UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE

FEDERAL TRADE COMMISSION, Plaintiff,

v.

FARPOINT SERVICES INT'L., LTD., GARRISON CORPORATION, INC., AMERICAN CARD SERVICES, S.A., HYPERION LLC, CONSOLIDATED GROUP OF COMPANIES LLC, ROBERTA GALWAY aka ROBIN GALWAY and ROBIN ARCAND, and PHILIP ARCAND, Defendants.



Case No.

COMPLAINT FOR INJUNCTIVE AND OTHER EQUITABLE RELIEF

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

1. The FTC brings this action under Sections 13(b) and 19 of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C.  53(b) and 57b, and the Telemarketing and Consumer Fraud and Abuse Prevention Act ("Telemarketing Act"), 15 U.S.C. 6101 et seq., to obtain permanent injunctive relief, rescission of contracts, restitution, disgorgement, and other equitable relief for defendants' deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C.  45(a), and the FTC's Trade Regulation Rule entitled "Telemarketing Sales Rule," 16 C.F.R. Part 310.

JURISDICTION AND VENUE

2. Subject matter jurisdiction is conferred upon this Court by 15 U.S.C. 45(a), 53(b), 57b, 6102(c), and 6105(b) and 28 U.S.C. 1331, 1337(a), and 1345.

3. Venue in the Western District of Washington is proper under 15 U.S.C.  53(b) and 28 U.S.C.  1391(b), (c), and (d).

PLAINTIFF

4. Plaintiff Federal Trade Commission is an independent agency of the United States Government created by statute. 15 U.S.C.  41 et seq. The Commission enforces Section 5(a) of the FTC Act, 15 U.S.C.  45(a), which prohibits unfair or deceptive acts or practices in or affecting commerce. The Commission also enforces the Telemarketing Sales Rule ("TSR" or "the Rule"), 16 C.F.R. Part 310, which prohibits deceptive or abusive telemarketing practices. The Commission may initiate federal district court proceedings by its own attorneys to enjoin violations of the FTC Act and the TSR and to secure such equitable relief as may be appropriate in each case, including restitution for injured consumers. 15 U.S.C.  53(b), 57b and 6105(b).

DEFENDANTS

5. Defendant Farpoint Services International Ltd. ("Farpoint"), is a British Columbia corporation with its offices and principal place of business located in Surrey, British Columbia, Canada. Farpoint transacts and has transacted business in the Western District of Washington.

6. Defendant Garrison Corporation, Inc., d/b/a Garrison Assurance, Garrison NV, or Garrison Outbound Telemarketing, ("Garrison") has its offices and principal place of business located in Las Vegas, Nevada. Defendant Garrison transacts or has transacted business in the Western District of Washington.

7. Defendant American Card Services, S.A., ("ACS") is a Nicaraguan corporation with its offices and principal place of business located in Surrey, British Columbia. Defendant American Card Services, Inc., transacts or has transacted business in the Western District of Washington.

8. Defendant Hyperion LLC has offices located in Surrey, British Columbia, and Las Vegas, Nevada. Defendant Hyperion transacts or has transacted business in the Western District of Washington.

9. Defendant Consolidated Group of Companies LLC ("CGC") is a Nevada corporation with its offices and principal place of business located at Las Vegas, Nevada. CGC was incorporated with the name Polo Holdings LLC, and its name was changed to CGC on March 15, 2001. CGC as Polo Holdings transacts or has transacted business in the Western District of Washington.

10. Defendant Roberta Galway aka Robin Galway or Robin Arcand is an officer of defendants Farpoint and Garrison. At all times material to this Complaint, acting alone or in concert with others, she has formulated, directed, controlled, or participated in the acts and practices set forth in this Complaint. She transacts or has transacted business in the Western District of Washington.

11. Defendant Philip Arcand is the sole owner or a principal of the corporate defendants Farpoint Services International, Ltd., Garrison Corporation, Inc., American Card Services, S.A., Hyperion LLC, and Consolidated Group of Companies LLC. At all times material to this Complaint, acting alone or in concert with others, he has formulated, directed, controlled, or participated in the acts and practices set forth in this Complaint. He transacts or has transacted business in the Western District of Washington.

COMMERCE

12. At all times relevant to this complaint, defendants have maintained a substantial course of business in the offering for sale and sale, through telemarketing, of credit card protection or debt consolidation services, in or affecting commerce, as "commerce" is defined in Section 4 of the FTC Act, 15 U.S.C.  44.

DEFENDANTS' BUSINESS PRACTICES

13. Since at least 1998, defendants Arcand and Galway through the corporate defendants Farpoint, ACS, and Garrison have telemarketed fraudulent credit card protection services or debt consolidation packages to United States residents. Defendants telemarket their products through independent sales organizations, providing the telemarketers with scripts, product, data processing, mail list maintenance, direct marketing services, business consulting services, customer service and merchant account access. Defendants have charged consumers fees of between $239 and $399 for credit card protection services or debt consolidation packages. These products are of little or no intrinsic value, and are not what they are represented to be by defendants. A substantial percentage of defendants' customers are elderly consumers.

14. In marketing their credit card protection services, defendants have represented that if consumers do not purchase defendants' credit card protection, consumers will be liable for unauthorized charges made to their accounts. Often they have represented that they are in some manner affiliated with the consumer's credit card issuing bank. In numerous instances, defendants do not disclose promptly or in a clear and conspicuous manner that the purpose of the call is to sell defendants' credit card protection service. The product that consumers receive is some version of a credit card registry, which does not protect consumers from unauthorized charges on their credit cards, but purports to help consumers if their cards are lost or stolen by notifying their card issuers about obtaining new cards. Moreover, consumers are protected by statute from unauthorized charges posted to their credit cards. In marketing their debt consolidation services, defendants tell consumers that defendants can extend or arrange credit so that consumers can consolidate all of their credit card debt at a single low interest rate. All that consumers receive, however, is a booklet containing general credit information and a list of banks that offer low-interest credit cards. This information is available for free from many sources.

15. Arcand and Galway through the corporate defendants have also engaged in credit card laundering for telemarketers who market products other than the defendants' products. Defendants through their various business entities have obtained merchant accounts for themselves under several different company names. In violation of the TSR they have processed credit card sales drafts through these accounts that are not the result of transactions between themselves and the cardholders. In other instances defendants have arranged for their telemarketing clients to process their credit card transactions through the merchant accounts of others with whom defendants have a business relationship. In some instances defendants have provided false information to the merchant banks in order to hide from the bank the fact that they are involved in telemarketing.

VIOLATIONS OF SECTION 5 OF THE FTC ACT

16. Section 5(a) of the FTC Act, 15 U.S.C.  45(a), prohibits deceptive acts and practices in or affecting commerce.

COUNT I

Credit Card Protection

17. In numerous instances, in connection with the offering of credit card protection services to consumers, defendants have made various representations, expressly or by implication, including but not limited to the following:

a. Defendants are affiliated with, or are calling from or on behalf of, Visa, MasterCard, or a credit card issuing institution; or
 
b. If consumers do not purchase defendants' services, consumers will be held fully liable for any unauthorized charges made to their credit card accounts.

18. In truth and in fact:

a. Defendants are not affiliated with, or calling from or on behalf of, Visa, MasterCard, or a credit card issuing institution; and
 
b. Under Section 226.12(b) of Regulation Z, 12 C.F.R.  226.12(b), and Section 133 of the Truth in Lending Act, 15 U.S.C.  1643, a consumer cannot be held liable for more than $50 for any unauthorized charges to a credit card account.

19. Therefore, defendants' representations, as set forth in Paragraph 17, are false and misleading and constitute deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. 45(a).

COUNT II

Advance-Fee Credit

20. In numerous instances, in connection with offers to obtain or arrange loans or other extensions of credit for consumers, defendants have represented, expressly or by implication, that, after paying defendants a fee, consumers will or are highly likely to receive a loan or low-interest credit card for the purpose of consolidating credit card debt.

21. In truth and in fact, after paying defendants a fee, consumers will not or are not highly likely to receive a loan or low-interest credit card for the purpose of consolidating credit card debt.

22. Therefore, defendants' representations, as set forth in Paragraph 20, are false and misleading and constitute deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. 45(a).

THE FTC'S TELEMARKETING SALES RULE

23. In the Telemarketing Act, 15 U.S.C.  6101 et seq., Congress directed the Commission to prescribe rules prohibiting deceptive and abusive telemarketing acts or practices. On August 16, 1995, the Commission promulgated the Telemarketing Sales Rule, 16 C.F.R. Part 310. The Rule became effective on December 31, 1995.

24. Defendants are "telemarketers"or "sellers" engaged in "telemarketing," as those terms are defined in the Rule, 16 C.F.R. 310.2(r), (t), and (u).

25. The Rule prohibits telemarketers and sellers from misrepresenting any material aspect of the performance, efficacy, nature, or central characteristics of the goods or services that are the subject of the sales offer. 16 C.F.R.  310.3(a)(2)(iii).

26. The Rule prohibits telemarketers and sellers from "making a false or misleading statement to induce any person to pay for goods or services." 16 C.F.R.  310.3(a)(4).

27. Except as expressly permitted by the applicable credit card system, the Rule makes it a deceptive telemarketing act or practice for:

a. 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;
 
b. Any person to employ, solicit, or otherwise cause a merchant, a representative, employee 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
 
c. 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.

16 C.F.R. 310.3(c).

28. The Rule prohibits telemarketers and sellers from requesting or receiving payment of any fee or consideration in advance of obtaining or arranging 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. 16 C.F.R. 310.4(a)(4).

29. The Rule also requires telemarketers using outbound calls to disclose promptly in a clear and conspicuous manner to the person receiving the call that the purpose of the call is to sell goods or services. 16 C.F.R.  310.4(d)(2).

30. Pursuant to Section 3(c) of the Telemarketing Act, 15 U.S.C. 6102(c), and Section 18(d)(3) of the FTC Act, 15 U.S.C. 57a(d)(3), violations of the Rule constitute unfair or deceptive acts or practices in or affecting commerce, in violation of Section 5(a) of the FTC Act, 15 U.S.C.  45(a).

VIOLATIONS OF THE TELEMARKETING SALES RULE

COUNT III

Credit Card Protection

31. In numerous instances, in connection with the telemarketing of credit card protection services to consumers, defendants have represented, directly or by implication, that, if consumers do not purchase defendants' services, consumers can be held fully liable for any unauthorized charges made to their credit card accounts.

32. In truth and in fact, under Section 226.12(b) of Regulation Z, 12 C.F.R.  226.12(b), and Section 133 of the Truth in Lending Act, 15 U.S.C.  1643, a consumer cannot be held liable for more than $50 for any unauthorized charges to a credit card account.

33. Therefore, defendants' representations, as alleged in Paragraph 31, are deceptive telemarketing acts or practices in violation of Section 310.3(a)(2)(iii) of the Telemarketing Sales Rule, 16 C.F.R.  310.3(a)(2)(iii).

COUNT IV

Credit Card Protection

34. In numerous instances, in connection with the telemarketing of credit card protection services to consumers, defendants have represented, directly or by implication, that defendants are affiliated with, or are calling from or on behalf of, Visa, MasterCard, or a credit card issuing institution.

35. In truth and in fact, defendants are not affiliated with, or calling from or on behalf of, Visa, MasterCard, or a credit card issuing institution.

36. Therefore, defendants' representations, as alleged in Paragraph 34, constitute false or misleading statements to induce a person to pay for goods or services, and are deceptive telemarketing acts or practices in violation of Section 310.3(a)(4) of the Rule, 16 C.F.R.  310.3(a)(4).

COUNT V

Credit Card Protection

37. In numerous instances, in connection with the telemarketing of credit card protection services to consumers, defendants have failed to disclose promptly and in a clear and conspicuous manner that the purpose of the telemarketing call is to sell goods or services, in violation of Section 310.4(d)(2) of the of the Telemarketing Sales Rule, 16 C.F.R.  310.4(d)(2).

COUNT VI

Advance-Fee Credit

38. In numerous instances, in connection with telemarketing offers to obtain or arrange loans or other extensions of credit, defendants have represented, directly or by implication, that, after paying defendants a fee, consumers will or are highly likely to receive a loan or low-interest credit card for the purpose of consolidating credit card debt.

39. In truth and in fact, after paying defendants a fee, consumers will not and are not highly likely to receive a loan or low-interest credit card for the purpose of consolidating credit card debt.

40. Therefore, defendants' representations, as alleged in Paragraph 38, are deceptive telemarketing acts or practices in violation of Section 310.3(a)(2)(iii) of the Telemarketing Sales Rule, 16 C.F.R.  310.3(a)(2)(iii).

COUNT VII

Advance-Fee Credit

41. In numerous instances, in connection with telemarketing offers to obtain or arrange loans or other extensions of credit for consumers, defendants have requested or received payment of a fee or consideration in advance of obtaining or arranging a loan or other extension of credit for consumers, when defendants have guaranteed or represented a high likelihood of success in obtaining or arranging a loan or other extension of credit for such consumers. Defendants have thereby violated Section 310.4(a)(4) of the Rule, 16 C.F.R. 310.4(a)(4).

COUNT VIII

Credit Card Laundering

42. In numerous instances, and without the express permission of the applicable credit card system, defendants have:

a. Presented to or deposited into, or caused 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 defendants;
 
b. Employed, solicited, or otherwise caused a merchant, a representative, employee 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
 
c. Obtained 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.

43. Defendants have thereby violated Section 310.3(c) of the Telemarketing Sales Rule, 16 C.F.R. 310.3(c).

COMMON ENTERPRISE

44. The defendants have operated as a common enterprise while engaging in the deceptive acts and practices and Telemarketing Sales Rule violations alleged above.

CONSUMER INJURY

45. Consumers throughout the United States have suffered and continue to suffer substantial monetary loss as a result of defendants' unlawful acts or practices. In addition, defendants have been unjustly enriched as a result of their unlawful practices. Absent injunctive relief by this Court, the defendants are likely to continue to injure consumers, reap unjust enrichment, and harm the public interest.

THIS COURT'S POWER TO GRANT RELIEF

46. Section 13(b) of the FTC Act, 15 U.S.C. 53(b), empowers this Court to grant injunctive and other ancillary relief, including consumer redress, disgorgement, and restitution, to prevent and remedy any violations of any provision of law enforced by the Commission.

47. Section 19 of the FTC Act, 15 U.S.C. 57b, and Section 6(b) of the Telemarketing Act, 15 U.S.C. 6105(b), authorize this Court to grant such relief as the Court finds necessary to redress injury to consumers or other persons resulting from defendants' violations of the Telemarketing Sales Rule, including the rescission and reformation of contracts and the refund of monies.

48. This Court, in the exercise of its equitable jurisdiction, may award other ancillary relief to remedy injury caused by the defendants' law violations.

PRAYER FOR RELIEF

WHEREFORE, plaintiff the Federal Trade Commission, pursuant to Sections 13(b) and 19 of the FTC Act, 15 U.S.C.  53(b) and 57b, Section 6(b) of the Telemarketing Act, 15 U.S.C. 6105(b), and the Court's own equitable powers, requests that the Court:

a. Award plaintiff such preliminary injunctive and ancillary relief as may be necessary to avert the likelihood of consumer injury during the pendency of this action and to preserve the possibility of effective final relief;
 
b. Permanently enjoin the defendants from violating the FTC Act and the Telemarketing Sales Rule, as alleged herein;
 
c. Award such relief as the Court finds necessary to redress injury to consumers resulting from the defendants' violations of the Telemarketing Sales Rule, and the FTC Act, including but not limited to, rescission of contracts, the refund of monies paid, and the disgorgement of ill-gotten monies;
 
d. Award plaintiff the costs of bringing this action and reasonable attorneys' fees, as well as such other and additional relief as the Court may determine to be just and proper.

Dated: _________________, 2001

Respectfully Submitted,

William E. Kovacic
General Counsel

___________________________
Eleanor Durham
Attorneys for Plaintiff
Federal Trade Commission