Five Star Auto Club Defendants To Pay $2.9 Million; Barred For Life From Multi-Level Marketing Businesses
An operation that claimed consumers could lease their "dream vehicle" for "free" while earning between $180 and $80,000 a month by paying an annual fee and small monthly payments, has been permanently shut down, and its principals have been barred for life from any multi-level marketing business and ordered to pay $2.9 million in consumer redress. The action was taken by U. S. District Court Judge Colleen McMahon at the request of the Federal Trade Commission.
On March 8, 1999, the FTC filed suit against Five Star Auto Club, Inc., and its principals, Michael and Angela Sullivan, alleging that despite the auto leasing and income claims, the vast majority of participants could neither lease a "free" car, nor earn money from joining the scheme. The agency alleged that Five Star was actually an illegal pyramid operation and asked the court to halt the scam, appoint a receiver and freeze the defendants' assets, pending trial.
On May 17, 2000, following trial, the court ruled that Five Star was a pyramid scheme that prevented the vast majority of participants from realizing the rewards promised by the defendants. On June 13, 2000, the court issued its final order barring Michael and Angela Sullivan, for life, from engaging in any further pyramiding or multi-level marketing activity.
The court also:
- shut down Five Star and its Web site and ordered liquidation of its assets;
- ordered the defendants to pay $2.9 million in consumer redress; and
- placed the Sullivans under strict conduct prohibitions when selling any business venture in the future.
Consumers who believe they are eligible to participate in the redress distribution may check the status of these proceedings by visiting the Federal Trade Commission's Web site, www.ftc.gov, or calling the FTC's Five Star hotline, 202-326-2849.
A January 2000 settlement with Thomas and Judy Bewley, the directors of Five Star's marketing offices, required that they turn over all their Five Star assets and prohibited them from making deceptive claims in any future business operations.
The complaints were filed in the U. S. District Court for the Southern District of New York.
Copies of the complaint and final order 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; toll free at 202-FTC-HELP (877-326-4357); TDD for the hearing impaired 877-326-2502. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.
Farrell Office of Public Affairs
James A. Kohm
Bureau of Consumer Protection