UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

FEDERAL TRADE COMMISSION,

Plaintiff

vs.

METROPOLITAN COMMUNICATIONS CORP., et al.,

Defendants

94 Civ. 0142 (JSR)

FINAL JUDGMENT AND ORDER FOR PERMANENT INJUNCTION

AND FOR SETTLEMENT OF CLAIMS FOR MONETARY RELIEF

AS TO DEFENDANT JOAN ORTH

Plaintiff, Federal Trade Commission ("Commission") commenced this action by filing its Complaint against Joan Orth and others on January 11, 1994, alleging that they engaged in unfair or deceptive acts and practices in violation of Section 5 of the Federal Trade Commission Act, 15 U.S.C. 45 (the "Act"), and seeking a permanent injunction and redress for injured consumers, pursuant to Section 13(b) of the Act, 15 U.S.C. 53(b).

On January 14, 1994 the Court entered an ex parte Temporary Restraining Order and asset freeze against all defendants and appointed a Temporary Receiver for the corporate defendants, Metropolitan Communications Corp., Columbia Communications Service Corp., Nationwide Digital Data Corp., and Stephens Sinclair, Ltd. (collectively, "the Receivership Companies"). On January 31, 1994 this Court entered a Stipulated Order for Preliminary Injunction With Asset Freeze as to defendant Orth ("the Stipulated Order"), and appointed Daniel R. Goodman, Esq., Permanent Receiver ("the Receiver") for the Receivership Companies.

Joan Orth, the Commission and the Receiver have stipulated to the entry of the following Final Judgment and Order in settlement of the Commission's Complaint against Orth. Being advised in the premises, the Court enters the following Order.

FINDINGS

  1. This is an action by the Commission instituted under Sections 5 and 13(b) of the Federal Trade Commission Act, 15 U.S.C. 45 and 53(b). The Complaint seeks both permanent injunctive relief and consumer redress for alleged deceptive acts or practices by Orth and others in connection with the promotion and sale of application preparation and filing services for Specialized Mobile Radio ("SMR") licenses issued by the Federal Communications Commission ("FCC") and investments in systems using those licenses.
  2. The Commission alleges that, from approximately June 1992 until January 1994, Orth maintained a substantial course of trade in the sale of application preparation and filing services for SMR licenses and in other investments using those licenses; that she sold such services and investments through written promotional materials and telephone sales presentations; and that she made material representations that were false and misleading, and failed to disclose material facts, to purchasers and prospective purchasers, as set forth in the Commission's Complaint.
  3. Orth contests the Commission's allegations and denies same.
  4. The Commission has the authority under Section 13(b) of the Act to seek the relief it has requested.
  5. This Court has jurisdiction over the subject matter of this case and has jurisdiction over Orth. Venue in the Southern District of New York is proper, and the Complaint states a claim upon which relief may be granted against Orth under Sections 5(a) and 13(b) of the FTC Act.
  6. The activities of Orth were in or affecting commerce, as defined in 15 U.S.C. 44.
  7. Orth waives all rights to seek judicial review or otherwise challenge or contest the validity of this Order. She also waives any claim that she may have held under the Equal Access to Justice Act, 28 U.S.C. 2412, concerning the prosecution of this action to the date of this Order. Except as provided below, each settling party shall bear its own costs and attorneys' fees.
  8. This civil action and the relief ordered herein are in addition to, and not in lieu of, other remedies as may be provided by law, including both civil and criminal remedies. Defendant Orth, by signing and stipulating to this Order, acknowledges and agrees that this action has not placed her in jeopardy and that this Order does not preclude subsequent criminal action against her.
  9. The Receiver and Orth have entered into an agreement, subject to approval of this Court, to exchange mutual releases.
  10. Entry of this Order is in the public interest.

ORDER

For purposes of this Order the following terms shall have the meanings specified below:

A. "Investment" or "Investment Offering" shall mean any service, product or interest, including any partnership, interest in any partnership, or other beneficial interest, tangible or intangible, that in any way is (1) offered for sale, traded or sold, to be held, wholly or in part, for purposes of economic benefit, profit, or income, or (2) offered for sale, traded or sold, based on representations, wholly or in part, express or implied, about past or future income, appreciation, or resale value.

B. “Telemarketing” or "Business of Telemarketing" shall mean the offer for sale or sale of a product or service that in any way involves telephonic sales presentations, unless such activities primarily involve regular, substantial, and continuing face-to-face contact between the offeror or seller and all or substantially all of the offerees or buyers.

C. "Telemarketed Product" or "Telemarketed Service" shall mean the offer for sale or sale of any product or service, including but not limited to partnerships, interest in any partnership, or other beneficial interests, tangible or intangible, that in any way is offered for sale or sold through telephonic sales presentations, unless such activities primarily involve regular, substantial, and continuing face-to-face contact between the offeror or seller and all or substantially all of the offerees or buyers.

D. "Notice to the Commission" shall mean that Orth provides the required information in writing, signed by Orth, to:

Associate Director for Service Industry Practices
Federal Trade Commission
6th and Pennsylvania Avenue, N.W., Room H-200
Washington, D.C. 20580

Re: FTC v. Metropolitan Communications Corp., et al.
File X940024

Notice shall be sufficient if sent by First Class mail, postage pre-paid or personally delivered to the above addressee.

E. "And" and "or" shall be construed conjunctively or disjunctively as necessary, to make the applicable phrase or sentence inclusive rather than exclusive.

I. PROHIBITED BUSINESS PRACTICES

IT IS HEREBY ORDERED that Orth, and her officers, directors, agents, servants, employees, salespersons, corporations, subsidiaries, affiliates, successors, assigns, and other entities or persons directly or indirectly under her control, and all persons or entities in active concert or participation with her who receive actual notice of this Order by personal service, or otherwise, are hereby permanently restrained and enjoined from the promotion, advertising, marketing, sale, or offering for sale, through telemarketing, of any investment or investment offering;

IT IS FURTHER ORDERED that Orth, and her officers, directors, agents, servants, employees, salespersons, corporations, subsidiaries, affiliates, successors, assigns, and other entities or persons directly or indirectly under her control, and all persons or entities in active concert or participation with her who receive actual notice of this Order by personal service or otherwise, in connection with the promotion, advertising, marketing, sale, or offering for sale of any application preparation services for Specialized Mobile Radio ("SMR") licenses issued by the Federal Communications Commission, any investment, investment offering, telemarketed product, or telemarketed service, are hereby permanently restrained and enjoined from:

(i) Falsely representing, directly or by implication, that purchasers of SMR license application services are likely to earn income of $4,000 per year or more within eighteen months of the start of operation of their license;

(ii) Falsely representing, directly or by implication, that a single individual or entity may own a license for only one SMR channel in any one geographical area;

(iii) Falsely representing, directly or by implication, that the only way a current holder of an SMR license or a current provider of SMR services can acquire additional SMR frequencies is to lease them from other licenseholders;

(iv) Falsely representing, directly or by implication, that SMR licenses are highly valuable and are likely to be worth many thousands of dollars;

(v) Falsely representing, directly or by implication, that the purchase of SMR license application and filing services is an excellent, low risk investment;

(vi) Misrepresenting, directly or by implication, any other material fact likely to affect a consumer's decision to purchase SMR license application preparation and filing services;

(vii)Falsely representing, directly or by implication, that it is highly likely that a 20 channel SMR operating system will be a successful, economically viable competitor to existing cellular phone systems for mobile telephone customers;

(viii)Falsely representing, directly or by implication, that it is highly likely that each share in an SMR partnership will yield to its purchaser $2,500 or more per year in annual income;

(ix) Falsely representing, directly or by implication, that an investment in a partnership to construct or operate an SMR system(s) is an excellent investment;

(x) Failing to disclose orally and in writing, clearly and prominently, that license management and option agreements may violate FCC statutes and regulations concerning the real party-in-interest in, and the transfer of control of, an FCC license, and that the consequences of such violation could be, among other things, revocation of the FCC licenses used by the SMR systems offered by Orth.

(xi) Falsely representing, in any manner, directly or by implication, any fact material to any investment or investment offering, including (without limitation) the riskiness, liquidity, market value, resale value, or expected income to be derived from said investment or investment offering;

(xii) Falsely representing, in any manner, directly or by implication, any fact material to any telemarketed product or telemarketed service;

(xiii)Conducting or participating in the business of telemarketing without compliance with all applicable federal and state registration and bond requirements;

(xiv)Violating any provision of the federal Telemarketing Sales Rule ("the Rule"), as set forth at 16 C.F.R. Part 310, or as the Rule may hereafter be amended.

IT IS FURTHER ORDERED that the prohibitions contained in this Section apply to any oral and written representations, and to assisting others in the making of any false representations delineated in this Section. The prohibitions in this Section shall be in addition to any restrictions and prohibitions contained in other Sections of this Order.

II. MONETARY RELIEF

IT IS FURTHER ORDERED that Judgment is hereby entered against Orth and in favor of the Commission in the amount of TWENTY THOUSAND DOLLARS ($20,000) for equitable monetary relief, including, but not limited to, consumer redress. Within twenty (20) days of entry of this Order, Orth shall transfer, or cause to be transferred, to the Commission, by wire or certified check, the full amount of this judgment. Any financial institution holding any assets of Orth is hereby authorized to transfer the above amount to the Commission. Upon payment to the Commission of the full judgment amount, as evidenced by a letter confirming receipt of same from counsel for the Commission, all freezes of Orth's assets imposed pursuant to the Stipulated Order shall be removed and released;

IT IS FURTHER ORDERED that Orth shall (1) release, relinquish, discharge and transfer any and all of her rights, title and interest in any FCC licenses, or the proceeds resulting from any prior sale thereof remaining to be paid to her, to the Receiver; and

(2) at the request of the Receiver, execute and deliver any and all documents required by the Receiver to effectuate any transfer of her licenses or the proceeds thereof;

IT IS FURTHER ORDERED that funds received by the Commission pursuant to this Section shall be deposited in an interest bearing account maintained by the Commission or the Receiver. Said funds shall be distributed as redress to eligible consumers holding allowed claims, in accordance with an Order to be entered by this Court. The Receiver, in consultation with the Commission, shall submit to the Court for its review and approval a Consumer Redress Plan ("the Plan") for the disbursement of funds. The Plan shall set forth, among other things, the criteria and parameters for participation by injured consumers in a redress program, and may delegate any and all tasks connected with such redress program to the Receiver, his agents, and/or any individuals, partnerships, or corporations, and shall provide for payment of the fees, salaries, and expenses incurred in carrying out said tasks from the funds received pursuant to this Section;

IT IS FURTHER ORDERED that the facts as alleged in the Complaint shall be taken as true in any subsequent litigation to collect amounts due pursuant to this Order, including but not limited to a nondischargeability Complaint in any bankruptcy case.

III. RECORDKEEPING REQUIREMENTS

IT IS FURTHER ORDERED that, for seven years from the date of entry of this Order, Orth, and her officers, agents, servants, employees, and all other persons or entities in active concert or participation with her who receive actual notice of this Order by personal service or otherwise, in connection with the advertising, promotion, offering for sale or sale of any investment, investment offering, telemarketed product or telemarketed service, are hereby enjoined and restrained from:

A. Destroying, concealing, transferring, or otherwise disposing of any correspondence to or from customers or law enforcement authorities, lead sheets, personnel records, shipping and mailing records maintained in the ordinary course of business, and exemplar copies of all written promotional material, scripts, and training materials;

B. Failing to make and keep records about any transaction between (1) Orth, directly or indirectly, or through any business owned, managed or controlled by her, directly or indirectly, and (2) any customer. Such records shall include the following: the customer's name, address and telephone number; a description of the good, service, or interest purchased; the dollar amounts the customer paid; the sales agent's name; and the date of the sale(s);

C. Failing to make and keep records that reflect, for every complaint or refund request by any customer of Orth or by any customer of any business owned, managed or controlled by her, directly or indirectly, whether such complaint or refund request is received directly or indirectly or through any third party: (1) the customer's name, address, telephone number and the dollar amount paid by the customer; (2) the written complaint, if any, and the date of the complaint or refund request; (3) the basis of the complaint, including but not limited to the name of any salesperson or agent complained against, and the nature and result of any investigation conducted concerning the validity of the complaint; (4) each response and the date of the response; (5) any final resolution and the date of the resolution; and (6) in the event of a denial of a refund request, the reason for such denial, or if the complaint was cured, the basis for determining that the complaint was cured;

D. Failing to make and keep books, records of cash disbursements and receipts, bank and other financial account statements, and accountants' reports that, in reasonable detail, accurately reflect the assets and liabilities, owners' equity, sources of revenue, expenses, and disposition of assets for all business entities owned, managed, or controlled by Orth directly or indirectly.

IV. MONITORING PROVISIONS

IT IS FURTHER ORDERED, to monitor compliance with this Order, that:

A. Orth shall notify the Commission in writing within ten days of the entry of this Order, of her current residence address, mailing address (for receipt of notice and service of process), telephone numbers, and employment status, including but not limited to the name, address, and telephone number of her current employer(s), and her job description;

B. For a period of seven years from the date of entry of this Order, Orth shall notify the Commission in writing within ten days of any changes in her residence or mailing address or employment status, including but not limited to the names, addresses, and telephone numbers of her new employer(s), and her new job description;

C. For a period of seven years from the date of entry of this Order, if Orth becomes affiliated, in any capacity, with a business entity, the activities of which include the advertising, promotion, offering for sale or sale of any investment, investment offering, telemarketed product or telemarketed service, Orth shall:

(1) within ten days of beginning such affiliation, notify the Commission in writing, such notice to include her new business address and telephone number; the name of the business's principals and Orth's supervisors, a statement of the business's activities, and Orth's duties and responsibilities;

(2) provide a copy of this Order to all salespersons Orth supervises, within ten days of beginning such supervision;

(3) if Orth participates as a principal, director, officer, majority owner, partner, or other controlling party, in such business entity, she shall, within ten days of beginning of her employment, provide a copy of this Order to any person whom she or the business employs (whether designated as an employee, independent contractor, consultant, or otherwise).

(4) upon providing a copy of this Order as described in subparagraphs C.2 and C.3 above, Orth shall obtain a signed statement from each recipient acknowledging receipt of the Order, and giving the recipient's residential address and telephone number. Orth shall maintain each such statement as part of her business records. Should any recipient fail or refuse to provide Orth with a signed statement, Orth shall prepare a signed statement that such recipient has been provided a copy of this Order, and that provides the recipient's residential address and telephone number. Orth shall maintain each such signed statement as part of her business records; and

D. Orth shall:

(1) permit representatives of the Commission, within forty-eight hours of receipt of written notice from the Commission, access during normal business hours to any office, or facility storing documents, of any business owned by her, or of which she is a principal, director, officer, partner, or other controlling party, to inspect and copy all documents belonging to such business or her, relating in any way to any matter contained in this Order;

(2) refrain from interfering with any duly authorized representatives of the Commission who seek to interview her employers, employees (whether designated as employees, consultants, independent contractors or otherwise), or agents, about any matter relating in any way to any matter subject to this Order; and

(3) upon written request by any duly authorized representative of the Commission, submit written reports (under oath, if requested), and produce documents, on forty-eight hours notice, relating in any way to any matter subject to this Order.

Provided, that the Commission may otherwise monitor the compliance of Orth with this Order by all lawful means available, including but not limited to the use of compulsory process, the taking of depositions or oral testimony, and the use of investigators posing as consumers or suppliers.

V. RIGHT TO REOPEN

IT IS FURTHER ORDERED that, within three business days after entry of this Order, Orth shall submit to the Commission a truthful, sworn statement that shall reaffirm and attest to the truth, accuracy, and completeness of her financial statements dated May 17, 1997 , and any subsequent written updates thereto which have been provided to the Commission.

The Commission's agreement to this Order is expressly premised upon the truthfulness, accuracy, and completeness of the financial statements dated May 17, 1997, and subsequent updates. If, upon motion by the Commission, the Court finds that the financial statements or subsequent updates failed to disclose any material asset, materially misrepresented the value of any asset or made any other material misrepresentation or omission as to Orth's financial status, the Commission may request that this Order be reopened as to her for the misrepresentation or omission for the sole purpose of increasing the monetary judgment against her to the sum of $500,000, less any payments made pursuant to Section II, above; provided, however, that in all respects this Order shall remain in full force and effect unless otherwise ordered by the Court and Orth shall have no right to contest any of the allegations in the Commission's Complaint in any proceedings brought pursuant to this section; provided, further, that proceedings instituted under this section shall be in addition to and not in lieu of any other civil or criminal remedies as may be provided by law, including any other proceedings the Commission may initiate to enforce this Order.

VI. RETENTION OF JURISDICTION

IT IS FURTHER ORDERED that this Court shall retain jurisdiction of this matter for purposes of construction, modification and enforcement of this Order. In the event that the Commission initiates proceedings to enforce this Order and the Court finds that Orth has violated the Order, Orth shall pay the costs and attorneys' fees incurred by the Commission in such enforcement proceedings.

VII. ENTRY OF THIS JUDGMENT

IT IS FURTHER ORDERED that, there being no just reason for delay of entry of this judgment, pursuant to Fed.R.Civ.P. 54(b), the Clerk shall enter this Order immediately.

The undersigned hereby STIPULATE AND AGREE to the entry of this Order which shall constitute a final judgment in this action as to Joan Orth.

Dated:

Joan Orth

Dated:

Daniel R. Goodman, Esq.
Receiver for Metropolitan Communications Corp.,
Columbia Communications Service Corp.,
Nationwide Digital Data Corp., and
Stephens Sinclair, Ltd.

Dated:

Stephen Gurwitz, Esq.
Attorney for Plaintiff
Federal Trade Commission

SO ORDERED this day of , 199 .

JED S. RAKOFF
UNITED STATES DISTRICT JUDGE