DEBRA A. VALENTINE
General Counsel

SCOTT R. BIALECKI
KELLI FARRAND CHAN
Federal Trade Commission
1961 Stout St., Suite 1523
Denver, Colorado 80294
303-844-3564
303-844-3599

MONICA E. TAIT, CA Bar # 157311
Federal Trade Commission
10877 Wilshire Blvd., Suite 700
Los Angeles, California 90024
310-824-4343

Attorneys for Plaintiff

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

 

 

FEDERAL TRADE COMMISSION, Plaintiff,

v.

ASHER AFRIAT, et al., Defendants.

Civ. No. 98-0282 LGB (Ex)

STIPULATED FINAL JUDGMENT AND ORDER FOR PERMANENT INJUNCTION AS TO DEFENDANTS ASHER AFRIAT, ABRAHAM AVI AFRIAT, OREN AFRIAT, AND RACHEL EDERY

DATE:
TIME:

Plaintiff, the Federal Trade Commission ("Commission" or "FTC"), filed its Complaint and Ex Parte Motion for a Temporary Restraining Order and other equitable relief on January 14, 1998. The Court issued a temporary restraining order on January 15, 1998. The parties stipulated to a preliminary injunction which was approved by the Court on January 29, 1998. The Complaint charges defendants Asher Afriat, Abraham Avi Afriat, Oren Afriat, and Rachel Edery with violations of Section 5 of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. 45. The Commission and defendants Asher Afriat, Abraham Avi Afriat, Oren Afriat, and Rachel Edery (hereinafter "the defendants"), represented by the attorneys whose names appear hereafter, have agreed to entry of this Stipulated Final Judgment and Order for Permanent Injunction ("Order") by the Court to resolve all matters in dispute in this action, without admission of liability, and without trial or adjudication of any issue of law or fact herein.

FINDINGS

1. The Commission brings this action pursuant to Sections 5(a) and 13(b) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C.  45(a) and 53(b). The Commission seeks permanent injunctive relief for alleged unfair or deceptive acts or practices by the defendants in connection with the telemarketing of materials related to employment with the United States Postal Service.

2. The Commission has the authority under Section 13(b) of the FTC Act to seek the relief it has requested.

3. This Court has jurisdiction over the subject matter of this action and has jurisdiction over the defendants. Venue in the Central District of California is proper under 28 U.S.C.  1391(b) and (c) and 15 U.S.C.  53(b), and the Complaint states claims upon which relief may be granted against the defendants under Sections 5(a) and 13(b) of the FTC Act, as amended, 15 U.S.C.  45(a) and 53(b).

4. The activities of the defendants, as alleged in the Complaint, were in or affecting commerce, as defined in Section 4 of the FTC Act, 15 U.S.C.  44.

5. The defendants waive all rights to seek judicial review or otherwise challenge or contest the validity of this Order except to the extent that any provisions set forth herein are unlawful or unenforceable; and provided that nothing in this paragraph shall limit or impair any defendant's right to challenge any allegation(s) of material misrepresentations or omissions under Section IX of this Order. They also waive any claim that they 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 entry of this Order. Each settling party shall bear its own costs and attorneys' fees.

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

7. Pursuant to Federal Rule of Civil Procedure 65(d), the provisions of this Order are binding upon each of the defendants, and their officers, agents, servants and employees, and upon those persons or entities in active concert or participation with them who receive actual notice of this Order by personal service or otherwise.

8. The defendants enter into this Order freely and without coercion and acknowledge that they understand the provisions of this Order and are prepared to abide by them.

DEFINITIONS

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

1. "Marketing career advisory goods or services" means any activity involving attempts to induce consumers to purchase any item, product, good or service represented to assist consumers in obtaining employment, by any means, including but not limited to advertisements in any medium and/or the business of telemarketing.
 
2. "Telemarketing" means any activity (including, but not limited to, initiating or receiving telephone calls, managing others who initiate or receive telephone calls, operating an enterprise that initiates or receives telephone calls, owning an enterprise that initiates or receives telephone calls, or otherwise participating as an officer, director, employee, independent contractor, or consultant in or for an enterprise that initiates or receives telephone calls) that involves attempts to induce consumers to purchase any item, good, service, investment, partnership interest, trust interest or other beneficial interest, to make a charitable contribution, or to enter a contest for a prize, by means of telephone sales presentations, either exclusively or in conjunction with the use of other forms of marketing. Provided, however, that the term "telemarketing" shall not include transactions that are not completed until after a face-to-face contact between the seller or solicitor and the consumers solicited, and the consumer is not required to pay or authorize payment until after such a presentation.
 
3. "Assisting others" means providing any of the following goods or services to any person or entity: (a) performing customer service functions, including but not limited to receiving or responding to consumer complaints; (b) formulating or providing, or arranging for the formulation or provision of, any telephone sales script or any other written marketing material; (c) providing or arranging for the provision of credit card merchant accounts or otherwise arrange for receipt of consumers' payments; (d) providing or arranging for the provision of funding or financing; (e) providing names of, or assisting in the generation of, potential customers; (f) performing marketing services of any kind; (g) acting as an officer or director, including but not limited to a "nominee" officer or director, of a business entity; or (h) having an ownership interest (10% or more) in any business entity.
 
4. "Postal Service" means the United States Postal Service, an independent agency within the executive branch of the United States government.
 
5. "Majority owner" means an ownership interest of 50% or more.
 
6. "Employment program" means any item, product, good or service represented to assist consumers in obtaining employment.

ORDER

I. BAN ON CERTAIN BUSINESS ACTIVITIES

IT IS THEREFORE ORDERED that defendants Asher Afriat, Abraham Afriat, Oren Afriat and Rachel Edery are hereby permanently restrained and enjoined from:

A. engaging in the business of marketing career advisory goods or services; and
 
B. assisting others who are engaged in the business of marketing career advisory goods or services.

Nothing in this Order shall be read as an exception to this Section.

II. PROHIBITED BUSINESS ACTIVITIES

IT IS FURTHER ORDERED that, in connection with the business of telemarketing and the business of marketing career advisory goods or services, defendants Asher Afriat, Abraham Afriat, Oren Afriat and Rachel Edery, and their successors, assigns, officers, agents, servants, employees, distributors, independent contractors, representatives, and those persons in active concert or participation with them who receive actual notice of this Order by personal service or otherwise, are hereby permanently restrained and enjoined from:

A. falsely representing, expressly or by implication, that an employment program is affiliated with or endorsed by the Postal Service, or any other government agency or governmental entity;
 
B. falsely representing, expressly or by implication, that permanent positions with the Postal Service, or any other government agency or government entity, are available in particular geographic areas, and that the Postal Service, or any other government agency or governmental entity, is offering examinations for such positions;
 
C. falsely representing, expressly or by implication, the particular score an examinee needs to qualify for a permanent position with the Postal Service, or any other government agency or governmental entity;
 
D. falsely representing, expressly or by implication, that consumers who purchase and review defendants' printed materials are likely to receive high scores on Postal Service, or any other government agency or governmental entity, exams;
 
E. falsely representing, expressly or by implication, that consumers who purchase and review defendants' printed materials are likely to receive permanent positions with the Postal Service, or any other government agency or governmental entity, within a short period of time;
 
F. falsely representing, expressly or by implication, the terms and conditions of any refund policy;
 
G. falsely representing, expressly or by implication, any material fact regarding employment with the Postal Service, employment with any federal, state or local government agency, or any other type of employment;
 
H. falsely representing, expressly or by implication, any material fact regarding any good or service sold or offered for sale;
 
I. violating the Telemarketing Sales Rule, 16 C.F.R. Part 310, including any amendments thereto;
 
J. engaging in the business of telemarketing without complying with all applicable federal and state registration and bond requirements; and
 
K. assisting others who violate any provision of subsections A-J of this section.

III. PROHIBITION ON THE SALE OF NAMES

IT IS FURTHER ORDERED that defendants Asher Afriat, Abraham Afriat, Oren Afriat and Rachel Edery, and their successors, assigns, officers, agents, servants, employees, distributors, independent contractors, representatives, and those persons in active concert or participation with them who receive actual notice of this Order by personal service or otherwise, are hereby permanently restrained and enjoined from providing to any person, except agents of the Commission or other law enforcement authorities, the name, address, telephone number, Social Security number, credit card or bank account number, e-mail address, or other identifying information of any person who paid any money to any defendant, at any time prior to entry of this Order in connection with any telemarketing transaction or any employment program.

IV. RECORD KEEPING PROVISIONS

IT IS FURTHER ORDERED that, for a period of five (5) years from the date of entry of this Order, defendants Asher Afriat, Abraham Afriat, Oren Afriat and Rachel Edery, and defendants' agents, employees, officers, and servants, corporations, successors, and assigns, and those persons in active concert or participation with them who receive actual notice of this Order by personal service or otherwise, in connection with any business where any defendant is the majority owner of the business or directly or indirectly controls the business, are hereby restrained and enjoined from failing to create, and from failing to retain for a period of three (3) years following the date of such creation, unless otherwise specified:

A. Books, records and accounts that, in reasonable detail, accurately and fairly reflect the cost of goods or services sold, revenues generated, and the disbursement of such revenues;
 
B. Records accurately reflecting: the name, address, and telephone number of each person employed in any capacity by such business, including as an independent contractor; that person's job title or position; the date upon which the person commenced work; and the date and reason for the person's termination, if applicable. The businesses subject to this Section shall retain such records for any terminated employee for a period of two (2) years following the date of termination;
 
C. Records containing the names, addresses, phone numbers, dollar amounts paid, quantity of items or services purchased, and description of items or services purchased, for all consumers to whom such business has sold, invoiced or shipped any goods or services;
 
D. Records that reflect, for every consumer complaint or refund request, whether received directly or indirectly or through any third party:
 
1. the consumer's name, address, telephone number and the dollar amount paid by the consumer;
 
2. the written complaint or refund request, if any, and the date of the complaint or refund request;
 
3. the basis of the complaint, including the name of any salesperson complained against, and the nature and result of any investigation conducted concerning any 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 the denial; and
 
E. Copies of all sales scripts, training materials, advertisements, or other marketing materials utilized; provided that copies of all sales scripts, training materials, advertisements, or other marketing materials utilized shall be retained for (3) years after the last date of dissemination of any such materials.

V. MONITORING COMPLIANCE OF SALES PERSONNEL

IT IS FURTHER ORDERED that defendants Asher Afriat, Abraham Afriat, Oren Afriat, and Rachel Edery, in connection with any business where he or she is the majority owner of the business or directly or indirectly controls the business and where the business is telemarketing or marketing career advisory goods or services, or the business assists others who are engaged in telemarketing or marketing career advisory goods or services, are hereby permanently restrained and enjoined from:

A. Failing to take reasonable steps sufficient to monitor and ensure that all employees and independent contractors engaged in sales or other customer service functions comply with Section II of this Order. Such steps shall include adequate monitoring of sales presentations or other calls with customers, and shall also include, at a minimum, the following: (1) listening to the oral representations made by persons engaged in sales or other customer service functions; (2) establishing a procedure for receiving and responding to consumer complaints; and (3) ascertaining the number and nature of consumer complaints regarding transactions in which each employee or independent contractor is involved; and
 
B. Failing promptly to investigate fully any consumer complaint received by any business to which this Section applies.

VI. MONITORING PROVISIONS

IT IS FURTHER ORDERED that, in order that compliance with the provisions of this Order may be monitored:

A. For a period of five (5) years from the date of entry of this Order, defendants Asher Afriat, Abraham Afriat, Oren Afriat, and Rachel Edery each shall notify the Commission of the following:
 
1. Any changes in his or her residence, mailing addresses, and telephone numbers, within ten (10) calendar days of the date of such change;
 
2. Any changes in his or her employment status (including self-employment) within ten (10) calendar days of such change. Such notice shall include the name and address of each business that he or she is affiliated with or employed by, a statement of the nature of the business, and a statement of his or her duties and responsibilities in connection with the business or employment; and
 
3. Any proposed change in the structure of any business entity owned or controlled by him or her, such as creation, incorporation, dissolution, assignment, sale, creation or dissolution of subsidiaries, or any other change that may affect compliance obligations arising out of this Order, thirty calendar (30) days prior to the effective date of any proposed change;
 
B. On or before one hundred eighty (180) calendar days after the date of entry of this Order, defendants Asher Afriat, Abraham Afriat, Oren Afriat, and Rachel Edery shall each provide a written report to the FTC, sworn to under penalty of perjury, setting forth in detail the manner and form in which they have complied and are complying with this Order. This report shall include but not be limited to:
 
1. His or her then current residence address and telephone number;
 
2. His or her then current employment, business address and telephone number, a description of the business activities of each such employer, and defendant's titles and responsibilities for each employer;
 
3. A copy of each acknowledgment of receipt of this Order obtained by him or her pursuant to Section X of this Order; and
 
4. A statement describing the manner in which he or she has complied and is complying with the terms of the ban in Section II of this Order;
 
C. Upon written request by a representative of the Commission, defendants shall submit additional written reports, as described in Section VI.B. above, (under oath, if requested) and produce documents on fifteen (15) business days' notice with respect to any conduct subject to this Order;
 
D. For the purposes of this Order, defendants shall, unless otherwise directed by the Commission's authorized representatives, mail all written notifications to the Commission to:

Regional Director
Denver Regional Office
Federal Trade Commission
1961 Stout Street, Suite 1523
Denver, CO 80294
Re: FTC v. Asher Afriat et al.

E. For the purposes of this paragraph, "employment" includes the performance of services as an employee, consultant, independent contractor, or nominee officer or director; and "employer" includes any individual or entity for whom any defendant performs services as an employee, consultant, or independent contractor; and
F. For purposes of the compliance reporting required by this Section, the Commission is authorized to communicate directly with defendants.

VII. ACCESS TO BUSINESS PREMISES

IT IS FURTHER ORDERED that, for a period of five (5) years from the date of entry of this Order, for the purpose of further determining compliance with this Order, defendants Asher Afriat, Abraham Afriat, Oren Afriat, and Rachel Edery shall permit representatives of the Commission, within three (3) business days of receipt of written notice from the Commission:

A. Access during normal business hours to any office, or facility storing documents, of any business where he or she is an officer, director, or majority owner (including any nominee position). In providing such access, the defendants shall permit representatives of the Commission to inspect and copy all documents relevant to any matter contained in this Order and shall permit Commission representatives to remove documents relevant to any matter contained in this Order for a period not to exceed five business days so that the documents may be inspected, inventoried, and copied; and
 
B. To interview the officers, directors, and employees, including all personnel involved in responding to consumer complaints or inquiries, and all sales personnel, whether designated as employees, consultants, independent contractors or otherwise, of any business to which subsection (A) of this section applies, concerning matters relating to compliance with the terms of this Order. The person(s) interviewed may have counsel present.

VIII. AUTHORITY TO MONITOR COMPLIANCE

IT IS FURTHER ORDERED that the Commission is authorized to monitor any defendant's compliance with this Order by all lawful means, including but not limited to the following means:

A. The Commission is authorized, without further leave of court, to obtain discovery from any person in the manner provided by Chapter V of the Federal Rules of Civil Procedure, Fed. R. Civ. P. 26 - 37, including the use of compulsory process pursuant to Fed. R. Civ. P. 45, for the purpose of monitoring any defendant's compliance with any provision of this Order;
 
B. The Commission is authorized to use representatives posing as consumers and as suppliers to any defendant, any defendant's employees, or any other entity managed or controlled in whole or in part by any defendant, without the necessity of identification or prior notice; and
 
C. Nothing in this Order shall limit the Commission's lawful use of compulsory process, pursuant to Sections 9 and 20 of the FTC Act, 15 U.S.C.  49, 57b-1, to investigate whether any defendant has violated any provision of this Order or Section 5 of the FTC Act, 15 U.S.C.  45.

IX. RIGHT TO REOPEN

IT IS FURTHER ORDERED that:

A. Within fifteen (15) calendar days after entry of this Order, defendants Asher Afriat, Abraham Afriat, Oren Afriat and Rachel Edery each shall submit to the Commission a truthful sworn statement, in the form shown on Appendix A, that shall acknowledge receipt of this Order and shall reaffirm and attest to the truth, accuracy and completeness of the financial statements that the defendants submitted to the Commission in January 1998. The Commission's agreement to this Order is expressly premised on the truthfulness, accuracy and completeness of such financial statements. If, upon motion by the Commission, within ten (10) years of the entry of this Order, this Court finds that any of defendants Asher Afriat's, Abraham Afriat's, Oren Afriat's, or Rachel Edery's January 1998 financial statements contains any material misrepresentations or omissions, the Court shall enter judgment in the amount of $1,000,000, which is immediately due and payable, in favor of the Commission and against only the defendant(s) who made the misrepresentations or omissions, provided, that under no circumstances shall the Commission collect more than $1,000,000 from the defendants, individually, or collectively; provided further, that in all other respects this Order shall remain in full force and effect unless otherwise ordered by the Court; and, provided further, that proceedings instituted under this provision would 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 that the Commission may initiate to enforce this Order. For purposes of this paragraph only, defendants waive any right to contest any of the allegations in the Complaint. Any defendant may seek judicial review of any finding(s) made by this Court as a result of this paragraph;
 
B. Any funds received by the Commission pursuant to this section shall be deposited into an account to be maintained by the Commission or its agent. Upon the final disposition of this action, such funds shall be either (1) distributed as redress to consumers, or (2) paid to the U.S. Treasury as equitable disgorgement, if such distribution is deemed impractical. If the Commission in its sole discretion determines that redress is practical, it shall submit a plan for the disbursement of funds to the Court for review and approval;
 
C. The defendants are hereby required, in accordance with 31 U.S.C.  7701, to furnish to the Commission their social security numbers, which shall be used for purposes of collecting and reporting on any delinquent amount arising out of this Order; and
 
D. Only in the event of any subsequent litigation to collect amounts due pursuant to this Order, including but not limited to a non-dischargeability complaint in any bankruptcy proceeding, the defendants further agree that the facts as alleged in the Complaint shall be taken as true.

X. SERVICE OF ORDER BY DEFENDANT

IT IS FURTHER ORDERED that, for a period of five (5) years from the date of entry of this Order, defendants Asher Afriat, Abraham Afriat, Oren Afriat, and Rachel Edery each shall:

A. Provide a copy of this Order to, and obtain a signed and dated acknowledgment of receipt of same from, each officer or director, each individual serving in a management capacity, all personnel involved in responding to consumer complaints or inquiries, and all sales personnel, whether designated as employees, consultants, independent contractors or otherwise, immediately upon employing or retaining any such persons, for any business where (1) the defendant is an officer, director, or majority owner (including any nominee position), and (2) the business engages in the business of telemarketing or the business of marketing career advisory goods and services; and
 
B. Maintain for a period of three years after creation, and upon reasonable notice, make available to representatives of the Commission, the original signed and dated acknowledgments of the receipt of copies of this Order, as required in the previous subsection.

XI. RETENTION OF JURISDICTION

IT IS FURTHER ORDERED that this Court shall retain jurisdiction over this matter for purposes of the construction, modification and enforcement of this Order.

XII. ENTRY OF THIS FINAL JUDGMENT

IT IS FURTHER ORDERED, pursuant to Federal Rule of Civil Procedure 54(b), that there is no just reason for delay and the Clerk of Court immediately shall enter this Order as a final judgment as to defendants Asher Afriat, Rachel Edery, Oren Afriat, and Abraham Avi Afriat.

SIGNED AND STIPULATED BY:

FEDERAL TRADE COMMISSION

Dated: , 1998

___________________________
Scott R. Bialecki

___________________________
Kelli Farrand Chan

___________________________
Monica E. Tait

FOR THE DEFENDANTS:

Dated: , 1998

___________________________
Asher Afriat

Dated: , 1998

___________________________
Abraham Avi Afriat

Dated: , 1998

___________________________
Oren Afriat

Dated: , 1998

___________________________
Rachel Edery

Dated: , 1998

___________________________
Tom Johnston
Attorney for Defendants Asher Afriat and Rachel Edery

Dated: , 1998

___________________________
Robert M. Ungar
O'Laverty & Ungar
Attorney for Defendant Abraham Avi Afriat

Dated: , 1998

___________________________
Daniel J. Cheren
Cheren and Associates
Attorney for Defendant Oren Afriat

There being no just reason for delay, the Clerk of the Court is hereby directed to enter this Order.

SO ORDERED this __ day of _____________, 1998.

___________________________
Honorable Lourdes G. Baird
United States District Judge

APPENDIX A

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

FEDERAL TRADE COMMISSION,
Plaintiff,

v.

ASHER AFRIAT, et al., Defendants.

 

Civ. No. 98-0282 LGB (Ex)

AFFIDAVIT OF [DEFENDANT]

 

[Defendant], being duly sworn, hereby states and affirms as follows:

1. My name is [defendant]. I am a defendant in the above-captioned civil action. I am over the age of eighteen. I have personal knowledge of the facts set forth in this Affidavit.

2. My current business address is ________________________. My current business telephone number is ________________. My current residential address is ________________. My current residential telephone number is _____________.

3. On [date], I received a copy of the Stipulated Final Judgment and Order for Permanent Injunction, which was signed by the Honorable Lourdes G. Baird and entered by the Court on [date of entry of Order]. A true and correct copy of the Order that I received is appended to this Affidavit.

4. I reaffirm and attest to the truthfulness, accuracy and completeness of the financial statement that I submitted to the Federal Trade Commission on or about __________. Moreover, there has been no material increase in my net worth since the filing of my financial statement with the Commission.

I declare under penalty of perjury under the laws of the United States that the foregoing is true and correct. Executed on [date], at [city and state].

____________________________
[Defendant]

State of ____________________, City of ____________________

Subscribed and sworn to before me this _____ day of _________, 199___.

_____________________________
Notary Public

My Commission Expires:

_____________________________