UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS

UNITED STATES OF AMERICA,

Plaintiff,

v.

DAVID STORY, individually and doing business as NETWORK PUBLICATIONS, Defendant.

CIVIL NO.

COMPLAINT FOR CIVIL PENALTIES, INJUNCTIVE, AND OTHER RELIEF

Plaintiff, the United States of America, acting upon notification and authorization to the Attorney General by the Federal Trade Commission ("Commission"), for its complaint alleges that:

1. Plaintiff brings this action under Sections 5(a)(1), 5(m)(1)(A), 13(b), 16(a), and 19 of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. 45(a)(1), 45 (m)(1)(A), 53(b), 56(a), and 57b, and Section 410(b) of the Credit Repair Organizations Act, 15 U.S.C.  1679h(b), to obtain monetary civil penalties, consumer redress and injunctive and other relief for Defendant's violations of Section 404(a)(2) of the Credit Repair Organizations Act, 15 U.S.C. 1679b(a)(2); and consumer redress and injunctive and other relief for Defendant's violations of Section 5(a)(1) of the FTC Act, 15 U.S.C.  45(a)(1).

JURISDICTION AND VENUE

2. This Court has jurisdiction of this matter pursuant to 28 U.S.C.  1331, 1337(a), 1345, 1355 and pursuant to 15 U.S.C.  45(m)(1)(A), 53(b), 56(a), 57b, and 1679h(b)(2). This action arises under 15 U.S.C. 45(a)(1) and 1679h(b).

3. Venue in this district is proper under 15 U.S.C.  53(b) and under 28 U.S.C.  1391(b) and 1395(a).

DEFENDANT

4. Defendant David Story is an individual doing business as Network Publications, with his office and principal place of business located at 11103 Visalia Drive, Dallas, Texas 75228. Defendant transacts or has transacted business in this District. 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 of Network Publications, including the acts and practices set forth in this complaint.

COMMERCE

5. 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

6. Since at least April 1998 defendant has advertised, promoted, offered for sale, and sold credit repair products to consumers through the use of the Internet, including the use of unsolicited commercial electronic messages ("e-mail"), popularly known as "spamming."

7. Defendant has claimed that he can improve consumers' credit histories, credit records, or credit ratings by assisting them in establishing new credit files. Defendant further claims that creating new credit files is legal.

8. Typical and illustrative of defendant's claim about his credit repair product include the following:

FORGET CREDIT REPAIR! NEW CREDIT FILES LEGALLY. BAD CREDIT? JUDGEMENTS? [sic] OTHER PROBLEMS? TIME IS MONEY! CREDIT IS WEALTH, WEALTH IS POWER. IF YOU CAN'T WAIT OR GAMBLE ON CREDIT REPAIR, THEN LEARN HOW TO OPEN A SECOND OR EVEN THIRD SEPARATE CREDIT FILE. THE FIRST SPECIAL MEATHOD [sic] IS VIRTUALLY UNKNOWN AND HAS NOTHING TO DO WITH QUESTIONABLE EIN OR TIN #S. AND YOU DON'T HAVE TO LIE ON YOUR CREDIT APPLICATIONS EITHER. THIS MEATHOD [sic] IS 100% TOTALLY LEGAL AND BEING USED EVERY SINGLE DAY OF THE WEEK.

THIS IS YOUR SECOND CHANCE! IF FOR ONE REASON OR ANOTHER YOUR CREDIT IS TARNISHED, THEN THIS IS YOUR CHANCE FOR A NEW BEGINNING. IT DOES NOT MATTER IF YOU HAVE A JUDGEMENT OR A DOZEN. FORECLOSURES, TAX LIENS, CHARGE-OFFS, SLOW PAYS, ETC. ETC. IT DOES NOT MATTER BECAUSE YOUR NEW FILE IS TOTTALLY [sic] INDEPENDENT OF YOUR OLD FILE AND ABSOLUTELY CAN NOT BE CONNECTED TO YOUR OLD FILE AT ALL.

* * *

WIPE OUT ALL OF THE OLD BAD CREDIT ON YOUR OLD FILE WHILE ENJOYING YOUR NEW AAA+ CREDIT. THIS IS ONE OF THE BEST IF NOT ONLY BOOK ON LEGALLY OPENING A SECOND SEPARATE CREDIT FILE AND REBUILDING YOUR CREDIT AND YOUR LIFE EVER WRITTEN OR PUT ON DISC. . . . ORDER NOW BY SENDING A TOTAL OF $23.45 TO NETWORK PUBLICATIONS, 11103 VISALIA, DALLAS, TEXAS 75228.

9. Consumers who send $23.45 to defendant, as instructed by defendant's advertisements, receive three computer diskettes containing a document entitled "HOW TO START A SECOND SEPARATE CREDIT FILE" that describes how to improve one's credit history. The document suggests that consumers apply for a Dun & Bradstreet number and to use that number for the purpose of applying for credit.

VIOLATIONS OF THE CREDIT REPAIR ORGANIZATIONS ACT

10. 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.

11. Section 404(a)(2) of the Credit Repair Organizations 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).

12. 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

13. In numerous instances, defendant has made statements to consumers or 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.

14. 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

15. In connection with the advertising, marketing, promotion, offering for sale, or sale of credit repair products, to induce consumers to purchase their 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 by obtaining Dun & Bradstreet numbers to use, instead of their Social Security Numbers, for credit purposes.

16. 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 by obtaining Dun & Bradstreet numbers to use, instead of their Social Security Numbers, for credit purposes.

17. Therefore, the representation set forth in paragraph 15 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).

CIVIL PENALTIES, CONSUMER REDRESS AND INJUNCTION

18. Defendant has violated the Credit Repair Organizations Act as described above with knowledge as set forth in Section 5(m)(1)(A) of the FTC Act, 15 U.S.C.  45(m)(1)(A).

19. Each sale or attempted sale, since the effective date of the Credit Repair Organizations Act, of credit repair products in which Defendant has violated the Credit Repair Organizations Act in one or more of the ways described above constitutes a separate violation for which Plaintiff seeks monetary civil penalties.

20. Section 5(m)(1)(A) of the FTC Act, 15 U.S.C.  45(m)(1)(A), authorizes the Court to award monetary civil penalties of not more than $10,000 for each violation of the Credit Repair Organizations Act. Section 4 of the Federal Civil Penalties Inflation Adjustment Act of 1990, 28 U.S.C.  2461, as amended, and as implemented by 16 C.F.R.  1.98(d) (1997), authorizes the Court to award monetary civil penalties of not more than $11,000 for each violation of the Credit Repair Organizations Act that occurs after November 20, 1996.

21. Under Section 13(b) of the FTC Act, 15 U.S.C. 53(b), this Court is authorized to issue a permanent injunction against Defendant's violating the FTC Act and Credit Repair Organizations Act, as well as such ancillary relief as preliminary injunction, rescission, restitution, disgorgement of profits resulting from Defendant's unlawful acts or practices, and other remedial measures.

22. Section 19 of the FTC Act, 15 U.S.C. 57b, authorizes the Court to award such relief as is necessary to redress the injury to consumers or others resulting from Defendant's violation of the Credit Repair Organizations Act.

PRAYER

WHEREFORE, Plaintiff requests that this Court, pursuant to 15 U.S.C.  45(a)(1),  45(m)(1)(A), 53(b), 57b, and 1679h(b), and the Court's own equity powers:

(1) Enter judgment against Defendant in favor of Plaintiff for each and every violation alleged in this complaint;

(2) Award Plaintiff monetary penalties from the Defendant for each and every violation of the Credit Repair Organizations Act;

(3) 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, restitution, consumer redress, and disgorgement of unlawfully obtained monies;

(4) Permanently enjoin Defendant from further violations of the Credit Repair Organizations Act and the FTC Act;

(5) Order Defendant to pay the costs of this action; and

(6) Award Plaintiff such additional relief as the Court may deem just and proper.

DATED:

Of Counsel:

C. STEVEN BAKER
Regional Director
Chicago Regional Office
55 E. Monroe St., Suite 1860
Chicago, Illinois 60603

FOR THE UNITED STATES OF AMERICA:

FRANK W. HUNGER
Assistant Attorney General
Civil Division
U.S. Department of Justice

PAUL E. COGGINS
United States Attorney

By:

[insert name]
Assistant United States Attorney
1100 Commerce St., 3rd Floor
Dallas, Texas 75242
(214) 767-0951

DOUGLAS ROSS
Attorney
Office of Consumer Litigation
Civil Division
U.S. Department of Justice
P.O. Box 386
Washington, D.C. 20044
(202) 514-1874