UNITED STATES DISTRICT COURT
FEDERAL TRADE COMMISSION, Plaintiff,
GARY WALTON, d/b/a Pinnacle Financial Services, Defendant.
Civil No. CIV98-0018 PCT SMM
STIPULATED PRELIMINARY INJUNCTION
Plaintiff, the Federal Trade Commission ("Commission"), having filed a Complaint for a permanent injunction and other relief, including restitution to consumers, pursuant to Sections 13(b) and 19 of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. §§ 53(b) and 57b, and Section 6 (b) of the Telemarketing and Consumer Fraud and Abuse Prevention Act ("Telemarketing Act"), 15 U.S.C. § 6105(b), naming as defendant Gary Walton, and the Court having issued an Order requiring defendant to show cause why a preliminary injunction should not be granted pursuant to Rule 65(b) of the Federal Rules of Civil Procedure, and the Commission and defendant Gary Walton having agreed to the following, the Court now orders:
For purposes of this Order the following definitions shall apply:
1. "Advance fee loan services" means services in which payment of a fee or consideration is requested or received by a seller or telemarketer in advance of obtaining or arranging a loan for a person.
2. "Defendant" means the named defendant, Gary Walton, individually and d.b.a. Pinnacle Financial Services and/or Inner Circle and/or any other trade name, as well as his successors and assigns, directors, officers, agents, servants, employees, salespersons, corporations, subsidiaries, affiliates, and other persons directly or indirectly under his control or in active concert or participation with him who receive actual notice of this Order by personal service, facsimile or otherwise, whether acting directly or through any corporation, subsidiary, division or other device.
3 "Material" means likely to affect a person's choice of, or conduct regarding, goods or services.
4. "Seller" shall have the meaning set forth in Section 310.2(r) of the Telemarketing Sales Rule, 16 C.F.R. § 310.2(r).
5. "Telemarketer" shall have the meaning set forth in Section 310.2(t) of the Telemarketing Sales Rule, 16 C.F.R. § 310.2(t).
6. "Telemarketing" shall have the meaning set forth in Section 310.2(u) of the Telemarketing Sales Rule, 16 C.F.R. § 310.2(u).
I. PROHIBITED PRACTICES
IT IS THEREFORE ORDERED that, in connection with the offering of any loan or other extension of credit, defendant is hereby restrained and enjoined, until further order of this Court, from:
A. Falsely representing, directly or by implication, that:
1. Consumers have a high likelihood of obtaining loans regardless of their credit histories; or
2. Defendant has a high rate of success in obtaining or arranging loans for consumers;
B. Falsely representing, directly or by implication, or failing to disclose any fact material to a consumer's decision to pay a fee for any loan or other extension of credit;
C. Violating any provision of the Telemarketing Sales Rule, 16 C.F.R. Part 310, including but not limited to:
1. Requesting or receiving payment of any fee or consideration in advance of obtaining a loan or other extension of credit when he has guaranteed or represented a high likelihood of success in obtaining or arranging a loan or other extension of credit for a person, as prohibited by Section 310.4(a)(4) of the Telemarketing Sales Rule, 16 C.F.R. § 310.4(a)(4);
2. Misrepresenting any material restriction, limitation, or condition to purchase, or any material aspect of the performance, efficacy, nature, or central characteristics of any goods or services that are the subject of a sales offer, as prohibited by Section §310.3(a)(2)(ii) and (iii) of the Telemarketing Sales Rule, 16 C.F.R. §310.3(a)(2)(ii) and (iii);
3. Providing substantial assistance or support to any seller or telemarketer as prohibited by Section 310.3(b) of the Telemarketing Sales Rule, 16 C.F.R. § 310.3(b), when defendant knows or consciously avoids knowing that the seller or telemarketer is engaged in any act or practice that violates Section 310.3(a) or (c) or Section 310.4 of the Telemarketing Sales Rule, 16 C.F.R. § 310.3(a) or (c) or 310.4. Such substantial assistance or support includes, but is not limited to:
a. Reviewing or purporting to review loan applications and/or obtaining or purporting to obtain consumers' credit reports; and
b. Providing customer services, including answering consumer questions, receiving identification and financial information from consumers, and communicating with consumers about the purported loan review process.
D. Failing to comply fully with Section 701(d) of the Equal Credit Opportunity Act, 15 U.S.C. § 1691(d), and Section 202.9 of Federal Reserve Board Regulation B, 12 C.F.R. § 202.9; and
E. Failing to comply fully with Section 615(a) of the Fair Credit Reporting Act, 15 U.S.C. § 1681m(a).
II. ASSET FREEZE
IT IS FURTHER ORDERED that, except as stipulated by the parties, or as directed by further order of this Court, defendant is hereby restrained and enjoined, directly or through any other person or entity, until further order of this Court, from:
A. Transferring, converting, encumbering, selling, concealing, dissipating, disbursing, assigning, spending, withdrawing, or otherwise disposing of any funds, real or personal property, accounts, contracts, customer (including "E-mail") lists, shares of stock or other assets, or any interest therein, wherever located, including funds in any trust account, that are (a) owned or controlled by defendant in whole or in part; or (b) in the actual or constructive possession of defendant, or (c) owned, controlled by, or in the actual or constructive possession of any corporation, partnership, or other entity directly or indirectly owned, managed, or controlled by, or under common control with defendant, including, but not limited to, any assets held by or for defendant at any bank, or savings and loan institution, credit union, financial institution, brokerage house, escrow agent, money market or mutual fund, title company, commodity trading company, common carrier, storage company, trustee, commercial mail receiving agency, mail holding or forwarding company, precious metal dealer, or other financial institution or depository of any kind, specifically including assets in the name of any d.b.a., including Pinnacle Financial Services and/or Inner Circle;
B. Opening or causing to be opened any safe deposit box titled in the name of defendant or subject to access by defendant;
C. Incurring charges on any credit card issued in the name, singly or jointly, of defendant.
The assets affected by this Section II shall include both existing assets and assets acquired after issuance of this Order, and defendant shall hold and account for these assets and all payments received by him, including, but not limited to, borrowed funds or property and gifts.
III. MAINTENANCE OF RECORDS
IT IS FURTHER ORDERED that defendant is hereby restrained and enjoined, until further order of this Court, from:
A. Failing to create and maintain books, records, and accounts which, in reasonable detail, accurately, fairly, and completely reflect the incomes, disbursements, transactions, and use of monies by defendant;
B. Destroying, erasing, mutilating, concealing, altering, transferring or otherwise disposing of, in any manner, directly or indirectly, any contracts, customer (including "E-mail") lists, consumer application files, accounting data, correspondence, advertisements, computer tapes, disks, or other computerized records, books, written or printed records, handwritten notes, telephone logs, telephone scripts, "verification" tapes or other audio or video tape recordings, receipt books, invoices, postal receipts, ledgers, personal or business canceled checks and check registers, bank statements, appointment books, copies of federal, state or local business or personal income or property tax returns, and other documents or records of any kind that relate to the business practices or business or personal finances of defendant.
IV. DUTIES OF ASSET HOLDERS
IT IS FURTHER ORDERED that, except as stipulated by the parties or as directed by further order of this Court, any financial or brokerage institution, business entity, or person that (a) holds, controls, or maintains custody of any account or asset of defendant, including, but not limited to, any mailing (including "E-mail") lists, real property, personal property, or any account or asset that defendant may control by virtue of being a signatory on said account or asset, or (b) has, since January 1, 1996, held, controlled, or maintained custody of any such account or asset shall:
A. Prohibit all persons and entities from withdrawing, removing, assigning, transferring, pledging, encumbering, disbursing, dissipating, converting, selling, or otherwise disposing of any of these assets;
B. Deny all persons and entities access to any safe deposit box that is titled in the name, individually or jointly, of defendant or otherwise subject to access by defendant; and
C. Provide to plaintiff, within five business days of receiving a copy of this Order, a certified statement setting forth:
1. the identification number of each account or asset titled in the name, individually or jointly, of defendant or held on behalf of, or for the benefit of defendant, including all trust accounts managed on behalf of defendant or subject to his control;
2. the balance of each identified account, or a description of the nature and value of the asset as of the close of business on the day on which this Order is served, and, if the account or other asset has been closed or removed since January 1, 1996, the date closed or removed, the total funds removed in order to close the account, and the name of the person or entity to whom the account or other asset was remitted; and
3. the identification and location of any safe deposit box that is either titled in the name, individually or jointly, of defendant or is otherwise subject to access by defendant.
D. Upon request and within five business days, provide to counsel for the Commission copies of all records or other documentation pertaining to the account or asset described in Paragraph C above, including but not limited to originals or copies of account applications, account statements, signature cards, checks, drafts, deposit tickets, transfers to and from the accounts, all other debit and credit instruments or slips, currency transaction reports, 1099 forms, and safe deposit box logs.
V. SERVICE OF PRELIMINARY INJUNCTION
IT IS FURTHER ORDERED that copies of this Order may be served by first class mail, overnight delivery, facsimile or personally by employees or agents of the Commission upon any bank, savings and loan institution, credit union, financial institution, brokerage house, escrow agent, money market or mutual fund, title company, commodity trading company, common carrier, storage company, trustee, commercial mail receiving agency, mail holding or forwarding company, media broker, newspaper or other advertiser in any medium, or any other person, partnership, corporation, or other legal entity that may be in possession of any records, assets, property, or property right of defendant and any other person, partnership, corporation, or legal entity that may be subject to any provision of this Order.
VI. DEFENDANT'S FINANCIAL STATEMENT
IT IS FURTHER ORDERED that, to the extent not already provided, defendant shall, within four business days from service of this Order, prepare and deliver to the counsel for the Commission a completed financial statement on the form attached to this Order. The completed financial statement shall be accurate as of the date of service of this Order upon defendant. Defendant shall attach to this completed financial statement copies of all his federal, state, and local business or personal income and property tax returns since January 1, 1996, and copies of all policies of insurance in effect since January 1, 1996, with attachments and schedules thereto, insuring against loss of, or damage to, real or personal property owned or held by or for defendant.
VII. CONSUMER CREDIT REPORT
IT IS FURTHER ORDERED that, pursuant to Section 604(1) of the Fair Credit Reporting Act, 15 U.S.C. § 1681b(1), any consumer reporting agency may furnish a consumer report concerning defendant to plaintiff.
VIII. CREATION OF OTHER BUSINESSES
IT IS FURTHER ORDERED that defendant is hereby restrained and enjoined, until further order of this Court, from creating, operating or controlling any business entity, whether newly-formed or previously inactive, including any partnership, limited partnership, joint venture, sole proprietorship, or corporation, without first providing counsel for the Commission with a written statement disclosing: (1) the name of the business entity; (2) the address and telephone number of the business entity; (3) the names of the business entity's officers, directors, principals, managers and employees; and (4) a detailed description of the business entity's intended activities.
IX. NOTICE TO RELATED PERSONS AND ENTITIES
IT IS FURTHER ORDERED that defendant shall immediately provide a copy of this Order to each affiliate, subsidiary, division, sales entity, successor, assign, officer, director, employee, independent contractor, agent, attorney, and representative, and shall, within ten days from the date of entry of this Order, provide plaintiff with a sworn statement that defendant has complied with this provision of the Order, which statement shall include the name and address of each such person or entity who or which received a copy of the Order.
X. RETENTION OF JURISDICTION
IT IS FURTHER ORDERED that this Court shall retain jurisdiction of this matter for all purposes.
SO ORDERED, this _____ day of ______, 1998, at _______ __.m.
Jointly stipulated to and submitted by the parties:
FOR PLAINTIFF FEDERAL TRADE COMMISSION