JEFFREY KLURFELD, Bar No. 53903
RAYMOND E. MCKOWN, Bar No. 150975
Federal Trade Commission
10877 Wilshire Boulevard, Ste. 700
Los Angeles, California 90024
(310) 824-4343 ph.
(310) 824-4380 fax
Attorneys for Plaintiff
FEDERAL TRADE COMMISSION

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
EASTERN DIVISION

FEDERAL TRADE COMMISSION, Plaintiff,

v.

RALPH LEWIS MITCHELL, JR., also known as Ralph Lewiss Mitchell, Jr., an individual doing business as Mitchell Enterprises, Millennium Group, Diamante Marketing Group, and DMG, Defendant.

COMPLAINT FOR INJUNCTIVE AND OTHER EQUITABLE RELIEF

Plaintiff, the Federal Trade Commission ("FTC" or "Commission") for its Complaint alleges:

1. The Commission brings this action under Sections 13(b) and 19 of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C.  53(b) and 57b, and Section 410(b) of the Credit Repair Organizations Act, 15 U.S.C.  1679h(b) to obtain preliminary and permanent injunctive relief, restitution, rescission, disgorgement and other equitable relief for the defendant's deceptive acts or practices in connection with the sale and offering for sale of credit repair products in violation of Section 5(a) of the FTC Act, 15 U.S.C.  45(a), and Section 404(a)(2) of the Credit Repair Organizations Act, 15 U.S.C.  1679b(a)(2).

JURISDICTION AND VENUE

2. This Court has jurisdiction of this matter pursuant to 28 U.S.C.  1331, 1337(a), and 1345, and 15 U.S.C.  53(b), 57b, and 1679h(b).

3. Venue is proper under 28 U.S.C.  1391 and 15 U.S.C.  53(b).

THE PARTIES

4. Plaintiff, the Federal Trade Commission, is an independent agency of the United States Government created by statute. 15 U.S.C.  41 et seq. The Commission is charged, inter alia, with enforcement of Section 5(a) of the FTC Act, 15 U.S.C.  45(a), which prohibits unfair or deceptive acts or practices in or affecting commerce. The Commission also enforces the Credit Repair Organizations Act. 15 U.S.C.  1679h(a). The Commission is authorized to initiate federal district court proceedings, by its own attorneys, to enjoin violations of the FTC Act and the Credit Repair Organizations Act in order to secure such equitable relief, including consumer redress, as may be appropriate in each case. 15 U.S.C.  53(b), 57b, and 1679h(b).

5. Defendant Ralph Lewis Mitchell, Jr., also known as Ralph Lewiss Mitchell, Jr., does business at 1201 University Avenue, #106-109, Riverside, California, and 1606 East Washington, Colton, California. At all times material to this complaint, acting alone or in concert with others, he has formulated, directed, controlled or participated in the acts and practices set forth in this complaint. Defendant Mitchell resides or has transacted business in this District.

COMMERCE

6. At all times relevant to this complaint, defendant has maintained a substantial course of trade in the offering for sale and selling of credit repair products, in or affecting commerce, as "commerce" is defined in Section 4 of the FTC Act, 15 U.S.C.  44.

DEFENDANT'S BUSINESS PRACTICES

7. Since at least January 1998, through various entities including but not limited to Mitchell Enterprises, Millennium Group, Diamante Marketing Group, and DMG, the defendant has advertised, promoted, offered for sale, and sold credit repair products to consumers through the use of the Internet using banner advertising, website links, and unsolicited commercial electronic messages ("e-mail") popularly known as "spamming."

8. Defendant claims he and his products can improve consumers' credit histories, credit records, or credit ratings by advising them how to establish new credit files. Defendant further claims these recommendations for creating new files are legal.

9. Typical and illustrative of defendant's claims about his credit products can be found at defendant's Internet sites, respectively, "www.edmg.com/credit/homea3.htm," and "www.edmg.com/credit/credit.htm," which include the following:

a. [At /homea3.htm]: TURN BAD CREDIT INTO GOOD!!! [N]ow Anyone can have a brand new credit file, INSTANTLY and OVERNIGHT! . . . It works with Bankruptcies, FBI (DUI) and Judgments! It's 100% LEGAL and best of all, the process is FREE! . . .

Learn how to use the Credit Bureaus to get a TOTALLY NEW CLEAN credit file.

ADD AAA CREDIT within WEEKS to your new or existing file. . . .

. . .All this for the unbelievably low price of only $39.95!

b. [At /credit.htm]: There is only one way people are freeing themselves from the shackles of bad credit and that is to get a completely NEW credit file! . . .

. . .

The answer is, the credit bureaus use certain linked information on each person! And by knowing which set of parameters the computer uses, and LEGALLY modifying them, you can become a "new Joe Shmoe" to the credit bureaus!

. . .

Q- Is this legal? A- Yes! Credit profiles sprung out of the business community in order to track each of our credit histories. They cannot be easily regulated. The New Credit Report just points out the credit bureau's own loopholes! . . .

Q- How fast can I have a new credit file? A- Within a day of two of receiving the package if you perform the steps required!

10. Consumers who send the requested amount [$32.95 after discounts] to defendant as instructed by defendant's advertisements receive a booklet, "Credit Secrets, The Credit Bureaus Don't Want You To Know!!!!," which advises consumers "There are 3 ways that people create a new credit file. One is to use their same name with different personal information. Another is to use the same personal information with a different first or last name. And last of all, they use an alias name with the same or different personal information. When I speak of personal information I'm talking about a person's birthdate, social security number, address etc. It's up to you to decide which way is best for you." The booklet advises consumers to "adjust" their social security number by selecting different numbers according to the author's formula. The booklet also discloses techniques to obtain a new Social Security card, a new driver's license or state identification card, a new home address, or a new name, all of which are false, in order to obtain a new credit profile.

VIOLATIONS OF THE CREDIT REPAIR ORGANIZATIONS ACT

11. The Credit Repair Organizations Act, 15 U.S.C.  1679a-j (1997), was enacted on September 30, 1996, and has been in full force and effect since April 1, 1997.

12. Section 404(a)(2) of the Credit Repair Organization Act prohibits all persons from making any statement, or counseling or advising any consumer to make any statement, the intended effect of which is to alter the consumer's identification to prevent the display of the consumer's credit record, history, or rating for the purpose of concealing adverse information that is accurate and not obsolete to any consumer reporting agency, as defined in 15 U.S.C.  1681(f), or to any person who has extended credit to the consumer or to whom the consumer has applied or is applying for an extension of credit. 15 U.S.C.  1679b(a)(2).

13. 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 and deceptive act or practice in commerce in violation of Section 5(a) of the FTC Act, 15 U.S.C. 45(a).

COUNT ONE

14. In numerous instances, defendant has counseled or advised consumers to make statements, the intended effect of which has been to alter the consumer's identification to prevent the display of the consumer's credit record, history, or rating for the purpose of concealing adverse information that is accurate and not obsolete to consumer reporting agencies, as that term is defined in 15 U.S.C.  1681(f), or to persons who have extended credit to those consumers or to whom those consumers have applied or are applying for extensions of credit.

15. Defendant has thereby violated Section 404(a)(2) of the Credit Repair Organizations Act, 15 U.S.C.  1679b(a)(2).

VIOLATIONS OF THE FEDERAL TRADE COMMISSION ACT

COUNT TWO

16. In connection with the advertising, marketing, promotion, offering for sale, or sale of credit repair products, to induce consumers to purchase his products, defendant has, expressly or by implication, represented that, through the use of his products, consumers can legally alter their identifications to conceal adverse credit information from consumers' credit records, credit histories, or credit ratings.

17. In truth and in fact, through the use of defendant's products, consumers cannot legally alter their identifications to conceal adverse credit information from their credit records, credit histories, or credit ratings.

18. Therefore, the representation set forth in paragraph 16 is false and misleading and constitutes a deceptive act or practice in or affecting commerce, in violation of Section 5(a) of the FTC Act, 15 U.S.C.  45(a).

CONSUMER INJURY

19. Consumers throughout the United States have suffered or are likely to suffer substantial monetary loss as a result of defendant's unlawful acts or practices. Absent injunctive relief by this Court, defendant is likely to continue to injure consumers and harm the public interest.

THIS COURT'S POWER TO GRANT RELIEF

20. Sections 13(b) and 19 of the FTC Act, 15 U.S.C.  53(b) and 57b, and Section 410(b) of the Credit Repair Organizations Act, 15 U.S.C.  1679h(b), empower this Court to issue a permanent injunction against defendant's violations of the Credit Repair Organizations Act and the FTC Act and, in the exercise of its equitable jurisdiction, to order such ancillary relief as preliminary injunction, rescission, restitution, disgorgement of profits resulting from defendant's unlawful acts or practices, and other remedial measures.

PRAYER FOR RELIEF

21. WHEREFORE, plaintiff requests that this Court, as authorized by Section 410(b) of the Credit Repair Organizations Act, 15 U.S.C.  1679h(b), Sections 13(b) and 19 of the FTC Act, 15 U.S.C.  53(b) and 57b, and pursuant to its own equitable powers:

(a) Award plaintiff such preliminary injunctive and ancillary relief as may be necessary to avert the likelihood of consumer injury during the pendency of this action and to preserve the possibility of effective final relief;

(b) Permanently enjoin defendant from violating the Credit Repair Organizations Act and the FTC Act, as alleged herein, in connection with the advertising, promoting, offering for sale, and sale of credit repair products or services;

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

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

Respectfully Submitted,

DEBRA A. VALENTINE
General Counsel

Dated: , 1999

Raymond E. McKown
Attorney for Plaintiff