UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF VIRGINIA
NORFOLK DIVISION

FEDERAL TRADE COMMISSION, Plaintiff,

v.

S.J.A. SOCIETY, INC., doing business as
Apex Marketing Group,
Atlantic Service Corp.,
ASC, and
Publishers Service,
Thomas P. Johnson, individually,
and as an officer and director of said corporation, and
Thomas Alan Blair,d/b/a
Advance Communications, individually, and
as general manager of S.J.A. Society, Inc., Defendants.

Civ. No. 2:97cv-472

STIPULATED FINAL JUDGMENT AND ORDER
FOR PERMANENT INJUNCTION AND CONSUMER REDRESS

Plaintiff, the Federal Trade Commission ("FTC" or "Commission"), has filed its complaint for permanent injunction and other relief pursuant to sections 13(b) and 19 of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. §§ 53(b) and 57b, the Telemarketing and Consumer Fraud and Abuse Prevention Act ("Telemarketing Act"), 15 U.S.C. § 6101 et seq., and the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692 et seq., charging defendants S.J.A. Society, Inc., doing business as Apex Marketing Group, Atlantic Service Corp., ASC, and Publishers Service, Thomas P. Johnson, and Thomas Alan Blair with violating Section 5 of the FTC Act, the FTC's Trade Regulation Rule entitled "Telemarketing Sales Rule," 16 C.F.R. Part 310, and the FDCPA.

The parties have agreed to the entry of this Stipulated Final Judgment and Order for Permanent Injunction and Consumer Redress ("Order") by this Court to resolve all matters of dispute between them in this action.

NOW, THEREFORE, Plaintiff Federal Trade Commission and defendants S.J.A. Society, Inc., doing business as Apex Marketing Group, Atlantic Service Corp., ASC, and Publishers Service, Thomas P. Johnson, and Thomas Alan Blair having requested the Court to enter this Order,

IT IS HEREBY ORDERED, ADJUDGED AND DECREED as follows:

FINDINGS

1. This Court has jurisdiction of the subject matter of this case and of the parties consenting hereto;

2. Venue is proper as to all parties in the Eastern District of Virginia;

3. The activities of defendants are in or affecting commerce, as defined in the FTC Act, 15 U.S.C. § 44;

4. The Complaint states a claim upon which relief may be granted against defendants S.J.A. Society, Inc., doing business as Apex Marketing Group, Atlantic Service Corp., ASC, and Publishers Service, Thomas P. Johnson, and Thomas Alan Blair under Sections 5 and 19 of the FTC Act, 15 U.S.C. §§ 45(a) and 57b, the Telemarketing Sales Rule, 16 C.F.R. Part 310, and the FDCPA, 15 U.S.C. § 1692 et seq.;

5. Defendants have waived all rights that may arise under the Equal Access to Justice Act, 28 U.S.C. § 2412, amended by Pub. L. 104-121, 110 Stat. 847, 863-64 (1996);

6. Defendants waive all rights to seek appellate review or otherwise challenge or contest the validity of this Order, and further waive and release any claim defendants may have against the Commission, the receiver, or the employees, agents, or representatives of the Commission and the receiver; and

7. This Order does not constitute and shall not be interpreted to constitute an admission by defendants that they have engaged in violations of the FTC Act, the Telemarketing Sales Rule, or the FDCPA, and defendants deny that they have engaged in any such violations, and they consent to entry of this order solely to avoid the time and expense of further litigation.

DEFINITIONS

1. "Defendants" means S.J.A. Society, Inc., doing business as Apex Marketing Group, Atlantic Service Corp., ASC, and Publishers Service ("SJA"), Thomas P. Johnson ("Johnson"), and Thomas Alan Blair ("Blair"), and their agents, employees, officers, and servants, and those persons in active concert or participation with them who receive actual notice of this order by personal service or otherwise.

2. "Consumer" means a purchaser, customer, subscriber, or person.

3. "Material" means likely to affect a consumer's choice of, or conduct regarding, goods or services, as that term is defined in the Telemarketing Sales Rule, 16 C.F.R. § 310.2(k).

PROHIBITED BUSINESS ACTIVITIES

I.

IT IS THEREFORE ORDERED that, in connection with the offering for sale, sale, or servicing of any magazine subscriptions, defendants are hereby permanently restrained and enjoined from misrepresenting, either orally or in writing, expressly or by implication, any material fact, including, but not limited to:

A. That any consumer will receive or is entitled to receive any prize, cash, airline ticket, coupon, or other good or service;

 

B. That any consumer can receive magazines by paying only a handling, shipping, processing, or similar charge;

 

C. That any consumer may cancel any transaction;

 

D. The cost of any magazine subscription;

 

E. The enforceability, or validity of any contract; and

 

F. That any consumer is or previously has been a customer of any defendant.

II.

IT IS FURTHER ORDERED that, in connection with the offering for sale, sale, or servicing of any magazine subscription, defendants are hereby permanently restrained and enjoined from failing to disclose in a clear and conspicuous manner before a consumer sends funds to defendants or divulges his or her credit card or bank account information, the total price the consumer must pay for defendants' magazine subscriptions, including:

A. The amount of each monthly payment;

 

B. The number of payments;

 

C. The conditions under which consumers will be assessed late charges, and the amount

of such charges; and

 

D. The cost, if any, of changing or substituting any magazine subscription for another.

III.

IT IS FURTHER ORDERED that, in connection with the offering for sale, sale, or servicing of any magazine subscription, defendants are hereby permanently restrained and enjoined from:

A. Failing to allow a consumer at least thirty (30) days to cancel a purchase from the date of delivery of all materials and disclosures required by state or federal law; and

 

B. Failing to credit a consumer's credit card account or issue a refund check, as the case may be, within seven (7) business days from the receipt of a cancellation request made in accordance with this Part.

IV.

IT IS FURTHER ORDERED that defendants are hereby permanently restrained and enjoined from attempting to collect, either directly or through any debt collector, any debt or alleged debt, from any consumer who exercises the right to cancel as provided for in Part IX.G. of this Order.

V.

IT IS FURTHER ORDERED that defendants are hereby permanently restrained and enjoined from failing to comply with the Telemarketing Sales Rule, 16 C.F.R. Part 310, a copy of which is attached hereto as Attachment A, and incorporated herein as if fully set forth verbatim. In the event the Telemarketing Sales Rule is hereafter amended or modified, defendants' compliance with the Telemarketing Sales Rule as so modified shall not be deemed a violation of this Part.

VI.

IT IS FURTHER ORDERED that, in connection with any telemarketing, defendants are hereby permanently restrained and enjoined from failing to comply with the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq., including when defendants collect or attempt to collect their own debts.

VII.

IT IS FURTHER ORDERED that defendants are hereby permanently restrained and enjoined from providing to any person, except agents of the Plaintiff, the receiver, or other law enforcement authorities, the name, address, telephone number, or credit card or bank account number of any consumer who provided such information to or did business with defendants between May 14, 1992 and the date this Order is entered; provided, however, that defendants may provide such information if required to do so by Court Order.

VIII.

IT IS FURTHER ORDERED that, in the event defendants or defendants' agents tape-record any conversation with a consumer to verify or confirm that a consumer is agreeing to purchase defendants' goods or services, defendants are permanently restrained and enjoined from accepting or processing such purchases unless the tape-recording meets the following criteria:

A. After obtaining permission from the consumer to tape-record the conversation, the tape recording shall reflect the entirety of the conversation;

 

B. The tape recording must clearly reflect the consumer's agreement to tape-record the call;

 

C. The tape recording must include clear, complete, and understandable disclosures of all material terms of the purchase, and that the consumer has expressly agreed to the material terms. The material terms disclosed in the tape-recorded conversation shall be consistent with any material terms previously disclosed to the consumer. Material terms include, but are not limited to:

 

1. Whether any consumer will receive or is entitled to receive any prize, cash, airline ticket, coupon, or other good or service;

 

2. Any handling, shipping, processing, or similar charge, or whether any consumer can receive magazines by paying only a handling, shipping, processing, or similar charge;

 

3. The terms of cancellation of any transaction;

 

4. The cost of any magazine subscription;

 

5. The enforceability, or validity of any contract;

 

6. Whether any consumer is or previously has been a customer of any defendant;

 

7. The amount of each monthly payment;

 

8. The number of payments;

 

9. The conditions under which consumers will be assessed late charges, and the amount of such charges; and

 

10. The cost, if any, of changing or substituting any magazine subscription for another.

This Part of this Order shall not affect any obligation to comply with any federal, state, or local law regarding the tape-recording of telephone conversations.

CONSUMER REDRESS

IX.

IT IS FURTHER ORDERED that defendants SJA and Johnson shall pay to the Commission as full satisfaction of all monetary claims asserted by Plaintiff in the Complaint the sum of Seven Hundred and Fifty Thousand Dollars ($750,000). In lieu of the foregoing monetary amount, which shall be suspended subject to the conditions set forth in Part X of this Order, and based on the sworn representations in the financial statement of defendant Johnson, as provided for in Part X of this Order, defendants SJA and Johnson shall pay to the FTC $xx,xxx, and shall pay certain sums to the receiver and defendants' counsel, Mays & Valentine L.L.P., pursuant to a separate order of the Court filed under seal. Payment to the FTC by defendants Johnson and SJA shall be made as follows:

A. $xx,xxx upon approval of this Order by the Commission and entry by the Court;

 

B. Twenty Thousand Dollars ($20,000) payable in six (6) quarterly payments of $3,333.33 plus accrued interest at 5.15% per annum. At any time, and without penalty, defendants may pay the balance due, make more frequent payments or make larger payments than scheduled.

 

C. To ensure payment of the above Twenty Thousand Dollars ($20,000), defendant Johnson shall execute a promissory note in such amount in favor of the Federal Trade Commission. Such note, which is attached hereto as Attachment B, shall be secured by certain collateral described therein and attached hereto as Attachment C, and the FTC is permitted to perfect a security interest in such collateral as permitted by law. In the event such security interest is found to be defective, after reasonable notice to Johnson, Johnson agrees to cooperate with Plaintiff to cure any deficiencies in perfecting said security interest. Defendant Johnson agrees that, as of the date of the signing of this Order, he shall not further encumber the security except with the express prior written permission of the staff of the Commission. Plaintiff agrees to release said security interest upon payment of the amounts set forth in this Section.

 

D. The Commission may apply any or all funds received from defendants pursuant to this Order, and any interest received thereon, to a consumer redress program and to related administrative expenses, or to the receivership estate; provided, however, that if the Commission determines a consumer redress program is not feasible, the Commission may pay such funds to the United States Treasury as disgorgement. The Commission shall have full and sole discretion to:

 

1. Determine the criteria for participation by individual claimants in any consumer redress program implemented pursuant to this Order;

 

2. Determine the manner and timing of any notices to be given to consumers regarding the existence and terms of such programs; and

 

3. Delegate any and all tasks connected with such redress program to any individuals, partnerships, or corporations; and pay the fees, salaries, and expenses incurred thereby from the payments made pursuant to this Order;

 

E. Defendants expressly waive their rights to litigate the issue of disgorgement. Defendants acknowledge and agree that all money paid pursuant to this Order is irrevocably paid to the Commission for purposes of settlement between Plaintiff and the defendants;

 

F. Defendants SJA and Johnson shall provide the Commission, or its agent, within thirty (30) days of such a request, the name, last known address, telephone number, date of purchase, credit card or bank account information, and the complete file record, including computer records and correspondence, of each consumer who purchased defendants' magazine subscriptions during the time period between May 14, 1992 and the date this Order is entered, as well as any further information Plaintiff deems necessary to effecting a consumer redress program; and

 

G. Within forty-five (45) days of the entry of this Order, defendants SJA and Johnson shall mail the letter attached to this Order as Attachment D ("notification letter") offering an opportunity to cancel the magazine subscription to each consumer who, during the time period between May 14, 1992 and the date this Order is entered: 1) requested a cancellation; 2) complained to defendants that they had been misled by defendants' solicitation, including any customers who indicated that once they correctly understood the actual cost of defendants' magazine subscriptions, realized they could not afford to pay for such magazine subscriptions; or 3) was sent a Warrant in Debt that the Virginia Beach General District Court had not issued. As to these consumers, it is agreed by the parties that such consumers are presumed to have requested cancellation of their magazine subscriptions and such request was denied. Defendants SJA and Johnson shall send notification letters by first-class, postage-prepaid mail, and shall include a postage-paid reply envelope. Defendants SJA and Johnson shall cancel such consumers' purchases immediately upon receipt of a request to do so, and shall cease and desist from attempting to collect any outstanding balance, or from assigning or selling such balance to any third party. Defendants SJA and Johnson shall maintain a record of each notification letter mailed, each response to such letters requesting cancellation, and the date the cancellation was effective.

X.

IT IS FURTHER ORDERED that the Court's approval of this Order is expressly premised upon the truthfulness, accuracy, and completeness of the financial statements provided to counsel for Plaintiff by defendants Johnson and Blair. If, at any time following entry of this Order, the Commission obtains information indicating that any of defendants' representations on their financial statement concerning their assets, income, liabilities, or net worth were fraudulent, materially misleading, inaccurate, or incomplete, the Commission may, upon motion to the Court, request that the Order herein be reopened for the purpose of requiring additional consumer redress; provided, however, that in all other respects this Order shall remain in full force and effect unless otherwise ordered by this Court; and provided further, that proceedings instituted under this Part are in addition to, and not in lieu of, any other civil or criminal remedies as may be provided by law, including any other proceedings Plaintiff may initiate to enforce this Order.

A finding of material misrepresentation or omission as to the financial statement of any defendant will render immediately due and payable the entire amount of the suspended judgment herein entered against said defendant, provided that the Federal Trade Commission will not seek an amount in excess of said judgment.

XI.

IT IS FURTHER ORDERED that, after payment of those sums to the receiver and counsel for defendants SJA and Johnson as specified in Part IX of this Order, A.G. Edwards & Sons, Inc., St. Louis, MO, and Central Fidelity National Bank, Richmond, VA shall forthwith transfer to the Plaintiff's escrow account, as directed by counsel for Plaintiff, all remaining assets held on behalf of any defendant. These transfers shall satisfy the obligations of SJA and Johnson as described in Part IX.A. of this Order. Defendants waive and relinquish any claim that they may have to such assets.

XII.

IT IS FURTHER ORDERED that defendants SJA and Johnson shall, within sixty (60) calendar days after the date of entry of this Order, send a written notice to each credit bureau or other credit reporting agency to whom SJA, or its officers, agents, servants, or employees submitted derogatory credit information relating to any consumer's failure to pay for any goods or services sold by defendants, where the consumer has not personally signed an agreement to purchase defendants' goods or services. The notice shall inform the credit reporting agency that such derogatory credit information on such consumer should be removed from the consumer's credit record.

GENERAL REQUIREMENTS

XIII.

IT IS FURTHER ORDERED that, in connection with the telemarketing of goods or services to consumers, defendants SJA and Johnson shall create and maintain procedures to ensure compliance by their employees, telemarketers, and agents with this Order, the Telemarketing Sales Rule, and the FDCPA. Defendants shall immediately terminate any such person who fails to comply with this Order, the Telemarketing Sales Rule, or the FDCPA, to the extent such termination is permitted under state or Federal law.

XIV.

IT IS FURTHER ORDERED that for a period of five (5) years from the date of entry of this Order, defendants SJA and Johnson shall create and maintain:

A. Records sufficient to demonstrate defendants' compliance with the provisions of this Order;

 

B. Records containing the name, address, and telephone number of each consumer who purchases goods or services from defendants either directly or though any third party;

 

C. A record of each written consumer complaint (including complaints referred from any third party, such as any office of the Better Business Bureau or any State Attorney General), and each refund request received by any defendant, including:

 

1. The consumer's name, address, telephone number and the dollar amount paid by the consumer;

 

2. The consumer's written complaint or refund request and the date the complaint or refund request was received;

 

3. The basis of the complaint or refund request, if known, and the nature and result of any investigation conducted as to the complaint;

 

4. The response to the complaint or refund request and the date of the response; and

 

5. The final resolution, the date of the resolution, and, in the event of a denial of a refund request, the reason for the denial; and

 

D. With regard to complaints or refund requests received by telephone, defendants SJA and Johnson shall develop and maintain a program to create and maintain the same information as identified in Part C.1 through C.5 of this Part.

XV.

IT IS FURTHER ORDERED that, for a period of five (5) years from the date of entry of this Order, for purposes of determining or securing compliance with this Order, any defendant shall:

A. Upon reasonable written notice by any representative of the Commission, permit representatives of the Commission access during normal business hours to the offices of any business owned or controlled in whole or in part by him to inspect and copy all documents relating in any way to any conduct subject to this Order;

 

B. Upon written request by any representative of the Commission produce documents on thirty (30) days notice concerning any conduct subject to this Order;

 

C. Defendants, their officers, directors, and employees, shall appear within thirty (30) days notice to be deposed concerning any conduct subject to this Order, or within such time as is jointly agreed to by the counsel for the and defendants' counsel, if defendants have counsel; and

 

D. The Commission may otherwise monitor the defendants' compliance with this Order by all lawful means available, including the use of investigators posing as consumers or vendors.

XVI.

IT IS FURTHER ORDERED that for a period of five (5) years from the date of entry of this Consent Decree, defendants Johnson and Blair shall promptly inform the Commission by prior written notification at least thirty (30) days in advance, or in the case of involuntary termination of employment, within thirty (30) days of such termination, of:

A. Any change in their residential address, occupation, place of business, or place of employment;

 

B. Any change in their employment status;

 

C. Any change in the name, address, type of business, or identity of each company, corporation, partnership, or business owned or controlled directly or indirectly by any of them;

 

D. Any proposed change in any company, corporation, partnership, or business that is owned or controlled, directly or indirectly, by any of them including, but not limited to, dissolution, assignment, or sale resulting in the emergence of a successor corporation, the creation or dissolution of subsidiaries, or any other change in their business relationship(s) that may affect compliance obligations arising out of this Order;

 

E. Their affiliation with a new business or employment that involves telemarketing, including a description of such business, the business address, and of their interest in and duties in connection with such business or employment;

 

F. The formation of any corporation, sole proprietorship, partnership, or independent consulting business or any other business entity that is engaged directly or indirectly in telemarketing, in which any of them is or is to become an officer or director, or in which any one of them is or is to become a holder of 10% or more of the stock; and

 

G. Any termination or suspension of business operations by any of them, the resumption of business operations, or any termination, suspension or establishment of any type of consulting relationship with any third party relating to telemarketing.

XVII.

IT IS FURTHER ORDERED that for a period of one year the defendants and their successors and assigns shall distribute a copy of this Order to all present and future officers, agents, representatives, employees, and independent contractors, and shall secure from each such person a signed statement acknowledging receipt of said Order. Within fifteen (15) days of entry of this Order, defendants shall file with the Federal Trade Commission an affidavit setting forth the fact and manner of their compliance, including the name and title of each person to whom a copy of the Order has been provided, and a copy of their acknowledgment. Thereafter, defendants shall file affidavits every 60 days for a period of one year from the date this Order is entered.

XVIII.

IT IS FURTHER ORDERED that all notifications required of defendants by this Order, or concerning this Order, shall be sent to the following address:

Associate Director
Division of Marketing Practices
Federal Trade Commission Room 238
6th Street & Pennsylvania Avenue, N.W.
Washington, D.C. 20580

All notifications required of the FTC by this Order, or concerning this Order, shall be sent to the following address:

S.J.A. Society, Inc.
505 S. Independence Avenue
Suite 103
Virginia Beach, Virginia 23452

If defendants notify the FTC of a change in address, all future notifications from the FTC to defendants shall be sent to that address.

XIX.

IT IS FURTHER ORDERED that defendant Johnson shall be allowed to sell S.J.A. Society, Inc. to any purchaser of the same who agrees in writing to be bound by the terms and conditions of this Order governing the company's operation. Such sale shall be permitted only upon the FTC's approval of the terms of such sale. Such approval shall not be unreasonably withheld.

THE RECEIVERSHIP

XX.

IT IS FURTHER ORDERED that upon entry of this Order, the receivership over defendant SJA shall terminate, subject to the further provisions of this Order.

XXI.

IT IS FURTHER ORDERED that this Court will retain jurisdiction of this matter for the purpose of enabling any of the parties to this Order to apply to the Court at any time for such further orders or directives as may be necessary or appropriate for the interpretation or modification of this Order, for the enforcement of compliance therewith or the punishment of violations thereof.

SO ORDERED, this ______ day of __________, 1997 in Norfolk, Virginia.

_______________________________________
THE HONORABLE HENRY COKE MORGAN
UNITED STATES DISTRICT JUDGE
EASTERN DISTRICT OF VIRGINIA

FEDERAL TRADE COMMISSION

__________________________
George Brent Mickum IV

__________________________
Stephen L. Cohen
Counsel for Plaintiff
Federal Trade Commission
Washington, DC 20580
202-326-3143;3222

__________________________
Salvatore R. Iaquinto
Local Counsel
Assistant Attorney General
4164 Virginia Beach Blvd. #204
Virginia Beach, VA 23452
757-631-4020
Virginia Bar # 40288

_______________________
Frank J. Santoro, Esq.
Receiver
Marcus, Santoro, Kozak & Melvin, P.C.
355 Crawford Pkwy #700
Portsmouth, VA 23704
757-393-2555
Virginia Bar #20259

_______________________
Eric W. Schwartz
Counsel for defendants S.J.A. Society, Inc. and Thomas P. Johnson
Mays & Valentine, L.L.P.
999 Waterside Dr. #2525
Norfolk, VA 23510-3300
757-627-5500
Virginia Bar #27974

ATTACHMENT A

TELEMARKETING SALES RULE

ATTACHMENT B

Note

Norfolk, Virginia Date: August 1, 1997

$20,000.00

FOR VALUE RECEIVED, the undersigned, S.J.A. Society, Inc. and Thomas P. Johnson ("Maker"), promise to pay to the Federal Trade Commission (together with its assigns "Holder") at such place as the Holder may designate in writing, in lawful money of the United States of America, the principal sum of Twenty Thousand Dollars ($20,000.00), together with interest on the outstanding principal balance from time to time at the rate of Five and 15/100 percent (5.15%) per annum.

This Note shall be paid in six (6) equal quarterly installments of principal and accrued interest in the amount of Three Thousand Five Hundred and Five Dollars ($3,505.00) each. The first such payment shall be due and payable on November 1, 1997, and subsequent payments shall be due on the first day of every third month thereafter (February, May, August, and November) until this Note is paid in full. The Maker and any endorser or guarantor hereof shall have the right to prepay this Note at any time in whole or in part without premium or penalty.

The Maker and any endorsers waive the benefit of their homestead exemption, presentment, notice of dishonor and protest; agree that any extension of the time of payment of all or any part of this Note may be made before, at, or after maturity by agreement with the Holder without notice to and without releasing the liability of any other party to this Note.

This Note is secured by those assets of S.J.A. Society, Inc. and Thomas P. Johnson, which are listed on Attachment C. S.J.A. Society, Inc. and Thomas P. Johnson hereby grant Holder a security interest in such assets.

WITNESS the following signatures and seals:

S.J.A. Society, Inc. Thomas P. Johnson

By:

President Individually

ATTACHMENT C

COLLATERAL SECURING PROMISSORY NOTE

1. 1994 Toyota Supra, VIN JT2JA82J9R0020548.

2. Two AMCAT/IBM Compatible Multi-user Computer System, Serial #s 3462 and 3463.

3. Four AMCAT Compatible Workstations, Serial #s 3445, 3454, 3456, and 3461.

4. One Panasonic KX 2023 Printer.

5. One HP LaserJet 4L Printer.

6. One Minolta dc-142RE Copier.

7. One LexMark Printer.

8. One Epson Color 800 Stylus.

9. One HP LaserJet 5 Printer.

10. One Sharp Copier SF-2118.

ATTACHMENT D

Dear Customer:

According to our records, you may have complained about your magazine subscription or requested that we cancel your subscription, and we denied that request. As part of a settlement with the Federal Trade Commission, we are now giving you an opportunity to cancel your subscription. If you wish to cancel your magazine subscription, please sign this letter in the space provided below, and return the letter in the enclosed postage-paid envelope. As soon as we receive your request, we will cancel your subscription and reduce your outstanding balance to zero.

If we have not received this signed letter from you within thirty (30) days, we will assume you do not wish to cancel your subscription.

I want to cancel my subscription.

Name Date