PAUL E. COGGINS
United States Attorney
Northern District of Texas

By:

Assistant United States Attorney
1100 Commerce St., 3rd Floor
Dallas, TX. 75242-1699
(214) 659-8600
(214) 767-2898 (facsimile)

IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS

UNITED STATES OF AMERICA, Plaintiff,

v.

PATRIOT COMPUTER CORPORATION, Defendant.

CASE NO.

CONSENT DECREE AND ORDER FOR CIVIL  PENALTIES, INJUNCTIVE AND OTHER RELIEF

WHEREAS plaintiff, the United States of America, has commenced this action by filing the Complaint herein; defendant has waived service of the Summons and Complaint; the parties have been represented by the attorneys whose names appear hereafter; and the parties have agreed to settlement of this action upon the following terms and conditions, without adjudication of any issue of fact or law and without defendant admitting liability for any of the matters alleged in the Complaint;

THEREFORE, upon stipulation of plaintiff and defendant, it is hereby ORDERED, ADJUDGED, and DECREED as follows:

1. This Court has jurisdiction of the subject matter and of the parties.

2. The Complaint states a claim upon which relief may be granted against the defendant under Sections 5(a)(1), 5(m)(1)(A), 13(b), and 16(a) of the Federal Trade Commission Act, 15 U.S.C. 45(a)(1), 45(m)(1)(A), 53(b), and 56(a).

DEFINITION

3. For the purposes of this Consent Decree, the term "Mail Order Rule" means the Federal Trade Commission's Trade Regulation Rule Concerning Mail or Telephone Order Merchandise, 16 C.F.R. Part 435, or as the Rule may hereafter be amended.

CIVIL PENALTY

4. Defendant Patriot Computer Corporation, its successors and assigns, shall pay to plaintiff a civil penalty, pursuant to section 5(m)(1)(A) of the Federal Trade Commission Act, 15 U.S.C.  45(m)(1)(A), in the amount of $200,000.

5. Defendant shall make the payment required by Paragraph 1 within five (5) days of the date of entry of this Consent Decree by electronic fund transfer in accordance with the instructions provided by the Office of Consumer Litigation, Civil Division, U.S. Department of Justice, Washington, D.C. 20530, for appropriate disposition.

6. In the event of any default in payment, which default continues for ten days beyond the due date of payment, the entire unpaid penalty, together with interest, as computed pursuant to 28 U.S.C. 1961 from the date of default to the date of payment, shall immediately become due and payable.

INJUNCTION

7. Defendant, its successors and assigns, and its officers and agents, servants, employees and attorneys, and all persons in active concert or participation with any one or more of them who receive actual notice of this Consent Decree by personal service or otherwise, are hereby enjoined from violating, directly or through any corporation, subsidiary, division or other device, any provision of the Mail Order Rule, including but not limited to:

a. Failing to timely offer to the buyer, clearly and conspicuously and without prior demand, an option either to consent to a delay in shipping or to cancel the order and receive a prompt refund, as required by 16 C.F.R.  435.1(b)(1); and
 
b. Failing to deem an order canceled and make a prompt refund to buyers who are entitled to such refunds under the Rule, as required by 16 C.F.R.  435.1(c).

8. In the event the Mail Order Rule is hereafter amended or modified, defendant's compliance with that Rule as so amended or modified shall not be deemed a violation of this injunction. A copy of the Mail Order Rule is attached hereto as "Appendix A" and incorporated herein as if fully set forth verbatim.

COMPLIANCE

9. Defendant shall, within thirty (30) days of the entry of this Consent Decree, provide a copy of this Consent Decree and the Business Guide to the Federal Trade Commission's Mail or Telephone Order Merchandise Rule (Jan. 1995) ("Business Guide") to each of its supervisory or managerial agents, servants, employees and attorneys who are engaged in defendant's mail, telephone, facsimile or Internet order sales business, secure from each such person a signed statement acknowledging receipt of a copy of this Consent Decree and Business Guide, and shall, within ten (10) days of complying with this paragraph, file an affidavit with the Regional Director, Western Region, Federal Trade Commission, 901 Market Street, San Francisco, CA 94103, setting forth the fact and manner of its compliance, including the name and title of each person to whom a copy of the Consent Decree and Business Guide has been provided.

10. For a period of five (5) years from the date of entry of this Consent Decree, defendant, its successors and assigns, shall maintain and make available to the Federal Trade Commission, within seven (7) days of the date of receipt of a written request, business records demonstrating compliance with the terms and provisions of this Consent Decree.

11. For a period of twenty (20) years from the date of entry of this Consent Decree, defendant, its successors and assigns, shall notify the Regional Director, Western Region, Federal Trade Commission, 901 Market Street, San Francisco, CA 94103, at least thirty (30) days prior to any change in defendant's business, including, but not limited to, merger, incorporation, dissolution, assignment, sale resulting in the emergence of a successor corporation, the creation or dissolution of a subsidiary or parent, or any other change in corporate status which may affect defendant's obligations under this Consent Decree.

12. One hundred twenty (120) days after entry of this Consent Decree, defendant shall provide a written report to the Federal Trade Commission, sworn to under penalty of perjury, setting forth in detail the manner and form in which the defendant has complied and is complying with this Consent Decree. This report shall include but not be limited to:

a. a specimen copy of each delay option notice used to comply with any provision of the Mail Order Rule, and a statement setting forth in detail the procedures in place for providing such notices;
 
b. a specimen copy of each advertisement or telemarketing script containing a shipping representation;
 
c. a statement setting forth in detail defendant's procedures for providing prompt refunds pursuant to the Mail Order Rule; and
 
d. a statement setting forth in detail the basis for claiming that defendant will by able to ship merchandise:
 
i. within the time stated in any advertisement;
 
ii. within thirty (30) days, where no time is stated clearly and conspicuously in any advertisement.

Defendant shall mail this written notification to: the Regional Director, Western Region, Federal Trade Commission, 901 Market Street, San Francisco, CA 94103.

13. Defendant is hereby required, in accordance with 31 U.S.C.  7701, to furnish to the Federal Trade Commission its taxpayer identifying number (social security number or employer identification number), which shall be used for purposes of collecting and reporting on any delinquent amount arising out of its relationship with the government.

CONTINUING JURISDICTION

14. This Court shall retain jurisdiction of this matter for the purposes of enabling any of the parties to this Consent Decree to apply to the Court at any time for such further orders or directives as may be necessary or appropriate for the interpretation or modification of this Consent Decree, for the enforcement of compliance therewith, or for the punishment of violations thereof.

JUDGMENT IS THEREFORE ENTERED in favor of plaintiff and against defendant, pursuant to all the terms and conditions recited above.

Dated this ___ day of _____, 20__

UNITED STATES DISTRICT JUDGE

The parties, by their respective counsel, hereby consent to the terms and conditions of the Consent Decree as set forth above and consent to the entry thereof. Defendant waives any rights that may arise under the Equal Access to Justice Act, 28 U.S.C. 2412, concerning the investigation and prosecution of this action.

FOR THE UNITED STATES OF AMERICA:

DAVID W. OGDEN
Acting Assistant Attorney General
Civil Division
U.S. Department of Justice

PAUL E. COGGINS
United States Attorney
Northern District of Texas

Assistant United States Attorney
1100 Commerce St., 3rd Floor
Dallas 75242-1699
(214) 659-8600
(214) 767-2898 (facsimile)

EUGENE THIROLF
Director
Office of Consumer Litigation

_________________________________
Attorney
Office of Consumer Litigation
Civil Division
U.S. Department of Justice
Washington, D.C. 20530

FOR THE FEDERAL TRADE COMMISSION:

_________________________________
JEFFREY KLURFELD
Regional Director
Western Region
Federal Trade Commission

_________________________________
LINDA K. BADGER
MATTHEW D. GOLD
KERRY O'BRIEN
Attorneys
Western Region
Federal Trade Commission
901 Market Street, Suite 570
San Francisco, CA 94103
(202) 356-5266

FOR THE DEFENDANT:

___________________________________
MARK DURST
President
Patriot Computer Corporation

___________________________________
KEVIN M. KEARNEY
Attorney for Defendant
Hodgson Russ Andrews Woods & Goodyear LLP
One M&T Plaza, Suite 2000
Buffalo, NY 14203-2391
(716) 856-4000
(716) 849-0349 (facsimile)