A Lockport, Illinois, man has admitted to running a deceptive scheme to bill churches and small businesses for unordered merchandise, the Federal Trade Commission announced today. Under an agreement with the FTC, David C. Ashley would return nearly $44,000 in uncashed checks and post a $400,000 bond before re-entering the telemarketing business. Ashley's company, Central Supplies, Inc., also will be dissolved and he would be prohibited from using that name or the name of an already-dissolved company, Hi-Tronics, Inc., again. These provisions are part of a settlement of charges that the FTC filed against Ashley and Central Supplies last October.
The FTC charged Ashley and his firm with employing a variety of deceptive and illegal tactics to sell janitorial supplies, including offering employees at churches and small businesses free gifts or samples in exchange for reviewing a catalog, with the true intention of securing their names for use on invoices for unordered merchandise. Ashley and Central Supplies also misrepresented that they were regular suppliers of the churches and businesses they called, and that subsequent shipments the defendants sent after receiving payments on initial shipments were the back ordered balance of the initial shipments. Under federal law, it is illegal to mail and bill for unordered merchandise, or to attempt to collect payment for such merchandise.
Upon filing of the FTC complaint, the federal district court granted the FTC's request to issue an order putting a temporary halt to the scheme and freezing the defendants' assets. The consent judgment to settle the charges requires the court's approval to become binding.
Specifically, the consent judgment would prohibit the defendants from:
- mailing a bill or attempting to collect payment for unordered merchandise in violation of federal law;
- misrepresenting the purpose of a promotional call, or making other misrepresentations of the type involved in this scheme; and
- reselling or providing their customer lists to others.
Ashley also would be prohibited from doing business under the names Central Supplies or Hi-Tronics, and would be required to obtain the $400,000 bond, to be used for the protection of future customers should he be found to have engaged in fraud again, before re-entering the telemarketing business. Nearly $44,000 in uncashed checks will be returned to the churches and small businesses that mistakenly paid for unordered merchandise, and the defendants would be prohibited from seeking payment for any goods not already paid for and that were shipped prior to the date the court enters this settlement. The settlement would not require the payment of redress, but it would permit the FTC to reopen the matter should the defendants be found to have misrepresented their financial conditions. The settlement also contains various reporting requirements that would assist the FTC in monitoring the defendants' compliance.
The FTC received substantial assistance in this case from the Postal Inspection Service.
The Commission vote to file the proposed consent judgment was 5-0. It was filed yesterday afternoon in U.S. District Court for the Northern District of Illinois, Eastern Division, in Chicago.
NOTE: A consent judgment has the force of law when signed by the judge.
An FTC brochure for businesses titled "Buying by Phone" suggests examining invoices carefully before paying and offers a variety of other tips to help businesses avoid being scammed. Copies of the brochure, the settlement 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; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest FTC news as it happens, call the FTC's NewsPhone at 202-326-2710. FTC news releases, brochures and other documents also are available on the Internet at the FTC's World Wide Web site at http:\\www.ftc.gov
(FTC File No. X950011)
(Civil Action No. 94 C 6391)