UNITED STATES DISTRICT COURT
FEDERAL TRADE COMMISSION, Plaintiff,
9094-5486 QUEBEC, INC., d/b/a CONSUMER RESOURCE SERVICES; ROBIN GEAR; and NANDO R. CAPORICCI, a/k/a ROBERT CAPORICCI, Defendants.
Complaint for Injunction and Other Equitable Relief
Plaintiff, the Federal Trade Commission ("FTC" or "Commission"), for its complaint alleges that:
1. Plaintiff 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 secure preliminary and permanent injunctive relief, rescission of contracts, restitution, disgorgement, and other equitable relief for defendants' violations 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" ("the Rule"), 16 C.F.R. Part 310.
JURISDICTION AND VENUE
2. This Court has jurisdiction over this matter pursuant to 15 U.S.C. §§ 45(a), 53(b), 57b, 6102(c), 6103 (a) and 6105(b), and 28 U.S.C. §§ 1331, 1337(a) and 1345.
3. Venue in the Northern District of New York is proper under 15 U.S.C. §§ 53(b) and 6103(a), and 28 U.S.C. § 1391(b), (c) and (d).
4. Plaintiff, the Federal Trade Commission, is an independent agency of the United States Government created by statute. 15 U.S.C. §§ 41 et seq. The Commission is charged with enforcement of 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, and the Telemarketing Sales Rule, 16 C.F.R. Part 310, which prohibits deceptive or abusive telemarketing acts or practices. The Commission is authorized to initiate federal district court proceedings to enjoin violations of the FTC Act and the Rule in order to secure such equitable relief as is appropriate in each case. 15 U.S.C. §§ 53(b), 57b, and 6105(b).
5. Defendant 9094-5486 Quebec, Inc., doing business as Consumer Resource Services ("CRS"), is a Canadian corporation with its principal address at 6900 Decarie Boulevard, #3340, Montreal, Quebec, H3X 2T8, and a mailing address at 116 West Service Road, #181, Champlain, New York 12919. CRS transacts or has transacted business in the Northern District of New York and throughout the United States.
6. Defendant Robin Gear is the president of CRS. He resides in Montreal, Canada. At all times material to this complaint, acting alone or in conjunction with others, he has formulated, directed, controlled, or participated in the acts and practices alleged in this complaint. He transacts or has transacted business in the Northern District of New York and throughout the United States.
7. Defendant Nando R. Caporicci, also known as Robert Caporicci, holds himself out as the owner and operator of CRS. He resides in Montreal, Canada. At all times material to this complaint, acting alone or in conjunction with others, he has formulated, directed, controlled, or participated in acts and practices alleged in this complaint. He transacts or has transacted business in the Northern District of New York and throughout the United States.
8. At all times material to this complaint, defendants have maintained a substantial course of trade in or affecting commerce, as "commerce" is defined in Section 4 of the FTC Act, 15 U.S.C. § 44.
DEFENDANTS' COURSE OF BUSINESS
9. Since at least October 2000, defendants have placed telemarketing calls to consumers, many of them elderly, throughout the United States. During these telemarketing calls, defendants obtain consumers' credit card information through false pretenses. Then, defendants use that information to open accounts in consumers' names with online payment services. Finally, defendants instruct online payment services to charge consumers' credit cards and transfer payments to defendants.
10. Online payment services are Internet-based companies that act as intermediaries between consumers and businesses operating over the Internet. Most commonly, they enable a consumer to pay for goods or services via a credit card, even if a business does not directly accept credit card payments.
11. To use an online payment service, a business must first register on the service's website. Thereafter, the online payment service provides the business with a link to place on its website. Typically, a consumer who wants to purchase a product or service advertised on the business's website clicks the button link and is transferred to the online payment service's website. At that point, the consumer is asked to provide identifying information such as his name, address, telephone number, and email address, along with the credit card or bank account information that he wants to use to pay for the product. The online payment service then charges or debits the consumer's account. The charge appears in the name of the online payment service and is processed through the payment service's merchant account. The online payment service then transfers payment, less a fee for its service, to the business offering the goods or services.
12. Defendants maintain a website located at www.crsweb.com, which contained a series of links to various online payment services' websites. Few, if any, consumers purchase products or services from the CRS website utilizing these links. Instead, defendants use telemarketing to obtain the credit card information that defendants themselves convey to online payment services.
13. To obtain consumers' credit card information, defendants tell consumers that they will receive a package containing products or services such as a low interest rate credit card or access to unclaimed cash [hereinafter "CRS package"]. Defendants also tell consumers that their credit card numbers are necessary to receive a free trial or more information about the CRS package, but that their credit cards will not be charged.
14. Defendants then use consumers' credit card information to establish accounts in consumers' names, or otherwise share that information, with online payment services. In the course of establishing these accounts, defendants often register or fabricate email addresses purportedly belonging to consumers and provide those email addresses to online payment services.
15. Defendants then instruct online payment services to charge consumers' credit cards, generally in the amount of $229, and transfer payment to defendants.
16. Many consumers who are charged for the CRS package did not agree to purchase the package and did not authorize the charge. They have never heard of the online payment service identified on their credit card billing statement. In fact, many of these consumers are elderly and do not even have access to a computer or an email account.
17. Many consumers who are charged for the CRS package do not receive any products from CRS.
18. Consumers who do receive a CRS package find that it does not contain a credit card or products promised by defendants. Instead, the CRS package consists of a notebook containing a few pages of literature, coupons, and a pamphlet of names, addresses and telephone numbers of companies that may provide free product samples or coupons.
VIOLATIONS OF SECTION 5 OF THE FTC ACT
19. Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), provides that "unfair or deceptive acts or practices in or affecting commerce are hereby declared unlawful."
20. In numerous instances, without consumers' knowledge or authorization, defendants have caused online payment services to charge consumers' credit cards and transfer funds to defendants.
21. Defendants' acts or practices, as alleged in paragraph 20, cause or are likely to cause substantial injury to consumers that is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition.
22. Therefore, defendants' acts or practices, as alleged in paragraph 20, are unfair and violate Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).
23. In numerous instances, defendants have represented, expressly or by implication, that consumers authorized defendants to charge their credit cards using online payment services.
24. In truth and in fact, consumers did not authorize defendants to charge their credit cards using online payment services.
25. Therefore, defendants' representations, as alleged in Paragraph 23, are deceptive and violate Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).
THE TELEMARKETING SALES RULE
26. 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.
27. Defendants are "sellers" or "telemarketers" engaged in "telemarketing," as those terms are defined in the Rule, 16 C.F.R. §§ 310.2(r), (t) and (u).
28. The Rule prohibits telemarketers and sellers from "[m]aking a false or misleading statement to induce any person to pay for goods or services." 16 C.F.R. § 310.3(a)(4).
29. Pursuant to Section 3 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).
DEFENDANTS' VIOLATION OF THE TELEMARKETING SALE RULE
(INDUCEMENT TO PURCHASE)
30. In numerous instances, in connection with telemarketing the CRS package, defendants have made false or misleading statements to induce consumers to pay for the package, including but not limited to the following:
32. Consumers in many areas of the United States have suffered and continue to suffer substantial monetary loss as a result of defendants' unlawful acts or practices. In addition, the defendants have harmed and continue to harm the public interest by engaging these practices. Absent injunctive and ancillary equitable relief by this Court, the defendants are likely to continue to violate the Act and the Rule and to injure consumers and harm the public interest.
THIS COURT'S POWER TO GRANT RELIEF
33. Section 13(b) of the FTC Act, 15 U.S.C. § 53(b), empowers this Court to grant injunctive and other ancillary relief, including redress, disgorgement and restitution, to prevent and remedy any violations of any provision of law enforced by the FTC.
34. Section 19 of the FTC Act, 15 U.S.C. § 57b, authorizes the 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.
35. 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 requests that this Court, as authorized by Sections 13(b) and 19 of the FTC Act, 15 U.S.C. §§ 53(b) and 57, Section 6(b) of the Telemarketing Act, 15 U.S.C. § 6105(b), and pursuant to its own equitable powers:
WILLIAM E. KOVACIC