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Operators that used deceptive spam and a Web site to recruit consumers into an illegal chain letter scheme have agreed to settle FTC charges that their scam violated federal laws. The settlement bars the defendants from promoting or selling pyramid or chain mail schemes, misrepresenting potential earnings claims, misrepresenting the legality of such schemes, failing to disclose the profits or earnings of other participants in any multilevel marketing program, and providing others with the means to make misrepresentations.

In April 2002, as part of an Internet fraud sweep, the FTC charged that Universal Direct and its principals, Linda Jean Lightfoot and Charles F. Childs were sending spam that promoted "a MLM (multi-level marketing) Gifting Program that CAN'T FAIL." The spam allegedly claimed that participants could earn $10,000 in cash gifts within a few months of joining and urged consumers to recruit other participants. The FTC alleged the scheme is an illegal chain-letter; that the earnings claims were false; and that most participants would fail to make any money. The FTC asked the court to halt the illegal scheme and freeze the defendants' assets pending trial. Following the preliminary injunction, the defendants refunded all the money they had collected from investors in the scheme. The settlement ends the litigation.

The settlement bars the defendants from:

  • participating, promoting, or selling any prohibited marketing programs - such as chain letters or pyramid programs;
  • misrepresenting potential earnings or benefits from marketing any product or service;
  • misrepresenting the legality of any program;
  • failing to disclose the profits or earnings of other participants in any multi-level marketing program; and
  • providing others with the means and instrumentalities to make misrepresentations.

The settlement also bars the defendants from selling, renting, leasing, or disclosing their customer lists.

The settlement is based on financial information provided by the defendants. If the court finds that the defendants failed to disclose assets or made other material misrepresentations, the FTC can reopen the matter to seek consumer redress or disgorgement of ill-gotten gains. The settlement also contains certain bookkeeping and record keeping provisions to allow the agency to monitor compliance with its order.

NOTE: A stipulated final judgment and order is for settlement purposes only and does not constitute an admission of a law violation.

Copies of the stipulated final judgment and order are available from the FTC's Web site at 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 at The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.


Claudia Bourne Farrell
Office of Public Affairs


James Kohm
Bureau of Consumer Protection

(FTC File No X020028)