UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION

UNITED STATES OF AMERICA,

Plaintiff,

v.

CORNERSTONE WEALTH CORP.,  d/b/a CREDIT FINANCIAL AND ASSOCIATES and CREDIT FINANCIAL SERVICES, a corporation; and JOHN ATCHLEY, JR., individually and as an officer of the corporation,

Defendants.

CIVIL NO.

COMPLAINT FOR CIVIL PENALTIES, INJUNCTIVE, AND OTHER RELIEF

Plaintiff, the United States of America, acting upon notification and authorization to the Attorney General by the Federal Trade Commission (“Commission”), for its complaint alleges that:

1. Plaintiff brings this action under Sections 5(a)(1), 5(m)(1)(A), 13(b), 16(a), and 19 of the Federal Trade Commission Act (“FTC Act”), 15 U.S.C. 45(a)(1), 45 (m)(1)(A), 53(b), 56(a), and 57b, and Section 410(b) of the Credit Repair Organizations Act, 15 U.S.C. 1679h(b), to obtain monetary civil penalties, consumer redress and injunctive and other relief for Defendants’ violations of the Credit Repair Organizations Act, 15 U.S.C. 1679-1679j; and consumer redress and injunctive and other relief for Defendants’ violations of Section 5(a)(1) of the FTC Act, 15 U.S.C. 45(a)(1).

JURISDICTION AND VENUE

2. This Court has jurisdiction of this matter pursuant to 28 U.S.C. 1331, 1337(a), 1345, 1355 and pursuant to 15 U.S.C. 45(m)(1)(A), 53(b), 56(a), 57b, and 1679h(b)(2). This action arises under 15 U.S.C. 45(a)(1) and 1679h(b).

3. Venue in this district is proper under 15 U.S.C. 53(b) and under 28 U.S.C. 1391(b) and (c) and 1395(a).

DEFENDANTS

4. Defendant Cornerstone Wealth Corporation (hereinafter “Cornerstone Wealth”) is a Texas corporation with its office and principal place of business located at 13601 Preston Road, Suite 816 E. Tower, Dallas, Texas 75240. Defendant Cornerstone Wealth resides and transacts business in this District.

5. Defendant John Atchley, Jr., is President of Defendant Cornerstone Wealth. His business address is the same as that of the corporate Defendant. In connection with the matters alleged herein, Defendant John Atchley, Jr., transacts business in this District.

6. Individually or in concert with others, Defendant John Atchley, Jr., has formulated, directed and controlled the acts and practices of Defendant Cornerstone Wealth, including the various acts and practices set forth herein.

COMMERCE

7. At all times relevant to this complaint, Defendants have maintained a substantial course of trade in selling credit repair services, in or affecting commerce, as “commerce” is defined in Section 4 of the FTC Act, 15 U.S.C. 44.

DEFENDANTS’ BUSINESS PRACTICES

8. Defendants have telemarketed, advertised, promoted, offered for sale, and sold credit repair services to consumers in the United States.

9. Defendants have offered services to remove negative information from, or improve, consumers’ credit histories, credit records, and credit ratings. Consumers have contacted Defendants by telephone and have been told by Defendants’ representatives that Defendants can remove bankruptcies, charge offs, late payments, and other negative information from consumers’ credit reports. Defendants have made such representations to consumers even where such negative information was accurate and not obsolete.

10. Defendants make or have made the following and similar claims about their credit repair services:

a. “Your credit report can legally be restored so you can obtain a new car, credit cards and even a new home! Cornerstone Wealth will work to have all negative information deleted from your credit report.”

b. “Our system is effective at removing all types of negative credit, including charge off, a foreclosure even a bankruptcy.”

11. Before providing any of the promised services, Defendants’ representatives request and require at least partial payment for these services. Defendants request and require advance payment of at least $130.00 prior to commencing work on behalf of consumers and monthly payments of at least $100.00, irrespective of the work performed.

THE CREDIT REPAIR ORGANIZATIONS ACT

12. The Credit Repair Organizations Act, signed by the President on September 30, 1996, took effect on April 1, 1997, and has since that date remained in full force and effect.

13. The purposes of the Credit Repair Organizations Act, according to Congress, are:

(1) to ensure that prospective buyers of the services of credit repair organizations are provided with the information necessary to make an informed decision regarding the purchase of such services; and

(2) to protect the public from unfair or deceptive advertising and business practices by credit repair organizations. 15 U.S.C. 1679(b).

14. Pursuant to Section 410(b)(1) of the Credit Repair Organizations Act, 15 U.S.C. 1679h(b)(1), any violation of any requirement or prohibition of the Credit Repair Organizations Act constitutes an unfair or deceptive act or practice in commerce in violation of Section 5(a) of the FTC Act, 15 U.S.C. 45(a). Pursuant to Section 410(b)(2) of the Credit Repair Organizations Act, 15 U.S.C. 1679h(b)(2), all functions and powers of the FTC under the FTC Act are available to the Commission to enforce compliance with Credit Repair Organizations Act in the same manner as if the violation had been a violation of any FTC trade regulation rule.

VIOLATIONS OF THE CREDIT REPAIR ORGANIZATIONS ACT

COUNT ONE

15. In connection with their operation as a credit repair organization, as that term is defined in Section 403(3) of the Credit Repair Organizations Act, 15 U.S.C. 1679a(3), Defendants have charged or received money or other valuable consideration for the performance of services that Defendants have agreed to perform for consumers before such services were fully performed, thereby violating Section 404(b) of the Credit Repair Organizations Act, 15 U.S.C. 1679b(b).

COUNT TWO

16. In connection with their operation as a credit repair organization, as that term is defined in Section 403(3) of the Credit Repair Organizations Act, 15 U.S.C. 1679a(3), Defendants have made the untrue or misleading representation that Defendants can improve substantially most consumers’ credit reports or profiles by permanently removing bankruptcies, charge offs, late payments, and other negative information from consumers’ credit reports. Defendants have made such representations to consumers even where such information is accurate and not obsolete, thereby violating Section 404(a)(3) of the Credit Repair Organizations Act, 15 U.S.C. 1679b(a)(3).

UNFAIR OR DECEPTIVE ACTS OR PRACTICES IN VIOLATION OF THE FTC ACT

17. Section 5(a) of the FTC Act, 15 U.S.C. 45(a), provides that "unfair or deceptive acts or practices in or affecting commerce are hereby declared unlawful."

VIOLATIONS OF THE FTC ACT

COUNT THREE

18. In connection with the advertising, marketing, promotion, offering for sale, or sale of credit repair services, Defendants have made untrue or misleading statements to induce consumers to purchase their services, including, but not limited to, the representation that Defendants can improve substantially most consumers’ credit reports or profiles by permanently removing bankruptcies, charge offs, late payments, and other negative information from consumers' credit reports. Defendants have made such representations to consumers even where such negative information is accurate and not obsolete.

19. In truth and fact, Defendants cannot improve substantially most consumers’ credit reports or profiles by permanently removing bankruptcies, charge offs, late payments, and other negative information from consumers' credit reports, even where such information is accurate and not obsolete.

20. Defendants have thereby violated Section 5(a) of the FTC Act. 15 U.S.C. 45(a).

CIVIL PENALTIES, CONSUMER REDRESS AND INJUNCTION

21. Defendants have violated the Credit Repair Organizations Act as described above with knowledge as set forth in Section 5(m)(1)(A) of the FTC Act, 15 U.S.C. 45(m)(1)(A).

22. Each sale or attempted sale, since the effective date of the Credit Repair Organizations Act, of credit repair services in which Defendants have violated the Credit Repair Organizations Act in one or more of the ways described above constitutes a separate violation for which Plaintiff seeks monetary civil penalties.

23. Section 5(m)(1)(A) of the FTC Act, 15 U.S.C. 45(m)(1)(A), authorizes the Court to award monetary civil penalties of not more than $10,000 for each violation of the Credit Repair Organizations Act. Section 4 of the Federal Civil Penalties Inflation Adjustment Act of 1990, 28 U.S.C. 2461, as amended, and as implemented by 16 C.F.R. 1.98(d) (1997), authorizes the Court to award monetary civil penalties of not more than $11,000 for each violation of the Rule that occurs after November 20, 1996.

24. Under Section 13(b) of the FTC Act, 15 U.S.C. 53(b), this Court is authorized to issue a permanent injunction against Defendants' violating the FTC Act and Credit Repair Organizations Act, as well as such ancillary relief as preliminary injunction, rescission, restitution, disgorgement of profits resulting from Defendants’ unlawful acts or practices, and other remedial measures.

25. Section 19 of the FTC Act, 15 U.S.C. 57b, authorizes the Court to award such relief as is necessary to redress the injury to consumers or others resulting from Defendants' violation of the Credit Repair Organizations Act.

PRAYER

WHEREFORE, Plaintiff requests that this Court, pursuant to 15 U.S.C. 45(a)(1), 45(m)(1)(A), 53(b), 57b, and 1679h(b), and the Court’s own equity powers:

(1) Enter judgment against Defendants in favor of Plaintiff for each and every violation alleged in this complaint;

(2) Award Plaintiff monetary penalties from the Defendants for each and every violation of the Credit Repair Organizations Act;

(3) Award such relief as the Court finds necessary to redress injury to consumers resulting from Defendants’ violations of the Credit Repair Organizations Act and the FTC Act, including but not limited to, rescission of contracts, restitution, consumer redress, and disgorgement of unlawfully obtained monies;

(4) Permanently enjoin Defendants from further violations of the Credit Repair Organizations Act and the FTC Act;

(5) Order Defendants to pay the costs of this action; and

(6) Award Plaintiff such additional relief as the Court may deem just and proper.

DATED:

Of Counsel: FOR THE UNITED STATES OF AMERICA:
C. Steven Baker
Regional Director
Chicago Regional Office
55 E. Monroe St., Suite 1860
Chicago, Illinois 60603
FRANK W. HUNGER
Assistant Attorney General
Civil Division

PAUL E. COGGINS
United States Attorney

By:

Assistant United States Attorney
1100 Commerce St., 3rd Floor
Dallas, Texas 75242
(214) 767-0951

EUGENE M. THIROLF
Director
Office of Consumer Litigation

ELIZABETH STEIN
Attorney
Office of Consumer Litigation
Civil Division
U.S. Department of Justice
P.O. Box 386
Washington, DC 20044
(202) 307-0486