Three California Telemarketers Banned from Telemarketing as Part of FTC Settlement

Three individuals and two companies named in a Federal Trade Commission lawsuit filed in 1999 as part of "Operation Misprint" have agreed to settle charges that they engaged in a bogus office and maintenance supply telemarketing scam. The FTC sued National Supply & Distribution Center, Inc. and Data Distribution Services, Inc., Steven Rayman, Larry Ellis, Lee Siegel and Scott Earl, based in Canoga Park, California, alleging that they deceptively marketed exorbitantly priced toner for office copy machines in violation of the FTC Act and the Telemarketing Sales Rule (TSR). Defendant Scott Earl agreed to a settlement in May 2000 that banned him from telemarketing. In three separate settlements, the remaining defendants are, among other things, banned from engaging or participating in telemarketing, or assisting others in telemarketing activities in the future. The settlements announced today end the litigation of this matter.

In December 1999, the FTC announced "Operation Misprint"-- a multi-agency effort to crack down on bogus office and maintenance supply telemarketing schemes that targeted large and small businesses and non-profit organizations. According to the FTC's complaint, the defendants' telemarketers would call a business and pretend to be the business's regular supplier of toner. They stated that the price of the toner was about to increase but that the business could order the toner at the old price. The business, believing that the caller was its regular supplier, would authorize shipment of toner, thinking that it was getting a bargain price. However, when the toner and an invoice arrived, many businesses realized that the toner had not been sent by their regular supplier and the cost of the toner was exorbitant. Some paid the invoice. Others, when they requested a refund, were told that the defendants' policy was not to make refunds. Further, when some complained about the no-refund policy and tried to return the toner, they were told that they must pay a 15 percent "restocking fee."

The defendants agreed to Court orders that, in addition to banning them from telemarketing, prohibit them from violating the FTC Act and the TSR in the future and from making certain misrepresentations in the advertising, promotion, offering for sale or sale of any good or service. Specifically, the Court orders prohibit the defendants from, among other things:

• misrepresenting that a person had ordered the supplies the defendants had shipped, or that consumers have an obligation to pay for merchandise they did not order; and
• misrepresenting any association with consumers or their regular suppliers, or the price of goods or services.

Under the terms of the orders, Steven Rayman is required to pay $400,000 in consumer redress, Lee Siegel is required to pay $35,000 in consumer redress, and Larry Ellis is required to pay $220,000 in consumer redress (with $120,000 payable immediately). Each order contains an avalanche clause for over $7 million against each defendant if the Court finds that the defendant made any omissions or misrepresentations on financial statements submitted to the FTC. In addition, the orders prohibit the defendants from selling National Supply & Distribution Center or Data Distribution Services' consumer lists. Finally, the orders contain various recordkeeping requirements to assist the FTC in monitoring the defendants' compliance.

The Commission vote authorizing staff to file the stipulated final judgments and orders was 5-0. They were all filed in the U.S. District Court, Central District of California, in Los Angeles, California. The Siegel settlement was filed on December 27, 2000 and entered by the Court on January 3, 2001; the Rayman settlement was filed on January 3, 2001 and entered on January 4, 2001; the Ellis settlement was filed on January 22, 2001 and entered on January 25, 2001.

NOTE: These stipulated final judgments and orders for permanent injunction are for settlement purposes only and do not constitute an admission by the defendants of a law violation.

Copies of the Stipulated Orders, as well as copies of news releases and legal documents pertaining to "Operation Misprint" and other office supply scam cases, are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the   complaint form. TDD for the hearing impaired 202-326-2502. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710. The FTC enters Internet, telemarketing and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies worldwide.

(FTC Matter No. X000010)
(Civil Action No.: CV-99-12828 HLH (AJWx)