FTC Charges Companies Defrauded Consumers Out of Approximately $3 Million
Greeting Cards of America (GCA), and its officers, and American Eagle Placements, and its owner, have been charged by the Federal Trade Commission with using deceptive tactics in selling their greeting card business opportunity. According to the FTC, since at least early 2001, the defendants were engaged in the marketing and sale of a greeting card business opportunity that defrauded consumers out of at least $3 million. In their advertisements, the GCA defendants allegedly made earnings and success claims that vastly overstated the amount consumers could expect to make from a GCA business opportunity. GCA allegedly also used "shills" – phony references – to deceive consumers. According to the FTC, American Eagle defendants operated a locator service which consumers paid for separately to place the greeting card racks sold to them by GCA. American Eagle defendants allegedly made false claims about the quality of the locations the placement service obtained and the sales support that they provided. The owner of the company also allegedly reiterated to consumers GCA’s false earnings claims in advance of the sale of the racks. The FTC alleges that these practices violate the FTC Act and the FTC’s Franchise Rule.
The FTC is asking the court to prohibit misrepresentations, appoint a receiver, freeze the defendants’ assets, and obtain consumer redress.
The Commission’s complaint names Greeting Cards of America, Inc., based in Plantation, Florida, and husband and wife team, Gerald (Jerry) Towbin, also known as Alex Carr, and Susan Towbin. The FTC also alleges that Jerry Towbin uses another alias, "John Grant," to pose as a reference for GCA; that he deceptively states his success as a GCA distributor, even though he does not have display racks, cards, or locations; and that Susan Towbin acts as a reference, using the aliases "Mary Grant" and "Sandy Grant."
According to the FTC, the defendants advertised on the Internet, on the radio, and in newspapers. The ads contain statements such as:
"– Prime high volume locations are provided for you!"
"– With just 30 locations selling only 10 cards per day, you will earn $135,000 per year."
"Sound too good to be true?? Not at all . . . With ‘Our System’"
"No matter How you do the numbers, "It’s a Moneymaker !!!!"
"Greeting Cards of America provides the three basic components of a successful business:
"A great product, displayed effectively, and revenue productive locations to sell them in." (Emphasis in the original.)
Through these ads, the FTC alleges, the defendants violated the FTC Act by misrepresenting potential earnings consumers could realize and misrepresenting that they provide significant assistance to purchasers of their business opportunity. In addition, the FTC alleges that Jerry and Susan Towbin, using aliases, have served as "shills" or references for GCA. Many consumers relied on the Towbins’ representations and purchased GCA’s business opportunity, the FTC stated.
In addition, the FTC alleges, the defendants violated the Franchise Rule by misrepresenting a specific level of earnings without having a reasonable basis for making such claims. The defendants also allegedly made earnings claims without providing the prospective purchasers with a disclosure document for earnings claims, as required by the Franchise Rule. Further, the FTC alleges, the defendants violated the Rule by failing to give a complete and accurate disclosure document.
The complaint also names American Eagle Placements, based in Stone Mountain, Georgia, and its owner Forrest Adams. According to the FTC, American Eagle is the locator service that GCA recommended to all of its purchasers. American Eagle allegedly makes false claims about the quality of the locations obtained for consumers and the sales support that they provide. According to the FTC, American Eagle sends either a locator to each consumer’s hometown or arranges for a locator to find locations over the telephone. American Eagle allegedly charges a separate fee for its services – $150 per rack that it places. The FTC alleges that Adams also reiterates the Towbins’ outlandish earnings claims to consumers.
The Commission vote to authorize staff to file a complaint in federal district court was 5-0. The complaint was filed in the U.S. District Court, Southern District of Florida, Ft. Lauderdale Division, on April 21, 2003 under seal. The seal was lifted on April 24, 2003.
NOTE: The Commission authorizes the filing of a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendants actually have violated the law. The case will be decided by the court.
(FTC File No. 022-3300)
(Civil Action No. 03-60746-CIV-Gold)
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