In an ongoing campaign to stamp out bogus business opportunities, the Federal Trade Commission has settled charges with four operations the agency charged with making deceptive earnings claims or failing to provide required disclosure documents to lure consumers to invest in businesses that provided little or no return on their investment.
In June 2002, the FTC filed a complaint against the operators of a Las Vegas, Nevada-based vending machine business scam. The defendants placed classified ads in newspapers and on the Internet soliciting telephone calls to the company. The FTC charged that when consumers returned the calls, the defendants claimed that consumers who purchased an eight-machine package at $3,300 could gross $81,000 a year and net almost $50,000 a year while working only a few hours a week. The defendants also allegedly claimed that the vending machines would be placed in “quality locations,” with heavy customer traffic. They allegedly told consumers that their machines were backed with a “one-year warranty and a 60-day location replacement warranty.” The FTC charged that the claims were false. According to the agency, investors did not realize the earnings they had been promised. The FTC alleged that few even recovered the amount they had invested, and that the locations that the defendants provided were not high traffic areas. The agency charged the defendants with violating federal law, including the Franchise Rule, which requires parties covered by the Rule to provide general disclosure documents and an earnings claim document to prospective purchasers.
The settlement with Vendco, LLC and its principal, Curt Briguglio, also known as Curt Briggs, prohibits them from making any representations about the income a consumer will make from a vending machine or about the location at which a vending machine sold or provided by the defendants will be placed. The settlement with Vendco, Briguglio, and Johan Briguglio, also known as Jo Briggs, bars them from making misrepresentations in the sale of any product or service. The settlement bars false earning claims and false claims regarding the terms of any assistance the defendants provide to consumers. It also bars violations of the Franchise Rule. The settlement prohibits the defendants from giving or selling their customer list to others. In addition, the defendants will pay $10,000 for consumer redress, which is based on their ability to pay. Should the representations about their financial condition be found to be inaccurate, $1.8 million, the total of their ill-gotten gains, will be due.
In another vending machine scheme, the FTC charged North American Vending, Inc and its principal, Terry Bird, with making unsubstantiated income claims in ads in business opportunity magazines. The ads included testimonials from apparent customers that said they made between $698 and $3,016. The FTC alleged that when prospective investors called, NAV employees made similar unsubstantiated claims. The agency alleged that: (1) the ads did not disclose the number and percentage of prior purchasers who had done as well or better that the claims, as required by the Franchise Rule; and (2) the defendants failed to provide the complete basic disclosure documents required by the Rule. The settlement permanently bars the defendants from violating the FTC Act and the Franchise Rule and requires $22,000 for consumer redress.
In another case, operators who promoted an Internet business opportunity claiming it was a one fee, turn-key get-rich-quick Internet home-business, but tacked on requirements that cost hundreds or thousands of dollars more, have agreed to settle FTC charges that their advertising was deceptive and violated federal laws. The settlement provides for $500,000 in consumer redress, bars deceptive claims associated with the sale of any goods or services, and requires the defendants to discontinue airing an infomercial they used to generate sales.
In May 2003, the FTC charged that End70 Corporation and its principal, Damien Zamora, used a Web site and infomercials to claim that their Internet Treasure Chest (ITC) business opportunity was very profitable and inexpensive. Infomercials and a Web site claimed that “ Internet Treasure Chest will give you everything you need to start your own exciting Internet Business including your own worldwide Web site all for the unbelievable price of only $59.95.” The Web site and infomercials also made earnings and income claims and testimonials such as:“ You don’t need a lot of money to start an Internet Business. In fact, we started out of our home and now we’re on track to do $1 million in sales this year.” The FTC alleged that the cost and earnings claims were deceptive and misleading in violation of the FTC Act, and that the defendants’ misrepresentations violated the Telemarketing Sales Rule.
At the request of the FTC, Judge David C. Godbey of the U.S. District Court for the Northern District of Texas, Dallas Division, issued a temporary restraining order and a preliminary injunction barring the defendants from misrepresenting the total cost of purchasing a business opportunity or the ITC products; barring misrepresentations that purchasers are likely to earn substantial income; freezing the defendants’ assets; and ordering the defendants to repatriate assets held abroad, pending trial. The settlement announced today ends that litigation.
The settlement bars any misrepresentations in the advertising, promotion, or sale of any business opportunity. Specifically, it bars misrepresentations about the cost of purchasing the business opportunity and likely earnings. It also bars violations of the Telemarketing Sales Rule. It requires the defendants to stop airing the infomercial they broadcast prior to the settlement. Based on financial statements provided by the defendants, they will pay $500,000 in consumer redress. Should their financial statements be found inaccurate, they will be required to pay $36 million.
The FTC has created a hotline for consumers affected by ITC’s deceptive advertising scam. Consumers may call 1-866-233-5640 for more information.
NOTE: Stipulated final judgments and orders are for settlement purposes only and do not constitute an admission by the defendant of a law violation. Consent judgments have the force of law when signed by the judge.
Correction: This press release was corrected to remove details about the Perfumes Unlimited case. Although there was a settlement in this case, it has not yet been entered by the court.
Copies of the settlements 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, 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 hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.
Internet Treasure Chest
James R. Golder or Deborah Dawson
FTC Southwest Region
Claudia Bourne Farrell
Office of Public Affairs
Joseph A. Lipinsky
FTC Northwest Region
Daniel R. Salsburg
Bureau of Consumer Protection