Two Seattle, Washington-based companies and their principal officers have agreed to pay an estimated $288,000 into a redress pool from which partial refunds may be made to students who paid $39.95 to $69.95 for either high-paying summer jobs in the Alaskan fishing industry or on cruise ships, or for scholarships or other college financial aid, the Federal Trade Commission announced today. The FTC had charged the defendants -- Progressive Media, Inc. and Collegiate Communications Group, Inc. -- last November with misrepresenting that the employment and financial aid directories they sold through telemarketing calls actually were "programs" that guaranteed students jobs with free room, board and transportation, or free financial aid from a "$6 billion pool of unclaimed aid." The FTC also alleged that the defendants' money-back guarantee turned out to be false.
The charges in this case were filed as part of "Operation Missed Fortune," a federal-state enforcement crackdown on business opportunity and employment schemes that involved more than 75 actions by the FTC and securities regulators or Attorneys General from 25 states (see Nov. 13, 1996 Operation Missed Fortune news release, as well as consumer education materials on business opportunities and scholarship search services, on the Internet at the FTC's website at www.ftc.gov). As the upcoming school year approaches, the FTC advises students looking for financial aid that no scholarship search service can guarantee that a student will receive a scholarship, and that such promises are a red flag for fraud. In addition, the FTC said, money-back guarantees for scholarship or employment services often come with conditions that are impossible or, at best, difficult to meet.
The individual defendants in this particular case are Matthew G. Lucas, Kevin Lustgarten and Mark Buchan. The FTC filed its complaint detailing the charges in federal district court in Seattle, and the judge on Nov. 4, 1996, issued a temporary restraining order freezing the defendants' assets. The court granted a preliminary injunction that continued the asset freeze and prohibited the alleged misrepresentations on Dec. 10. Trial was set for April 8, but the defendants then entered into settlement negotiations with the FTC.
The redress payments are included in consent judgments that resulted from those settlement negotiations and which, if approved by the court, would end the litigation. Buchan would pay $5,000, Lustgarten would pay $3,000 and Lucas would sell various assets, including retirement accounts that would be exempt from a litigated judgment, and then turn over an estimated $280,000 to the redress fund. The FTC relied on sworn financial statements of the defendants in determining these redress amounts, and has included a provision in the judgments allowing the agency to ask the court to reopen the case should the defendants be found to have misrepresented their financial condition.
The judgments also would prohibit the defendants from making any false or misleading representation in connection with the future marketing of any employment or financial aid product or service, including that they are providing something other than a publication or newsletter. These provisions also prohibit misrepresentations about the likelihood that a customer will get a certain job, receive certain earnings or benefits, or obtain financial aid, and about whether or what amount of financial aid goes unclaimed each year.
In addition, the consent judgments would prohibit the defendants from misrepresenting any money-back guarantee and, in fact, would prohibit them from mentioning return or refund rates unless asked and, in that instance, would require them to accurately describe the steps consumers must take to obtain a refund. The judgments also contain various reporting and record-keeping provisions that would assist the FTC in monitoring the defendants' compliance.
The Commission vote to approve these consent judgments for filing in court was 5-0. They were filed July 23 in U.S. District Court for the Western District of Washington, in Seattle. The FTC's Seattle Regional Office handled this case with assistance from the Washington state Department of Licensing and the Alaska state Department of Labor, Employment Securities Division.
NOTE: These consent judgments are for settlement purposes only and do not constitute admissions by the defendants of law violations. Consent judgments have the force of law when signed by the judge.
Copies of the consent judgments, as well as other materials associated with this case and Operation Missed Fortune, are available from the FTC's web site at http://www.ftc.gov and also 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 news as it is announced, call the FTC NewsPhone recording at 202-326-2710.
Office of Public Affairs
202-326-2161 or 202-326-2180
Seattle Regional Office
Joe Lipinsky or Robert Schroeder
2896 Federal Building, 915 Second Avenue Seattle,
Washington 98174 206-220-6350
(FTC File No. X970011)
(Civil Action No. C96-1723WD)