Defendants Agree to Pay $233,000 in Consumer Redress
A New York City company that sold peppermint patty vending machines nationwide has settled Federal Trade Commission charges that it deceived consumers by telling them they could expect a 750 percent yearly return on their initial investment. According to the FTC, Hi Tech Mint Systems, Inc., and its principals, Larry Lind and Ron DePung, made numerous false claims in their ads, sales pitches and promotional materials to induce consumers to invest between $3,000 and $14,999 for their candy vending machine business opportunities. The Commission alleged that the defendants violated provisions of the FTC's Franchise Rule, a pre-purchase disclosure rule intended to give potential buyers key information about a business opportunity, including the legal and financial history of the seller and its principal officers. As part of the settlement announced today, individual defendant Larry Lind would be required to post a $250,000 performance bond before engaging in the selling of any franchise or other business venture. In addition, the defendants would be prohibited from violating the Franchise Rule and from making false and misleading representations in connection with the sale of business opportunities. They also would be required to pay approximately $233,000 for consumer redress.
In August 1998, the FTC filed charges against Hi Tech Mint Systems and Ron DePung, also known as Thomas Depuond, as part of "Operation VendUp Broke" - a sweep netting over 40 enforcement actions against fraudulent vending machine business opportunities that offered - more - lucrative earnings. The Commission amended its initial complaint to include Larry Lind. The settlement announced today ends the litigation in this case. According to the FTC, the defendants made an array of deceptive promises to induce consumers to buy their business opportunities. The FTC alleged that Hi Tech hyped its business opportunities by stating that purchasers would get a package that would generate four separate means of income. Consumers were told that they could make as much as $50,000 to $145,000 per year by selling the mints and distributing the hand-outs displayed in "promotional boxes" attached to or located on the top of the vending machines. Hi Tech also promised that it would recommend companies that would, for a fee, find successful locations for prospective vendors to place their machines. The FTC alleged that through these and other acts the defendants violated the FTC Act, which prohibits unfair and deceptive practices.
The FTC's complaint also alleged that the defendants violated the Franchise Rule by failing to provide consumers with disclosure documents, or with accurate and complete disclosure documents, including the required documents to substantiate defendants' earnings claims.
The proposed settlement, which requires the court's approval, would prohibit the defendants from falsely representing the income, profits, return on investment, or sales volume of any franchise or other business venture. Additionally, the proposed settlement would prohibit the defendants from falsely representing any other fact material to a consumer's decision to purchase any item, product, good, or service. The proposed settlement would require Larry Lind to obtain a $250,000 performance bond before engaging in the sale of any franchise or other business venture. The settlement also would require the defendants to pay approximately $233,000 for consumer redress, with an avalanche clause that would require them to pay a $2 million suspended judgment if the court finds that they made misrepresentations or omissions on their financial statements submitted to the FTC.
Finally, the proposed settlement contains various recordkeeping and reporting requirements designed to assist the FTC in monitoring the defendants' compliance.
The Commission vote to authorize staff to file the stipulated final judgment and order for permanent injunction was 5-0. It was filed in the U.S. District Court, Southern District of New York, in Manhattan, on December 6, 2001. It is subject to court approval. The FTC's Northeast Region - New York - handled the investigation.
NOTE: This stipulated judgment and order is for settlement purposes only and does not constitute an admission by the defendants of a law violation. Consent judgments have the force of law when signed by the judge.
Copies of the legal documents associated with these cases 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. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint in English or Spanish (bilingual counselors are available to take complaints), or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to thousands of civil and criminal law enforcement agencies in the U.S. and abroad.
( FTC Matter No. X980075)
(Civil Action No. 98 Civ. 5881 (JES))
Office of Public Affairs
Barbara Anthony, Ronald Waldman or Ann Weintraub
FTC Northeast Region - New York