UNITED STATES DISTRICT COURT
FEDERAL TRADE COMMISSION,
METROPOLITAN COMMUNICATIONS CORP., et al.,
94 Civ. 0142 (JSR)
FINAL JUDGMENT AND ORDER FOR PERMANENT INJUNCTION
AND FOR SETTLEMENT OF CLAIMS FOR MONETARY RELIEF AS TO DEFENDANTS SHELDON JACKLER, METROPOLITAN COMMUNICATIONS CORP., COLUMBIA COMMUNICATIONS SERVICE CORP., NATIONWIDE DIGITAL DATA CORP., and STEPHENS SINCLAIR, LTD.
Plaintiff, Federal Trade Commission ("the Commission") commenced this action by filing its Complaint against Sheldon Jackler, Metropolitan Communications Corp., Columbia Communications Service Corp., Nationwide Digital Data Corp., Stephens Sinclair, Ltd., and other defendants on January 11, 1994, alleging that they engaged in unfair or deceptive acts and practices in violation of Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45 (the "Act"), and seeking a permanent injunction and redress for injured consumers, pursuant to Section 13(b) of the Act, 15 U.S.C.§ 53(b).
On January 14, 1994 the Court entered an ex parte Temporary Restraining Order and asset freeze against all defendants and appointed a Temporary Receiver for the corporate defendants, Metropolitan Communications Corp., Columbia Communications Service Corp., Nationwide Digital Data Corp., and Stephens Sinclair, Ltd. (collectively, "the Receivership Companies"). On January 31, 1994 this Court entered a Stipulated Order for Preliminary Injunction With Asset Freeze as to defendant Jackler and the Receivership Companies ("the Stipulated Order"), and appointed Daniel R. Goodman, Esq., Permanent Receiver ("the Receiver") for the Receivership Companies.
The Receiver filed a Complaint dated February 23, 1995 in the United States District Court for the Southern District of New York against Sheldon Jackler and other defendants, Civil Action No. 95 Civ. 1365 (JFK), alleging, inter alia, that the defendants were liable for civil damages under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), and to recover certain fraudulent conveyances ("the Receiver's Action").
Sheldon Jackler, the Receivership Companies, the Commission and the Receiver have stipulated to the entry of the following Final Judgment and Order in settlement of the Commission's Complaint against Jackler and the Receivership Companies. Being advised in the premises, the Court enters the following Order.
For purposes of this Order the following terms shall have the meanings specified below:
A. "Investment" or "Investment Offering" shall mean any service, product or interest, including any partnership, interest in any partnership, or other beneficial interest, tangible or intangible, that in any way is (1) offered for sale, traded or sold, to be held, wholly or in part, for purposes of economic benefit, profit, or income, or (2) offered for sale, traded or sold, based on representations, wholly or in part, express or implied, about past or future income, appreciation, or resale value.
B. "Business of Telemarketing" shall mean the offer for sale or sale of a product or service that in any way involves telephonic sales presentations, unless such activities primarily involve regular, substantial, and continuing face-to-face contact between the offeror or seller and all or substantially all of the offerees or buyers. Solely for the purposes of this Order, the Business of Telemarketing shall not include the advertising of products via direct mail or the Internet where no telephonic sales presentation is made in connection with, or as a result of, said advertising.
C. "Assisting others engaged in the Business of Telemarketing" shall mean knowingly and intentionally providing any of the following goods or services to any person or entity that is engaged in the Business of Telemarketing or plans to engage in the Business of Telemarketing in the immediate future: (1) procuring or providing office space or equipment; (2) procuring or providing financial support; (3) formulating, or participating in the formulation of, any sales script or sales outline for use in telemarketing; (4) providing training, instruction, advice or information for use in telemarketing; (5) formulating, or participating in the formulation of, any sales brochures, contracts, or other marketing materials; (6) providing lists of names and/or addresses of consumers who previously did business with any person or entity engaged in the Business of Telemarketing; (7) receiving or responding to consumer inquiries; or (8) receiving or responding to consumer complaints.
D. "Telemarketed Product" or "Telemarketed Service" shall mean the offer for sale or sale of any product or service, including but not limited to partnership, interest in any partnership, or other beneficial interests, tangible or intangible, that in any way is offered for sale or sold through telephone sales presentations, unless such activities primarily involve regular, substantial, and continuing face-to-face contact between the offeror or seller and all or substantially all of the offerees or buyers.
E. "Notice to the Commission" shall mean that Jackler provides the required information in writing, signed by Jackler, to:
Notice shall be sufficient if sent by First Class mail, postage pre-paid or personally delivered to the above addressee.
E. "And" and "or" shall be construed conjunctively or disjunctively as necessary, to make the applicable phrase or sentence inclusive rather than exclusive.
I. PROHIBITED BUSINESS PRACTICES
A. IT IS THEREFORE ORDERED that Jackler, and his officers, directors, agents, servants, employees, salespersons, attorneys, corporations, subsidiaries, affiliates, successors, assigns, and other entities or persons directly or indirectly under his control, and all persons or entities in active concert or participation with him who receive actual notice of this Order by personal service, or otherwise, are hereby permanently restrained and enjoined from the promotion, advertising, marketing, sale, or offering for sale of:
(i) any application preparation or filing service for any licenses or permits issued by the United States government, or any agency thereof; and
(ii) any Investment or Investment Offering which involves, or has as a component of such Investment or Investment Offering, any license or permit, or any interest in any license or permit issued by the United States Government.
B. IT IS FURTHER ORDERED that Jackler, and his officers, directors, agents, servants, employees, salespersons, attorneys, corporations, subsidiaries, affiliates, successors, assigns, and other entities or persons directly or indirectly under his control, and all persons or entities in active concert or participation with him who receive actual notice of this Order by personal service or otherwise, in connection with the promotion, advertising, marketing, sale, or offering for sale of any application preparation services for Specialized Mobile Radio ("SMR") licenses issued by the Federal Communications Commission, Investment, Investment Offering, Telemarketed Product, or Telemarketed Service, are hereby permanently restrained and enjoined from:
IT IS FURTHER ORDERED that the prohibitions contained in this Section apply to any oral and written representations, and to assisting others in the making of any false representations delineated in this Section. The prohibitions in this Section shall be in addition to any restrictions and prohibitions contained in other Sections of this Order.
II. BOND REQUIREMENT
IT IS FURTHER ORDERED that Jackler, whether directly or indirectly through any persons or entities under his control, is hereby permanently enjoined and restrained from engaging in the Business of Telemarketing or Assisting others engaged in the Business of Telemarketing, unless, prior to engaging in the Business of Telemarketing or Assisting others engaged in the Business of Telemarketing, he first obtains a performance bond ("the Bond") in the principal sum of ONE HUNDRED THOUSAND DOLLARS ($100,000). The terms and conditions of the Bond requirement are as follows:
A. The Bond shall be conditioned upon compliance with Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), the Telemarketing Sales Rule, 16 C.F.R. Part 310, and with the provisions of this Order. The Bond shall be deemed continuous and remain in full force and effect as long as Jackler continues to engage in the Business of Telemarketing, or assists others in the Business of Telemarketing. Jackler shall maintain the Bond for a period of five (5) years after he provides Notice that he has ceased to engage in the Business of Telemarketing, or ceased to assist others in the Business of Telemarketing. The Bond shall cite this Order as the subject matter of the Bond, and shall provide surety thereunder against financial loss resulting from whole or partial failure of performance due, in whole or in part, to any violation of Section 5(a) of the FTC Act, the Telemarketing Sales Rule, the provisions of this Order, or to any other violation of law;
B. The Bond required pursuant to this Section shall be an insurance agreement providing surety for financial loss issued by a surety company that is admitted to do business in each state in which the Jackler, or any entity directly or indirectly under his control, is doing business and that holds a Federal Certificate of Authority As Acceptable Surety On Federal Bond and Reinsuring. The Bond shall be in favor of both: (1) the Federal Trade Commission for the benefit of any consumer injured as a result of any activities that required obtaining the Bond; and (2) any consumer so injured;
C. The Bond required pursuant to this Section is in addition to, and not in lieu of, any other bonds required by federal, state, or local law;
D. At least ten (10) days before commencing in any activity that requires obtaining the Bond, Jackler shall provide Notice to the Commission describing in reasonable detail said activities, and include in such Notice a copy of the Bond obtained;
E. Jackler shall not disclose the existence of the Bond to any consumer or other purchaser or prospective purchaser of any Telemarketed Service or Product, without simultaneously making the following disclosure: "THE BOND IS REQUIRED BY ORDER OF THE U.S. DISTRICT COURT IN SETTLEMENT OF CHARGES THAT DEFENDANT ENGAGED IN FALSE AND MISLEADING REPRESENTATIONS IN THE PROMOTION AND SALE OF INVESTMENTS IN CONNECTION WITH LICENSES ISSUED BY THE FEDERAL COMMUNICATIONS COMMISSION." This disclosure shall be made by Jackler in all sales materials, and on the front side of all documents sent to customers to acknowledge orders and/or the receipt of funds. The disclosure shall be set forth in a clear and conspicuous manner, separated from all other text, in 100 percent black ink against a light background, in print at least as large as the main text of the sales material or document, and enclosed in a box containing only the required disclosure.
III. MONETARY RELIEF
IT IS FURTHER ORDERED that, in full satisfaction of the Commission's claim against Jackler and the Receivership Companies for monetary relief, Jackler shall pay the sum of ONE MILLION, SIX HUNDRED THOUSAND DOLLARS ($1,600,000) as follows:
A. Within five business days of presentation of a certified copy of this Order by the Receiver, Barnett Bank shall transfer by wire to the Commission the sum of ONE MILLION, SIX HUNDRED THOUSAND DOLLARS ($1,600,000), from Jackler's frozen account # 1463803453 at Barnett Bank ("the Frozen Account"); Barnett Bank shall transfer the balance of the Frozen Account to the Receiver to be disbursed by the Receiver in accordance with a Stipulation of Settlement entered into by Jackler and the Receiver.
IT IS FURTHER ORDERED that Jackler shall release, relinquish, discharge and transfer any and all of his rights, title and interest in the stock and assets of the Receivership Companies to the Receiver, to be administered by the Receiver in accordance with the Stipulated Order and any further Orders of the Court;
IT IS FURTHER ORDERED that by stipulating and agreeing to the entry of this Order, Jackler shall be deemed to have released, relinquished, discharged, and transferred any and all of his right, title and interest in the stock and assets of the Receivership Companies to the Receiver;
IT IS FURTHER ORDERED that within five (5) business days of presentation of a certified copy of this Order, any assets held by M.J. Meyerson, frozen pursuant to prior Order of this Court, may be released;
IT IS FURTHER ORDERED that funds received by the Commission pursuant to this Section shall be deposited in an interest bearing account maintained by the Commission or the Receiver. Said funds shall be distributed as redress to eligible consumers holding allowed claims, in accordance with an Order to be entered by this Court. The Receiver, in consultation with the Commission, shall submit to the Court for its review and approval a Consumer Redress Plan ("the Plan") for the disbursement of funds. The Plan shall set forth, among other things, the criteria and parameters for participation by injured consumers in a redress program, and may delegate any and all tasks connected with such redress program to the Receiver, his agents, and/or any individuals, partnerships, or corporations, and shall provide for payment of the fees, salaries, and expenses incurred in carrying out said tasks from the funds received pursuant to this Section.
IV. RECORDKEEPING REQUIREMENTS
IT IS FURTHER ORDERED that, for seven years from the date of entry of this Order, Jackler, and his officers, agents, servants, employees, attorneys, and all other persons or entities in active concert or participation with him who receive actual notice of this Order by personal service or otherwise, in connection with the advertising, promotion, offering for sale or sale of any Investment, Investment offering, Telemarketed Product or Telemarketed Service, are hereby enjoined and restrained from:
A. Destroying, concealing, transferring, or otherwise disposing of any correspondence to or from customers or law enforcement authorities, lead sheets, personnel records, shipping and mailing records maintained in the ordinary course of business, and exemplar copies of all written promotional material, scripts, and training materials;
B. Failing to make and keep records about any transaction between (1) Jackler, directly or indirectly, or through any business owned, managed or controlled by him, directly or indirectly, and (2) any customer. Such records shall include the following: the customer's name; his or her address; his or her telephone number; a description of the good, service, or interest purchased; the dollar amounts the customer paid; the sales agent's name; and the date of the sale(s);
C. Failing to make and keep books, records of cash disbursements and receipts, bank and other financial account statements that, in reasonable detail, accurately reflect the assets and liabilities, owners' equity, sources of revenue, expenses, and disposition of assets for all business entities owned, managed, or controlled by Jackler, directly or indirectly;
D. Failing to make and keep records that reflect, for every complaint or refund request by any customer of Jackler, or by any customer of any business owned, managed or controlled by him, directly or indirectly, whether such complaint or refund request is received directly or indirectly or through any third party: (1) the customer's name, address, telephone number and the dollar amount paid by the customer; (2) the written complaint, if any, and the date of the complaint or refund request; (3) the basis of the complaint, including but not limited to the name of any salesperson or agent complained against, and the nature and result of any investigation conducted concerning the validity of the complaint; (4) each response and the date of the response; (5) any final resolution and the date of the resolution; and (6) in the event of a denial of a refund request, the reason for such denial, or if the complaint was cured, the basis for determining that the complaint was cured.
V. MONITORING PROVISIONS
IT IS FURTHER ORDERED, to monitor compliance with this Order, that:
A. Jackler shall provide Notice to the Commission within ten (10) days of the entry of this Order, of his current residence address, mailing address (for receipt of notice and service of process), telephone numbers, and employment status, including but not limited to the name, address, and telephone number of his current employer(s), and his job description;
B. For a period of seven (7) years from the date of entry of this Order, Jackler shall provide Notice to the Commission within ten (10) days of any changes in his residence or mailing address or employment status, including but not limited to the names, addresses, and telephone numbers of his new employer(s), and his new job description;
C. For a period of seven (7) years from the date of entry of this Order, if Jackler becomes engaged in the Business of Telemarketing, or becomes affiliated, in any capacity, with a business entity, the activities of which include the advertising, promotion, offering for sale or sale of any Investment, Investment Offering, the Business of Telemarketing, Telemarketed Product or Telemarketed Service, Jackler shall:
(1) within ten (10) days of beginning such affiliation, provide Notice to the Commission which shall include his new business address and telephone number; the name of the business's principals and Jackler's supervisors, a statement of the business's activities, and Jackler's duties and responsibilities;
(2) provide a copy of this Order to all salespersons Jackler supervises, within ten (10) days of beginning such supervision;
(3) provide a copy of this Order to any person whom he or the business employs (whether designated as an employee, independent contractor, consultant, or otherwise) if Jackler participates as a principal, director, officer, majority owner, partner, or other controlling party, in such business entity, within ten (10) days of beginning of his employment;
(4) upon providing a copy of this Order as described in subparagraphs C.3 and C.2 above, Jackler shall obtain a signed statement from each recipient acknowledging receipt of the Order, and giving the recipient's residential address and telephone number. Jackler shall maintain each such statement as part of his business records. Should any recipient fail or refuse to provide Jackler with a signed statement, Jackler shall prepare a signed statement that such recipient has been provided a copy of this Order, and that provides the recipient's residential address and telephone number. Jackler shall maintain each such signed statement as part of his business records; and
D. Jackler shall:
(1) permit representatives of the Commission, within forty-eight hours of receipt of written notice from the Commission, access during normal business hours to any office, or facility storing documents, of any business owned by him, or of which he is a principal, director, officer, partner, or other controlling party, to inspect and copy all documents belonging to such business or him, relating in any way to any matter subject to this Order;
(2) refrain from interfering with any duly authorized representatives of the Commission who seek to interview his employers, employees (whether designated as employees, consultants, independent contractors or otherwise), or agents, about any matter relating in any way to any matter subject to this Order; and
(3) upon written request by any duly authorized representative of the Commission, submit written reports (under oath, if requested), and produce documents, on forty-eight hours notice, relating in any way to any matter subject to this Order.
Provided, that the Commission may otherwise monitor the compliance of Jackler with this Order by all lawful means available, including but not limited to the use of compulsory process, the taking of depositions or oral testimony, and the use of investigators posing as consumers or suppliers.
VI. RIGHT TO REOPEN
IT IS FURTHER ORDERED that, within three (3) business days after entry of this Order, Jackler shall submit to the Commission a truthful, sworn statement that shall reaffirm and attest to the truth, accuracy, and completeness of his financial statements dated July 10, 1997, and any subsequent written updates thereto which have been provided to the Commission.
The Commission's agreement to this Order is expressly premised upon the truthfulness, accuracy, and completeness of the financial statements dated July 10, 1997, and subsequent updates. If, upon motion by the Commission, the Court finds that the financial statements or subsequent updates failed to disclose any material asset, materially misrepresented the value of any asset or made any other material misrepresentation or omission as to Jackler's financial status, the Commission may request that this Order be reopened as to Jackler for the purpose of increasing the monetary judgment against him to the sum of $2,600,000, less any payments made pursuant to Section III, above; provided, however, that in all respects this Order shall remain in full force and effect unless otherwise ordered by the Court and Jackler shall have no right to contest any of the allegations in the Commission's Complaint in any proceedings brought pursuant to this Section; provided, further, that proceedings instituted under this Section shall be in addition to and not in lieu of any other civil or criminal remedies as may be provided by law, including any other proceedings the Commission may initiate to enforce this Order.
VII. CONTINUATION OF THE RECEIVER
IT IS FURTHER ORDERED that the Receiver shall continue to administer the Receivership Companies and their assets in accordance with the Stipulated Order, this Order, and any further Orders which may be entered by this Court.
VIII. RETENTION OF JURISDICTION
IT IS FURTHER ORDERED that this Court shall retain jurisdiction of this matter for purposes of construction, modification and enforcement of this Order. In the event that the Commission initiates proceedings to enforce this Order and the Court finds that Jackler has violated the Order, Jackler shall pay the costs and attorneys' fees incurred by the Commission in such enforcement proceedings.
XI. ENTRY OF THIS JUDGMENT
IT IS FURTHER ORDERED that there being no just reason for delay of entry of this judgment, and, pursuant to Fed.R.Civ.P. 54(b), the Clerk shall enter this Order immediately.
The undersigned hereby STIPULATE AND AGREE to the entry of this Order which shall constitute a final judgment in this action as to Sheldon Jackler and the Receivership Companies.
Sheldon Jackler, Individually
Sheldon Jackler, President
Stephen Hill, Esq.
Daniel R. Goodman, Esq.
Stephen Gurwitz, Esq.
SO ORDERED this day of , 199 .
JED S. RAKOFF