UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
FORT LAUDERDALE DIVISION

FEDERAL TRADE COMMISSION, Plaintiff,

v.

STEPHEN I. TASHMAN, individually,
and as an officer or manager of the corporate Defendant;
STEPHEN M. MISHKIN,
individually,
and as an officer or manager of the corporate Defendant;
ERNEST F. LOCKAMY,
individually,
and as an officer or manager of the corporate Defendant;
MICHAEL S. DUNDEE,
individually,
and as an officer or manager of the corporate Defendant;
HARRIS M. COHEN,
individually,
and as an officer or manager of the corporate Defendant; and
TELECARD DISPENSING CORP.,
a Florida Corporation; Defendants.

Civil Action No.________

COMPLAINT FOR PERMANENT INJUNCTION
AND OTHER EQUITABLE RELIEF

Plaintiff, the Federal Trade Commission ("FTC" or "the 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, to secure a permanent injunction, preliminary injunctive relief, rescission of contracts, restitution, disgorgement, appointment of a receiver, 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 "Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures" ("the Franchise Rule" or "the Rule"), 16 C.F.R.  436.

JURISDICTION AND VENUE

2. This Court has jurisdiction over this matter pursuant to 28 U.S.C.  1331, 1337(a) and 1345, and 15 U.S.C.  53(b) and 57b.

3. Venue in the United States District Court for the Southern District of Florida is proper under 28 U.S.C.  1391(b) and (c), and 15 U.S.C.  53(b).

PLAINTIFF

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, inter alia, with enforcement of Section 5(a) of the FTC Act, 15 U.S.C.  45(a), which prohibits deceptive acts or practices in or affecting commerce, as well as the enforcement of the Franchise Rule, 16 C.F.R. Part 436. The Commission is authorized to initiate Federal District Court proceedings to enjoin violations of the FTC Act in order to secure such equitable relief as may be appropriate in each case, and to obtain consumer redress. 15 U.S.C.  53(b) and 57b.

DEFENDANTS

5. Defendant Stephen I. Tashman is an officer, director, manager or principal owner of the corporate Defendant. At all times material to this complaint, acting alone or in concert with others, he has formulated, directed, controlled or participated in the acts or practices of the corporate Defendant, including the acts or practices set forth in this complaint.

6. Defendant Stephen M. Mishkin is an officer, director, manager, or principal owner of the corporate Defendant. At all times material to this complaint, acting alone or in concert with others, he has formulated, directed, controlled or participated in the acts or practices of the corporate Defendant, including the acts or practices set forth in this complaint.

7. Defendant Ernest F. Lockamy is an officer, director, manager, or principal owner of the corporate Defendant. At all times material to this complaint, acting alone or in concert with others, he has formulated, directed, controlled or participated in the acts or practices of the corporate Defendant, including the acts or practices set forth in this complaint.

8. Defendant Michael S. Dundee is an officer, director, manager, or principal owner of the corporate Defendant. At all times material to this complaint, acting alone or in concert with others, he has formulated, directed, controlled or participated in the acts or practices of the corporate Defendant, including the acts or practices set forth in this complaint.

9. Defendant Harris M. Cohen is an officer, director, manager, or principal owner of the corporate Defendant. At all times material to this complaint, acting alone or in concert with others, he has formulated, directed, controlled or participated in the acts or practices of the corporate Defendant, including the acts or practices set forth in this complaint.

10. Defendant Telecard Dispensing Corp., a Florida corporation with its principal place of business at 1909 Tyler St., 5th Floor, Hollywood, FL 33020, promotes and sells prepaid telephone card vending machine business ventures.

11. Each of the Defendants transacts or has transacted business in this District.

COMMERCE

12. At all times relevant to this complaint, the Defendants have maintained a substantial course of trade in the offering for sale and sale of vending machine business ventures, in or affecting commerce, as "commerce" is defined in Section 4 of the FTC Act, 15 U.S.C.  44.

DEFENDANTS' BUSINESS ACTIVITIES

13. Since at least 1994, the Defendants have been engaged in a common course of conduct to promote, offer to sell and sell nationwide business ventures for substantial sums. These business ventures consist of "talking" vending machines and prepaid telephone cards. The vending machines are designed to be placed in retail locations, such as convenience stores, truck stops, discount stores, restaurants and other locations where the public may purchase the prepaid telephone cards. The prepaid telephone cards are also sold by the Defendants to the purchasers of the business ventures as well as to other sellers of prepaid phone cards.

14. In connection with the offering for sale and sale of vending machine business ventures, the Defendants have offered or have provided to potential purchasers and purchasers, their services in connection with locating and securing sites for the vending machines purchased.

15. In the course of offering for sale and sale of business ventures, the Defendants have represented that they will provide significant assistance to vending machine purchasers in the purchaser's method of operation, including but not limited to, providing the purchaser with prepaid telephone cards that will function for the purpose sold.

16. The Defendants require that purchasers of the vending machine business ventures pay the corporate Defendant at least $4,990 as a condition of obtaining or commencing a vending machine business venture.

17. The Defendants advertise their business ventures via national radio advertisements and give potential purchasers a toll-free telephone number to call. Through these advertisements, subsequent telephone conversations, and literature, the Defendants have induced individuals to purchase their business ventures by numerous misrepresentations concerning the earnings potential of their business ventures, the number of business venture purchasers allowed in a particular geographic area, the level of assistance Defendants will provide in placing the vending machines in suitable retail locations and the fact that the prepaid telephone cards will function for the purpose sold.

VIOLATIONS OF SECTION 5 OF THE FTC ACT

18. 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."

COUNT ONE

19. In the course of offering for sale and selling vending machine business ventures, Defendants have made, or caused to be made, expressly or by implication, representations that purchasers can reasonably expect to achieve a specific level of earnings, such as sufficient prepaid telephone card sales to generate $600 to $700 or more per week per machine or sufficient profit within one year to equal the amount paid for the machines.

20. In truth and in fact purchasers cannot reasonably expect to achieve a specific level of earnings, such as sufficient phone card sales to generate $600 to $700 or more per week per machine or sufficient profit within one year to equal the amount paid for the machines. Therefore, the representations set forth in Paragraph 19 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 TWO

21. In the course of offering for sale and selling vending machine business ventures, Defendants have made, or caused to be made, expressly or by implication, representations that purchasers will receive an exclusive territory in which either no such other purchaser or a defined, limited number of such other purchasers will be permitted to place vending machines.

22. In truth and in fact, in numerous instances, purchasers will not receive an exclusive territory in which either no such other purchasers, or a defined, limited number of such other purchasers will be permitted to place vending machines. Therefore, the representations set forth in Paragraph 21 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 THREE

23. In the course of offering for sale and selling vending machine business ventures, Defendants have made, or caused to be made, expressly or by implication, representations that Defendants will help purchasers locate the machines in desirable, high traffic locations in each purchaser's area.

24. In truth and in fact, in numerous instances, Defendants do not help locate the purchasers' machines in desirable, high traffic locations in each purchaser's area. Therefore, the representations set forth in Paragraph 23 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).

VIOLATIONS OF THE FRANCHISE RULE

25. The business ventures sold by the Defendants are franchises, as "franchise" is defined in Section 436.2(a) of the Franchise Rule, 16 C.F.R.  436.2(a).

26. The Franchise Rule requires a franchisor to provide prospective franchisees with a complete and accurate basic disclosure statement containing twenty categories of information, including information about the history of the franchisor and its officers, the terms and conditions under which the franchise operates, as well as information about other franchisees. 16 C.F.R.  436.1(a)(1) - (a)(20). Disclosure of this information enables a prospective franchisee to assess any potential risks involved with the franchise.

27. The Franchise Rule additionally requires that (1) a franchisor have a reasonable basis for any oral, written, or visual earnings or profit representations made by the franchisor to a prospective franchisee, 16 C.F.R.  436.1(b)(2), (c)(2) and (e)(1); (2) the franchisor provide to prospective franchisees a document disclosing the basis (or the lack of such basis) for any such oral, written or visual earnings or profit representations it makes to a prospective franchisee, 16 C.F.R.  436.1(b)-(e); and (3) the franchisor, in immediate conjunction with any generally disseminated earnings claim, disclose the number and percentage of prior purchasers known to have earned as much or more than the amount claimed, 16 C.F.R.  436.1(e)(3).

28. Pursuant to Section 18(d)(3) of the FTC Act, 15 U.S.C. 57a(d)(3), and 16 C.F.R.  436.1, violations of the Franchise 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).

COUNT FOUR

29. In numerous instances in connection with the offering and promotion of franchises, the Defendants have failed to provide prospective franchisees with complete and accurate disclosure documents as required by the Franchise Rule, thereby violating Section 436.1(a) of the Rule, 16 C.F.R.  436.1(a) and Section 5(a) of the FTC Act, 15 U.S.C. 45(a).

COUNT FIVE

30. In numerous instances, in connection with the offering and promotion of franchises, the Defendants have made earnings claims within the meaning of the Rule, 16 C.F.R.  436.1(b)-(e), but have failed to provide prospective franchisees with the earnings claims document required by the Franchise Rule, and have failed to have a reasonable basis for such claims at the times they were made, thereby violating Sections 436.1(b)-(e) of the Rule, 16 C.F.R.  436.1(b)-(e) and Section 5(a) of the FTC Act, 15 U.S.C. 45(a).

CONSUMER INJURY

31. Consumers in many areas of the United States have suffered substantial monetary loss as a result of Defendants' unlawful acts or practices. Absent injunctive relief by this Court, Defendants are likely to continue to injure consumers and harm the public interest.

THIS COURT'S POWER TO GRANT RELIEF

32. Section 13(b) of the FTC Act, 15 U.S.C.  53(b), empowers this Court to grant injunctive and other ancillary relief to prevent and remedy any violations of any provision of law enforced by the Federal Trade Commission.

33. Section 19 of the FTC Act, 15 U.S.C.  57b, authorizes 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 Franchise Rule.

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

PRAYER FOR RELIEF

WHEREFORE, the Plaintiff, the Federal Trade Commission, requests that this Court, as authorized by Sections 13(b) and 19 of the FTC Act, 15 U.S.C.  53(b) and 57b, and pursuant to its own equitable powers:

1. 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;
 
2. Permanently enjoin the Defendants from violating the FTC Act and the Franchise Rule, as alleged herein, in connection with the offering, promotion, and sale of business ventures, distributorships, business opportunities and franchises;
 
3. Award such equitable relief as the Court finds necessary to redress injury to consumers resulting from the Defendants' violations of the Franchise Rule and the FTC Act, including but not limited to, rescission and reformation of contracts, the refund of monies paid, and the disgorgement of ill-gotten monies;
 
4. Award Plaintiff the costs of bringing this action; and
 
5. Award such other and additional equitable relief as the Court may determine to be just and proper.

Respectfully submitted,

Debra A. Valentine
General Counsel

Anthony E. DiResta
Regional Director
Atlanta Regional Office

Andrea L. Foster
Acting Assistant Regional Director
Atlanta Regional Office

_______________________________
Ronald E. Laitsch

_______________________________
Katharine B. Alphin
Attorneys for Plaintiff
Federal Trade Commission
60 Forsyth Street, S.W.
Suite 5M35
Atlanta, Georgia 30303
(404) 656-1358