UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA

FEDERAL TRADE COMMISSION, Plaintiff,

v.

NATIONAL SCHOLARSHIP FOUNDATION, INC.; D.B.F.
NATIONAL BUSINESS REPORTING BUREAU, INC., a.k.a. National Business Reporting Bureau, D. & B. National Business Reporting Bureau;
ELEANOR MORSE;
CALVIN MORSE;
DOROTHY BEAM;
SANDRA K. BROWN;
JAMES P. MCKENNA; and
TIMOTHY QUINN, Defendants.

-CIV-

Case No.

COMPLAINT FOR INJUNCTION AND OTHER EQUITABLE RELIEF

Plaintiff, the Federal Trade Commission ("Commission"), by its undersigned attorneys, alleges as follows:

JURISDICTION AND VENUE

1. This is an action under Section 13(b) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. 53(b), to secure injunctive and other equitable relief, including rescission, restitution and disgorgement, against defendants for violations of Section 5(a) of the FTC Act, 15 U.S.C. 45(a), which prohibits deceptive acts or practices.

2. This Court has subject matter jurisdiction over plaintiff's claims pursuant to 28 U.S.C.  1331, 1337(a), and 1345, and 15 U.S.C.  45(a) and 53(b).

3. Venue in this district is proper under 28 U.S.C.  1391(b) and (c), and 15 U.S.C.  53(b).

THE PARTIES

4. The Commission is an independent agency of the United States government created by the FTC Act, 15 U.S.C.  41-58. Section 13(b) of the FTC Act authorizes the Commission to initiate, by its own attorneys, federal district court proceedings to enjoin violations of Section 5(a) of the FTC Act and to secure such equitable relief, including consumer redress, as may be appropriate in each case.

5. Defendant National Scholarship Foundation, Inc. ("NSF") is a Florida corporation with its principal place of business at 100 East Linton Boulevard, Suite 500-A, Delray Beach, Florida 33483. NSF was incorporated on August 22, 1995, purportedly as a Florida non-profit corporation. Since August 1995, NSF has solicited consumers, through direct mail and telephone calls, to purchase its college scholarship search services. NSF transacts business in the Southern District of Florida.

6. Defendant D.B.F. National Business Reporting Bureau, Inc. ("NBRB") is a Florida corporation with its principal place of business at 4781 North Congress Avenue, Suite 199, Lantana, Florida 33462. NBRB also does business or has done business as National Business Reporting Bureau and D. & B. National Business Reporting Bureau. NBRB was incorporated on April 19, 1995, purportedly as a Florida non-profit corporation. Since August 1995, NBRB has reported business information concerning NSF to consumers. NBRB transacts business in the Southern District of Florida.

7. Defendant Eleanor Morse is a principal and director of NSF and since March of 1996 has been the president and registered agent of NSF. Since April 3, 1996, she has been an authorized signatory for NSF's bank accounts. Individually, or in concert with others, she directs, controls, formulates, or participates in the acts and practices of NSF, including the acts and practices complained of below. Eleanor Morse transacts business in the Southern District of Florida.

8. Defendant Calvin Morse is a founder of NSF. In March of 1996, he purportedly transferred control of NSF to Eleanor Morse by stepping down as NSF's president and registered agent and as a principal and director of NSF. However, he remains an authorized signatory for NSF's bank accounts. In addition, he continues to deal with third parties on behalf of NSF. Individually, or in concert with others, he directs, controls, formulates, or participates in the acts and practices of NSF, including the acts and practices complained of below. Calvin Morse transacts business in the Southern District of Florida.

9. Defendant Dorothy Beam is a director of NSF and is the vice president of NSF. In addition, she is the founder of NBRB. Until on or about August 6, 1997, she was the president and a director of NBRB. Individually, or in concert with others, she directs, controls, formulates, or participates in the acts and practices of NSF and NBRB, including the acts and practices complained of below. Dorothy Beam transacts business in the Southern District of Florida.

10. Defendant Sandra K. Brown is a director and the secretary of NSF. Individually, or in concert with others, she directs, controls, formulates, or participates in the acts and practices of NSF, including the acts and practices complained of below. Sandra Brown transacts business in the Southern District of Florida.

11. Defendant James P. McKenna is the general manager of NSF. Individually, or in concert with others, he directs, controls, formulates, or participates in the acts and practices of NSF, including the acts and practices complained of below. James McKenna transacts business in the Southern District of Florida.

12. Defendant Timothy Quinn is a director and the president of NBRB. From on or about April 4, 1997 until on or about August 27, 1997, he was a director and the secretary of NSF. Individually, or in concert with others, he directs, controls, formulates, or participates in the acts and practices of NSF and NBRB, including the acts and practices complained of below. Timothy Quinn transacts business in the Southern District of Florida.

13. At all times material to this complaint, corporate defendants NSF and NBRB have acted as a common enterprise. Corporate defendants NSF and NBRB share officers, employees and a common goal to deceive consumers into purchasing college scholarship search services.

DEFENDANTS' COURSE OF CONDUCT

14. Since at least August 1995, and continuing thereafter, defendants NSF, Eleanor Morse, Calvin Morse, Dorothy Beam, Sandra Brown and James McKenna have maintained a substantial course of trade in the offer and sale of college scholarship search services. Defendant Timothy Quinn joined NSF on or about April 4, 1997.

15. Since at least August 1995, and continuing thereafter, defendants NBRB and Dorothy Beam have maintained a substantial course of trade in the reporting of business information to consumers, and in particular the reporting of business information concerning NSF to potential customers of NSF. Defendant Timothy Quinn joined NBRB on or about August 6, 1997.

16. NSF annually sends millions of postcards nationwide to potential college students and their families to solicit NSF's scholarship search services. The postcards typically contain the following statement:

Please be advised that a recent addition to our files indicates your student is eligible for our "COLLEGE SCHOLARSHIP & GRANT PROGRAM". Last year a total of $40 billion in financial aid was awarded to families of all income levels. We will be accepting students on a first come, first serve basis. Please call our office 1-800-771-7737 for information and immediate confirmation. (ENROLLMENT GUARANTEES A MINIMUM OF $1,000.00)

17. NSF representatives answer calls to NSF's toll free number. A representative typically tells a caller that NSF can likely find thousands of dollars worth of free grants and scholarships for the student in question (usually the caller or the son or daughter of the caller) if the caller pays NSF's fee. NSF representatives will then explain that NSF's services are "guaranteed," and that NSF will refund its $189 fee (previously, a $179 fee and a $150 fee) to any NSF customer who does not receive $1,000 or more in scholarship money through NSF within one year. NSF representatives assure consumers that NSF finds funding for its customers through scholarships carefully matched to the needs and qualifications of the students in question. NSF representatives assure consumers that the scholarship sources provided by NSF are not known to the general public. NSF representatives further assure consumers that NSF finds funds that do not have to be paid back. NSF representatives typically conclude their telephone sales pitches by attempting to convince consumers to provide NSF with their credit card numbers over the phone, explaining that, because deadlines are fast approaching, time is of the essence and that the sooner NSF has its fee, the sooner NSF can start processing the paperwork and the sooner the consumer will get scholarships.

18. NSF generally does not provide consumers with any written materials before consumers pay NSF's fees. Thus, consumers who pay NSF's fees are relying entirely on NSF's postcards and the oral statements of NSF representatives.

19. A few days after the consumer pays NSF's fee, NSF sends the consumer a "Letter of Acceptance." To provide an aura of legitimacy to the transaction, NSF also sends consumers a report printed by NBRB and an instruction form encouraging consumers to call NBRB. Defendants' representatives portray NBRB as an independent, third party reporting organization that provides objective and reliable reports that accurately describe its members' business practices. The NBRB report states, among other things, that NSF has received a "Triple AAA Rating" from NBRB. The NBRB also falsely states that directors of NSF are members of the American Association for Higher Education. Consumers who call the toll-free number for NBRB, in order to obtain further information about NSF, get a recorded message that restates the written report almost word-for-word.

20. According to NSF's representatives, once a consumer pays NSF's fee, he or she must complete a questionnaire that NSF represents that it will use to match the consumer with scholarship sources from which the student is likely to obtain at least $1,000. NSF's representatives represent that within about six weeks after receipt of the questionnaire, NSF will send the student a "portfolio" that includes a personalized list of scholarships. In some cases, NSF never sends the portfolio at all.

21. NSF's "portfolio" typically contains a large amount of general information about applying to college and the costs of a college. The actual list of scholarships typically includes a substantial number of scholarships awarded by the college or university the student plans to attend, or scholarships awarded by the student's state or local government. Many of the sources are not scholarships or grants, but are prize contests, loan programs, or work-study programs. Frequently, the sources listed are no longer extant, their application deadlines have passed, or the consumer does not meet the qualifications for the scholarship.

22. Many consumers who do not receive $1,000 in scholarships and grants from NSF's services request refunds from NSF in accordance with the full refund guarantee stated in the initial solicitation they received. NSF often does not honor its refund guarantee but rather attempts to impose prohibitive additional conditions that were not disclosed before the consumers purchased NSF's services. After consumers enroll, NSF discloses that to get a refund the consumer must apply to each of the sources listed in NSF's portfolio, document that the student has been rejected by each of the sources, and send copies to NSF of all correspondence from the rejecting sources. In many cases, the consumer cannot apply to every source or even request an application because sources listed by NSF no longer exist, their application deadlines have passed before the consumer receives the portfolio, or the eligibility requirements supplied in the portfolio unequivocally disqualify the consumer from consideration. Additionally, NSF representatives tell some consumers that they cannot obtain a refund unless they return to NSF all materials that NSF has sent them. Some of the consumers who attempt to contact NSF to obtain a refund are unable to reach any NSF representative. NSF's practices prevent or deter many consumers from requesting and/or obtaining a refund. Many consumers who are able to obtain refunds from NSF do so only after complaining to a Better Business Bureau or a state governmental agency.

23. The acts and practices of defendants, as alleged herein, are in or affecting commerce, as "commerce" is defined in Section 4 of the FTC Act, 15 U.S.C.  44.

DEFENDANTS' VIOLATIONS OF THE FTC ACT

24. Section 5(a) of the FTC Act prohibits deceptive acts or practices in or affecting commerce.

25. As set forth below, defendants, individually or in concert with others, have violated Section 5(a) of the FTC Act by misrepresenting material facts in connection with the offer and sale of their college scholarship search services.

26. Defendants falsely represent, directly or by implication, that NSF will provide consumers with a personal portfolio of scholarship and grant sources from which consumers are likely to obtain at least $1,000 in grants or scholarships. In fact, NSF does not provide consumers with a personal portfolio of scholarship and grant sources from which consumers are likely to obtain at least $1,000 in grants or scholarships.

27. Defendants falsely represent, directly or by implication, that NSF will refund its fee readily to any consumer who purchases NSF's services and does not obtain at least $1,000 in scholarships or grants. In fact, NSF does not refund its fee readily to any consumer who purchases NSF's services and does not obtain at least $1,000 in scholarships or grants.

28. Defendants falsely represent, directly or by implication, that NBRB is an independent, third party reporting organization that provides objective and reliable reports that accurately describe NSF's business practices. In fact, NBRB is not an independent, third party reporting organization that provides objective and reliable reports that accurately describe NSF's business practices. In fact, NBRB is owned or controlled by individuals who own or control NSF.

29. Defendants' false and misleading representations of material fact, as set forth above, constitute deceptive acts or practices in violation of Section 5(a) of the FTC Act.

CONSUMER INJURY

30. Defendants' violations of Section 5(a) of the FTC Act have injured, and will continue to, injure consumers. As a result of defendants' deceptive acts or practices, consumers have lost all or part of the fees they have paid to defendants. For the reasons set forth above, consumers will continue to suffer financial injury unless defendants' unlawful practices are enjoined.

THIS COURT'S POWER TO GRANT RELIEF

31. Section 13(b) of the FTC Act empowers this Court to issue injunctive and other relief against violations of the FTC Act and, in the exercise of its equitable jurisdiction, to award redress to remedy the injury to consumers, to order disgorgement of monies resulting from defendants' unlawful acts or practices, and to order other ancillary equitable relief.

PRAYER FOR RELIEF

WHEREFORE, plaintiff requests that this Court:

(1) Enjoin defendants permanently, preliminarily, and temporarily from violating Section 5(a) of the FTC Act;

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

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

Respectfully submitted,

DATED:_________________

_____________________________
GREGG SHAPIRO
GREGORY A. ASHE
Federal Trade Commission
600 Pennsylvania Ave. N.W., Rm. 200
Washington, D.C. 20580
(202) 326-3719 (telephone)
(202) 326-3392 (telefax)

THOMAS E. SCOTT
United States Attorney

DATED:_________________

By: __________________________
Laurie E. Rucoba
Assistant United States Attorney
Fla. Bar # A5500052
299 East Broward Blvd.
Ft. Lauderdale, Florida 33301
(954) 356-7314 (telephone)
(954) 356-7336 (telefax)

Attorneys for Plaintiff
FEDERAL TRADE COMMISSION