DEBRA A. VALENTINE
General Counsel

RA'OUF M. ABDULLAH
ALICE SAKER HRDY
Federal Trade Commission
600 Pennsylvania Avenue, N.W.
Washington, D.C. 20580
(202) 326-3024; (202) 326-2009
(202) 326-3392 Telecopier

RAYMOND McKOWN
Federal Trade Commission
10877 Wilshire Boulevard, Suite 700
Los Angeles, California 90024
(310) 824-4325
(310) 824-4380 Telecopier

Attorneys for Plaintiff

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

FEDERAL TRADE COMMISSION, Plaintiff,

vs.

SWEET SONG CORPORATION, in its own name and d/b/a WINDSOR & WHITE TRADING CO. and d/b/a PACIFIC WELLINGTON ASSOCIATES; TSAVORITE SWORD CORPORATION, in its own name and d/b/a PACIFIC WELLINGTON ASSOCIATES; RON HUDSON INC., in its own name and d/b/a PACIFIC WELLINGTON ASSOCIATES; HARI JIWAN SINGH KHALSA, a/k/a STEPHEN JON OXENHANDLER, a/k/a BOB THOMAS; SIRI RAM SINGH KHALSA a/k/a WILLIAM TAYLOR, a/k/a PHILLIP ANDERSON, Defendants.

CV-97-4544 LGB (JGx)

[proposed]

STIPULATED FINAL ORDER FOR PERMANENT INJUNCTION AND OTHER EQUITABLE RELIEF AS TO SIRI RAM SINGH KHALSA

The Federal Trade Commission ("Commission" or "FTC") commenced this action on June 20, 1997. The FTC and defendant Siri Ram Singh Khalsa, a/k/a WILLIAM TAYLOR, a/k/a PHILLIP ANDERSON ("settling defendant"), have agreed to entry of this Stipulated Final Order for Permanent Injunction and Other Equitable Relief ("Order") and stipulate to the Court's findings below.

FINDINGS

The Court finds:

1. The Court has jurisdiction over the Commission's claim pursuant to 28 U.S.C.  1331, 1337(a) and 1345, and 15 U.S.C.  45(a), 53(b), 57b(a), 6102(c) and 6105; and has jurisdiction over the parties.
 
2. Venue in the Central District of California, Western Division, United States District Court, is proper.
 
3. This is an action instituted by the FTC under Sections 5(a), 13(b) and 19 of the FTC Act, 15 U.S.C.  45(a), 53(b) and 57b. The Complaint seeks both permanent injunctive relief and consumer redress for alleged deceptive practices by defendants in violation of Section 5(a) of the FTC Act, 15 U.S.C.  45(a) and various provisions of the Telemarketing Sales Rule, 16 C.F.R. Part 310, in connection with the offering for sale and sale of gemstones as investments.
 
4. Plaintiff Commission has the authority to seek the relief it requests, and the Court has the authority to grant it under Sections 13(b) and 19 of the FTC Act, 15 U.S.C. 53(b) and 57b.
 
5. The activities of the defendant are in or affecting commerce, as the term is defined in Section 4 of the FTC Act, 15 U.S.C. 44.
 
6. The settling defendant has stipulated to the entry of this Order but neither admits nor denies the allegations set forth in the complaint.
 
7. This Order constitutes the final adjudication of all claims of plaintiff Commission in connection with the matters alleged in the Complaint. Other than any enforcement proceedings brought in connection with this Order, the Commission will not seek any further relief from the settling defendant arising out of the facts as alleged in the Complaint filed in this action. Notwithstanding the foregoing, this action and the relief awarded herein are in addition to, and not in lieu of, other remedies by parties other than the Commission, as may be provided by law, including both civil and criminal remedies. All relief set forth in this Order is purely remedial in nature and is not a fine, penalty, punitive assessment, exemplary damage or forfeiture.
 
8. Entry of this Order is in the public interest.

DEFINITIONS

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

A. Assisting others shall mean knowingly providing any of the following services to any person or entity:

(1) performing customer service functions, including, but not limited to, receiving or responding to consumer complaints;
 
(2) formulating or providing, or arranging for the formulation or provision of, any telephone sales script or any other marketing material;
 
(3) hiring, recruiting, or training personnel;
 
(4) advising or consulting others on the commencement or management of a business venture;
 
(5) providing names of, or assisting in the generation of, potential customers; or
 
(6) performing marketing or telemarketing services of any kind.

B. Collectible Artifacts shall refer to goods whose value is derived solely from rarity, uniqueness, condition, or historical qualities.

C. Documents shall be synonymous in meaning and equal in scope to the usage of the term in Rule 34(a) of the Federal Rules of Civil Procedure, and shall include 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. Each draft or non-identical copy shall constitute a separate document.

D. Investment opportunity shall mean any service, product or interest, tangible or intangible, that is offered for sale, sold, or traded based wholly or in substantial part on representations, either express or implied, about past, present, or future income, profit, or appreciation.

E. 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. The term does not include the solicitation of, or assisting others in the solicitation of, sales through the mailing of a catalog which: contains a written description or illustration of the goods or services offered for sale; includes the business address of the seller; includes multiple pages of written material or illustrations; and has been issued not less frequently than once a year, when the person making the solicitation does not solicit customers by telephone but only receives calls initiated by customers in response to the catalog and during those calls takes orders only without further solicitation. For purposes of the previous sentence, the term "further solicitation" does not include providing the customer with information about, or attempting to sell, any other item included in the same catalog which prompted the customer's call or in a substantially similar catalog. The terms telemarketing and assisting others also do not include:

(i) telephone calls in which the sale of goods or services is not completed, and payment or authorization of payment is not required, until after a face-to-face sales presentation by the seller;
 
(ii) telephone calls initiated by a customer that are not the result of any solicitation by a seller or telemarketer;
 
(iii) telephone calls between the defendant and any business, except calls involving the retail sale of nondurable office or cleaning supplies; and
 
(iv) telephone calls initiated by a customer in response to an advertisement through any media, other than direct mail solicitations limited to the offer in the advertisement.

I. INVESTMENT AND COLLECTIBLE ARTIFACT SALES BAN

IT IS THEREFORE ORDERED that defendant Siri Ram Singh Khalsa is hereby restrained and enjoined from engaging, participating, or assisting others, whether directly, indirectly, or through any business entity or other device, in the offering for sale or sale of any Investment Opportunity or Collectible Artifact.

II. TELEMARKETING BAN

IT IS FURTHER ORDERED that Siri Ram Singh Khalsa is permanently restrained and enjoined from engaging, participating, or assisting others, whether directly, indirectly, or through any business entity or other device, in the business of telemarketing to consumers.

III. ADDITIONAL PROHIBITED BUSINESS ACTIVITIES

IT IS FURTHER ORDERED that Siri Ram Singh Khalsa, his officers, agents, servants, employees, and attorneys and all other persons in active concert or participation with him who receive actual notice of this Order by personal service or otherwise, in connection with the advertising, promotion, offering for sale, or sale of any good or service, including but not limited to gemstones, coins or bullion, is hereby permanently enjoined from:

A. Falsely representing, expressly or by implication, that any good or service is sold at a discount from the retail market value or at or below the price at which a consumer could resell it;

B. Falsely representing, expressly or by implication, the degree of risk of any purchase;

C. Falsely representing, expressly or by implication, the past appreciation, the future appreciation, the income potential, or the origin of any good or service;

D. Falsely representing, expressly or by implication, any other fact material to a consumer's decision to purchase goods or services;

E. Violating or assisting others in violating any provision of the Commission's Telemarketing Sales Rule, 16 C.F.R. Part 310, as amended from time to time (current version attached as Appendix B), including but not limited to misrepresenting, directly or by implication, "[a]ny material aspect of an investment opportunity." 16 C.F.R.  310.3(a)(2)(vi).

F. Falsely representing, expressly or by implication, the terms, effect, basis or purpose of this Order, and

G. Assisting others in the acts or practices prohibited in subsections A through F, of this Section III.

IV. CUSTOMER LISTS

IT IS FURTHER ORDERED that defendant Siri Ram and his officers, agents, servants, employees, attorneys, and all other persons in active concert or participation with him who receive actual notice of this Order by personal service or otherwise, are hereby restrained and enjoined from using, selling, renting, leasing, transferring, or otherwise disclosing the name, address, telephone number, credit card number, bank account number, e-mail address, or other identifying information of any person who was a customer of or investor in Windsor and White Trading Compnay, Pacific Wellington Trading Company, Sweet Song Corporation, Tsavorite Sword Corporation, Ron Hudson Corporation, or any other entity related to the foregoing entities or any of their affiliates or subsidiaries, at any time prior to entry of this Order. The foregoing notwithstanding, Siri Ram Singh Khalsa may disclose such identifying information to a law enforcement agency or as required by any law, regulation, or court order. For purposes of this Section IV, the term "customer" shall include any person or entity who was contacted or solicited to purchase investment goods or services by any defendant in this civil action, or by any of their agents, affiliates, or subsidiaries, prior to the entry of this Order.

V. RECORD KEEPING PROVISIONS

IT IS FURTHER ORDERED that, for a period of five (5) years from the date of entry of this Order, in connection with any business that offers or sells goods and services to consumers in which the settling defendant is the majority owner or he otherwise directly or indirectly manages or controls, the settling defendant, his agents, employees, officers, and servants, corporations, successors, and assigns, and those persons in active concert or participation with him who receive actual notice of this Order by personal service or otherwise, 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 legal name, address, and telephone number of each person that any of the above-referenced businesses employs in any capacity, including as an employee, consultant, independent contractor, free-lancer or otherwise; that person's job title or position; duties; 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 subsection shall retain such records for any terminated employee for a period of three (3) years following the date of termination;

C. Records containing the names, addresses, phone numbers, dollar amounts paid, quantity of items or services purchased, and description of items or services purchased, or amounts donated, for all consumers to whom any of the above-referenced businesses has sold, invoiced or shipped any goods or services, or from whom any of the above-referenced businesses has accepted money or other items of value;

D. Records that reflect, for every consumer complaint or refund request, whether received directly or indirectly or through any third party or other means:

(1) the consumer's name, address, telephone number and the dollar amount paid by the consumer;
 
(2) the original or a true and correct copy of 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 the validity of any complaint;
 
(4) each response and the date of the response;
 
(5) the name of the person(s) who investigated the complaint;
 
(6) any final resolution, and the date of the resolution;
 
(7) in the event of a denial of a refund request, the reason for such denial; and
 
(8) Copies of all sales scripts, training packets, advertisements, or other marketing materials utilized.

VI. EMPLOYEE NOTIFICATION AND ACKNOWLEDGMENTS

IT IS FURTHER ORDERED that, for a period of five (5) years from the date of entry of this Order, in connection with any business that offers or sells goods and services to consumers in which the settling defendant is the majority owner or he otherwise directly or indirectly manages or controls, the settling defendant shall:

A. Provide a copy of this Order to, and obtain a signed and dated acknowledgment of receipt of same from: each director, each officer, 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, free-lancers or otherwise, immediately upon employing or retaining any such persons; 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 that are described in Subsection A of this Section VI. In making this material available, the settling defendant shall permit representatives of the Commission to inspect and copy all such original dated acknowledgments.

VII. REPORTS BY DEFENDANT

IT IS FURTHER ORDERED that:

A. For a period of five (5) years from the date of entry of this Order, the defendant shall notify the Commission of the following: (1) any changes in his business address, residential address or telephone number, within fifteen (15)days of the date of such change; and (2) any changes in his employment status (including self-employment) within fifteen (15) days of such change. Such notice shall include the name and address of each business that defendant is employed by, a statement of the nature of the businesses, and a statement of his duties and responsibilities in connection with the business(es) or employment(s);

B. One hundred and eighty (180) days after the date of entry of this Order, the defendant shall submit written reports to the Commission, signed under penalty of perjury, setting forth in detail the manner and form in which the defendant has complied and is complying with this 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, business address(es) and telephone number(s), 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 Section VII of this Order; and
 
(4) A statement describing the manner in which the defendant has complied and is complying with the prohibitions of Section III of this Order.

C. For a period of five (5) years from the date of entry of this Order, upon written request by a representative of the Commission, the settling defendant shall submit written reports (under oath, if requested) and produce documents on fifteen (15) days notice with respect to any conduct subject to this Order; D. For the purposes of this Order, all written notifications to the Commission shall be mailed to:

Associate Director for
Marketing Practices
Room H-238
Federal Trade Commission
600 Pennsylvania Ave., N.W.
Washington, D.C. 20580

Re: FTC v. Sweet Song Corp., et al.
File X970051.

E. For purposes of this Section VII, the term employment includes the performance of services as an agent, servant, employee, consultant, independent contractor, free-lancer, or otherwise; and the term employers include any individual or entity for whom the settling defendant performs services as an employee, agent, consultant, independent contractor, free-lancer, or otherwise.

F. For purposes of the compliance reporting required by this section, the Commission is authorized to communicate directly with Siri Ram Singh Khalsa.

VIII. ACCESS TO BUSINESS PREMISES

IT IS FURTHER ORDERED that, for a period of five (5) years from the date of entry of this Order, for the purpose of further determining compliance with this Order, the settling defendant shall permit representatives of the Commission, with three (3) business days of receipt of written notice:

A. Access during normal business hours to any office, or facility storing documents, of any business where he is an officer, director, manager or majority owner. In providing such access, the settling defendant shall permit representatives of the Commission to inspect and copy all documents relevant to any matter contained in this Order; and shall permit Commission representatives to remove documents relevant to any matter contained in this Order for a period not to exceed five (5) business days so that the documents may be inspected, inventoried, and copied. Access to documents does not include access to any documents that are protected by the attorney-client privilege or the attorney work product privilege, as those privileges are defined in federal law; and

B. To interview the officers, directors, and employees, including all personnel involved in responding to consumer complaints or inquiries, and all sales personnel, whether designated as employees, consultants, independent contractors or otherwise, of any business to which subsection A of this section applies, concerning matters relating to compliance with the terms of this Order. The person interviewed is permitted to have counsel present.

Provided that, upon application of the Commission and for good cause shown, the Court may enter an ex parte order granting immediate access to the settling defendant's business premises for the purposes of inspecting and copying all documents relevant to any matter contained in this Order.

IX. AUTHORITY TO MONITOR COMPLIANCE

IT IS FURTHER ORDERED that the Commission is authorized to monitor defendant's compliance with this Order and with Section 5 of the FTC Act, 15 U.S.C.  45, by all lawful means, including but not limited to:

A. Obtaining discovery from any person in the manner provided by the Federal Rules of Civil Procedure, including the use of compulsory process pursuant to Fed. R. Civ. P. 45;

B. Using undisclosed representatives posing as consumers and suppliers in contacts with defendant, his employees, or any other entity managed or controlled in whole or in part by defendant; and

C. Using compulsory process, pursuant to Sections 9 and 20 of the FTC Act, 15 U.S.C.  49, 57b-1.

X. RIGHT TO REOPEN

IT IS FURTHER ORDERED that the Commission's agreement to this Order is expressly premised upon the material truthfulness, accuracy, and completeness of settling defendant Siri Ram Singh Khalsa's financial condition as represented in his sworn financial statement he submitted to the Commission, which was dated on or about October 21, 1998. The parties stipulate that this financial statement constitutes material information relied upon by the Commission in negotiating and agreeing to this Order. If, upon motion by the Commission, this Court finds that settling defendant Siri Ram Singh Khalsa failed to disclose on his financial statement any material asset, materially misrepresented the value of any asset, or made any other material misrepresentation or material omission, the defendant shall pay to the Commission the sum of five hundred thousand dollars ($500,000). Provided however, in all other respects, this Order shall remain in full force and effect unless otherwise ordered by the Court; and, provided further, that proceedings instituted under this provision by the Commission shall be in addition to and not in lieu of any other civil or criminal remedies as may be provided by law, including any other proceedings the Commission may initiate to enforce this Order. Settling defendant Siri Ram Singh Khalsa waives any and all rights to contest any of the allegations in the Commission's Complaint in this matter in any subsequent proceeding conducted under this Section X. In any such reopening, the Commission is empowered to enforce any modified monetary judgment against any of the settling defendant's assets, real or personal, tangible or intangible.

XI. REAFFIRMATION OF FINANCIAL INFORMATION AND RECEIPT OF ORDER

IT IS FURTHER ORDERED that, within three (3) business days after receiving notice of entry of this Order, settling defendant Siri Ram Singh Khalsa shall submit to the Commission a truthful sworn affidavit, using the format depicted in Appendix A to this Order, that shall:

A. Reaffirm and attest to the material truth, accuracy and completeness of the financial statement referenced in Section X, above, and

B. Acknowledge personal receipt of this Order.

XII. ASSET FREEZE

IT IS FURTHER ORDERED that this Order supersedes the Preliminary Injunction, with asset freeze, entered in this matter on July 10, 1997, as modified by this Court on October 22, 1997, to the extent specified in this Order. The freeze of settling defendant Siri Ram Singh Khalsa's assets shall be lifted upon execution of the sworn affidavit referenced in Section XI, and upon the filing of a Notice of Receipt of Sworn Affidavit by the Commission in which it acknowledges receipt of the sworn affidavit.

XIII. FEES AND COSTS

IT IS FURTHER ORDERED that each party to this stipulated Order hereby agrees to bear its own costs and attorneys' fees incurred in connection with this action.

XIV. RECEIVERSHIP AND WAIVER OF CLAIMS

IT IS FURTHER ORDERED that the settling defendant waives all rights to seek judicial review or otherwise challenge or contest the validity of this Order. The settling defendant waives any claims he had or may have under the Equal Access to Justice Act, 28 U.S.C.  2412, concerning the prosecution of this action to the date of entry of this Order.

XV. IT IS FURTHER ORDERED that nothing in this Order shall affect the receivership provisions contained in Sections VIII through XIII of the Preliminary Injunction entered by this Court on July 10, 1997. The settling defendant shall cooperate with the Receiver in preparing final income tax returns for the receivership entities and provide assistance in:

A. Identifying and interpreting computer records of the corporate defendants;

B. Identifying customers and explaining customer transactions;

C. Identifying vendors and explaining vendor transactions; and

D. Identifying and interpreting business records of the corporate defendants.

Settling defendant Siri Ram Singh Khalsa hereby releases and discharges the Receiver from any and all claims, demands, liabilities, causes of action, actions, damages, judgments, obligations, costs, losses or expenses of any kind, whether based on tort, contract, or other theories of recovery, whether now known or unknown, suspected or unsuspected, matured or unmatured, whether having arisen or hereafter to arise, which the settling defendant may now or hereafter have against the Receiver.

XVI. IT IS FURTHER ORDERED that the Receiver hereby releases and discharges settling defendant Siri Ram Singh Khalsa from any and all claims, demands, liabilities, causes of action, actions, damages, judgments, obligations, costs, losses or expenses of any kind, whether based on tort, contract, or other theories of recovery, whether now known or unknown, suspected or unsuspected, matured or unmatured, whether having arisen or hereafter to arise, which the Receiver may now or hereafter have against the settling defendant.

XVII. RETENTION OF JURISDICTION

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

XVIII. MULTIPLE EXECUTION OF STIPULATION

IT IS FURTHER ORDERED that the parties to this Order may execute it in multiple counterparts that taken together shall constitute the one and the same Order.

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XIX. ENTRY OF THIS JUDGMENT

IT IS FURTHER ORDERED that pursuant to Fed. R. Civ. P. 54(b) and Local Rule 14.10, the Clerk shall enter this Order immediately.

STIPULATED AND AGREED TO AS TO FORM AND CONTENT:

___________________________
RA'OUF M. ABDULLAH
Attorney for Plaintiff
Federal Trade Commission

___________________________
Steven K. Linkon, Esq.
Receiver for Corporate
Defendants

___________________________
SIRI RAM SINGH KHALSA
Settling Defendant

___________________________
Theodor Albert, Esq.
Attorney for Receiver,
Steven K. Linkon

 

STIPULATED AS TO FORM:

Leonard, Dicker & Schreiber,
Limited Liability Partnership
By Richard C. Leonard, Esq.
Attorney for settling defendant
Siri Ram Singh Khalsa

IT IS SO ORDERED.

Dated, Los Angeles, California, the _____ day of _____________, 1999.

________________________________
The Honorable Lourdes G. Baird
United States District Judge

APPENDIX A
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

FEDERAL TRADE COMMISSION, Plaintiff,

vs.

SWEET SONG CORPORATION, in its own name and d/b/a WINDSOR & WHITE TRADING CO. and d/b/a PACIFIC WELLINGTON ASSOCIATES; TSAVORITE SWORD CORPORATION, in its own name and d/b/a PACIFIC WELLINGTON ASSOCIATES; RON HUDSON, INC., in its own name and d/b/a PACIFIC WELLINGTON ASSOCIATES; HARI JIWAN SINGH KHALSA, a/k/a STEPHEN JON OXENHANDLER, a/k/a BOB THOMAS; SIRI RAM SINGH KHALSA a/k/a WILLIAM TAYLOR, a/k/a PHILLIP ANDERSON; Defendants.

CV-97-4544 LGB

AFFIDAVIT OF DEFENDANT SIRI RAM SINGH KHALSA

Siri Ram Singh Khalsa, being duly sworn, hereby states and affirms as follows:

1. My name is Siri Ram Singh Khalsa. 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 FTC v. Sweet Song, et al., CV-97-4544 LGB (C.D. Cal. 1997), a case in the Central District of California.

3. On [please type or write the date you received the Order here], I received a copy of the STIPULATED FINAL JUDGMENT AND ORDER FOR PERMANENT INJUNCTION AND OTHER FINAL RELIEF AS SIRI RAM SINGH KHALSA ("Order"), which was signed by the Honorable Lourdes G. Baird and entered by the Court on [please type or write the date of entry of Order here]. A true and correct copy of the Order I received, upon which I have affixed my signature in the presence of the subscribed notary, is appended to this Affidavit.

4. Also attached to this Affidavit is a true and correct copy of my signed financial statement dated October 21, 1998 that I provided to the Federal Trade Commission.

5. The above-mentioned financial statement was materially true, accurate, and complete, to the best of my knowledge, as of the date I signed it.

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

___________________________________

[Full name of defendant]

State of ____________________, City of ____________________

Subscribed and sworn to before me this _____ day of _________, 1998.

_____________________________
Notary Public
My Commission Expires:
_________________________

APPENDIX B

PART 310: TELEMARKETING SALES RULE

Sec.
310.1 Scope of regulations in this part.
310.2 Definitions.
310.3 Deceptive telemarketing acts or practices.
310.4 Abusive telemarketing acts or practices.
310.5 Record keeping requirements.
310.6 Exemptions.
310.7 Actions by states and private persons.
310.8 Severability.
Authority: 15 U.S.C. 6101-6108.

 310.1 Scope of regulations in this part.

This part implements the Telemarketing and Consumer Fraud and Abuse Prevention Act, 15 U.S.C. 6101-6108.

 310.2 Definitions.

(a) Acquirer means a business organization, financial institution, or an agent of a business organization or financial institution that has authority from an organization that operates or licenses a credit card system to authorize merchants to accept, transmit, or process payment by credit card through the credit card system for money, goods or services, or anything else of value.
(b) Attorney general means the chief legal officer of a State.
(c) Cardholder means a person to whom a credit card is issued or who is authorized to use a credit card on behalf of or in addition to the person to whom the credit card is issued.
(d) Commission means the Federal Trade Commission.
(e) Credit means the right granted by a creditor to a debtor to defer payment of debt or to incur debt and defer its payment.
(f) Credit card means any card, plate, coupon book, or other credit device existing for the purpose of obtaining money, property, labor, or services on credit.
(g) Credit card sales draft means any record or evidence of a credit card transaction.
(h) Credit card system means any method or procedure used to process credit card transactions involving credit cards issued or licensed by the operator of that system.
(i) Customer means any person who is or may be required to pay for goods or services offered through telemarketing.
(j) Investment opportunity means anything, tangible or intangible, that is offered, offered for sale, sold, or traded based wholly or in part on representations, either express or implied, about past, present, or future income, profit, or appreciation.
(k) Material means likely to affect a person's choice of, or conduct regarding, goods or services.
(l) Merchant means a person who is authorized under a written contract with an acquirer to honor or accept credit cards, or to transmit or process for payment credit card payments, for the purchase of goods or services.
(m) Merchant agreement means a written contract between a merchant and an acquirer to honor or accept credit cards, or to transmit or process for payment credit card payments, for the purchase of goods or services.
(n) Outbound telephone call means a telephone call initiated by a telemarketer to induce the purchase of goods or services.
(o) Person means any individual, group, unincorporated association, limited or general partnership, corporation, or other business entity.
(p) Prize means anything offered, or purportedly offered, and given, or purportedly given, to a person by chance. For purposes of this definition, chance exists if a person is guaranteed to receive an item and, at the time of the offer or purported offer, the telemarketer does not identify the specific item that the person will receive.
(q) Prize promotion means:

(1) A sweepstakes or other game of chance; or

(2) An oral or written express or implied representation that a person has won, has been selected to receive, or may be eligible to receive a prize or purported prize.

(r) Seller means any person who, in connection with a telemarketing transaction, provides, offers to provide, or arranges for others to provide goods or services to the customer in exchange for consideration.
(s) State means any State of the United States, the District of Columbia, Puerto Rico, the Northern Mariana Islands, and any territory or possession of the United States.
(t) Telemarketer means any person who, in connection with telemarketing, initiates or receives telephone calls to or from a customer.
(u) 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. The term does not include the solicitation of sales through the mailing of a catalog which: contains a written description or illustration of the goods or services offered for sale; includes the business address of the seller; includes multiple pages of written material or illustrations; and has been issued not less frequently than once a year, when the person making the solicitation does not solicit customers by telephone but only receives calls initiated by customers in response to the catalog and during those calls takes orders only without further solicitation. For purposes of the previous sentence, the term "further solicitation" does not include providing the customer with information about, or attempting to sell, any other item included in the same catalog which prompted the customer's call or in a substantially similar catalog.

310.3 Deceptive telemarketing acts or practices.

(a) Prohibited deceptive telemarketing acts or practices.
 
It is a deceptive telemarketing act or practice and a violation of this Rule for any seller or telemarketer to engage in the following conduct:

(1) Before a customer pays(1) for goods or services offered, failing to disclose, in a clear and conspicuous manner, the following material information:

(i) The total costs to purchase, receive, or use, and the quantity of, any goods or services that are the subject of the sales offer;(2)

(ii) All material restrictions, limitations, or conditions to purchase, receive, or use the goods or services that are the subject of the sales offer;

(iii) 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;

(iv) In any prize promotion, the odds of being able to receive the prize, and if the odds are not calculable in advance, the factors used in calculating the odds; that no purchase or payment is required to win a prize or to participate in a prize promotion; and the no purchase/no payment method of participating in the prize promotion with either instructions on how to participate or an address or local or toll-free telephone number to which customers may write or call for information on how to participate; and

(v) All material costs or conditions to receive or redeem a prize that is the subject of the prize promotion;

(2) Misrepresenting, directly or by implication, any of the following material information:

(i) The total costs to purchase, receive, or use, and the quantity of, any goods or services that are the subject of a sales offer;

(ii) Any material restriction, limitation, or condition to purchase, receive, or use goods or services that are the subject of a sales offer;

(iii) Any material aspect of the performance, efficacy, nature, or central characteristics of goods or services that are the subject of a sales offer;

(iv) Any material aspect of the nature or terms of the seller's refund, cancellation, exchange, or repurchase policies;

(v) Any material aspect of a prize promotion including, but not limited to, the odds of being able to receive a prize, the nature or value of a prize, or that a purchase or payment is required to win a prize or to participate in a prize promotion;

(vi) Any material aspect of an investment opportunity including, but not limited to, risk, liquidity, earnings potential, or profitability; or

(vii) A seller's or telemarketer's affiliation with, or endorsement by, any government or third-party organization;

(3) 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:

(i) Express written authorization by the customer, which may include the customer's signature on the negotiable instrument; or

(ii) 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:

(A) The date of the draft(s);

(B) The amount of the draft(s);

(C) The payor's name;

(D) The number of draft payments (if more than one);

(E) A telephone number for customer inquiry that is answered during normal business hours; and

(F) The date of the customer's oral authorization; or

(iii) 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:

(A) All of the information contained in  310.3(a)(3)(ii)(A)-(F); and

(B) The procedures by which the customer can obtain a refund from the seller or telemarketer in the event the confirmation is inaccurate; and

(4) Making a false or misleading statement to induce any person to pay for goods or services.

(b) Assisting and facilitating. It is a deceptive telemarketing act or practice and a violation of this Rule for a person to provide substantial assistance or support to any seller or telemarketer when that person knows or consciously avoids knowing that the seller or telemarketer is engaged in any act or practice that violates  310.3(a) or (c), or  310.4 of this Rule.
 
(c) Credit card laundering. Except as expressly permitted by the applicable credit card system, it is a deceptive telemarketing act or practice and a violation of this Rule for:

(1) A merchant to present to or deposit into, or cause another to present to or deposit into, the credit card system for payment, a credit card sales draft generated by a telemarketing transaction that is not the result of a telemarketing credit card transaction between the cardholder and the merchant;

(2) Any person to employ, solicit, or otherwise cause a merchant or an employee, representative, or agent of the merchant, to present to or deposit into the credit card system for payment, a credit card sales draft generated by a telemarketing transaction that is not the result of a telemarketing credit card transaction between the cardholder and the merchant; or

(3) Any person to obtain access to the credit card system through the use of a business relationship or an affiliation with a merchant, when such access is not authorized by the merchant agreement or the applicable credit card system.

 310.4 Abusive telemarketing acts or practices.

(a) Abusive conduct generally. It is an abusive telemarketing act or practice and a violation of this Rule for any seller or telemarketer to engage in the following conduct:

(1) Threats, intimidation, or the use of profane or obscene language;

(2) Requesting or receiving payment of any fee or consideration for goods or services represented to remove derogatory information from, or improve, a person's credit history, credit record, or credit rating until:

(i) The time frame in which the seller has represented all of the goods or services will be provided to that person has expired; and

(ii) The seller has provided the person with documentation in the form of a consumer report from a consumer reporting agency demonstrating that the promised results have been achieved, such report having been issued more than six months after the results were achieved. Nothing in this Rule should be construed to affect the requirement in the Fair Credit Reporting Act, 15 U.S.C. 1681, that a consumer report may only be obtained for a specified permissible purpose;

(3) Requesting or receiving payment of any fee or consideration from a person, for goods or services represented to recover or otherwise assist in the return of money or any other item of value paid for by, or promised to, that person in a previous telemarketing transaction, until seven (7) business days after such money or other item is delivered to that person. This provision shall not apply to goods or services provided to a person by a licensed attorney; or

(4) Requesting or receiving payment of any fee or consideration in advance of obtaining a loan or other extension of credit when the seller or telemarketer has guaranteed or represented a high likelihood of success in obtaining or arranging a loan or other extension of credit for a person.

(b) Pattern of calls. (1) It is an abusive telemarketing act or practice and a violation of this Rule for a telemarketer to engage in, or for a seller to cause a telemarketer to engage in, the following conduct:

(i) Causing any telephone to ring, or engaging any person in telephone conversation, repeatedly or continuously with intent to annoy, abuse, or harass any person at the called number; or

(ii) Initiating an outbound telephone call to a person when that person previously has stated that he or she does not wish to receive an outbound telephone call made by or on behalf of the seller whose goods or services are being offered.

(2) A seller or telemarketer will not be liable for violating  310.4(b)(1)(ii) if:

(i) It has established and implemented written procedures to comply with  310.4(b)(1)(ii);

(ii) It has trained its personnel in the procedures established pursuant to  310.4(b)(2)(i);

(iii) The seller, or the telemarketer acting on behalf of the seller, has maintained and recorded lists of persons who may not be contacted, in compliance with  310.4(b)(1)(ii); and

(iv) Any subsequent call is the result of error.

(c) Calling time restrictions. Without the prior consent of a person, it is an abusive telemarketing act or practice and a violation of this Rule for a telemarketer to engage in outbound telephone calls to a person's residence at any time other than between 8:00 a.m. and 9:00 p.m. local time at the called person's location.
 
(d) Required oral disclosures. It is an abusive telemarketing act or practice and a violation of this Rule for a telemarketer in an outbound telephone call to fail to disclose promptly and in a clear and conspicuous manner to the person receiving the call, the following information:

(1) The identity of the seller;

(2) That the purpose of the call is to sell goods or services;

(3) The nature of the goods or services; and

(4) That no purchase or payment is necessary to be able to win a prize or participate in a prize promotion if a prize promotion is offered. This disclosure must be made before or in conjunction with the description of the prize to the person called. If requested by that person, the telemarketer must disclose the no-purchase/no-payment entry method for the prize promotion.

 310.5 Recordkeeping requirements.

(a) Any seller or telemarketer shall keep, for a period of 24 months from the date the record is produced, the following records relating to its telemarketing activities:

(1) All substantially different advertising, brochures, telemarketing scripts, and promotional materials;

(2) The name and last known address of each prize recipient and the prize awarded for prizes that are represented, directly or by implication, to have a value of $25.00 or more;

(3) The name and last known address of each customer, the goods or services purchased, the date such goods or services were shipped or provided, and the amount paid by the customer for the goods or services;(3)

(4) The name, any fictitious name used, the last known home address and telephone number, and the job title(s) for all current and former employees directly involved in telephone sales; provided, however, that if the seller or telemarketer permits fictitious names to be used by employees, each fictitious name must be traceable to only one specific employee; and

(5) All verifiable authorizations required to be provided or received under this Rule.

(b) A seller or telemarketer may keep the records required by  310.5(a) in any form, and in the manner, format, or place as they keep such records in the ordinary course of business. Failure to keep all records required by  310.5(a) shall be a violation of this Rule.
 
(c) The seller and the telemarketer calling on behalf of the seller may, by written agreement, allocate responsibility between themselves for the recordkeeping required by this Section. When a seller and telemarketer have entered into such an agreement, the terms of that agreement shall govern, and the seller or telemarketer, as the case may be, need not keep records that duplicate those of the other. If the agreement is unclear as to who must maintain any required record(s), or if no such agreement exists, the seller shall be responsible for complying with  310.5(a)(1)-(3) and (5); the telemarketer shall be responsible for complying with  310.5(a)(4).
 
(d) In the event of any dissolution or termination of the seller's or telemarketer's business, the principal of that seller or telemarketer shall maintain all records as required under this Section. In the event of any sale, assignment, or other change in ownership of the seller's or telemarketer's business, the successor business shall maintain all records required under this Section.

 310.6 Exemptions.

The following acts or practices are exempt from this Rule:

(a) The sale of pay-per-call services subject to the Commission's "Trade Regulation Rule Pursuant to the Telephone Disclosure and Dispute Resolution Act of 1992," 16 CFR Part 308;
 
(b) The sale of franchises subject to the Commission's Rule entitled "Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures," 16 CFR Part 436;
 
(c) Telephone calls in which the sale of goods or services is not completed, and payment or authorization of payment is not required, until after a face-to-face sales presentation by the seller;
 
(d) Telephone calls initiated by a customer that are not the result of any solicitation by a seller or telemarketer;
 
(e) Telephone calls initiated by a customer in response to an advertisement through any media, other than direct mail solicitations; provided, however, that this exemption does not apply to calls initiated by a customer in response to an advertisement relating to investment opportunities, goods or services described in  310.4(a)(2) or (3), or advertisements that guarantee or represent a high likelihood of success in obtaining or arranging for extensions of credit, if payment of a fee is required in advance of obtaining the extension of credit;
 
(f) Telephone calls initiated by a customer in response to a direct mail solicitation that clearly, conspicuously, and truthfully discloses all material information listed in  310.3(a)(1) of this Rule for any item offered in the direct mail solicitation; provided, however, that this exemption does not apply to calls initiated by a customer in response to a direct mail solicitation relating to prize promotions, investment opportunities, goods or services described in  310.4(a)(2) or (3), or direct mail solicitations that guarantee or represent a high likelihood of success in obtaining or arranging for extensions of credit, if payment of a fee is required in advance of obtaining the extension of credit; and
 
(g) Telephone calls between a telemarketer and any business, except calls involving the retail sale of nondurable office or cleaning supplies; provided, however, that  310.5 of this Rule shall not apply to sellers or telemarketers of nondurable office or cleaning supplies.

 310.7 Actions by States and private persons.

(a) Any attorney general or other officer of a State authorized by the State to bring an action under the Telemarketing and Consumer Fraud and Abuse Prevention Act, and any private person who brings an action under that Act, shall serve written notice of its action on the Commission, if feasible, prior to its initiating an action under this Rule. The notice shall be sent to the Office of the Director, Bureau of Consumer Protection, Federal Trade Commission, Washington, D.C. 20580, and shall include a copy of the State's or private person's complaint and any other pleadings to be filed with the court. If prior notice is not feasible, the State or private person shall serve the Commission with the required notice immediately upon instituting its action.
 
(b) Nothing contained in this Section shall prohibit any attorney general or other authorized State official from proceeding in State court on the basis of an alleged violation of any civil or criminal statute of such State.

310.8 Severability.

The provisions of this Rule are separate and severable from one another. If any provision is stayed or determined to be invalid, it is the Commission's intention that the remaining provisions shall continue in effect.

By direction of the Commission.

Donald S. Clark
Secretary


1. When a seller or telemarketer uses, or directs a customer to use, a courier to transport payment, the seller or telemarketer must make the disclosures required by  310.3(a)(1) before sending a courier to pick up payment or authorization for payment, or directing a customer to have a courier pick up payment or authorization for payment.

2. For offers of consumer credit products subject to the Truth in Lending Act, 15 U.S.C. 1601 et seq., and Regulation Z, 12 CFR 226, compliance with the disclosure requirements under the Truth in Lending Act, and Regulation Z, shall constitute compliance with  310.3(a)(1)(i) of this Rule.

3. For offers of consumer credit products subject to the Truth in Lending Act, 15 U.S.C. 1601 et seq., and Regulation Z, 12 CFR 226, compliance with the recordkeeping requirements under the Truth in Lending Act, and Regulation Z, shall constitute compliance with  310.5(a)(3) of this Rule.