FTC Targets Deceptive FCC License Brookers

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A Federal district court has frozen the assets of two companies and three principal officers and a salesman following Federal Trade Commission charges stemming from their roles in an allegedly deceptive scheme to market federal telecommunications licenses. The licenses are issued by the Federal Communications Commission to be used for communications by radio dispatchers for taxicabs and trucking companies and others for paging operations. Many license holders obtained the licenses by using application preparation services that touted the licenses as high-yield investments. The defendants in this case are alleged to have deceptively marketed brokerage services to license-holders by claiming they achieve a high return for their customers by selling or leasing the licenses to telecommunications companies.

The defendants named in the case are Falcon Crest Communications, Inc., its parent company, Republic Communications Corp., Joel H. Cohen, Jordan Drew, Gary Perry and Nicholas Vasti. The businesses are based on Long Island, New York.

"These are the kind of scams that target people who may already have been victims of investment schemes," said Jodie Bernstein, Director of the FTC Bureau of Consumer Protection. "Consumers who have lost money investing in high-tech enterprises should be very skeptical about companies that promise to turn their losses into winnings," she said.

According to the FTC complaint detailing the charges in the case, many consumers who purchased these licenses, issued by the FCC, lack experience in the telecommunications field but are induced to purchase the licenses, often by application preparation services, as "excellent investments." According to the complaint, the defendants then contacted the FCC license-holders claiming to be experienced, professional and successful brokers and offering to locate buyers or lessees for the licenses through a nationwide marketing campaign. In its "Marketing Newsletter," Falcon Crest referred to itself as "a leader in the communications field, [which] has the expertise, the finances and the contacts to turn your license into financial gain," according to the complaint. Some sales pitches described in the complaint included statements such as, "People who have listed their Specialized Mobile Radio licenses with us have received offers of $7,000 to $25,000 per license," "The big companies, like AT&T, Nextel, Motorola and Dialpage are soliciting our business," and "Our success rate in marketing licenses is 99 percent. The only time we don't market a frequency, the tower must have fallen."

Falcon Crest charged consumers an up-front, non-refundable fee of $495 which it claimed to use for engineering studies and other work necessary to market the licenses. It claimed that the corporation profited only from a nine percent commission it charged on the sale or lease price of their licenses, according to the FTC complaint.

The FTC alleges Falcon Crest has not been and is not likely to be successful at getting lucrative offers for its clients' licenses and Falcon Crest does not procure purchase or lease offers from large, well-known telecommunications companies such as AT&T.

In addition to freezing the defendants' assets to preserve any funds for redress to consumers, the federal district court in which the FTC filed the complaint has ordered a temporary halt to the challenged claims, pending a hearing. Ultimately, the FTC is seeking a court order permanently prohibiting the defendants from making the claims and ordering them to pay consumer redress. The FTC filed the complaint in the U.S. District Court for the Eastern District of New York Nov. 29, under seal. The Commission vote to authorize staff to file the complaint was 5-0. The seal was lifted on Dec. 1.

The FTC received substantial assistance in this case from the Delaware Department of Justice and the New York Department of Law.

This case is the latest in a series of FTC cases involving scams related to FCC licenses. The FTC and the FCC are jointly issuing a license-broker alert which they intend to send to existing holders of paging and SMR licenses. In the future, the FCC will send the alert to all new licensees when licenses are granted.

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 complaint, the license broker alert and another consumer brochure, "Mobile Radio Investment Scams," 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 202-326- 2502. To find out the latest news as it is announced, call the FTC 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. 952 3319)
(Civil Action No. 95-4881(ADS) )

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