Legal Library: Cases and Proceedings

As a condition of Hikma Pharmaceuticals PLC’s $375 million acquisition of generic drug services company Custopharm, Inc., the Federal Trade Commission required Custopharm’s parent company, private equity fund Water Street Healthcare Partners, LLC to retain and transfer Custopharm’s assets related to the corticosteroid drug triamcinolone acetonide, or TCA, to another company Water Street owns, Long Grove Pharmaceuticals, LLC. According to the complaint, absent a remedy, Hikma likely would have stopped developing its injectable TCA product, forestalling the increased price competition it would have brought to the market. Thus without this remedy, the acquisition likely would have harmed future competition in the U.S. market for injectable triamcinolone acetonide.

The Federal Trade Commission has required Prince International Corp. and Ferro Corp. to divest three facilities used to make porcelain enamel frit, glass enamel, and forehearth colorants, as a condition of Prince’s parent company – American Securities Partners VII, L.P. – acquiring competitor Ferro Corp. for $2.1 billion.  According to the complaint, the acquisition as proposed likely would allow the merged firm to unilaterally raise prices for porcelain enamel frit in the North American market, and for forehearth colorants in the world market. It  also would eliminate Prince as an independent competitor in the world market for glass enamel, increasing the likelihood of coordination between the merged firm and its largest competitor, Fenzi Holdings SPV S.p.A. On July 5, 2022, the Commission announced the final consent agreement in this matter.

The owners and operators of a vast payday lending scheme that overcharged consumers millions of dollars will be permanently banned from the lending industry under the terms of a settlement with the Federal Trade Commission. The settlement also provides that nearly all outstanding debt—made up entirely of illegal finance charges—held by the company will be deemed as paid in full.

The FTC charged the enterprise with deceptively overcharging consumers millions of dollars and withdrawing money repeatedly from consumers’ bank accounts without their permission.

The Federal Trade Commission is sending 26,698 checks totaling more than $970,000 to consumers who were harmed by a deceptive payday lending scheme that operated under the names Harvest Moon Financial, Gentle Breeze Online, and Green Stream Lending.

In May 2022, the FTC took action against R360 LLC and its owner, Steven Doumar, for deceiving people seeking help for addiction about the evaluation and selection criteria for the treatment centers in their network. The case is the FTC’s first under the Opioid Addiction Recovery Fraud Prevention Act of 2018. The agency secured a $3.8 million civil penalty judgment against the defendants and an order prohibiting them from continuing to make the same kinds of misrepresentations.

The Federal Trade Commission has filed an administrative complaint against Electronic Payment Systems and its owners, John Dorsey and Thomas McCann, for allegedly opening credit card processing merchant accounts for fictitious companies on behalf of Money Now Funding, a business opportunity scam that the FTC previously sued. By ignoring warning signs that the merchants were fake, Electronic Payment Systems assisted Money Now Funding in laundering millions of dollars of consumers’ credit card payments to the scammers from 2012 to 2013.

In a consent agreement settling the matter, which the FTC has accepted for public comment, Electronic Payment Systems and its owners have agreed to restrictions on the merchants for whom they can provide credit card payment processing services, as well as additional merchant screening and monitoring requirements. The FTC is not able to obtain a monetary judgment in this case because of the Supreme Court’s decision in AMG Capital Management v. FTC.

The Federal Trade Commission, working jointly with the U.S. Department of Justice, is mailing 1,179,803 refund checks totaling more than $505 million to people who were deceived by a massive payday lending scheme operated by AMG Services, Inc. and Scott A. Tucker.

Multi-level marketer AdvoCare International, L P and its former chief executive officer agreed to pay $150 million and be banned from the multi-level marketing business to resolve Federal Trade Commission charges that the company operated an illegal pyramid scheme that deceived consumers into believing that they could earn significant income as "distributors" of its health and wellness products. Two top promoters also settled charges that they promoted the illegal pyramid scheme and misled consumers about their income potential, agreeing to a multi-level marketing ban and a judgment of $4 million that will be suspended when they surrender substantial assets.

In October 2017, a federal district judge issued an order finding several defendants, including repeat offender Jared Wheat, in contempt for violating previous court orders related to the sale of weight-loss dietary supplements. The order imposed a more than $40 million judgment against the defendants, part or all of which the FTC may use to provide refunds to deceived consumers who bought the products. In May 2020, the Commission announced that it was mailing refunds totaling more than $8.5 million to defrauded consumers.

The FTC’s October 2018 complaint against Redwood Scientific charged the defendants with a scheme that used illegal robocalls to deceptively market dissolvable oral film strips as effective smoking cessation, weight-loss, and sexual-performance aids. Announced in June 2019 as part of a crackdown on illegal robocalls against operations around the country responsible for more than one billion calls, an initial  settlement resolved the FTC’s charges against one defendant in the Redwood Scientific case, Danielle Cadiz. The order permanently banned Cadiz from all robocall activities, including ringless voicemails, and imposes a judgment of $18.2 million against Cadiz. In March 2022, the FTC announced the final court orders against all remaining defendants.

A payment processing company that allegedly helped a bogus discount club scheme debit tens of millions of dollars from consumers without authorization will be required to pay $2.3 million and face a permanent ban from working with high-risk clients as a result of a Federal Trade Commission lawsuit.

According to the FTC’s complaint in the case, which was first filed in 2017, iStream Financial Services and its senior officers, Kris Axberg and Richard Joachim, allegedly debited money from consumers who were seeking payday or cash advance loans, but were enrolled in a bogus coupon service and charged initial fees up to almost $100 plus as much as $19.95 each month. Consumers were enrolled in the discount club scheme online and through outbound telemarketing.

Global Partners LP and Richard Wiehl have agreed to divest to Petroleum Marketing Investment Group, LLC, seven stores that sell gasoline and diesel fuel in five local markets in Connecticut, to settle Federal Trade Commission charges that Global’s proposed acquisition of 27 retail gasoline and diesel outlets owned or operated by Wiehl violates federal antitrust laws. The complaint alleges that the acquisition will harm competition for the retail sale of gasoline in and around the Connecticut towns and cities of Fairfield, Bethel, Milford, Wilton, and Shelton. In all of these local markets except Wilton, the acquisition will also harm competition for the retail sale of diesel fuel. Under the terms of the proposed consent order, among other stipulations, Global and Wiehl must divest to Petroleum Marketing Investment Group six Global retail fuel outlets and one Wheels retail fuel outlet. On March 3, 2022, the Commission announced the final consent agreement in this matter.

In April 2021, two companies, BASF SE and DIEM Labs, agreed to pay a total of more than $416,000 to settle FTC charges that they deceptively marketed two dietary fish oil supplements as clinically proven to reduce liver fat in adults and children with non-alcoholic fatty liver disease (NAFLD). The payment will enable the Commission to provide refunds to all consumers who bought either supplement. They also were barred from the allegedly illegal conduct. The Commission announced approval of the final consent orders in June 2021.

Global Partners LP and Richard Wiehl have agreed to divest to Petroleum Marketing Investment Group, LLC, seven stores that sell gasoline and diesel fuel in five local markets in Connecticut, to settle Federal Trade Commission charges that Global’s proposed acquisition of 27 retail gasoline and diesel outlets owned or operated by Wiehl violates federal antitrust laws. The complaint alleges that the acquisition will harm competition for the retail sale of gasoline in and around the Connecticut towns and cities of Fairfield, Bethel, Milford, Wilton, and Shelton. In all of these local markets except Wilton, the acquisition will also harm competition for the retail sale of diesel fuel. Under the terms of the proposed consent order, among other stipulations, Global and Wiehl must divest to Petroleum Marketing Investment Group six Global retail fuel outlets and one Wheels retail fuel outlet.

The Federal Trade Commission obtained an order permanently banning a payment processor that facilitated a fraudulent student loan debt relief scheme from processing debt relief payments. The order also requires the company and its owner to surrender $500,000 to the FTC for consumer redress.

The FTC’s complaint against Automatic Funds Transfer Services, Inc. (AFTS) and its owner, Eric Johnson, alleges that AFTS processed at least $31 million in consumer payments for a fraudulent student loan debt relief scheme sued by the FTC in 2019. The debt relief scheme used numerous names, including The Student Loan Group (SLG).

The FTC sued a publisher called Agora Financial, LLC, alleging that it tricks seniors into buying books, newsletters, and other publications that falsely promise a cure for type 2 diabetes or promote a phony plan to help them cash in on a government-affiliated check program. According to the FTC’s complaint, Agora Financial and some of its affiliates target publications, including The Doctor’s Guide to Reversing Diabetes in 28 Days (The Doctor’s Guide), primarily at older consumers nationwide, as well as pitching them on a fake scheme to cash in on Congress’ Secret $1.17 Trillion Giveaway. The FTC announced a proposed order settling the allegations against all defendants in February 2021.

The funder and servicer of the payment plans used by consumers to pay for expensive and often ineffective investment “trainings” from Online Trading Academy (OTA) will be required to offer debt forgiveness to consumers under a proposed settlement with the Federal Trade Commission.

Universal Guardian Acceptance, LLC (UGA) and Universal Account Servicing, LLC (UAS), have agreed to settle Federal Trade Commission charges that they facilitated consumers’ payments to OTA, when they knew or should have known that OTA was deceiving consumers.

In January 2020, three people and a telephone call center that helped Florida-based Grand Bahama Cruise Line LLC (GBCL) and others to make millions of illegal robocalls to consumers settled an FTC complaint and are permanently barred from making telemarketing robocalls. The FTC will litigate in federal court against GBCL and six other defendants involved in the massive operation, who have not agreed to settle. The FTC announced a settlement with the seven remaining defendants in September 2021.

The Federal Trade Commission alleged that BlueHippo Funding, LLC, and BlueHippo Capital, LLC operated a deceptive computer financing scheme in violation of a federal court order.