ARENT FOX KINTNER PLOTKIN & KAHN, PLLC
LEWIS ROSE
D. REED FREEMAN, JR.
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036-5339
Telephone: 202-857-6000

VAN ETTEN, SUZUMOTO & HAAG, LLP
DAVID B. VAN ETTEN #119049
MARK K. SUZUMOTO #108690
JOHN RANDOLPH HAAG #105736
11755 Wilshire Boulevard, Suite 2400
Los Angeles, California 90025-1531
Telephone: 310-966-1200
Attorneys for Defendants.





FEDERAL TRADE COMMISSION
STEPHEN L. COHEN
MICHAEL DONOHUE
6th & Pennsylvania Ave., N.W.
Washington, D.C. 20580
202-326-3222; 326-3563

FEDERAL TRADE COMMISSION
MONICA TAIT (CA BAR # 157311)
Local Counsel
10877 Wilshire Blvd. #700
Los Angeles, California 90024
310-824-4343

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

 

FEDERAL TRADE COMMISSION,
Plaintiff,

vs.

INTERACTIVE AUDIOTEXT SERVICES, INC., et al., Defendants.

 

CASE NO. CV 98-3049 CBM (BQRx)



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  13(b) and 19 of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C.  53(b) and 57b, and the Telephone Disclosure and Dispute Resolution Act of 1992 ("TDDRA"), 15 U.S.C.  5701 et seq., charging Defendants Interactive Audiotext Services, Inc., American Billing & Collection, Inc., U.S. Interstate Distributing, Inc., Allstate Communications, Inc., Frank Montelione, Russel Leventhal, Stuart Leventhal, and John O. Cooper with violating Section 5 of the FTC Act, and the FTC's Trade Regulation Rule entitled the "900-Number Rule," 16 C.F.R. Part 308.

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 Interactive Audiotext Services, Inc., American Billing & Collection, Inc., U.S. Interstate Distributing, Inc., Allstate Communications, Inc., Frank Montelione, Russel Leventhal, Stuart Leventhal, and John O. Cooper 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 Central District of California.

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 Interactive Audiotext Services, Inc., American Billing & Collection, Inc., U.S. Interstate Distributing, Inc., Allstate Communications, Inc., Frank Montelione, Russel Leventhal, Stuart Leventhal, and John O. Cooper under  5 and 19 of the FTC Act, 15 U.S.C.  45(a) and 57b, and the 900-Number Rule, 16 C.F.R. Part 308.

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

6. 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, TDDRA, or the 900-Number Rule.

7. This agreement resolves all matters arising from the allegations in the complaint.

8. Nothing in this Order shall be construed as relieving Defendants of any obligations they may have under any other rule or law enforced by the FTC or Federal Communications Commission.

DEFINITIONS

1. ANI," or "AUTOMATIC NUMBER IDENTIFICATION," means a system whereby the telephone line number from where the call is originated can be electronically captured by the receiving party.

2. "CLAIMS ADMINISTRATOR" means an independent organization selected by Defendants and approved by the FTC to administer the redress program pursuant to this Order.

3. "CONSUMER" means a purchaser, customer, or natural person.

4. "DEFENDANTS" means Interactive Audiotext Services, Inc.("IAS"), American Billing & Collection, Inc. ("ABC"), U.S. Interstate Distributing, Inc. ("USID"), Allstate Communications, Inc. ("Allstate"), Frank Montelione, Russel Leventhal, Stuart Leventhal, and John O. Cooper, and their successors and assigns.

5. "REPRESENTATIVES" means Defendants' 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. Representatives does not include any independent debt collection agency acting contrary to express written instructions.

6. "QUALIFIED CUSTOMER" means:

a. Any consumer who, after December 31, 1995, received an invoice from Defendants, paid Defendants for 800-number-accessed services, and complained to the Defendants on or before the execution date of this Order that the service for which they were billed was not authorized by him or her;
 
b. Any consumer who, after December 31, 1995, received an invoice from Defendants, paid Defendants for 800-number-accessed services billed on the basis of ANI, and complained to the Defendants on or before the execution date of this Order that the service for which they were billed was accessed by a minor;
 
c. Any consumer who, after December 31, 1995, successfully exercised his or her rights under the Truth in Lending Act, 15 U.S.C. 1601 et seq. or Regulation Z, 12 C.F.R. Part 226, and thereafter paid an invoice received from the Defendants on or before the execution date of this Order; and
 
d. Any consumer who complained to Defendants with respect to an invoice received from American Billing and Collection, Inc. ("ABC") on or before the execution date of this Order who ABC subsequently referred to collections and who paid the collector(s) after December 31, 1995.

Provided, however, that no consumer who receives an invoice that complies with this Order shall be deemed a "Qualified Customer."

7. "ELIGIBLE CUSTOMER" means a Qualified Customer who has, on or before the return date listed on the Qualified Customer's Notice Package, mailed to the Claims Administrator: (1) a signed and dated Affidavit in the form specified as Attachment B to this Order; and (2) a signed and dated Waiver in the form specified as Attachment C to this Order.

8. "ELIGIBLE AMOUNT" means the amount of the refund to which an Eligible Customer is entitled. Such amount shall be equal to the amount paid to Defendants by the Qualified Customer and which Defendants' records indicate was for: (1) services that the consumer did not authorize; (2) service(s) for which they were billed that were accessed by a minor; (3) charges on the invoice that were previously subject to a successful dispute by the consumer pursuant to the Truth in Lending Act, 15 U.S.C.  1601, or Regulation Z, 12 C.F.R. Part 226; or (4) services paid by the consumer who complained to Defendants with respect to an invoice received from ABC on or before the execution date of this Order, and which ABC subsequently referred and was paid to a collection agency after December 31, 1995.

9. "MATERIAL" means likely to affect a consumer's choice of, or conduct regarding, goods or services.

10. The term "800 NUMBER" includes any number advertised as or widely understood to be toll-free.

11. "PRESUBSCRIPTION OR COMPARABLE ARRANGEMENT" has the same meaning as set forth in  308.2(e) of the 900-Number Rule. It is understood and agreed that a  308.2(e)(1) presubscription or comparable arrangement cannot be formed in the same call in which information or entertainment services are sold.

I. PROHIBITED BUSINESS ACTIVITIES

IT IS THEREFORE ORDERED, that in connection with the offering for sale or sale of any information or entertainment service accessed through any 800 number, or the billing and collection for such service, directly or through any intermediary, Defendants and their Representatives are hereby permanently restrained and enjoined from:

A. Billing, causing to be billed to, or attempting to collect from, any consumer for purchases made by a minor; provided, however that Defendants and their Representatives shall not be liable for violations of this provision for attempting to collect from any consumer who claims that the purchases were made by a minor but fails to return to Defendants an executed affidavit swearing or affirming this fact under the penalty of perjury within forty-five (45) days of Defendants' mailing the affidavit;

B. Billing, causing to be billed to, or attempting to collect from, any consumer on the basis that the service was accessed from such consumer's telephone;

C. Billing, causing to be billed to, or attempting to collect from, any consumer who successfully exercised his or her rights under the Truth in Lending Act, 15 U.S.C. 1601 et seq., or Regulation Z, 12 C.F.R. Part 226;

D. Billing for, causing to be billed for, collecting or providing 800-number telephone lines for, or providing access to, any service accessed through an 800 number without a presubscription or comparable arrangement; provided, however that any Defendant or its Representative acting as a service bureau for any non-defendant third party shall be liable for violations of this provision only where it knew or should have known of the violation;

E. Using as a personal identification number ("PIN") a social security number, credit, charge, or debit card number, checking account number, or telephone number;

F. Failing to promptly credit any consumer who documents that the billed services were unauthorized or due to a lost or stolen credit card, and who has reported such unauthorized use, loss, or theft to his or her credit card issuer; and

G. Making any misrepresentation of material fact, including, but not limited to:

1. Any misrepresentation that a consumer is obligated to pay for any service that the consumer did not purchase;
 
2. Any misrepresentation that a consumer is obligated to pay for any service because the service was accessed from that consumer's telephone; or
 
3. Any misrepresentation that a purchase has been authorized.

II.

IT IS FURTHER ORDERED that, in connection with the offering for sale or sale of any information or entertainment service accessed through any 800 number, or the billing and collection for such service, directly or through any intermediary, Defendants and their Representatives are hereby permanently restrained and enjoined from obtaining or submitting for payment a check, draft, or other form of negotiable paper drawn on any consumer's checking, savings, share, or similar account, without that consumer's express verifiable authorization. Such authorization shall be deemed verifiable if any of the following means are employed:

A. Express written authorization by the consumer, which may include the consumer's signature on the negotiable instrument; or

B. Express oral authorization which is tape recorded and made available upon request to the consumer's bank and which evidences clearly both the consumer's authorization of payment for the services that are the subject of the sales offer and the consumer's receipt of all of the following information:

1. The date of the draft(s);
 
2. The amount of the draft(s);
 
3. The payor's name;
 
4. The number of draft payments (if more than one);
 
5. A telephone number for customer inquiry that is answered during normal business hours;
 
6. The date of the customer's oral authorization;
 
7. The cost per minute of any call, or if unknown:
 
a. the maximum possible per-minute charge; or
 
b. a stated range of possible costs for the call, where the maximum possible per-minute charge is disclosed at least as prominently as any lower estimate of possible charges; and
 
8. Whether any recurring charges will be billed to the consumer; or

C. Written confirmation of the transaction, sent to the consumer prior to submission for payment of the consumer's check, draft, or other form of negotiable paper, that includes:

1. All of the information contained in Paragraph B.1-8, above; and
 
2. The procedures by which the consumer can obtain a refund in the event the confirmation is inaccurate.

III.

IT IS FURTHER ORDERED that, in connection with the offering for sale or sale of any information or entertainment service, Defendants and their Representatives are hereby permanently restrained and enjoined from:

A. Referring any caller to a 500, international number, or other non-900 number that entails charges for an international call without disclosing, clearly and conspicuously, the cost of calling any such number; provided, however, that Defendants or their Representatives shall not be in violation of this provision if, after exercising due diligence to determine the cost of calling any such number to which a consumer is referred, they do not know the cost of such calls, they disclose, clearly and conspicuously, that: "International long distance telephone charges to [insert country of call termination] apply," and "To determine your exact per-minute charges, contact your long distance carrier"; and

B. Making any misrepresentation that normal or standard rates apply to international long distance calls.

IV.

IT IS FURTHER ORDERED that Defendants and their Representatives are permanently restrained and enjoined from failing to comply with the 900-Number Rule, 16 C.F.R. Part 308, as it may be amended, including, but not limited to:

A. Failing to provide a preamble message, as required by  308.5(a) of the 900-Number Rule, 16 C.F.R.  308.5(a); and

B. Failing to disclose the cost of the call in a slow and deliberate manner in any solicitation to call a pay-per-call service.

V. CONSUMER REDRESS

IT IS FURTHER ORDERED that:

A. Within 90 days following entry of this Order, Defendant ABC shall:

1. Review 1,000 written consumer complaints to determine if the complaints are noted or are listed in the customer service computer database under the "comments fields" for each such consumer;
 
2. If the review described in subparagraph (1) demonstrates that the "comment fields" contained in the customer service computer database reflect the entry of written consumer complaints in 90% of the cases, Defendant ABC shall search its customer service computer database and identify all consumers who have received and paid a direct invoice. All such computer screens containing any entries in the "comments field" shall be searched manually to determine if the consumer is a Qualified Customer and, if so, the Eligible Amount of any refund to which he or she may be entitled under this Order. All records containing no entries in the "comments field," and all entries indicating that the consumer did not register or lodge a complaint with respect to an invoice or payment thereof shall be excluded from consideration as a "Qualified Customer";
 
3. If the review described in subparagraph (1) demonstrates that the "comment fields" contained in the customer service computer database do not reflect the entry of written consumer complaints in 90% of the cases, Defendant ABC shall search its customer service computer screens together with hard copies of consumer complaints to determine if the consumer is a Qualified Customer and the Eligible Amount of any refund to which they may be entitled under this Order. All records containing no entries in the "comments field," and all entries indicating that the consumer did not register or lodge a complaint with regard to an invoice or payment thereof, shall be excluded from consideration as a "Qualified Customer"; and
 
4. Develop a list with the name, address, telephone number, and Eligible Amount for each Qualified Customer to be submitted to the Claims Administrator;

B. Following 105 days after the entry of this Order, the Commission may, upon 10 business days' written notice to Defendants, review all documents, including but not limited to print outs of all applicable computer records, used by the Defendants in connection with Paragraph A;

C. Within 120 days following entry of this Order, the Claims Administrator shall send, by first-class mail, address correction requested, to the last known address of each Qualified Customer, a "Notice Package" consisting of:

1. A copy of a letter in the form specified in Attachment A to this Order, incorporated herein by reference, with the return date filled in;
 
2. A copy of the Affidavit in the form specified in Attachment B to this Order, incorporated herein by reference, with the return date filled in;
 
3. A self-addressed postage-paid return envelope;
 
4. The Waiver in the form specified in Attachment C to this Order, incorporated herein by reference, with the return date filled in; and
 
5. An envelope containing the materials listed in subsections 1-4 and bearing the return address of the Claims Administrator;

For purposes of this Subpart, the return date shall be the date sixty (60) days after the date of mailing the Notice Package;

D. Effective 120 days following entry of this Order, Defendants shall forgive all outstanding debts as of that time incurred by consumers who would be Qualified Customers, but for the fact they have not paid. Defendants shall also forgive all outstanding debts incurred as a result of invoices sent by Defendants to consumers calling 1-900-938-8487 during the period from February 10, 1998 through April 23, 1998. Should Defendants receive payment for any debts that have been forgiven pursuant to this Part, Defendants shall return such payment within ten (10) business days of receipt;

E. On the 30th, 60th, and 90th day after the Notice Package is mailed, the Claims Administrator shall prepare a list of all Eligible Customers, total the Eligible Amount for all Eligible Customers from whom the Claims Administrator has received a completed affidavit and waiver, and fax a request to Defendants to transfer within five (5) business days thereof by wire transfer said amount to an interest-bearing escrow account maintained by the Claims Administrator; Defendants shall be jointly and severally liable for payment of such amounts;

F. Within 15 days after receiving a wire transfer from Defendants, the Claims Administrator shall mail a check in the Eligible Amount to each such Eligible Customer from whom the Claims Administrator has received a completed affidavit and waiver. The checks shall be marked that they will be void after 60 days of the date of the check;

G. Within 250 days following entry of this Order the Claims Administrator shall send, by first-class mail, address correction requested, to the last known address of each Qualified Customer whose Attachment B Affidavit was returned unsigned and/or undated; and/or whose Attachment C Waiver was returned unsigned or undated,a "Second Notice Package" consisting of:

1. A copy of a letter in the form specified in Attachment D to this Order, incorporated herein by reference, with the return date filled in;
 
2. A copy of the Affidavit in the form specified in Attachment B to this Order, incorporated herein by reference, with the return date filled in;
 
3. A self-addressed postage-paid return envelope;
 
4. The Waiver in the form specified in Attachment C to this Order, incorporated herein by reference, with the return date filled in; and
 
5. An envelope containing the materials listed in subsections 1-4 and bearing the return address of the Claims Administrator;

For purposes of this Subpart, the return date shall be the date sixty (60) days after the date of mailing the Second Notice Package;

H. On the 30th, 60th, and 90th day after the Second Notice Package is mailed, the Claims Administrator shall prepare a list of all Eligible Customers, total the Eligible Amount for all Eligible Customers from whom the Claims Administrator has received a completed affidavit and waiver, and fax a request to Defendants to transfer, within five (5) business days thereof, by wire transfer said amount to an interest-bearing escrow account maintained by the Claims Administrator; Defendants shall be jointly and severally liable for payment of such amounts;

I. Within 15 days after receiving a wire transfer from Defendants, the Claims Administrator shall mail a check in the Eligible Amount to each such Eligible Customer from whom the Claims Administrator has received a completed affidavit and waiver. The checks shall be marked that they shall be void after 60 days of the date of the check;

J. Defendants shall use all reasonable efforts to determine the correct and complete name and last known address of all Qualified Customers, including the use of the United States Postal Service "address correction requested" service in each instance where Defendants' database does not provide correct or complete information;

K. Within 395 days following entry of this Order, Defendants shall provide a written report to the FTC, sworn to under penalty of perjury, setting forth in detail the manner and form in which Defendants have complied with this Part of the Order;

L. In each instance where a "Notice Package" described in Paragraphs C and G of this Part is returned by the United States Postal Service as undelivered and the Claims Administrator is provided with a corrected address, the Claims Administrator shall remail the Notice Package to the corrected address within five (5) business days after its receipt of the corrected address from the Postal Service;

M. The Claims Administrator shall establish and maintain a telephone number that persons may call to receive information relating to the program provided in this Part. This telephone number shall be operational until 365 days following entry of this Order;

N. On the 537th day following entry of this Order, all monies remaining in the Escrow Account maintained by the Claims Administrator shall revert back to Defendants with all accrued interest;

O. Where a deadline imposed by this Section, or any other part of this Order, falls on a Saturday, Sunday, holiday, or any day on which the Federal Trade Commission is closed for any reason, including a closure based on inclement weather, the deadline shall be extended to the next day in which the Commission is open for business; and

P. Defendants are responsible for ensuring that the Claims Administrator performs all tasks as specified in this Part. Should the Claims Administrator fail to comply with any provision in this Part, Defendants shall be liable to make alternative arrangements, subject to the approval of the Commission or its representatives, for timely accomplishment of such tasks. Failure of the Claims Administrator to perform tasks as specified in this Part shall not subject Defendants to sanctions for contempt; however, Defendants' failure to make alternative arrangements, under the circumstances and according to the provisions described above, may subject Defendants to sanctions for contempt.

VI. CORRECTION OF CREDIT REPORTS

IT IS FURTHER ORDERED that Defendant ABC shall, within sixty (60) calendar days after the date of entry of this Order, for each consumer identified pursuant to Part V of this Order, send a written notice to each credit bureau or other credit reporting agency to whom ABC or its Representatives submitted derogatory credit information relating to any consumer's failure to pay for any goods or services sold by Defendants. 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.

VII. GENERAL REQUIREMENTS

IT IS FURTHER ORDERED that, for a period of three (3) years from the date of entry of this Order, Defendants, in connection with any business engaged in offering for sale or selling any information or entertainment service, or in assisting others engaged in such service, 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 Paragraph 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 services purchased, and description of services purchased for all consumers to whom such business has sold 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;
 
6. in the event of a denial of 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 three (3) years after the last date of dissemination of any such materials.

VIII.

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

A. For a period of three (3) years from the date of entry of this Order, Defendants shall notify the Commission of the following:

1. Any changes in any individual Defendant's residence, mailing addresses, and telephone numbers, within 30 days of the date of such change;
 
2. Any change in any individual Defendant's employment status (including self-employment) within 30 days of such change. Such notice shall include the name and address of each business that any such Defendant is affiliated with or employed by, a statement of the nature of the business, and a statement of such Defendant's duties and responsibilities in connection with the business or employment; and
 
3. Any proposed change in the corporate structure of corporate defendant, or any proposed change in the structure of any business entity owned or controlled by any individual Defendant such as creation, incorporation, dissolution, assignment, sale, merger, dissolution of subsidiaries, filing of a bankruptcy petition, or change in the corporate name or address, or any other change that may affect compliance obligations arising out of this Order, thirty (30) days prior to the effective date of any proposed change; provided, however, that, with respect to any proposed change in the corporation about which any Defendant learns less than thirty (30) days prior to the date of such action is to take place, such Defendant shall notify the Commission as soon as it is practicable after learning of such proposed change;

B. Except as otherwise provided in Part V of this Order, one hundred eighty (180) days after the date of entry of this Order, Defendants shall provide a written report to the FTC, sworn to under penalty of perjury, setting forth in detail the manner and form in which Defendants have complied and are complying with this Order. The report shall include but not be limited to:

1. The individual Defendant's then-current residence address and telephone number;
 
2. The individual Defendant's then-current employment, business address and telephone numbers, a description of the business activities of each such employer, and Defendant's title and responsibilities for each employer;
 
3. A copy of each acknowledgment of receipt of this Order obtained by Defendants pursuant to Part XII; and
 
4. A statement describing the manner in which each such Defendant has complied with and is complying with the injunctive provisions of this Order;

C. Upon written request by a representative of the Commission, each Defendant shall submit additional written reports (under oath, if requested) and produce documents on reasonable 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:

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

and

E. For the purposes of this Part, "employment" includes the performance of services as an employee, consultant, or independent contractor; and "employers" include any individual or entity for whom any Defendant performs services as an employee, consultant, or independent contractor.

IX.

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

A. The Commission is authorized, with 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 and investigating defendant's compliance with any provision of this Order;

B. The Commission or its agent is authorized to anonymously call and tape record calls to Defendants' 800 and 900 information and entertainment telephone numbers, including holding incidental conversations with customer service representatives, without the necessity of identification, prior notice, or the presence of counsel; 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 defendants have violated any provision of this Order, Section 5 of the FTC Act, 15 U.S.C. 45, or the 900-Number Rule.

X.

IT IS FURTHER ORDERED that, for a period of three (3) years from the date of entry of this Order, for the purpose of further determining compliance with this Order, Defendants shall permit the Commission's agents, upon reasonable written notice from the Commission:

A. Access during normal business hours to any office, or facility storing documents, of any business where (1) any Defendant is the majority owner of the business or directly or indirectly manages or controls the business, and where (2) the business is engaged in offering for sale or selling any information or entertainment service, or in assisting others engaged in such service. In providing such access, Defendants shall permit the Commission's agents to inspect and copy, at the FTC's expense, all documents relevant to any matter contained in this Order; 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 this Part applies, concerning matters relating to compliance with the terms of this Order. The person interviewed may have counsel present.

XI.

IT IS FURTHER ORDERED that, for a period of three (3) years from the date of entry of this Order, Defendants 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, within three (3) business days after employing or retaining such persons, for any business where (1) any Defendant is the majority owner of the business or directly or indirectly manages or controls the business, and (2) where the business is engaged in offering for sale or selling any information or entertainment service, or in assisting others engaged in such service; and

B. Maintain for a period of three (3) 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 Paragraph (A) of this Part.

XII.

IT IS FURTHER ORDERED that within ten (10) business days after receipt by Defendants of this Order as entered by the Court, Defendants shall submit to the Commission a truthful sworn statement, in the form shown on Attachment E, that shall acknowledge receipt of this Final Order.

XIII.

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 at any time to apply to the Court for such further orders or directives as may be necessary or appropriate for the interpretation or modification of this Order, for the enforcement or compliance therewith, or the punishment of violations thereof.

Defendants, by their counsel and individually, hereby consent to the terms and conditions of the Stipulated Final Judgment and Order for Permanent Injunction as set forth above and consent to the entry thereof.

FOR DEFENDANTS

Lewis Rose
D. Reed Freeman
Arent Fox Kintner Plotkin & Kahn, PLLC
1050 Connecticut Avenue, NW
Washington, DC 20036
202-857-6000

COUNSEL FOR DEFENDANTS

 

John O. Cooper, Individually
Mark K. Suzumoto #108690
Van Etten, Suzumoto & Haag, LLP
11755 Wilshire Boulevard, Suite 2400
Los Angeles, California 90025-1531
310-966-1200

 

Stuart Leventhal, Individually
Stuart Leventhal
President
American Billing & Collection, Inc.

 

Russel Leventhal, Individually
Frank Montelione, Individually

Russel Leventhal
CEO
U.S. Interstate Distributing

 

Russel Leventhal
President
Allstate Communications, Inc.
Russel Leventhal
CEO
Interactive Audiotext Services, Inc.

FOR PLAINTIFF FEDERAL TRADE COMMISSION

Stephen L. Cohen
Federal Trade Commission
Washington, DC 20580
202-326-3563
Michael Donohue
Federal Trade Commission
Washington, DC 20580
202-326-3222

The parties, having agreed to the entry of this Order enjoining Defendants and their Representatives from violating Section 5 of the FTC Act, 15 U.S.C.  45(a), and the 900-Number Rule, 16 C.F.R. Part 308, and requiring payment of consumer redress, this Stipulated Final Judgment and Order For Permanent Injunction and Consumer Redress is hereby Ordered.

DATED

UNITED STATES DISTRICT JUDGE
CENTRAL DISTRICT OF CALIFORNIA

ATTACHMENT A

[CLAIMS ADMINISTRATOR LETTERHEAD]

[Date]

Dear :

Our records show that we sent you invoices for adult phone entertainment services billed by American Billing & Collection, Inc. (ABC). ABC has recently started a program whereby it will offer refunds to its customers who have paid such invoices, but who swear or affirm that they did not purchase or authorize the purchase of the adult phone entertainment services for which they received a bill or bills. According to our records, you are qualified to receive a refund under this program in the amount of [Eligible Amount].

This program is part of an agreement between ABC and the Federal Trade Commission (FTC). The FTC has alleged that in some instances, ABC has sent bills to consumers who did not themselves order the adult phone entertainment services. Although ABC believes that it has always sent bills to the appropriate party, it has agreed to provide refunds to the eligible customers who follow the steps listed below.

How To Apply

In order to apply for a refund, you MUST do the following:

(1) Sign and date the enclosed Affidavit; and
 
(2) Return the Affidavit to us in the enclosed envelope. You must mail the Affidavit back to us by [return date] to make sure that you are considered for the refund for which you are qualified. If we do not receive your Affidavit in time, you will not get a refund; and
 
(3) Sign, date and return the enclosed Waiver form. By signing the Waiver form, you will give up any rights you may have against Interactive Audiotext Services, Inc., Allstate Communications, Inc., American Billing & Collection, Inc., also doing business as ABC Services, U.S. Interstate Distributing, Inc., Frank Montelione, Russel Leventhal, Stuart Leventhal, and John O. Cooper, and their affiliates, successors, assigns, directors, officers, agents, representatives, and employees, and their divisions and other subsidiaries, from any and all claims of every name and nature relating to the private billing for adult phone entertainment services provided via 800 or other numbers widely understood to be toll-free for which you receive a refund.

If you have any questions about this program, please contact:

[claims administrator]
[Telephone Number]

Remember: You must mail the signed and dated Affidavit, together with the enclosed Waiver to us by [return date].

Sincerely,

Claims Administrator

Enclosures

ATTACHMENT B

IN THE UNITED STATES DISTRICT COURT
FOR THE CENTRAL DISTRICT OF CALIFORNIA

FEDERAL TRADE COMMISSION,
Plaintiff,

vs.

INTERACTIVE AUDIOTEXT SERVICES, INC., et al.

Defendants.

CASE NO. CV 98-3049 CBM (BQRx)

CUSTOMER AFFIDAVIT
PURSUANT TO CONSENT ORDER

I [enter name], hereby swear or affirm as follows:

1. I am over the age of 18 years and state that the matters contained herein are based upon my own knowledge. I believe that I am otherwise competent to testify in this matter.
 
2. Since January 1, 1996, I have paid [Eligible Amount] to American Billing & Collection, Inc.
 
3. I neither purchased nor authorized the purchase of the adult phone entertainment services for which I have: (1) received a bill from American Billing & Collection, Inc., (2) lodged a complaint concerning American Billing & Collection, Inc.; and (3) paid to American Billing & Collection, Inc. or its agents.

I swear or affirm, under the penalty of perjury, with knowledge of the penalties for false statements provided by 18 United States Code Section 1001,(1) and with the knowledge that this declaration is submitted by me to affect action by the Federal Trade Commission, that the foregoing is true and correct to the best of my knowledge, information and belief.

Date: ______________

[Name]

[bar code]

ATTACHMENT C

Notice of Acceptance of Refund and Waiver of Claims

I hereby accept ABC's offer of a refund in the amount of [Eligible Amount], as contained in its letter of [date of Attachment A or D].

In consideration of this refund, which I deem to be a compromise of any claim and/or dispute I may now have or may have with Interactive Audiotext Services, Inc., Allstate Communications, Inc., American Billing & Collection, Inc., also doing business as ABC Services, U.S. Interstate Distributing, Inc., Frank Montelione, Russel Leventhal, Stuart Leventhal, and John O. Cooper, and their affiliates, successors, assigns, directors, officers, agents, representatives, and employees, and their divisions and other subsidiaries, I hereby release and discharge Interactive Audiotext Services, Inc., Allstate Communications, Inc., American Billing & Collection, Inc., also doing business as ABC Services, U.S. Interstate Distributing, Inc., Frank Montelione, Russel Leventhal, Stuart Leventhal, and John O. Cooper, and their affiliates, successors, assigns, directors, officers, agents, representatives, and employees, and their divisions and other subsidiaries, from any and all claims of every name and nature relating to the private billing for adult phone entertainment services provided via 800 or other numbers widely understood to be toll-free for which I received a refund, through and including the date of this instrument.

Date

Name

Signature

Address

Remember: You must sign this form and mail it to us by [return date].

[bar code]

ATTACHMENT D

[CLAIMS ADMINISTRATOR]

[Date]

Dear :

Our records show that your response to our letter of [date], which explained that you are qualified to receive a refund in the amount of [Eligible Amount] for amounts paid on invoices from American Billing & Collection, Inc. (ABC) for adult phone entertainment services, was inadequate because you failed to sign and/or date the "Consumer Affidavit Pursuant to Consent Order" and/or because you failed to sign and/or date the Notice of Acceptance of Refund and Waiver of Claims.

As we explained in our previous letter, ABC has started a program whereby it will offer refunds to its customers who have received and paid such invoices for adult phone entertainment services, but who swear or affirm, with knowledge of and under the penalties of perjury, that they did not purchase or authorize the adult phone entertainment services for which they received a bill or bills. You are qualified for a refund under this program.

In order to apply for a refund, you MUST do the following immediately:

(1) Sign and date the enclosed Affidavit;
 
(2) Return the Affidavit to us in the enclosed envelope. You must mail the Affidavit back to us by [second return date] to make sure that you are considered for the full refund for which you are qualified. If we do not receive your Affidavit in time, you will not get a refund;
 
(3) Return the waiver form which is enclosed. By signing the waiver form, you will give up any rights you may have against Interactive Audiotext Services, Inc., Allstate Communications, Inc., American Billing & Collection, Inc., also doing business as ABC Services, U.S. Interstate Distributing, Inc., Frank Montelione, Russel Leventhal, Stuart Leventhal, and John O. Cooper, and their affiliates, successors, assigns, directors, officers, agents, representatives, and employees, and their divisions and other subsidiaries from any and all claims of every name and nature relating to the private billing for adult phone entertainment services provided via 800 or other numbers widely understood to be toll-free for which you receive a refund.

If you have any questions about this program, please contact:

[claims administrator]

[Telephone Number]

Remember: We must receive the signed and dated Affidavit, together with the enclosed release to us by [second return date].

Sincerely,

Claims Administrator

Enclosures

ATTACHMENT E

IN THE UNITED STATES DISTRICT COURT
FOR THE CENTRAL DISTRICT OF CALIFORNIA

FEDERAL TRADE COMMISSION, Plaintiff,

vs.

INTERACTIVE AUDIOTEXT SERVICES, INC., et al.

Defendants.

CASE NO. CV 98-3049 CBM (BQRx)

AFFIDAVIT OF [NAME]

I ______________ [enter name], being duly sworn, hereby states and affirms as follows:

1. My name is _________________________. My current address is _______________________________________________________. I am a citizen of the United States and am over the age of eighteen. I have personal knowledge of the facts set forth in this Affidavit.

2. On [date], I received a copy of the Stipulated Final Judgment and Order for Permanent Injunction and Consumer Redress, which was signed by the Honorable Consuelo Marshall and entered by the Court on [date of entry of Order]. A true and correct copy of the Order I received is appended to this Affidavit.

I swear or affirm, under the penalty of perjury, with knowledge of the penalties for false statements provided by 18 United States Code Section 1001, and with the knowledge that this declaration is submitted by me to affect action by the Federal Trade Commission, that the foregoing is true and correct.

Date: ______________

______________________
[Name]

1. 18 U.S.C.  1001 states in part: "Whoever, in any matter within the jurisdiction of the executive, legislative or judicial branch of the Government of the United States, knowingly and willfully makes any materially false, fictitious, or fraudulent statement or entry shall be fined under this title or imprisoned not more than five years or both."