EVAN SIEGEL
SARA LORBER
Federal Trade Commission
55 East Monroe Street, Suite 1860
Chicago, Illinois 60603
(312) 960-5634

JOHN JACOBS (CA Bar # 134154)
Federal Trade Commission
10877 Wilshire Boulevard, Suite 700
Los Angeles, California 90024
(310) 824-4343

Attorneys for Plaintiff
FEDERAL TRADE COMMISSION

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

FEDERAL TRADE COMMISSION, Plaintiff,

v.

CLARENDON HOUSE, Inc., a corporation doing business as National Data Service; FIRST NATIONAL DATA GROUP, Inc., a corporation doing business as National Data Service; PETER M. DEARDEN, individually and doing business as National Data Service; and ELLEN H. STEWART, individually, Defendants.

Civ. No. 98-9262 WMB (AJWx)

STIPULATED ORDER FOR
PERMANENT INJUNCTIVE RELIEF
WITH CONSUMER REDRESS AND
OTHER EQUITABLE RELIEF

Plaintiff, the Federal Trade Commission ("FTC" or "Commission"), has filed an Amended Complaint for a Permanent Injunction and Other Relief ("Amended Complaint") pursuant to

Sections 13(b) and 19 of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. §§ 53(b) and 57b, and the Telemarketing and Consumer Fraud and Abuse Prevention Act ("Telemarketing Act"), 15 U.S.C. §§ 6101 et seq., charging defendants Clarendon House, Inc. d/b/a National Data Service and d/b/a Winston, Levy, Sinclair & Associates, First National Data Group, Inc. d/b/a National Data Service, Peter M. Dearden, and Ellen H. Stewart (collectively "defendants") with deceptive acts and practices in connection with the advertising and telemarketing of informational guides to consumers throughout the United States. The Commission's Amended Complaint alleges that defendants' deceptive acts and practices violate Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), and Sections 310.3(a)(1)(i), 310.3(a)(1)(iii), 310.3(a)(2)(iii), and 310.3(a)(4) of the Commission's Telemarketing Sales Rule ("the Telemarketing Rule"), 16 C.F.R. §§ 310.3(a)(1)(i), 310.3(a)(1)(iii), 310.3(a)(2)(iii), and 310.3(a)(4). The Commission and defendants have consented to the entry of this Stipulated Order for Permanent Injunctive Relief with Consumer Redress and Other Equitable Relief ("Stipulated Order") without a trial or adjudication of any issue of law or fact herein.

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

FINDINGS

1. This is an action by the Commission instituted under Sections 13(b) and 19 of the FTC Act, 15 U.S.C. §§ 53(b) and 57b, and Sections 3 and 6 of the Telemarketing Act, 15 U.S.C. §§ 6102(c) & 6105(b). Pursuant to these sections of the FTC Act and the Telemarketing Act, the Commission has the authority to seek the relief contained herein.

2. This Court has jurisdiction over the subject matter of this case and all parties hereto. Venue in the Central District of California is proper.

3. The Commission's Amended Complaint states a claim upon which relief may be granted against defendants under Sections 5, 13(b), and 19 of the FTC Act, 15 U.S.C. §§ 45, 53(b), and 57b, and the Telemarketing Rule, 16 C.F.R. Part 310.

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

5. Defendants, who deny the material allegations set forth in the Amended Complaint, without admitting such allegations and without this stipulation constituting evidence against or admissions by defendants, agree to entry of this Stipulated Order.

6. The parties shall each bear their own costs and attorney's fees incurred in this action and have waived all claims under the Equal Access to Justice Act, 28 U.S.C. § 2412, and all rights to seek judicial review, or otherwise to challenge the validity of this Stipulated Order.

7. Entry of this Stipulated Order is in the public interest.

DEFINITIONS

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

1. "Assets" means all real and personal property of defendants, or held for the benefit of any such defendants, including but not limited to "goods," "instruments," "equipment," "fixtures," "general intangibles," "inventory," "checks," or "notes" (as these terms are defined in the Uniform Commercial Code), lines of credit, and all cash, wherever located.

2. "Customer" means any person who is or may be required to pay for goods or services offered through telemarketing. 16 C.F.R. § 310.2(i).

3. "Material" means likely to affect a person's choice of, or conduct regarding, goods or services.

4. "Person" means any individual, group, unincorporated association, limited or general partnership, corporation, or other business entity.

5. "Document" is synonymous in meaning and equal in scope to the usage of the term in Federal Rule of Civil Procedure 34(a) and includes writings, drawings, graphs, charts, photographs, audio and video recordings, computer records, and other data compilations from which information can be obtained and translated, if necessary, through detection devices into reasonably usable form. A draft or non-identical copy is a separate document within the meaning of the term.

6. "Telemarketing" means (except within the context of Section II, infra) a plan, program, or campaign which is conducted to induce the purchase of goods or services by use of one or more telephones, and which involves more than one interstate telephone call.

I.

PROHIBITED BUSINESS ACTIVITIES
PURSUANT TO THE FTC ACT

IT IS THEREFORE ORDERED that, in connection with the advertising, promotion, offering, or sale of any auction- information packages, foreclosed-home information packages, job-opportunity guides, or other informational packages or business opportunities, whether related to the public or private sectors, or any other goods or services, defendants, and their successors, assigns, officers, agents, employees, and those persons in active concert or participation with them who receive actual notice of this Stipulated Order by personal service or otherwise, whether acting directly or through any entity, corporation, subsidiary, division, or other device, are hereby permanently restrained and enjoined from:

A. Misrepresenting, expressly or by implication, that consumers who purchase defendants' information packages on seized cars and other items frequently are able to purchase vehicles in good condition for a fraction of their wholesale values, including as little as $350;

 

B. Misrepresenting, expressly or by implication, that consumers who purchase defendants' foreclosed-home information packages frequently are able to purchase foreclosed homes in reasonably good condition for substantially below their market values;

 

C. Misrepresenting, expressly or by implication, that consumers who purchase defendants' job-opportunity packages will receive listings of businesses currently seeking to hire individuals to type at home for such businesses;

 

D. Making any representation, expressly or by implication, about the ability of consumers who purchase defendants' information packages to: (1) purchase vehicles, homes, or other goods or services, or (2) obtain employment as at-home typists, unless the representation is true and, at the time it is made, defendants possess and rely upon competent and reliable evidence that substantiates the representation;

 

E. Failing to disclose in a clear and conspicuous manner, prior to charging a consumer for any goods or services, the identity of the goods or services that are the subject of a sales offer, the total cost to purchase, receive, or use the goods or services that are the subject of a sales offer, or the quantity of the goods or services that are the subject of a sales offer;

 

F. Misrepresenting, directly or by implication, any material aspect of the nature or terms of defendants' refund, cancellation, exchange, or repurchase polices;

 

G. Failing to disclose, before a customer pays for goods or services offered, in a clear and conspicuous manner, the following material information:

1. if a defendant has a policy of not making refunds, cancellations, or repurchases, a statement informing the customer that this is the defendant's policy, or

2. if a defendant makes a representation about a refund, cancellation, exchange, or repurchase policy, a statement of all material terms and conditions of such policy; or

H. Misrepresenting, expressly or by implication, any fact material to a consumer's decision to purchase or use defendants' goods or services.

II.

PROHIBITED BUSINESS ACTIVITIES
PURSUANT TO THE TELEMARKETING RULE

IT IS FURTHER ORDERED that, in connection with the advertising, promotion, offering, or sale of any auction- information packages, foreclosed-home information packages, job- opportunity packages, or any other goods or services, defendants, and their successors, assigns, officers, agents, employees, and those persons in active concert or participation with them who receive actual notice of this Stipulated Order by personal service or otherwise, whether acting directly or through any entity, corporation, subsidiary, division, or other device, are hereby permanently restrained and enjoined from violating the Telemarketing Rule, 16 C.F.R. Part 310, as presently promulgated or as hereinafter amended, including but not limited to the following:

A. Violating Section 310.3(a)(2)(iii) of the Telemarketing Rule, 16 C.F.R. § 310.3(a)(2)(iii), by misrepresenting, directly or by implication, any material aspect of the performance, efficacy, nature, or central characteristics of goods or services that are the subject of a sales offer;

 

B. Violating Section 310.3(a)(4) of the Telemarketing Rule, 16 C.F.R. § 310.3(a)(4), by making a false or misleading statement to induce any person to pay for goods or services;

 

C. Violating Section 310.3(a)(1)(i) of the Telemarketing Rule, 16 C.F.R. § 310.3(a)(1)(i), by failing to disclose, in a clear and conspicuous manner, before a customer pays for the goods or services offered for sale, the total costs to purchase, receive, or use, and the quantity of, any goods or services that are the subject of the sales offer, and

 

D. Violating Section 310.3(a)(1)(iii) of the Telemarketing Rule, 16 C.F.R. § 310.3(a)(1)(iii), by failing to disclose, in a clear and conspicuous manner, before a customer pays for goods or services offered, the following material information: if the seller has a policy of not making refunds, cancellations, exchanges, or repurchases, a statement informing the customer that this is the seller's policy; or, if the seller or telemarketer makes a representation about a refund, cancellation, exchange, or repurchase policy, a statement of all material terms and conditions of such policy.

III.

RESTRICTIONS ON USE OF DEMAND DRAFTS IT IS FURTHER ORDERED that, in connection with the sale of any good or service in or affecting commerce, defendants, and their successors, assigns, officers, agents, employees, and those persons in active concert or participation with them who receive actual notice of this Stipulated Order by personal service or otherwise, whether acting directly or through any entity, corporation, subsidiary, division, or other device, are hereby permanently restrained and enjoined from obtaining or submitting for payment a check, draft, or other form of negotiable paper drawn on a person's checking, savings, share, or similar account, without that person's express verifiable authorization. Such authorization shall be deemed verifiable if any of the following means are employed:

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

 

B. Express oral authorization which is tape recorded and made available upon request to the customer's bank and which evidences clearly both the customer's authorization of payment for the goods and services that are the subject of the sales offer and the customer'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; and

6. The date of the customer's oral authorization; or

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

1. All of the information contained in Subsections B.1 through B.6 of this Section, supra; and

2. The procedures by which the customer can obtain a refund from the seller or telemarketer in the event the confirmation is inaccurate.

IV.

CONSUMER REDRESS

IT IS FURTHER ORDERED that

A. Defendants Clarendon House, Inc. ("Clarendon") and First National Data Group, Inc. ("First National") shall pay and assign to the Commission the sum of $3,955,000. The sum required to be paid to the Commission by defendants shall be paid through the Receiver pursuant to Section VII, infra, and shall be subject to, and reduced by, the following credits: (a) the total amount of charge backs by defendants' customers that have been deducted from defendants' restricted bank account reserves ("restricted accounts") at Goleta National Bank and EFS National Bank from November 20, 1998, until the close of business on the date that this Stipulated Order is signed by the Court; (b) any positive balance of the restricted accounts as of the close of business on the date this Stipulated Order is signed by the Court; and (c) the total charge backs by defendants' customers that have been debited against defendants' accounts with American Express and Discover (collectively "Amex accounts") as of the close of business on the date that this Stipulated Order is signed by the Court, as evidenced by statements from such institutions dated on or around March 31, 1999, or ten (10) days before the Stipulated Order is signed, whichever is later ("Amex date"), and as updated thereafter.

 

Provided, further, that when defendants avail themselves of these credits, they shall, within seven days of the date this Stipulated Order is signed by the Court, take all steps necessary to assign to the Commission any positive balance that may exist in the restricted accounts as of July 15, 1999; and upon such assignment, take all steps necessary to ensure that such positive balance(s) is (are) remitted by Goleta National Bank and EFS National Bank to the Commission on or before July 15, 1999.

 

If a positive balance exists in any of the restricted accounts on July 15, 1999, counsel for the Commission shall, as assignee, provide written instructions to Goleta National Bank and/or EFS National Bank directing them to remit to defendants an amount equivalent to the sum of charge back debits, if any, made against defendants' Amex accounts between the Amex date and July 1, 1999, as shown on Amex account statements provided by defendants and dated on or around July 1, 1999.

 

The restricted accounts affected by this Section are those at Goleta National Bank (bank control account number 151-7791 and, in the general ledger account, Certificate of Deposit number 7757) and EFS National Bank (account number 113032). The Amex accounts are American Express merchant account number 5046792339 and Discover merchant account number 601101753729142.

 

B. In order to facilitate payment as specified in Subsection A of this Section, defendant Ellen H. Stewart ("Stewart") shall contribute to Clarendon the sum of $80,000.00 for deposit in account number 010-75489 at American Pacific State Bank, an account held by the Receiver ("Receiver's Clarendon account"). Such contribution shall be paid by Stewart within seven days of the date that the Court signs this Stipulated Order.

 

C. To further facilitate payment as specified in Subsection A of this Section, defendant Peter Dearden ("Dearden") shall contribute to Clarendon, for deposit in the Receiver's Clarendon account, a sum that is the equivalent of the difference between the $3,955,000.00 obligation stated in Subsection A and:

(a) The credits described in Subsection A; and

(b) The sum held by the Receiver that is available for distribution after fees and expenses as allowed by the Court pursuant to Section IX of the Order Appointing Temporary Receiver; and which shall include the sum of $80,000.00 payable by Stewart pursuant to Subsection B of this Section.

The contribution described in this Subsection C shall be made within seven days after the Court approves the Receiver's final report and application for fees and expenses, or within seven days after the Court approves this Stipulated Order, whichever occurs later. The asset freeze ordered by the Court on November 19, 1998, and appended thereafter, shall be lifted in accordance with Section VIII to allow such payment.

 

D. For purposes of administration, all payments required under this Section to be made to the Commission or to the Receiver's account shall be made by certified check or other guaranteed funds payable to and delivered to the Commission, or by wire transfer in accord with directions provided by the Commission;

 

E. The funds paid by defendants and the Receiver pursuant to this Section and Section VII, infra, shall be deposited into a redress fund, administered by the Commission pursuant to its Memorandum of Instructions to the Redress Administrator, to be used for equitable relief, including but not limited to consumer redress and any attendant expenses for the administration of any redress fund. To the extent that redress to certain purchasers is impracticable, any funds not so used shall be paid to the United States Treasury as disgorgement. The Commission shall lodge with the Court, and serve counsel for defendants with, a copy of its Memorandum of Instructions to the Redress Administrator and any subsequent amendments or alterations at least fourteen (14) days prior to the effective date of such instructions. Defendants shall have no right to contest the manner of distribution chosen by the Commission. The Commission, in its sole discretion, may use a designated agent to administer consumer redress. The Commission and defendants acknowledge and agree that this judgment for equitable monetary relief is solely remedial in nature and is not a fine, penalty, punitive assessment, or forfeiture;

 

F. In the event of any default on any obligation of defendants to make payment under this Section or Section VIII, infra, interest, computed pursuant to 28 U.S.C. § 1961(a), shall accrue from the date of default to the date of payment; and

 

G. Defendants are hereby required, in accordance with 31 U.S.C. § 7701, to furnish to the Commission their respective taxpayer identifying numbers (social security numbers or employer identification numbers), which shall be used for purposes of collecting and reporting on any delinquent amount arising out of such persons' relationship with the government.

V.

PERFORMANCE BOND OR ESCROW ACCOUNT FOR TELEMARKETING

IT IS FURTHER ORDERED that

A. Defendants Clarendon, First National, Dearden, and Stewart inclusively or in any combination thereof are permanently restrained and enjoined from engaging in, or assisting others engaged in, the offering for sale or selling of any product, program, or service to the general public by means of telemarketing, unless they first obtain a performance bond in the principal amount of, for defendants Clarendon, First National, Dearden, and/or Stewart, not less than One Hundred Fifty Thousand Dollars ($150,000), and, for Stewart alone, not less than Fifty Thousand Dollars ($50,000). Said bond(s) shall be conditioned upon compliance by such defendants with the FTC Act and Sections I through III of this Stipulated Order. The bond(s) shall be deemed continuous and remain in full force and effect as long as such defendants continue to offer for sale or sell any product, program, or service, directly or indirectly, to the general public by means of telemarketing, and for at least three (3) years after they have ceased any such activity. The bond(s) shall cite the FTC Act and Sections I through III of this Stipulated Order as the subject matter of the bond(s) and provide surety against such defendants' failure to pay any consumer redress or disgorgement that may be ordered in consequence of the violation thereof. Such performance bond(s) shall be an insurance agreement providing surety issued by a surety company that is admitted to do business in a state in which such defendant(s) is (are) doing business and that holds a Federal Certificate of Authority as Acceptable Surety on Federal Bonding and Reinsuring. Such defendants shall provide a copy of such performance bond(s) to the Commission prior to the commencement of any business for which such bond(s) is (are) required.

 

Provided, however, in lieu of a performance bond, such defendants or any of them may establish and fund, pursuant to the terms set forth herein, an interest bearing escrow account in the principal sum of One Hundred Fifty Thousand Dollars ($150,000) for defendants Clarendon, First National, Dearden, and/or Stewart, or Fifty Thousand Dollars ($50,000) for defendant Stewart alone, in cash, or such other assets of equivalent value, which the Commission, or its representative, in its sole discretion may approve, before commencing any business activity for which a bond is required under this Section. Such defendants shall maintain such principal amounts in these accounts for so long as they continue to offer for sale or sell any product, program, or service to the general public by means of telemarketing, and for at least three (3) years after they have ceased any such activity. Interest or earnings accruing on such escrow account(s) shall be paid periodically to such defendants. Such defendants shall pay all costs associated with the creation, funding, operation, and administration of the escrow account(s). The Commission, or its representative, shall, in its sole discretion, approve the escrow agent(s). The escrow agreement(s) shall be in substantially the form attached to this Stipulated Order as Appendix A.

 

The performance bond(s) or escrow agreement(s) shall provide that the surety company(ies) or escrow agent(s) shall, within thirty (30) days following receipt of notice of a final judgment by a court in an action initiated by the Commission or the United States against such defendant(s) for consumer redress or disgorgement in an action brought pursuant to this Stipulated Order or under the provisions of the FTC Act has been entered and determining the amount of consumer redress or disgorgement to be paid, pay to the Commission so much of the performance bond(s) or funds of the escrow account(s) as is equal to the amount of any consumer redress or disgorgement ordered, provided that, if defendants Clarendon, First National, Dearden, or Stewart have agreed to the entry of a court order for consumer redress in such an action, a specific finding that any such defendants violated the terms of this Stipulated Order or the provisions of the FTC Act shall not be necessary. A copy of the notice provided for herein shall be mailed to such defendants at their last known addresses.

 

Defendants Clarendon, First National, Dearden, or Stewart may not disclose the existence of the performance bond(s) or escrow account(s) to any consumer, or other purchaser, or prospective purchaser, to whom a product, program, or service is advertised, promoted, offered for sale, sold, or distributed by means of telemarketing, without also disclosing at the same time and in a like manner that the performance bond(s) or escrow account(s) is (are) required by order of the United States District Court for the Central District of California in settlement of charges that defendants engaged in false and misleading representations.

VI.

RIGHT TO REOPEN

IT IS FURTHER ORDERED that within five (5) business days after the date this Stipulated Order is signed by the Court, defendants Clarendon, First National, Dearden, and Stewart shall each submit to the Commission a truthful sworn statement (in the form shown on Appendix B to this Stipulated Order) that shall reaffirm and attest to the truthfulness, accuracy, and completeness of their respective financial statements, namely that of Clarendon and First National, executed on November 20, 1998, subsequently amended on November 30, 1998, and as further shown by the reports of the Receiver; of Dearden, executed on November 21, 1998, and as subsequently amended on November 30, 1998; and of Stewart, executed on January 24, 1999, and as subsequently amended on February 24, 1999. The Commission's agreement to this Stipulated Order is expressly premised upon the financial condition of each defendant, as represented in their financial statements and amendments thereto, and reports of the Receiver, which contain material information upon which the Commission relied in negotiating and agreeing upon this Stipulated Order.

If, upon noticed motion of the Commission, the Court finds that Clarendon, First National, Dearden, or Stewart failed to submit the sworn statement required by this Section, or that they failed to disclose any material asset, or materially misrepresented the value of any asset, or made any other material misrepresentation in or omission from the financial statement(s), the Commission may either (1) request that the judgment herein be reopened against such defendant(s) for the purpose of requiring additional monetary consumer redress or obtaining other equitable relief up to the total amount of consumer injury in this matter, or (2) seek to obtain other equitable relief.

Provided, however, that in all other respects this judgment shall remain in full force and effect, unless otherwise ordered by the Court.

VII.

TERMINATION OF RECEIVERSHIP

IT IS FURTHER ORDERED that the Receiver shall, if he has not already done so, file his final report and request for fees and expenses within five days after the date this Stipulated Order is signed by the Court. Upon approval of the same and the Receiver's receipt of the funds contributed to the Receiver's Clarendon account by Dearden and Stewart pursuant to §§ IV.B and IV.C, supra, the Receiver shall transfer to the Commission all funds in his possession, less fees and expenses as allowed by the Court pursuant to Section IX of the Order Appointing Temporary Receiver. Upon the making of such transfers, the Receivership created by the Order Appointing Temporary Receiver, and signed by the Court on December 2, 1998, shall terminate.

VIII.

LIFTING OF ASSET FREEZE AND
TRANSFER OF FUNDS FOR CONSUMER REDRESS

IT IS FURTHER ORDERED that the freeze against the assets of defendants Clarendon, First National, and Dearden ordered by the Court on November 19, 1998, and extended thereafter, shall be lifted as follows:

A. When the Court signs the Stipulated Order, the asset freeze over restricted accounts at Goleta National Bank and EFS National Bank, as described in Section IV.A, shall lift to the extent necessary to enable such defendants to assign or to transfer the restricted accounts to the Commission.

 

B. When such defendants avail themselves of the credits described in Section IV.A and make the assignment described in that Section, then the asset freeze over all of such defendants' assets at Merrill Lynch shall lift only to the extent necessary to permit Merrill Lynch to transfer, from Merrill Lynch CMA account # 210-65G76, to the Receiver's Clarendon account the sum described in Section IV.C.

 

C. Upon both the assignment described in Section IV.A, and the transfer of funds by Merrill Lynch to the Receiver's Clarendon account, the remaining funds, accounts, and other assets covered by the asset freeze shall be released to such defendants, pursuant to written notification by counsel for the Commission, which shall be provided immediately upon the receipt and transfer of funds by the Receiver described in Section VII.

IX.

ACKNOWLEDGMENT OF RECEIPT

IT IS FURTHER ORDERED that, within five (5) business days after receipt of this Stipulated Order as entered by the Court, defendants Clarendon, First National, Dearden, and Stewart shall each submit to the Commission a truthful sworn statement, in the form shown on Appendix C to this Stipulated Order, that shall acknowledge receipt of this Stipulated Order.

X.

DISTRIBUTION OF STIPULATED ORDER BY DEFENDANTS

IT IS FURTHER ORDERED that, for a period of five (5) years from the date of entry of this Stipulated Order, defendants Clarendon, First National, Dearden, and Stewart shall:

A. Provide a copy of this Stipulated Order to, and obtain a signed and dated acknowledgment of receipt of same from, each officer or director, whether designated as employees, provided that Sections IV, VI, VII, VIII, IX, XII, XV, and Appendices B and C thereto may be redacted, for any business in which (1) any defendant is an owner of the business or directly or indirectly manages or controls the business, and (2) the business is engaged in or assists others in engaging in telemarketing; and

 

B. Provide a copy of this Stipulated Order or a summary in the form of Appendix D to, and obtain a signed and dated acknowledgment of receipt of same from, all personnel in a management capacity, all personnel involved in responding to consumer complaints or inquiries, and all sales personnel, whether designated as employees or engaged in telemarketing or the supervision of telemarketing, or otherwise, immediately upon employing or retaining any such persons, for any business in which (1) any defendant is an owner of the business or directly or indirectly manages or controls the business, and (2) the business is engaged in or assists others in engaging in telemarketing; and

 

C. Maintain for a period of three (3) years after execution and, upon reasonable notice, make available to representatives of the Commission the original signed and dated acknowledgments of the receipt of copies of the summary of this Stipulated Order, as required in Subsections A and B of this Section, for any business in which (1) any defendant is an owner of the business or directly or indirectly manages or controls the business, and (2) the business is engaged in or assists others in engaging in telemarketing.

XI.

RECORD KEEPING

IT IS FURTHER ORDERED that, for a period of five (5) years from the date of entry of this Stipulated Order, defendants Clarendon, First National, Dearden, and Stewart, in connection with any telemarketing business which they own in full or in part, or which they directly or indirectly manage or control, 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 business 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, telephone 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 sales or consumer service persons 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.

XII.

COMPLIANCE REPORTING BY DEFENDANTS

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

A. For a period of five (5) years from the date of entry of this Stipulated Order, defendants Clarendon, First National, Dearden, and Stewart shall notify the Commission in writing of the following:

1. Any change in defendant's residence, mailing address, or telephone number within thirty (30) days of the date of such change;

2. Any change in defendant's employment status (including self-employment) within thirty (30) days of such change. Such notice shall include the name and address of each business defendant is affiliated with or employed by, a statement of the nature of the business, and a statement of defendant's duties and responsibilities in connection with the business; and

3. Any proposed change in the structure of any business entity owned in full or in part, or controlled by defendant, such as creation, incorporation, dissolution, assignment, sale, merger, creation or dissolution of subsidiaries, proposed filing of a bankruptcy petition, change in the corporate name or address, or any other change that could affect compliance obligations arising out of this Stipulated Order, thirty (30) days prior to the effective date of any proposed change; provided, however, that, with respect to any proposed change in the business about which defendant learns less than thirty (30) days prior to the date such action is to take place, defendant shall notify the Commission as soon as is practicable after learning of such proposed change.

B. One hundred eighty (180) days after the date of entry of this Stipulated Order, defendants Clarendon, First National, Dearden, and Stewart shall each provide a written report to the Commission, sworn to under penalty of perjury, setting forth in detail the manner and form in which each has complied and is complying with this Stipulated Order. This report shall include but not be limited to:

1. Defendant's then-current residence address and telephone number;

2. Defendant's then-current employment or business addresses and telephone numbers, a description of the business activities of each business or employer, and defendant's business title and responsibilities;

3. A copy of each acknowledgment of receipt of this Stipulated Order obtained by defendant pursuant to Section IX of this Stipulated Order, if any; and

4. A statement describing the manner in which defendant has complied and is complying with Sections I-V and XI of this Stipulated Order.

C. During all periods of time during which defendants are required to maintain a bond or escrow account pursuant to Section V, upon written request by a representative of the Commission, defendants Clarendon, First National, Dearden, and Stewart shall submit additional written reports (under oath, if requested) and produce documents on thirty (30) days' notice with respect to any conduct subject to this Stipulated Order.

 

D. For the purposes of this Stipulated Order, defendants Clarendon, First National, Dearden, and Stewart shall, unless otherwise directed by the Commission's authorized representatives, mail all written notifications to the Director of the Commission's Regional Office in Chicago at the address specified in Section XV, infra.

 

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

XIII.

COMMISSION'S AUTHORITY TO MONITOR COMPLIANCE

IT IS FURTHER ORDERED that the Commission is authorized to monitor defendants' compliance, and the compliance of their successors, assigns, officers, agents, employees, and those persons in active concert or participation with them who receive actual notice of this Stipulated Order by personal service or otherwise, whether acting directly or through any entity, corporation, subsidiary, division, or other device, with this Stipulated Order by all lawful means, including but not limited to the following:

A. During all periods of time during which defendants are required to maintain a bond or escrow account pursuant to Section V, 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 and investigating any defendant's compliance with any provision of this Stipulated Order;

 

B. The Commission is authorized to use representatives posing as consumers and 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 Stipulated 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, and their successors, assigns, officers, agents, employees, and those persons in active concert or participation with them who receive actual notice of this Stipulated Order by personal service or otherwise, whether acting directly or through any entity, corporation, subsidiary, division, or other device, have violated any provision of this Stipulated Order, any provision of the Telemarketing Rule, 16 C.F.R. Part 310, or Section 5 of the FTC Act, 15 U.S.C. § 45.

XIV.

ACCESS TO BUSINESS PREMISES

IT IS FURTHER ORDERED that, for a period of five (5) years from the date of entry of this Stipulated Order, for the purpose of further determining compliance with this Stipulated Order, the Commission may, upon good cause, petition the Court, with notice to defendants, and their successors, assigns, officers, agents, employees, and those persons in active concert or participation with them who receive actual notice of this Stipulated Order by personal service or otherwise, whether acting directly or through any entity, corporation, subsidiary, division, or other device, for an order to allow:

A. Access during normal business hours to any office, or facility storing documents, of any business in which (1) any defendant is an owner of the business or directly or indirectly manages or controls the business, and (2) the business is engaged in or assists others in engaging in telemarketing. If the Court grants such access, defendants, and their successors, assigns, officers, agents, employees, and those persons in active concert or participation with them who receive actual notice of this Stipulated Order by personal service or otherwise, whether acting directly or through any entity, corporation, subsidiary, division, or other device, shall permit representatives of the Commission to inspect and to copy all documents relevant to any matter contained in this Stipulated Order, and shall permit Commission representatives to remove documents relevant to any matter contained in this Stipulated Order for a period not to exceed forty-eight (48) hours so that the documents may be inspected, inventoried, and copied; or

 

B. Interviews with 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 Stipulated Order. The persons interviewed may have counsel present.

 

Provided, however, that nothing in this Section shall limit the right of the Commission to seek any relief under Fed. R. Civ. P. 65 to which it may be entitled.

XV.

NOTICES

IT IS FURTHER ORDERED that all notices and other documents required of defendants in this Stipulated Order shall be made to the following address:

Regional Director

Federal Trade Commission

55 East Monroe Street, Suite 1860

Chicago, Illinois 60603

 

Re: FTC v. Clarendon House, Inc., et al.

or any such other address as the Commission shall specify.

XVI.

CUSTOMER LISTS

IT IS FURTHER ORDERED that defendants, and their successors, assigns, officers, agents, employees, and those persons in active concert or participation with them who receive actual notice of this Stipulated Order by personal service or otherwise, whether acting directly or through any entity, corporation, subsidiary, division, or other device, are permanently restrained and enjoined from providing or disclosing, whether or not in exchange for payment or other consideration, to any party, the names, addresses, telephone numbers, credit card numbers, or bank account numbers of, or other information related to ("customer list information"), persons whose identities or customer list information were obtained by defendants before the entry of this Stipulated Order. Provided, however, that past sales by defendants of customer lists shall not be deemed a violation of this provision, and that defendants, and their successors, assigns, officers, agents, employees, and those persons in active concert or participation with them who receive actual notice of this Stipulated Order by personal service or otherwise, whether acting directly or through any entity, corporation, subsidiary, division, or other device, may provide such information to a law enforcement agency either voluntarily or as required by any law, regulation, or Court order.

XVII.

RETENTION OF JURISDICTION

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

The Commission and defendants hereby stipulate and agree to entry of the foregoing Stipulated Order, which shall constitute a final judgment in this action.

IT IS SO ORDERED.

APPENDIX A

to Federal Trade Commission v. Clarendon House, Inc., et al.

Stipulated Order for Permanent Injunctive Relief
With Consumer Redress and Other Equitable Relief

THIS ESCROW AGREEMENT, made and entered into this _____ day of ___________________, ________, by and between [use appropriate defendant]; and the Federal Trade Commission, an agency of the Government of the United States of America, by and through ____________________________ (hereinafter "FTC"); and _____________________________ (hereinafter "Escrow Agent");

WITNESSETH:

WHEREAS, the FTC and [use appropriate defendant] have entered into a Stipulated Order for Permanent Injunction and Final Judgment (hereinafter "Stipulated Order"), a copy of which is attached hereto as Attachment A; and

WHEREAS, the Stipulated Order requires that [use appropriate defendant], in connection with the offering for sale or selling of any product, program, or service to the general public by means of telemarketing, obtain and maintain in force an escrow account, under the terms and conditions specified in the Stipulated Order;

NOW, WHEREFORE, in accordance with the terms of the Stipulated Order, which are incorporated herein by reference, the parties covenant and agree as follows:

1. Before commencing the business activities described in Section V of the Stipulated Order, [use appropriate defendant] shall establish an Escrow Account at ____________________________, to be styled [use appropriate defendant] Escrow Account, ______________________, Escrow Agent. [Use appropriate defendant] shall deposit into the Escrow Account [$150,000 for Clarendon, First National, Dearden, and/or Stewart, or $50,000 for Stewart alone], the amount required by Section V of the Stipulated Order.

2. The Escrow Agent shall be the sole signatory on the Escrow Account, and access to the funds held in that account shall be solely through the Escrow Agent. It is understood by the parties to this Escrow Agreement that upon the signing of this Agreement, [use appropriate defendant] relinquishes to the Escrow Agent all legal title to the principal escrow funds, except as to such amounts in the Escrow Account that are in excess of [$150,000 for Clarendon, First National, Dearden, and/or Stewart, or $50,000 for Stewart alone]. Until and unless the Escrow Account is terminated as provided for herein, [use appropriate defendant] agrees to make no claim to or demand for return of the funds, directly or indirectly, through counsel or otherwise; and, in the event of bankruptcy, [use appropriate defendant] acknowledges that the funds are not part of [use appropriate defendant's] estate, nor does the estate have any claim or interest therein.

3. The Escrow Agent and the parties hereto agree that the escrow funds shall be held only in accordance with the terms of the Stipulated Order and the Escrow Agreement. [Use appropriate defendant] shall pay all costs associated with the creation, funding, operation, and administration of the Escrow Account as they become due. In the event that [use appropriate defendant] fails to pay such costs as they become due, the Escrow Agent shall pay the costs from the interest earned on the escrow funds.

4. The escrow funds may be invested from time to time, to the extent possible, in United States Treasury Bills having a remaining maturity of 90 days or less, or repurchase obligations secured by such United States Treasury Bills with any remainder being deposited and maintained in a money market deposit account with Escrow Agent. The Escrow Agent is authorized to liquidate in accordance with its customary procedures any portion of the escrow funds consisting of investments to provide for payments required to be made under this Agreement. Interest or earnings on such invested escrow funds shall be paid periodically, not less than quarterly, to [use appropriate defendant].

5. The Escrow Agent, within thirty (30) days following receipt of notice of a final judgment by a court in an action initiated by the Commission or the United States against such defendants for consumer redress or disgorgement in an action brought pursuant to the Stipulated Order or under the provisions of the FTC Act has been entered and determining the amount of consumer redress or disgorgement to be paid, shall pay to the Commission so much of the funds of the escrow account as is equal to the amount of any consumer redress or disgorgement ordered, provided that, if [use appropriate defendant] has (have) agreed to the entry of a court order, a specific finding that such defendant(s) violated the terms of this Stipulated Order or the provisions of the FTC Act shall not be necessary. The Escrow Agent shall have the power to convert to cash so much of the Escrow Account assets as are necessary to satisfy the obligations of the judgment or order.

6. The Escrow Account shall continue until at least three (3) years after [use appropriate defendant] last offers for sale or sells any product or program to the general public by means of telemarketing, at which time, if there are no pending FTC investigations, legal, or administrative actions by the FTC against [use appropriate defendant], or unsatisfied obligations pursuant to a judgment or order described in paragraph 5 herein, for which a claim could be made against the escrow funds under the terms of the Stipulated Order, the FTC shall, upon [use appropriate defendant's] request, instruct the Escrow Agent to terminate the Escrow Account and return the balance of the Escrow Account to [use appropriate defendant]. At such time, the Escrow Agent shall be fully and completely released from its agency as herein described. The legal title to the escrow funds shall vest in [use appropriate defendant] at such time as the Escrow Agent, pursuant to instructions from the FTC, returns the funds to [use appropriate defendant].

In Witness hereof, each of the parties has caused this Escrow Agreement to be executed on its behalf by its duly authorized representatives.

DATED: __________________

[Use appropriate defendant]

For the Federal Trade Commission

For the Escrow Agent

APPENDIX B

to Federal Trade Commission v. Clarendon House, Inc., et al.

Stipulated Order for Permanent Injunctive Relief
With Consumer Redress and Other Equitable Relief

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

FEDERAL TRADE COMMISSION, Plaintiff,

v.

CLARENDON HOUSE, Inc., a corporation doing business as National Data Service; FIRST NATIONAL DATA GROUP, Inc., a corporation doing business as National Data Service; PETER M. DEARDEN, individually and doing business as National Data Service; and ELLEN H. STEWART, individually, Defendants.

Civ. No. 98-9262 WMB (AJWx)

I, _____________________________, hereby state that the information contained in the Financial Statement of Defendant ______________________________ and related papers provided to the plaintiff on ________________ [and as amended on ______________], and, with respect to bank accounts, as more particularly stated in the reports to the Court by the Receiver, [for corporate defendants if applicable] was [were] true, accurate, and complete at such time.

/ / /

/ / /

I declare under penalty of perjury that to the best of my knowledge the foregoing is true and correct.

DATED

APPENDIX C

to Federal Trade Commission v. Clarendon House, Inc., et al.

Stipulated Order for Permanent Injunctive Relief
With Consumer Redress and Other Equitable Relief

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

FEDERAL TRADE COMMISSION, Plaintiff,

v.

CLARENDON HOUSE, Inc., a corporation doing business as National Data Service; FIRST NATIONAL DATA GROUP, Inc., a corporation doing business as National Data Service; PETER M. DEARDEN, individually and doing business as National Data Service; and ELLEN H. STEWART, individually, Defendants.

Civ. No. 98-9262 WMB (AJWx)

[Name of defendant], being duly sworn, hereby states and affirms as follows:

1. My name is_______________________. My current residence 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. I am a defendant in Federal Trade Commission v. Clarendon House, Inc. et al. (United States District Court for the Central District of California).

3. On ____________, I received a copy of the Stipulated Order for Permanent Injunctive Relief with Consumer Redress and Other Equitable Relief, which was signed by the Honorable William Matthew Byrne, Jr., and entered by the Court on _____________. A true and correct copy of the Order I received is appended to this Affidavit.

I declare under penalty of perjury under the laws of the United States that the foregoing is true and correct. Executed on __________, at _____________, California.

[Full name of defendant]

APPENDIX D

to Federal Trade Commission v. Clarendon House, Inc., et al.

Stipulated Order for Permanent Injunctive Relief
With Consumer Redress and Other Equitable Relief

[This caption may be omitted from the actual Notice.]

Form Notice to Managers, Sales Personnel, and
Customer Complaint Personnel of XYZ Corporation

[Actual name of XYZ Corporation to be used.]

INTRODUCTION

To Whom It May Concern:

This notice is to inform you of various legal requirements that are applicable to all businesses engaged in telemarketing, including the XYZ Corporation, and in particular the provisions of a settlement order entered in the United States District Court for the Central District of California in an action filed against Peter M. Dearden and Ellen H. Stewart and corporations that they owned, Clarendon House, Inc., and First National Data Group, Inc. In the interest of resolving the action, those persons negotiated a settlement which includes a Court order that is binding not only upon the parties to that settlement, but also upon their officers, agents, servants, employees and other persons in active concert or participation with them who receive actual notice of the Court order by any means, including through this notice. You should be aware that violation of the federal law or the terms of the Court order as described in this notice may subject you to legal liability, including possible contempt of court. The consent order, as well as federal law, prohibits certain specific conduct as described in this notice. You should be aware of the following:

PROHIBITED BUSINESS ACTIVITIES
PURSUANT TO THE TELEMARKETING RULE

All telemarketers in the United States are governed by a rule known as the Telemarketing Sales Rule, 15 C.F.R. Part 310. You should be aware that XYZ Corporation and all of its employees are subject to the provisions of that Rule, as it presently exists or as it may be amended in the future. That Rule, as well as the Court's order, prohibits various activities, including, but not limited to the following:

A. Misrepresenting, directly or by implication, any material aspect of the performance, efficacy, nature, or central characteristics of goods or services that are the subject of a sales offer [16 C.F.R. §310.3(A)(2)(iii)];

 

B. Making a false or misleading statement to induce any person to pay for goods or services [16 C.F.R. §310.3(a)(4)];

 

C. Failing to disclose, in a clear and conspicuous manner, before a customer pays for the goods or services offered for sale, the total costs to purchase, receive, or use, and the quantity of, any goods or services that are the subject of the sales offer [16 C.F.R. § 310.3(a)(1)(i)]; and

 

D. Failing to disclose, in a clear and conspicuous manner, before a customer pays for goods or services offered, the following material information: if the seller has a policy of not making refunds, cancellations, exchanges, or repurchases, a statement informing the customer that this is the seller's policy; or, if the seller or telemarketer makes a representation about a refund, cancellation, exchange, or repurchase policy, a statement of all material terms and conditions of such policy [16 C.F.R. § 310.3(a)(1)(iii)].

RESTRICTIONS ON USE OF DEMAND DRAFTS

Submission for payment of a check, draft, or other form of negotiable paper drawn on a person's checking, savings, share or similar account, without that person's express verifiable authorization is illegal and also prohibited by the Court's order. Such authorization shall be deemed verifiable if any of the following means are employed:

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

 

B. Express oral authorization which is tape recorded and made available upon request to the customer's bank and which evidences clearly both the customer's authorization of payment for the goods and services that are the subject of the sales offer and the customer'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; and

6. The date of the customer's oral authorization; or

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

1. All of the information contained in Subsections B.1 through B.6 of this Section, supra; and

2. The procedures by which the customer can obtain a refund from the seller or telemarketer in the event the confirmation is inaccurate.

PROHIBITED BUSINESS ACTIVITIES
PURSUANT TO THE FTC ACT

The Federal Trade Commission Act and the terms of the Court order prohibit the following:

A. Failing to disclose in a clear and conspicuous manner, prior to charging a consumer for any goods or services, the identity of the goods or services that are the subject of a sales offer, the total cost to purchase, receive, or use the goods or services that are the subject of a sales offer, or the quantity of the goods or services that are the subject of a sales offer;

 

B. Misrepresenting, directly or by implication, any material aspect of the nature or terms of XYZ Corporation's refund, cancellation, exchange, or repurchase polices;

C. Failing to disclose, before a customer pays for goods or services offered, in a clear and conspicuous manner, the following material information:

1. if XYZ Corporation has a policy of not making refunds, cancellations, or repurchases, a statement informing the customer that this is the defendant's policy, or

2. if XYZ Corporation makes a representation about a refund, cancellation, exchange, or repurchase policy, a statement of all material terms and conditions of such policy; or

D. Misrepresenting, expressly or by implication, any fact material to a consumer's decision to purchase or use defendants' goods or services.

You should also be aware that the following practices, which may or may not be applicable to the XYZ corporation, are specifically prohibited by the Court's order:

A. Misrepresenting, expressly or by implication, that consumers who purchase defendants' information packages on seized cars and other items frequently are able to purchase vehicles in good condition for a fraction of their wholesale values, including as little as $350;

 

B. Misrepresenting, expressly or by implication, that consumers who purchase defendants' foreclosed-home information packages frequently are able to purchase foreclosed homes in reasonably good condition for substantially below their market values;

 

C. Misrepresenting, expressly or by implication, that consumers who purchase defendants' job-opportunity packages will receive listings of businesses currently seeking to hire individuals to type at home for such businesses;

 

D. Making any representation, expressly or by implication, about the ability of consumers who purchase defendants' information packages to: (1) purchase vehicles, homes or other goods or services, or (2) obtain employment as at-home typists, unless the representation is true and, at the time it is made, defendants possess and rely upon competent and reliable evidence that substantiates the representation.

The following definitions apply to this notice:

1. "Customer" means any person who is or may be required to pay for goods or services offered through telemarketing. 16 C.F.R. § 310.2(i).

2. "Material" means likely to affect a person's choice of, or conduct regarding, goods or services.

3. "Person" means any individual, group, unincorporated association, limited or general partnership, corporation, or other business entity.

4. "Telemarketing" means a plan, program, or campaign which is conducted to induce the purchase of goods or services by use of one or more telephones and which involves more than one interstate telephone call.

DATED:

Typed or Printed Name