Image Sales & Consultants, Inc., a Fort Wayne, Indiana-based company, and its president, Michael Dague, have agreed to settle Federal Trade Commission charges stemming from their role in "Operation False Alarm," a joint federal/state law enforcement campaign targeting unscrupulous telemarketers that prey upon small businesses, requesting that the business purchase advertisements in publications with child safety or other civic-purpose themes. In most cases, according to the FTC, the publications for which the ads were solicited were never distributed in the business's community as claimed, so that the business failed to get the promised advertising benefit. Worse, once a business purchased an ad, it faced repeated billing for more ads -- whether authorized or not -- and aggressive collection tactics for unauthorized invoices -- including threats that the bill will be turned over to a collection agency. Thousands of small businesses all over the country have paid unauthorized invoices for unordered advertising in these publications, the agency added.
As part of "Operation False Alarm," in April 1997 the FTC filed charges against Michael Dague and his company, alleging that the defendants convinced small businesses in more than 18 states to pay for "advertising" in their publications by falsely claiming that their booklets enjoy a widespread distribution in the businesses' local communities. Image Sales & Consultants operated under several names, including Children's Safety & Protection Network, Fire Prevention & Safety Coloring Book for Kids, Drug Abuse Prevention Program, Crime Watch Awareness, Teens Against Drugs & Alcohol, Fire Safety Advisor, and others. Many businesses who refused the advertising appeal for these publications were subsequently barraged with false invoices and other collection efforts for the unordered advertising. These efforts ran the gamut from harassing collection calls to unauthorized Cash On Delivery (C.O.D.) package letters containing bills for unordered ads.
In the settlement agreement, Image Sales & Consultants admitted that it falsely represented that businesses previously authorized placement of advertisements in the company's publications; that it falsely represented that advertising proceeds from businesses will be used to defray costs of printing and distributing the company's publications and publications containing the advertising will be widely distributed to local organizations in the business's community; that it falsely represented that it had incurred the cost of printing a publication in reliance on a business's authorization of and promise to pay for an advertisement; and that it falsely represented that businesses have ordered advertisements billed to them by sending bills C.O.D. and by threatening to take action to collect such bills. Image Sales & Consultants also admitted that its false representations caused financial injury to the businesses that paid for advertisements in its publications.
The settlement prohibits Image Sales & Consultants and its president from using any alias, or misrepresenting their identities, or from selling or transferring the names or other identifiable information of previous customers contacted by the defendants in connection with the sale of advertisements or advertising sponsorships. The settlement also contains recordkeeping requirements designed to assist the FTC in monitoring the defendants' compliance with the agreement. Finally, the agreement permanently bans company president Michael Dague from engaging or participating in the sale or distribution of any advertising or publication.
The FTC filed the settlement agreement in the U.S. District Court for the Northern District of Indiana, Fort Wayne Division, on June 9. The settlement was subject to the court's approval and the judge signed the settlement the same day. The Commission vote to file the settlement was 4-0, with Commissioner Mary L. Azcuenaga not participating.
In April 1998, The Century Corporation, another Fort Wayne, Indiana-based company named in "Operation False Alarm," agreed, without admitting law violations, to settle charges that it, too, convinced small businesses to pay for "advertising" in their publications by falsely claiming that their booklets enjoyed a widespread distribution in the businesses' local communities. The FTC alleged that the defendants misrepresented that businesses had previously authorized advertising for which they were obligated to pay, and that businesses had ordered the advertisements billed to them and must pay the invoices or face collection action. In most cases, according to the FTC, the publications for which the ads were solicited were never distributed in the business's community as claimed. Under the settlement agreement, which was filed in and approved by the U.S. District Court for the Northern District of Indiana, Fort Wayne Division, on April 8, The Century Corporation, Richard A. Haffenden, president of Century, and Clifford Belvin, secretary of the company, are prohibited from engaging in the kinds of illegal activity alleged in the complaint. The defendants are prohibited from making any misrepresentation of material fact in connection with the sale, offering for sale or distribution, marketing or sponsorship of any advertisement, publication, program, or product, and must first obtain a performance bond in the amount of $500,000 before participating in such activities in the future. The settlement prohibits the defendants from disclosing their customer lists, and the settlement holds individual defendants Haffenden and Belvin jointly and severally liable for $55,000 in consumer redress. The Commission vote to file the settlement was 5-0.
Copies of the settlements, the news release announcing "Operation False Alarm," as well as a number of consumer education publications about charitable fundraising solicitations 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; 202-382-4357; 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.
(FTC File No. X970045--Image Sales)
(Civil Action No. 1:97CV0131)
(FTC File No. X970044--Century)
(Civil Action No. 1:97CV0130)
Office of Public Affairs
Cleveland Regional Office
1111 Superior Avenue, Suite 200
Cleveland, Ohio 44114