A federal district court in Nevada has temporarily halted what the Federal Trade Commission alleges to be a deceptive Ponzi scheme that bilked consumers out of millions of dollars. According to the FTC, telemarketers for Affordable Media, LLC, doing business as Sterling Group Media and The Sterling Group, LLC, and its affiliates, promised prospective investors at least a 25 percent profit, as well as the return of their principal, within 90 days, if they invested in the defendants' "Media Units" -- blocks of television commercials that promoted various products with purportedly proven consumer appeal. The "Media Units" sold for $5,000 or $10,000 each.
The FTC charged that such representations violate the FTC Act and the Telemarketing Sales Rule. In fact, contrary to what the defendants' telemarketers told consumers, many investors who purchased the Media Units have not received any profits or return of their principal, more than 90 days later. To the extent that some investors did receive profits, they apparently came from money invested by other investors, not from the sale of the products advertised on TV.
The defendants collected at least $18 million from their sale of investments to the public, the FTC alleges. In addition to the temporary restraining order, the court has ordered an asset freeze to preserve funds for consumer redress.
The FTC's complaint detailing the allegations names Las Vegas-based Affordable Media, LLC; Financial Growth Consultants, based in San Diego, d/b/a Sterling Marketing Group; Sterling Multi-Media Co., and Venture Capitalization Co., both based in Lakewood, Colorado; Eric Steven Stein, Ina Liberty Bell, and Ruth Stein, also known as Ruth Garcia, all managers of Affordable Media; Denyse Lindaalyce Anderson and Michael K. Anderson, managers of Financial Growth; and George John McWilliams and Edward James Hally, managers of Sterling Multi-Media and Venture Capitalization.
According to the complaint, the defendants' telemarketers, through unsolicited telephone calls, and advertisements posted on the Internet, offered consumers a chance to buy from Affordable Media or Sterling Multi-Media a "Media Unit" that entitles its owner to share the proceeds from the sales of products advertised in a number of television commercials that Sterling places in various media markets. The products -- ranging from water-filled dumbbells to "The Talking Pet Tag" -- have a retail price of $20 each. But, according to the telemarketers, their actual cost is $5, so each sale yields a $15 profit. The telemarketers tell potential investors that each commercial spot is almost certain to generate at least five sales.
The defendants and their telemarketers falsely represented to prospective investors that all previous investors earned returns of 50 percent or more, as well as the return of their principal, within 60-90 days and that prospective investors are highly likely to receive similar returns, the FTC alleged. In many instances, according to the FTC, the defendants expressly guarantee that prospective investors will earn at least a 25 percent profit, as well as the return of their principal, within 90 days of investing their money.
Further, the complaint alleges that consumers have suffered substantial money loss as a result of the defendants' unlawful practices. The FTC requests that the court issue a permanent injunction prohibiting the defendants from violating the FTC Act and the Telemarketing Sales Rule in the future, and order the defendants to pay consumer redress.
On the day the FTC filed its complaint, the Las Vegas Attorney General's Office filed a 12-count felony complaint charging two of the FTC defendants, Ina Liberty Bell and Eric S. Stein, with securities fraud and racketeering by misrepresenting to perspective investors a return of between 25 and 53 percent within 60 to 90 days. Ina Bell was arrested on April 24, 1998.
The FTC would like to thank the state securities regulators in Utah, Colorado, Texas, Pennsylvania, South Dakota, North Dakota, Arkansas, Oklahoma, Nevada and California; the Nevada Attorney General's Office; the U.S. Attorney's Office in Las Vegas; the U.S. Postal Inspection Service, the Federal Bureau of Investigation and the National Tape Library based in San Diego, California, for their assistance in this case.
The Commission vote to file the complaint was 5-0. The complaint was filed under seal in the U.S. District Court, District of Nevada, in Las Vegas, on April 23, 1998. The seal was lifted on April 27, 1998.
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 are available from the FTC’s web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TDD 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.
(File No. 982 3115)
(Civil Action No. CV-S-98-00669-LDG)
Office of Public Affairs
CRC, Federal Trade Commission
Attn: Sterling Group
Washington, DC 20580