IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MIDDLE DISTRICT OF FLORIDA
JACKSONVILLE DIVISION

FEDERAL TRADE COMMISSION, Plaintiffs,

v.

THOMAS GREGG HOLLOWAY, individually and as an officer of First Freedom Financial Corporation and Southern Telmark Corp.;
FIRST FREEDOM FINANCIAL CORPORATION, a South Carolina corporation; and
SOUTHERN TELMARK CORP., a South Carolina corporation; Defendants.

Civ. No.

COMPLAINT FOR PERMANENT INJUNCTION AND OTHER EQUITABLE RELIEF

Plaintiffs, the Federal Trade Commission ("FTC" or "the Commission") for its complaint against Thomas Gregg Holloway, First Freedom Financial Corporation, and Southern Telmark Corp., (collectively, "Defendants"), allege:

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. 6101-6108, to secure preliminary and permanent injunctive relief, restitution, rescission or reformation of contracts, 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" (the "Telemarketing Sales Rule"), 16 C.F.R. Part 310.

JURISDICTION AND VENUE

2. This Court has subject matter jurisdiction pursuant to 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 District of Middle District of Florida is proper under 15 U.S.C.  53(b).

PLAINTIFF

4. Plaintiff Federal Trade Commission is an independent agency of the United States Government created by statute. 15 U.S.C. 41-58, as amended. The Commission is charged, inter alia, 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. The Commission also enforces 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, by its own attorneys, to enjoin violations of the FTC Act and the Telemarketing Sales Rule, 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, 6102(c), and 6105(b).

DEFENDANTS

5. Defendant Thomas Gregg Holloway is an officer, or has held himself out as an officer, of First Freedom Financial Corporation and Southern Telmark Corp. At all times material to this complaint, acting in concert with others, he has formulated, directed, controlled, or participated in the acts and practices of First Freedom Financial Corporation and Southern Telmark Corp. He transacts or has transacted business in the Middle District of Florida.

6. Defendant First Freedom Financial Corporation ("First Freedom"), is a South Carolina corporation, registered to do business in Florida, with its principal place of business at 6501 Arlington Exp., #A202, Jacksonville, Florida 32211. First Freedom transacts or has transacted business in the Middle District of Florida.

7. Defendant Southern Telmark Corp. ("Southern Telmark"), is a South Carolina corporation, registered to do business in Florida, with its principal place of business at 6501 Arlington Exp., #A202, Jacksonville, Florida 32211. Southern Telmark transacts or has transacted business in the Middle District of Florida.

COMMERCE

8. At all times relevant 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 CONDUCT

9. Since at least 1996, Defendants First Freedom and Southern Telmark, acting alone or in concert with others, have solicited consumers throughout the country and falsely promised to provide credit cards to consumers in exchange for an advance fee, ranging from $79 to $229.

10. Defendants have placed advertisements in magazines, such as Readers Digest, and have mailed postcards to consumers, inviting consumers to call a toll free number for information about obtaining a guaranteed credit card.

11. When consumers call in response to the ads, defendants offer to provide them an unsecured major credit card, such as a Visa or MasterCard, with absolutely no security deposit, regardless of their credit history. Defendants represent to consumers that they are pre-approved for a credit card and assure them that if they pay the required fee, they will receive the credit card. Defendants also offer to provide consumers other purported benefits, such as an opportunity to purchase items from a catalogue or "free" incentives such as a satellite dish, vacation for two, and a pager.

12. In connection with taking applications over the telephone, the Defendants persuade consumers to divulge their checking account information, including their name as it appears on the account and the account number.

13. Defendants routinely debit the bank accounts of consumers, in advance of providing those consumers with the VISA or MasterCard credit cards promised during the telephone calls.

14. After debiting the funds from consumers' bank accounts, Defendants do not provide consumers with the promised VISA or MasterCard credit cards.

15. At best, in some instances, Defendants do provide consumers with a "card" that only can be used to purchase items from a catalogue supplied by the Defendants and an application for a major credit card from a separate financial institution.

16. Only then do consumers understand that they are not yet approved to receive a credit card, and they will have to complete an additional application which must be screened by a bank based on the bank's own credit criteria, and may have to pay additional fees to that bank if they are ultimately approved to receive a credit card.

VIOLATIONS OF SECTION 5 OF THE FTC ACT

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

18. Misrepresentations or omissions of material fact constitute deceptive acts or practices prohibited by Section 5(a) of the FTC Act.

COUNT ONE

19. In numerous instances, in connection with the telemarketing of advance fee credit cards, defendants or their employees or agents have represented, expressly or by implication, that after paying defendants a fee, consumers will, or are highly likely to, receive an unsecured major credit card, such as a VISA or MasterCard credit card.

20. In truth and in fact, in numerous instances, after paying defendants a fee, consumers do not receive an unsecured major credit card, such as a VISA or MasterCard credit card.

21. Therefore, the representation set forth in Paragraph 18 is false and misleading and constitutes a deceptive act or practice in violation of Section 5(a) of the FTC Act, 15 U.S.C. 45(a).

THE FTC'S TELEMARKETING SALES RULE

22. The Commission promulgated the Telemarketing Sales Rule pursuant to Section 6102(a) of the Telemarketing Act, 15 U.S.C.  6102(a). The Rule became effective on December 31, 1995.

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

24. The Telemarketing Sales Rule also prohibits telemarketers and sellers from, among other things, 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 or other extension of credit. 16 C.F.R. 310.4(a)(4).

25. 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 Telemarketing Sales 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).

26. Defendants are "sellers" or "telemarketers" engaged in "telemarketing," as those terms are defined in the FTC Telemarketing Sales Rule. 16 C.F.R. 310.2(r), (t) & (u).

VIOLATIONS OF THE TELEMARKETING SALES RULE

COUNT TWO

27. In numerous instances, in connection with the telemarketing of advance fee credit cards, defendants or their employees or agents have misrepresented, directly or by implication, that after paying defendants a fee, consumers will, or are highly likely to, receive an unsecured major credit card, such as a VISA or MasterCard credit card.

28. Defendants have thereby violated Section 310.3(a)(2)(iii) of the Telemarketing Sales Rule, 16 C.F.R.  310.3(a)(2)(iii).

COUNT THREE

29. In numerous instances, in connection with the telemarketing of advance fee credit cards, defendants or their employees or agents have requested and received payment of a fee in advance of consumers obtaining a credit card when defendants have guaranteed or represented a high likelihood of success in obtaining or arranging for the acquisition of an unsecured credit card, such as a VISA or MasterCard credit card, for such consumers.

30. Defendants have thereby violated Section 310.4(a)(4) of the Telemarketing Sales Rule, 16 C.F.R. 310.4(a)(4).

CONSUMER INJURY

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

THIS COURT'S POWER TO GRANT RELIEF

32. Section 13(b) of the FTC Act, 15 U.S.C. 53(b), authorizes this Court to issue a permanent injunction against Defendants' violations of the FTC Act and, in the exercise of its equitable jurisdiction, to order such ancillary relief as temporary and preliminary injunctions, consumer redress, rescission, restitution and disgorgement of profits resulting from Defendants' unlawful acts or practices, and other remedial measures.

33. 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 the Court to grant to the FTC 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 money.

PRAYER FOR RELIEF

WHEREFORE, Plaintiff 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:

1. Award Plaintiffs 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, including but not limited to, temporary and preliminary injunctions, appointment of a receiver, and an order freezing assets;
 
2. Permanently enjoin Defendants from violating the FTC Act and the Telemarketing Sales Rule, as alleged herein;
 
3. Award such relief as the Court finds necessary to redress injury to consumers resulting from Defendants' violations of the FTC Act and the Telemarketing Sales Rule, including, but not limited to, rescission or reformation of contracts, restitution, refund of monies paid, and disgorgement of ill-gotten monies; and

4. Award Plaintiffs the costs of bringing this action, as well as such other and additional relief as the Court may determine to be just and proper.

Respectfully Submitted,

WILLIAM E. KOVACIC
General Counsel

RONALD E. LAITSCH
Federal Trade Commission
225 Peachtree, Suite 1500
Atlanta, Georgia 30303
(404) 656-1358 (telephone)
(404) 656-1379 (facsimile)
Attorney for Plaintiff
Federal Trade Commission