Court holds defendants in contempt

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When a federal court tells a business to stop a certain course of conduct, here’s a handy tip for those who want to avoid even more serious legal trouble:  Stop already.

That’s the lesson from the FTC’s ongoing law enforcement action against Business Recovery Services LLC and the person who runs the outfit.  The case began earlier this year when the FTC charged that the defendants violated the Telemarketing Sales Rule by falsely claiming their kits — which set buyers back as much as $499 — would help people recover money they lost in previous telemarketing scams.  What was in the kit?  Among other things, FTC publications available at and fill-in-the-blank form letters addressed to the IRS, state AGs, the U.S. Postal Inspection Service, the BBB, and the buyer’s credit card company.

In addition, the FTC charged that the defendants violated the portion of the TSR that makes it illegal to collect advance fees for “recovery” goods or services — items represented to help people get their money back from earlier telemarketing transactions.  The rule is clear:  Companies selling stuff like that can’t ask for or accept so much an one thin dime until seven days after consumers get money back.

On April 15, 2011, a federal judge in Arizona granted the FTC’s request for a preliminary injunction, which — among other things — forbids the defendants from accepting advance fees in violation of the TSR.  Any guesses what the FTC alleges the defendants have been up to since the court entered the order?  If you said “charging up-front fees for do-it-yourself kits they claimed would help consumers recover money they lost in business opportunity and work-at-home scams,” you’d be right.

The court found the defendants in contempt for violating the April order.  The contempt order requires the defendants to make refunds to some consumers and gives them 30 days to show that their business practices comply with the court’s preliminary injunction. The court will assess a $1,000 per day fine for every day they fail to certify compliance.  For every violation of the injunction the FTC can prove after the contempt order, the court will assess a $1,000 fine and order refunds to customers.

The Department of Justice filed the motion for contempt on the FTC’s behalf.

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