UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON

FEDERAL TRADE COMMISSION,

Plaintiff

v.

TOUCHNET, INC., TOUCHTONE TELECOMMUNICATIONS & ADVERTISING, INC., ERIC CARINO and MALISSA CARINO,

Defendants.

Civ. No. C98-0176

STIPULATED FINAL ORDER AND JUDGMENT


Plaintiff, the Federal Trade Commission ("Commission" or "FTC"), filed a complaint for a permanent injunction and other relief, including restitution to consumers, pursuant to Section 13(b) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. 53(b), alleging that defendants have violated Section 5(a) of the FTC Act and the FTC's Trade Regulation Rule entitled "Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures ("the Franchise Rule"), 16 C.F.R. Part 436. Defendants, Touchnet, Inc. ("Touchnet"), Touchtone Telecommunications & Advertising, Inc. ("Touchtone"), Eric Carino, and Malissa Carino, and plaintiff, by and through its counsel, have agreed to entry of this Stipulated Final Order and Judgment ("Order"), without trial or adjudication of any issue of law and fact.

NOW THEREFORE, plaintiff and defendants having requested the Court to enter this Order, it is ORDERED, ADJUDGED, AND DECREED as follows:

FINDINGS

A. This Court has jurisdiction over the subject matter of this action and the parties hereto;

B. The complaint states a claim upon which relief may be granted against defendants under Sections 5(a) and 13(b) of the FTC Act, 15 U.S.C. 45(a) and 53(b);

C. Defendants have waived all rights to seek judicial review or otherwise to challenge or contest the validity of this Order;

D. This Order does not constitute and shall not be interpreted to constitute either an admission by defendants or a finding by the Court that defendants have engaged in violations of the FTC Act or the Franchise Rule; and

E. Entry of this Order is in the public interest.

DEFINITIONS

For purposes of this Order, the following definitions shall apply:

1. "Defendants" means Touchnet, Touchtone, Eric Carino, and Malissa Carino, their successors and assigns, and their directors, officers, agents, employees, salespersons, corporations, subsidiaries, affiliates, attorneys, and other persons directly or indirectly under their control or in active concert or participation with them who receive actual notice of this Order by personal service, facsimile or otherwise, whether acting directly or through any corporation, subsidiary, division or other device;

2. "Franchise" means "franchise" as defined in Section 436.2(a) of the Franchise Rule, 16 C.F.R. 436.2(a), a copy of which is attached to this Order as Attachment A;

3. "Business opportunity" or "business venture" means any written or oral business arrangement, however denominated, whether or not covered by the Franchise Rule, which consists of the payment of any consideration for: (a) the right or means to offer, sell or distribute goods or services (whether or not identified by a trademark, service mark, trade name, advertising or other commercial symbol); and (b) assistance to any person in connection with or incident to the establishment, maintenance, or operation of a new business or the entry by an existing business into a new line or type of business; and

4. "Person" means a natural person, organization or other legal entity, including a corporation, partnership, proprietorship, association, cooperative, government or governmental subdivision or agency, or any other group or combination acting as an entity.

ORDER

I.

IT IS THEREFORE ORDERED that defendants are hereby permanently restrained and enjoined from engaging, participating, or assisting in any manner or in any capacity whatsoever in the advertising, marketing, promoting, offering for sale or selling of any business opportunity, franchise or business venture, whether directly or indirectly, in concert with others, or through any intermediary, business entity or device.

II.

IT IS FURTHER ORDERED that defendants, in connection with the advertising, marketing, promoting, offering for sale or selling of any goods and services, are hereby permanently restrained and enjoined from making, or assisting in the making, either orally or in writing, expressly or by implication, any false or misleading statements or representations of fact to any person about the following:

A. The income, profits or sales volume a purchaser can achieve through the use of the goods or services;

B. The income, profits or sales volume achieved by other consumers who have used the goods or services;

C. The cost of the goods or services or the cost to use the goods or services; or

D. The length of time that it may or will take to recoup the cost of the goods or services.

III.

IT IS FURTHER ORDERED that defendants shall:

A. Cease all collection efforts on all outstanding accounts not fully paid that are in any way related to any business opportunity, franchise or business venture defendants sold or participated in selling from January 1, 1995, to the date this Order is entered. Within ten (10) business days from the date this Order is entered, defendants shall mail to all clients with such accounts a notice in the form shown as Attachment B to this Order; and

B. Within ten (10) days from the date this Order is entered, provide the names and addresses of those customers to whom notices were sent pursuant to Paragraph III.A. above to:

Regional Director
Federal Trade Commission
915 Second Avenue, Suite 2896
Seattle, Washington 98174

IV.

IT IS FURTHER ORDERED that defendants, within three (3) business days from the date this Order is entered, shall submit to the Commission sworn statements, in the form shown in Attachment C to this Order, that reaffirm and attest to the truthfulness, accuracy, and completeness of the defendants' financial statements that were executed on February 12, 1998 (designated the "Financial Statements"). The Commission's agreement to this Order is expressly premised upon the truthfulness, accuracy, and completeness of the defendants' financial condition as represented in the Financial Statements referenced above, which contain material information upon which the Commission relied in negotiating and agreeing to the terms of this Order. If, upon motion by the Commission, this Court finds that any defendant failed to file the sworn statement required by this Paragraph, or filed a Financial Statement that failed to disclose any material asset, materially misrepresented the value of any asset, or made any other material misrepresentation in or omission from the Financial Statement, the judgment herein shall be reopened for the purpose of determining an appropriate amount for that defendant to pay as redress; provided, however, that in all other respects, this Order shall remain in full force and effect unless otherwise ordered by this Court.

V.

IT IS FURTHER ORDERED that defendants, for a period of five (5) years from the date this Order is entered, and upon reasonable written notice from the Commission, shall permit duly authorized representatives of the Commission, without restraint or interference from defendants:

A. Access during normal business hours to any office or facility owned, managed or controlled by a defendant, or the successor or assign of a defendant, to inspect and copy any document that relates in any way to a business opportunity, franchise or business venture; and

B. To interview directors, officers, and employees (including consultants, independent contractors, and the like) of any business entity that is owned, managed or controlled, in whole or in part, by any defendant, regarding any matter that relates in any way to a business opportunity, franchise or business venture. The person interviewed may have counsel present.

The Commission may otherwise monitor defendants' compliance with this Order by all lawful means available including, but not limited to, the use of investigators posing as consumers, potential investors, suppliers, and other entities.

VI.

IT IS FURTHER ORDERED that, for a period of five (5) years from the date this Order is entered:

A. Defendants Touchnet and Touchtone, and their successors and assigns, shall notify the Commission in writing at least thirty (30) days prior to any proposed change in either corporation including, but not limited to, dissolution, merger, assignment, sale that will result in the emergence of a successor corporation, the creation or dissolution of a subsidiary or franchise, the transfer of the business by assignment to another entity or any other change in the corporation that may affect compliance obligations arising under this Order; and

B. Defendants Eric Carino and Malissa Carino shall notify the Commission in writing, within fourteen (14) days, of any change in his/her present business or employment or of his/her affiliation with any new business or employment if that employment or affiliation is related to a business opportunity, franchise or business venture. Each such notice shall include the defendant's then-current business address and telephone number, current home address, and a statement of the nature of the new business or employment along with a description of his/her interest, duties, and responsibilities in such business or employment.

VII.

IT IS FURTHER ORDERED that defendants, within 180 days from the date this Order is entered, shall file with the Commission a written report setting forth in detail the manner and form in which they have complied with this Order.

VIII.

IT IS FURTHER ORDERED that all notices and reports of defendants required by this Order shall be made to the following address:

Regional Director
Federal Trade Commission
915 Second Avenue, Suite 2896
Seattle, Washington 98174

IX.

IT IS FURTHER ORDERED that this Court shall retain jurisdiction of this matter for all purposes.

SO ORDERED, this day of , 1998.

The Honorable Barbara Rothstein
United States District Judge

The parties hereby stipulate and agree to the terms and conditions set forth above and consent to entry of this Stipulated Final Order and Judgment. Defendants waive any 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).

FOR PLAINTIFF FEDERAL TRADE COMMISSION:

Joe Lipinsky, WSBA #25446
Kathryn C. Decker, WSBA #12389
Charles A. Harwood
Regional Director
Attorneys for Plaintiff
Federal Trade Commission

FOR THE DEFENDANTS:
TOUCHNET, INC.

By: Eric Carino, President

TOUCHTONE TELECOMMUNICATIONS &
ADVERTISING, INC.

By: Eric Carino, President

ERIC CARINO
Eric Carino, Individually

MALISSA CARINO
Malissa Carino, Individually

ATTACHMENT B
[Corporate Letterhead]

Date

Consumer name
Consumer address
Dear Mr./Mrs./Ms. :

Our records indicate that you purchased a [pay-per-call 900 number, prepaid telephone card or Internet consulting] business opportunity with our company between January 1, 1995, and [date -- 10 days after Order is entered].

Pursuant to an agreement we reached with the Federal Trade Commission settling allegations that we misrepresented the business opportunity, franchise or business venture we sold, we have agreed to cease collection efforts on any monies you owe and may owe us for the purchase of the [pay-per-call 900 number, prepaid telephone card or Internet consulting] business opportunity.

Therefore, you are no longer contractually obligated to pay us any more money under your contract.

Sincerely,
Eric Carino
President, [corporation]