC's promotion whereby consumers receive a glossy jewelry catalog from which they can purchase baubles and gold trinkets. (Exs. 11 & 12).

11. A number of consumers have reported that CCC did not tell them about the U.S. Gold & Diamond Exchange in the initial sales call or that they did not receive post-sale materials concerning this jewelry catalog promotion. (Ex. 44 at  6; Ex. 45 at  8; Ex. 46 at  8; Ex. 51 at  2; Ex. 52 at  6; Ex. 57 at  6; Ex. 58 at 5; Ex. 60 at  5; Ex. 62 at  6 ).

12. During their investigation, the Arkansas AG's Office requested a list of Arkansas customers from Defendants. CCC provided a list of approximately 100 Arkansas consumers. The Arkansas AG's Office contacted more than half of the consumers on the list. Of the Arkansas consumers that were interviewed, only one received an unsecured credit card (after paying an additional fee of $90) even though all reported that they were promised a credit card and had money withdrawn from their checking accounts. (DePriest Dec. at 8). The Arkansas consumers essentially reflect a random sampling of CCC consumers. Thus, their experiences are representative of the experiences of all CCC consumers.

13. Cases in the Northern District of Georgia granting ex parte relief include: FTC v. Georgia Export International Co., No. 1:96-CV-2906-OED (N.D. Ga. November 4, 1996) (TRO with asset freeze, immediate access, and appointment of receiver); FTC v. Career Assistance Planning, Inc., No. 1:96-CV-2187-MHS (N.D. Ga. August 27,1996) (TRO with asset freeze, immediate access, and appointment of receiver); FTC v. Career Information Services, Inc., No. 1:96-CV-1464-ODE (N.D. Ga. June 13, 1996) (TRO with asset freeze and immediate access to premises); FTC v. Windward Marketing, Ltd., No. 1:96-CV-0615-FMH (N.D. Ga. March 12, 1996) (TRO with asset freeze, immediate access, and appointment of receiver); FTC v. Marquette, Inc., No. 95-CV-1749-RLV (N.D. Ga. July 10, 1995) (TRO with asset freeze and immediate access); FTC v. United Consumer Services, Inc., No. 1: 94-CV-3164-CAM (N.D. Ga. Nov. 30, 1994) (TRO with asset freeze and immediate access); FTC v. Claude A. Blanc, Jr., No. 2:92-CV-129-WCO (N.D. Ga. June 16, 1992) (TRO with asset freeze and immediate access); and FTC v. Transworld Courier Services, Inc., No. 1:90-CV-1635-RHH (N.D. Ga. 1990) (TRO with asset freeze, immediate access, and appointment of receiver). (Cited TRO Orders are attached in Volume 4).

14. An individual's status as a corporate officer gives rise to a presumption of ability to

control a small, closely-held corporation. "A heavy burden of exculpation rests on the chief executive and primary shareholder of a closely held corporation whose stock-in-trade is overreaching and deception." Standard Educs., Inc. v. FTC, 475 F.2d 401, 403 (D.C. Cir.), cert. denied, 414 U.S. 828 (1973).

15. To satisfy Section 5's knowledge requirement, the Commission "need not demonstrate . . . that the individual Defendants possessed the intent to defraud." Jordan Ashley, 1994-1 Trade Cas. at 72,096 (citing Amy Travel, 875 F.2d at 573-74). In addition, "direct participation in the fraudulent practices is not a requirement for liability. Awareness of fraudulent practices and failure to act within one's authority to control such practices is sufficient to establish liability." Atlantex Assocs., 1987-2 Trade Cas. at 59,254 (citations omitted).

16. See footnote 13.