FTC Halts Fraudulent Computer Business

The Federal Trade Commission has charged a California-based business with deceiving Spanish-speaking consumers who responded to its offer of a complete computer system for three payments of $199 without a social security number or credit check. The FTC alleges that despite the defendants’ claims, they did not deliver the entire computer at the time the first payment was made. Instead, consumers opened their boxes and allegedly found only keyboards, speakers, and other peripherals that would be useless without the computer itself. Only then, the FTC charges, did they learn that they would not receive the full computer until all the payments had been made. At that point, according to the FTC, some consumers decided that they had been scammed and just gave up. Others made the final two payments, which with shipping and handling totaled more than $700, and ended up with junk computers that were salvaged or damaged computers that did not work. A U.S. district court has issued a temporary restraining order halting the defendants’ business practices and freezing their assets.

According to the FTC’s complaint, defendants Unicyber Technology, Inc., Unicyber Gilboard, Inc., and Chul K. Han have advertised their computer systems via Spanish-language television ads, claiming that they offered a payment plan that did not require a social security number or credit check. The agency alleges that when consumers called a toll-free number to order the system, defendants’ sales representatives repeated the claims made in the ads but informed consumers that the installment payment amount was not $199, but instead was $245, due to “shipping and handling” costs. In some cases, defendants’ sales representatives attempted to “upsell” consumers by pitching additional peripherals, such as CD burners, or component upgrades, such as larger monitors. During these sales calls, the representatives allegedly also informed consumers that defendants did not accept personal checks or credit cards, explaining that the shipment will be delivered cash on delivery (“C.O.D.”) and consumers must obtain a money order to give to the delivery person when the computer system arrived. The representatives assured consumers that the computer system would arrive in one shipment approximately one week later.

According to the FTC, defendants sent consumers a large box labeled “Computer” and “Fragile.” Only after consumers paid C.O.D. for this shipment did they discover that, instead of a complete computer system, the box contained only a few flimsy computer peripherals. The FTC’s complaint alleges that, when consumers called the company to find out what happened to the rest of their computer systems, they learned that defendants would not ship the missing pieces until after consumers sent in the two remaining payments. The defendants’ representatives informed consumers they would receive the computer monitor after mailing a second money order, and a central processing unit after mailing the third money order.

The FTC’s complaint alleges that some consumers, believing they had been deceived, gave up at this point and refused to make any further payments. Consumers who went along with defendants’ plan and made all three payments were further defrauded when they received not a functional computer system but useless components – salvaged and refurbished older computer models that were damaged, too old to run currently available applications, or otherwise did not work properly, if at all. Those consumers who attempted to obtain refunds from the defendants were often unsuccessful.

“We believe these fraudsters cheated consumers out of millions of dollars,” said Howard Beales, Director of the FTC’s Bureau of Consumer Protection. “They promised a complete computer system, and delivered nothing but junk.”

The FTC’s complaint states that the defendants’ business practices are deceptive in violation of the FTC Act. The FTC further alleges that consumers have been harmed substantially, and continue to be harmed, by the defendants’ operation. The FTC’s complaint asks the court to permanently bar the defendants from future deceptive practices and order them to pay consumer redress.

The FTC has created a hotline for consumers who may have been affected by Unicyber’s business practices. Consumers may call 310-824-4393 – information is available in English and Spanish.

The Commission vote to authorize staff to file the complaint was 5-0. The Complaint was filed in the U.S. District Court for the Central District of California on March 9, 2004.

NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant has actually violated the law. The case will be decided by the court.

Copies of the Commission’s complaint 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 at http://www.ftc.gov . 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.

(FTC File No. 032 3186)
(Civ. No. 04-1569 LGB (MANx))