Company and Individual Defendants To Pay Consumer Redress
At the request of the Federal Trade Commission, a federal district court judge has permanently barred Inetintl.Com, Inc., doing business as Inet International, and two individual defendants from engaging in the sale or offering for sale of any business venture, franchise or investment opportunity, and has ordered $1.76 million in redress for consumers. A fourth defendant will be required to post a $250,000 performance bond before advertising, promoting, marketing or selling franchises, business ventures or investment opportunities.
In April 1998, the Federal Trade Commission alleged that Santa Monica, California-based Inetintl.Com, doing business as Inet; Craig A. Lawson, also known as Bob Bryan; Erik R. Arnesen; and Stanley R. Goldberg, also known as Geoff Stevens, deceptively claimed investors could earn $100,000 in their first year, and $300,000 in the second year, marketing Internet access and Internet-related goods and services. Inet offered the franchise businesses for fees starting at $3,000 and ranging up to $10,000, plus monthly "maintenance" fees of up to $250 a month. By placing ads in magazines and newspapers the franchisees were to solicit affiliates to purchase an Inet "Internet Business Marketing System" that would allow the affiliates to sell Internet access, as well as web site development, TV Internet boxes, computers and on-line dating services to the public. They claimed that franchisees could obtain up to 100,000 Internet access subscribers, thereby earning up to $400,000 a month - a number it described as "easily achievable and realistic." To prove their earnings claims, the defendants encouraged prospective investors to call "satisfied franchisees" who would support their claims. According to the FTC, few if any investors ever achieved the income levels touted by the defendants, and one or more of the "satisfied franchisees" were actually shills, working with the defendants to con consumers. The FTC asked the court to issue a permanent injunction against the business practices, freeze the defendants assets, bar future violations of federal law and order redress for consumers.
U. S. District Court Judge Christina A. Snyder has ordered total consumer redress of $1.76 million, $478,088 of which is to be paid by Goldberg, an Inet division marketing director and shill. The amount was based on an estimate of what consumers lost to this scam. Goldberg has appealed the court's decision. Based on financial information provided by the defendants, it is unclear how much of the judgment will be collected for redress.
Inet, Goldberg, and Lawson, Inet's national marketing director and founder, have been barred for life from "engaging, directly or indirectly in the sale or offering for sale of any business venture, franchise or investment opportunity." Lawson is a fugitive and a warrant has been issued for his arrest. Arneson, Inet's president, will be required to post a performance bond in the amount of $250,000 before engaging in the "advertising, promotion, marketing, offering for sale, sale or distribution of franchises, business ventures, or investment opportunities."
In addition, the final judgment as to Goldberg bars him from falsely representing the experiences of references; the value, characteristics or nature of any product or service; and falsely representing or failing to disclose material facts about a product or service.
The consent judgment with Arneson bars him from making false earnings projections to purchasers of franchises, business ventures or investment opportunities; from using shills; from misrepresenting material facts; and from violating the Franchise Rule.
Both Goldberg and Arneson are barred from providing, selling or sharing customer lists used by Inet with others. Both also are barred from using information or materials developed by or for the Inet operation to assist others in setting up an Inet copy-cat operation. They are subject to record keeping provisions to allow the FTC to monitor their compliance with the court orders.
The cases were filed in U.S. District Court, Central District of California, Western Division at Los Angeles.
Copies of the legal documents are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 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.
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