Defendants Were Named as Part of "OPERATION COPYCON"
Corporate Supplies, Inc., based in Cummings, Georgia, and its principals, Larry Sarchenko and Robert Henkel, have agreed to pay $20,000 in consumer redress as part of a settlement with the Federal Trade Commission. Named as defendants in "Operation CopyCon," the FTC alleged that the defendants duped their victims into accepting and paying for shipments of unordered toner cartridges and other office supplies. In addition to paying consumer redress, the defendants are permanently banned from engaging in the sale of non-durable office supplies and are required to post a $200,000 performance bond before engaging in telemarketing activities.
In September 2000, the FTC announced "Operation CopyCon"-- a multi-agency effort to crack down on bogus office and maintenance supply telemarketing schemes that targeted large and small businesses and non-profit organizations. The FTC filed a complaint against the defendants for their deceptive sales practices in connection with the sale of non-durable office supplies, principally toner cartridges. The complaint alleged that the defendants violated the FTC Act by misrepresenting that:
- they were the regular supplier or were associated with the consumer's regular supplier or the manufacturer of the office printer, fax machine or photocopier;
- the defendants offered office supplies at a lower price than what the consumer had been paying; and
- office supplies had been ordered by the consumer.
In addition, the complaint alleged that the defendants violated the Telemarketing Sales Rule (TSR) by making false and misleading statements, failing to disclose the identity of the seller, and failing to disclose the sales purpose of the call.
According to the FTC, Corporate Supplies defendants sold non-durable office supplies to large and small businesses, as well as to government agencies and non-profit institutions. The defendants routinely sent unordered merchandise. In some instances, they shipped merchandise even after the business refused to place an order. In other instances, they obtained an order by using deceptive claims and then sent additional unordered shipments. The defendants often falsely claimed that a current or former employee had ordered the supplies and tried to find someone else within the company to accept the shipment of "ordered" supplies. On occasion, they even misrepresented that an employee in another department had ordered the toner cartridges but could no longer use them, thereby getting an employee to accept the shipment by using false pretenses. In addition, they billed the businesses at prices substantially higher than their regular price, even after stating that the supplies were at a discount or special price. The settlement announced today resolves the case.
The settlement, which required the court's approval, prohibits the defendants from engaging in violations of the FTC Act and the TSR. The defendants are prohibited from, among other things:
- shipping unordered goods;
- billing for unordered goods;
- misrepresenting any association with the consumer or their regular supplier, the price of goods or services, including discounts or special prices, and how long any goods or services will last; and
- misrepresenting the purpose of telemarketing calls, or that a person had ordered the supplies the defendant had shipped, or that consumers have an obligation to pay for merchandise they did not order.
The settlement permanently bans the defendants from selling non-durable office supplies and prohibits them from selling their customer lists and from transferring business information. In addition, the settlement requires the defendants to pay $20,000 in consumer redress. It contains an avalanche clause for $250,000 to be paid if the FTC or the court finds that the defendants made any misrepresentations or omissions in financial statements. Finally, the settlement contains various recordkeeping requirements to assist the FTC in monitoring the defendants' compliance.
The Commission vote authorizing staff to file the stipulated final judgment and order was 5-0. It was filed in the U.S. District Court for the Northern District of Georgia, Atlanta Division, and entered by the court on March 5, 2001. The FTC's Southeast Region Office - Atlanta handled the investigation.
(FTC Matter No. X000105)
(Civil Action No. 1:00-CV-2449-ODE)
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