The remaining defendant named in a 1994 Federal Trade Commission lawsuit has agreed to pay $200,000 for consumer redress, and to post a bond of $1 million to protect future customers before marketing or liquidating coins or gemstones or engaging in telemarketing. The redress and bond requirement are part of a settlement Jeffrey L. Kelley has signed with the FTC, resolving charges arising from his role in an allegedly deceptive telemarketing scheme that preyed on consumers trying to liquidate gemstones they previously purchased from other telemarketers as investments. In addition, the settlement permanently prohibits Kelley from making both the specific misrepresentations cited in the FTC's complaint, and any other misrepresentations in connection with telemarketing.
In October 1994, the FTC filed a complaint alleging that the defendants, Thomas E. O'Day and Jeffrey L. Kelley, 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 the 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.
The FTC's complaint named 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. In May 1995, the FTC announced that Thomas E. O'Day had agreed to pay up to $350,000 for consumer redress and to post a $1 million bond before entering the gemstone marketing or liquidation business.
Under the consent judgment Kelley signed to settle these charges, he is permanently prohibited from making the misrepre- sentations alleged in the FTC's complaint. Specifically, Kelley 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 gemstones 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 Kelley 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 consent judgment further prohibits Kelley from using, or providing to any third party, his customer lists.
The bond provision included in the settlement requires Kelley to post a performance bond of $1 million before he engages in the advertising, telemarketing, sale, brokering, or liquida- tion of gemstones or coins, or engages in telemarketing. A $1 million bond also is required before Kelley could hold any ownership interest in an entity that engages in such activities.
The order requires Kelley to disclose the existence of any bond he posts pursuant to these requirements in all written sales materials sent to consumers.
The $200,000 redress payment required by the settlement is due within five days after the order is approved by the court.
Finally, the order includes various reporting requirements that will assist the FTC in monitoring Kelley's compliance.
The Commission vote to authorize staff to file the stipulated final judgment and order was 5-0. It was filed in the U.S. District Court for the Middle District of Florida, Orlando Division, and signed by the judge on Sept. 27. The FTC's Atlanta Regional Office handled the investigation.
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.
The FTC has developed free fact sheets that offer tips for consumers on protecting themselves from recovery room and gemstones investment scams. Copies of the FTC's "Telemarketing Recovery Room Scams," and "Gemstone Investing" brochures, 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; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest FTC news as it is announced, call the FTC's NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the Internet at the FTC's World Wide Web Site at: http://www.ftc.gov
(FTC File No. X950023) (Civil Action No. 94-1108-CIV-ORL-22)