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Thirteen of 24 defendants charged by the Federal Trade Commission last year with using a fraudulent prize-promotion pitch to induce consumers, many of them elderly, to donate money to two purported charitable organizations, have agreed to settle the FTC charges. The settlements contain broad injunctions against similar misrepresentations and would impose strict requirements that the defendants monitor employees and tele- marketers they assist in the future. The seven individual defendants would have to post $1 million bonds before engaging, or assisting others engaging, in telephone prize-promotion programs in the future, and one individual will turn over to the FTC the proceeds from the sale of real property, expected to be approximately $250,000.

The defendants allegedly organized and promoted a scheme to solicit donations for teenage alcohol and drug-abuse rehabilita- tion programs purportedly run by AWARE, and for food banks pur- portedly run in consumers' communities by The Gleaners. The settling defendants are: All American Marketing, Inc., New Horizons International, Inc., Preferred Marketing Services, Inc., Premium Awards Processing Company, Inc., Planet Smart Marketing, Inc., International Charity Consultants, Inc., and corporate officers Martin Mayer, Michael Plummer, Ronny Ladner, John Rubbico, Trina Frederico, Ronald V. Cook and Ottavio "Tommy" Ronca. The FTC charges remain pending against the other 11 defendants in the case. Most of the defendants were based in Las Vegas, Nevada, although some had offices in California, Massachusetts and Louisiana.

The settlements stem from FTC charges filed in March 1994. The FTC alleged that the defendants combined false representa- tions about the value and nature of prizes consumers would receive in return for their donations -- typically represented to be a car or cash when, in fact, consumers received cheap jewelry or something else of nominal value -- with false claims about the nature and extent of charitable activities undertaken by AWARE and The Gleaners. The FTC also alleged that the defendants falsely represented that donations were tax-deductible. Many consumers donated as much as $3,500, the FTC alleged.

Upon filing of the complaint, the federal district court issued a temporary restraining order halting the scheme, freezing the defendants' assets, and appointing a receiver to manage the corporate defendants. Subsequent searches were conducted by more than 50 state and federal law-enforcement officers nationwide.

Under the seven separate agreements announced today to settle the charges, the 13 defendants would be prohibited from misrepresenting any material fact about any good or service they offer or about any charitable donation they solicit in the future. Among the prohibited claims would be misrepresentations about the value or nature of any premium incentive item offered in connection with product, service or donation solicitation, the likelihood that the consumer will receive a specific premium, the terms governing a promotion in which consumers have to purchase something or make a donation in order to receive a premium, the amount of the donation that will be forwarded to a charity, and whether the donation is tax deductible.

The defendants also would be required to disclose, up front, all material terms and conditions associated with a transaction, including the odds of receiving a premium and whether a purchase is necessary. If consumers ask, the defendants would be required to disclose the retail value of the premium. The settlements would prohibit the defendants from resoliciting any consumer to purchase or donate before the consumer receives all merchandise and premiums associated with a prior offer.

In addition, the settlements would require the defendants to monitor their employees and fire those who repeatedly engage in conduct that violates the settlements. Similarly, they would be required to monitor telemarketers they assist. The agreements AWARE/Gleaners Telefunders--05/24/95)

also would prohibit the settling defendants from transferring their existing customer lists to any third party.

Each of the seven individuals who settled would be required to post a $1 million bond to protect future customers before engaging in any telephone prize-promotion, and would be required to reveal the existence of the bond to customers. Ronald V. Cook would be required to pay at least $250,000 to the FTC, to be obtained from the sale of commercial property he owns in Las Vegas. Because they played lesser roles or based on their finan- cial statements, the other individual and corporate defendants would not be required to make redress payments, but the settle- ments would permit the FTC to reopen the cases should the defen- dants be found to have misrepresented their financial conditions.

Finally, the settlements contain various reporting provi- sions that would assist the FTC in monitoring the defendants' compliance.

he Commission vote to accept the settlements for filing in court was 5-0. They were filed on May 23 in U.S. District Court for the District of Nevada, in Las Vegas, and require the court's approval to become binding.

NOTE: These agreements are for settlement purposes only and do not constitute admissions by the defendants of law violations. Settlements have the force of law when signed by a judge.

A free FTC brochure for consumers titled "Charity Fraud" offers questions you may wish to ask before donating to a charitable organization and suggests organizations you may call for additional information.

Copies of the brochure, these settlements and other documents associated with this case are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580.

(FTC File NO. X940028)

(Civil Action No. CV-S-94-DWH(RLJ))