One of the defendants named in a 1994 Federal Trade Commission lawsuit has agreed to pay up to $350,000 for consumer redress, and to post a bond of $1 million to protect future customers before marketing or liquidating coins or gemstones, or before acquiring any interest in a business that does so. The redress and bonds are part of a settlement Thomas E. O'Day has signed with the FTC, resolving charges arising from his role in an allegedly deceptive telemarketing scheme that preyed on con- sumers trying to liquidate gemstones they previously purchased from other telemarketers as investments. In addition, the settlement permanently prohibits O'Day from making both the specific misrepresentations the FTC cited in its complaint, and any other misrepresentations regarding any material aspect of any future telemarketing offer.
In October 1994, the FTC filed a complaint naming as defendants Thomas E. O'Day, doing business as Thomas O'Day (also known as Thomas O'Day Company, Tom O'Day Company, Thomas O'Day & Associates, and Tom O'Day & Associates) of Orlando, Florida; and Jeffrey Kelley, also known as Jeff Barnett. Charges against Kelley are still pending.
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The FTC alleged that the defendants contacted consumers throughout the United States who had previously purchased gemstones as investments -- many of whom purchased overpriced gemstones from the operators of other schemes -- and offered to liquidate consumers' gemstone portfolios for a fee. The defendants allegedly misrepresented the cost of their gemstone liquidation program and falsely promised that they had buyers ready and willing to purchase the consumers' gemstones. Consumers often paid thousands more for the program than the defendants had represented it would cost, and on some occasions were induced to purchase additional overpriced gems or coins from the defendants, the FTC alleged.
Under the consent judgment to settle these charges, O'Day is permanently prohibited from making the misrepresentations alleged in the FTC's complaint. Specifically, O'Day is prohibited from misrepresenting:
- his ability to sell consumers' gemstones;
- that a buyer has been identified who will purchase a consumer's gemstones;
- that a consumer's gemstone will be sold at a price that equals or exceeds the price paid by the consumer for his or her gemstones;
- that a sale of a consumer's gemstones was imminent;
- the cost to consumers of selling or liquidating their gemstones, including whether they would have to pay any money other than an advertising fee or commission at closing;
- the wholesale, retail, cash-liquidation or any other value of any coin or gemstone sold; and
- the terms and conditions under which refunds of fees paid by consumers would be issued.
In addition, the consent judgment prohibits O'Day from misrepresenting, in connection with the business of tele- marketing, any fact material to a consumer's decision to purchase any good or service.
The bond requirement included in the settlement requires O'Day to post a performance bond of $1 million if he engages in the advertising, telemarketing, sale, brokering, or liquidation of gemstones or coins. A $1 million bond is also required before O'Day may hold any ownership interest in an entity that engages
in such activities. The order requires O'Day to disclose the existence of any bonds he posts pursuant to these requirements in all written sales materials sent to consumers.
In addition, the order requires O'Day to pay up to $350,000, which could be used to provide redress to consumers. The first payment of $275,000 will be due seven days after the order is entered. The remaining payment requirement will be satisfied after O'Day sells real property he owns in Orlando, Florida, and turns over a portion of the proceeds to the FTC.
Finally, the order includes various reporting requirements to assist the FTC in monitoring O'Day's compliance.
The Commission vote to authorize staff to file the consent judgment was 4-0. The settlement, which requires the court's approval to become binding, was approved by the judge on May 4. The FTC's Atlanta Regional Office handled the investigation. The final judgment and order was filed in the U.S. District Court for the Middle District of Florida, Orlando Division.
NOTE: A consent judgment is for settlement purposes only and does not constitute an admission by the defendants of a law violation. It has the force of law when signed by the judge.
Copies of the final judgment and order, as well as 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. x95 0023)
(Civil Action No. 94-1108-CIV-ORL-22)