JOEL N. BREWER
G. BRENT MICKUM
Federal Trade Commission
601 Pennsylvania Ave., N.W.
Washington, D.C. 20580
Attorneys for Plaintiff
UNITED STATES DISTRICT COURT
FEDERAL TRADE COMMISSION,
AKOA, INC., et al.,
Civ. No. 97-7084 LGB (Mcx)
STIPULATION OF EDWARD E. RAYDEN TO FINAL JUDGMENT FOR PERMANENT INJUNCTION
Plaintiff, the Federal Trade Commission ("FTC") filed its Amended Complaint against AKOA, Inc., Easyway International, Inc., Rayco, Inc., Jeffrey L. Rayden, Larry D. Wayne, and Edward E. Rayden, all also d/b/a National PC Systems, pursuant to Sections 13(b) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. §§ 53(b), charging Defendants with violations of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a). On September 25, 1997, the Court granted the Plaintiff's ex parte Application for a Temporary Restraining Order with Asset Freeze, Expedited Discovery, Immediate Access, and Appointment of a Temporary Receiver, and ordered Defendants to Show Cause why a preliminary injunction should not issue against them. The parties subsequently stipulated to a continuance of the Temporary Restraining Order to November 6, 1997.
NOW, Plaintiff FTC and defendant Edward E. Rayden, by and through their counsel, having stipulated to this Final Judgment for Permanent Injunction ("Judgment") to resolve all matters of dispute between them in this action, without defendant Edward E. Rayden admitting any of the allegations made in the Amended Complaint or admitting that he has violated the FTC Act or any other applicable law, IT IS HEREBY ORDERED, ADJUDGED AND DECREED AS FOLLOWS:
I. BAN FROM SALE OF SERVICE CONTRACTS
IT IS THEREFORE ORDERED that defendant Edward E. Rayden shall be and hereby is permanently restrained and enjoined from
A. Engaging or participating in the advertising, promoting, marketing, offering for sale, sale or distribution to consumers of any service contract by mail or telephone, through any business entity, investment or other device, for which service contracts constitute more than ten percent (10%) of the revenues of the business entity, investment or other device, in any capacity whatsoever, including but not limited to as a business owner, trustee, officer, director, employee; or
B. Providing assistance to or consulting with any other person, or with any other business entity for which service contracts constitute more than ten percent (10%) of the revenues of the business entity, engaged in the advertising, promoting, marketing, offering for sale, or sale to consumers of any service contract by mail or telephone.
II. PROHIBITED ACTIVITIES
IT IS FURTHER ORDERED that, in connection with the advertising, offering for sale, promoting, marketing, sale or distribution to consumers of goods or services by mail or telephone, Defendant is hereby permanently restrained and enjoined from:
A. Requesting, demanding or accepting payment by any consumer for any goods or services without the consumer's prior expressed request or consent for such goods or services.
B. Making any express or implied representation of fact for the purpose of soliciting the purchase of goods or services from defendant Edward E. Rayden, or from any entity which defendant Edward E. Rayden owns in whole or in part, controls or has authority to control, that is false or misleading, including, but not limited to, misrepresenting, directly or by implication, any of the following:
III. PROHIBITED BUSINESS ACTIVITIES
IT IS FURTHER ORDERED that, for any business entity which defendant Edward E. Rayden owns in whole or in part, controls or has authority to control, in connection with the advertising, offering for sale, promoting, marketing, sale or distribution to consumers of goods or services by mail or telephone, defendant Edward E. Rayden is hereby permanently restrained and enjoined from:
A. Sending any promotional or advertising material that is in the form of, and reasonably could be interpreted or construed as, a bill, invoice, or statement of account due, to any consumer, unless Defendant makes the following disclosure, clearly and prominently, on the front of the envelope, close to the consumer's address, and on the top right corner of the front of the first page of the enclosure: "THIS IS NOT A BILL." This disclosure shall be in 30 point type or larger, in print that contrasts with the background against which it appears.
B. In telephoning any consumer without the consumer's prior consent for the purpose of soliciting the purchase of goods or services from defendant Edward E. Rayden or from any entity which defendant Edward E. Rayden owns in whole or in part, controls or has authority to control, failing to disclose to the consumer, promptly and in a clear and conspicuous manner, the following information:
C. Refusing any refund request from any consumer who paid for any goods or services as a result of any false or misleading representation by Defendant.
D. Refusing upon request to make a full refund to any consumer who paid for goods or services and who has not been able to obtain them within the time represented or, if no time is represented, within two (2) weeks of making a request for goods or services.
E. Failing to make any refund required by this Judgment within seven (7) business days from the date the request for refund is received by Defendant, whether such request was made orally, in writing, or by any other means.
IV. MONETARY JUDGMENT
IT IS FURTHER ORDERED that:
A. A judgment in the amount of fifteen thousand dollars ($15,000.00) is hereby entered against defendant Edward E. Rayden. Defendant Edward E. Rayden shall pay this judgment, immediately upon its entry, by delivering to the Receiver herein, Norbert J. Nowicki, Nowicki & Associates, 7424 Jackson Dr., Suite 2, San Diego, CA 92119, a certified check in the entire amount made payable to "Norbert J. Nowicki, Receiver." The Receiver shall hold this amount in escrow as an offset against his fees, if any, or for payment to the FTC for redress to consumers or disgorgement, as will be hereafter determined by the Court in disposing of this matter as to all parties. In the event of any default in payment, interest as computed under 28 U.S.C. § 1961 shall accrue on the unpaid balance from the date of default until the balance is fully paid.
B. Defendant Edward E. Rayden hereby agrees to the discharge of the unpaid remainder of any debts owed to him by the AKOA, Inc., Rayco, Inc., Easyway International, Inc., all also d/b/a National PC Systems, and all also d/b/a Checkwriter Systems, ("corporate defendants"), and shall promptly execute and tender to the Receiver all papers requested by the Receiver reasonably necessary to effectuate this provision.
C. Except as provided in Paragraphs VI, and VII of this Judgment, payment by defendant Edward E. Rayden of $15,000.00 and any interest on this amount and discharge of the unpaid remainder of all debts under the terms of this Paragraph shall satisfy all claims for monetary relief against him individually in this action by the FTC.
V. CLAIMS PROCEDURE
IT IS FURTHER ORDERED that after payment of the monetary judgment by defendant Edward E. Rayden and resolution of this matter as to all the other named defendants, the FTC shall, if practical, develop a claims procedure that will enable consumers who paid the defendants in this matter for computer maintenance service contracts to make claims against those funds, and provide for a means of distributing the funds recovered to the consumers who have approved claims. Defendant Edward E. Rayden forever disclaims all right, title, and interest in all sums paid to the Receiver and the FTC. None of these funds shall be returned to any of the defendants herein, their successors, heirs, or assigns. If the FTC determines, in its sole discretion, that redress to consumers is wholly or partially impractical, or if any portion of the funds used for redress remains unclaimed by consumers after a period for making claims ends, the remainder shall be deposited in the United States Treasury. No portion of any payments under this Judgment shall be deemed a payment of any fine, penalty, or punitive assessment.
VI. RIGHT TO REOPEN
IT IS FURTHER ORDERED that the FTC's agreement to this Judgment is expressly premised upon the truthfulness, accuracy, and completeness of the Financial Statement of defendant Edward E. Rayden executed on October 20, 1997, and his other financial statements, which, by his signature hereto he hereby acknowledges and affirms under penalty of perjury, viz., that no part of the approximately $145,000 held in two American Savings Bank accounts, numbers 824-1001414-4 and 824-1002313-7, which defendant Edward E. Rayden holds in trust for the sole benefit of his mother, Eileen Rayden, was derived, directly or indirectly, from his engaging, individually or with any other named defendant herein, in any of the activities alleged in the Amended Complaint. These financial statements contain material information upon which the FTC has relied in negotiating and agreeing to the terms of this Judgment. If, upon motion by the FTC, this Court finds that any of defendant Edward E. Rayden's financial statements was untruthful, inaccurate or incomplete, or materially misrepresented defendant Edward E. Rayden's financial condition or the source of his income or any asset, or the value of any asset, or the purpose for which he is holding any asset, or made any other material misrepresentations or omissions of assets, the FTC may request that the Judgment be reopened for the purpose of modifying the terms of the Judgment to provide a payment of up to $150,000.00 by defendant Edward E. Rayden in redress to consumers or disgorgement to the United States Treasury; provided, however, that in all other respects this Judgment shall remain in full force and effect unless otherwise ordered by this Court; and, provided further, that proceedings instituted under this paragraph are in addition to, and not in lieu of, any other civil or criminal remedies that may be provided by law, including any other proceedings that the FTC may initiate to enforce this Judgment.
VII. COSTS AND ATTORNEY FEES
IT IS FURTHER ORDERED as follows:
A. Except as set forth in Paragraph IV and in this Paragraph, each party to this Judgment shall bear its own costs and attorney fees incurred in connection with this action; provided, however, in the event Plaintiff initiates proceedings to enforce the provisions of this Judgment, and, provided further, the Court determines that Defendant has violated any term or provision of this Judgment, defendant Edward E. Rayden shall pay the costs and attorney fees incurred by Plaintiff in connection with proceedings to enforce this Judgment against him; and,
B. Notwithstanding any other provision of this Judgment, defendant Edward E. Rayden agrees that, if he fails to meet the payment obligations set forth in Paragraph IV, he shall pay the costs and attorneys fees incurred by the FTC and its agents in any attempts to collect amounts due any of them pursuant to this Judgment. Defendant Edward E. Rayden further agrees that the facts as alleged in the Amended Complaint shall be taken as true in any subsequent litigation filed by the FTC to enforce its rights under Paragraph IV, including but not limited to a nondischargeability complaint in any subsequent bankruptcy proceeding.
VIII. NOTICE OF AFFILIATION OR CHANGE IN STATUS
IT IS FURTHER ORDERED that, for a period of three (3) years from the entry of this Judgment, defendant Edward E. Rayden shall promptly give written notice to the Associate Director for Enforcement, Federal Trade Commission, Washington, D.C. 20580, of:
A. Any change in his employment status (including self-employment) within ten (10) days of such change. Such notice shall include the name and address of each business that he is affiliated with or employed by, a statement of the nature of the business, and a statement of his duties and responsibilities in connection with the business or employment; and,
B. Any proposed change in the structure of the corporate defendants, or any business entity owned or controlled in whole or in part by defendant Edward E. Rayden, such as creation, incorporation, dissolution, assignment, sale, creation or dissolution of subsidiaries, or any other change that may affect compliance obligations arising out of this Judgment, thirty (30) days prior to the effective date of any proposed change.
C. Plaintiff hereby acknowledges receipt of notice by defendant Edward E. Rayden that Direct Results, Inc., a Nevada corporation, may become his sole proprietorship. With regard to this business, defendant Edward E. Rayden acknowledges that he will timely provide the other information required by Paragraph VIII, Subpart A of this Judgment when it becomes available to him.
IX. MAINTENANCE OF BUSINESS RECORDS
IT IS FURTHER ORDERED that, for a period of three (3) years from the entry of this Judgment, for any business entity owned in whole or in part, controlled by Edward E. Rayden, or which defendant Edward E. Rayden has authority to control, in connection with the advertising, promoting, offering for sale, sale, or distribution of any goods or services by mail or telephone, Defendant shall create and maintain:
A. Records containing the name, address, telephone number, and Social Security number of each person employed by Defendant in any capacity, that person's job title or position, the date upon which the employee commenced work, and the date and reason for the employee's termination, if applicable;
B. Records containing the names, addresses, and telephone numbers, and all written or tape-recorded communications with consumers to whom Defendant, whether directly or through any business entity or other device, sells, invoices, or ships goods or services;
C. Records and accounts that, in reasonable detail, accurately and fairly reflect the income, disbursements, transactions, and use of monies by Defendant;
D. Records of every written or oral consumer complaint or refund request received by Defendant, including the following:
E. Defendant Edward E. Rayden shall be authorized hereby to obtain, upon reasonable notice, copies of documents in the possession of the Receiver of the corporate defendants.
X. MONITORING OF BUSINESS PRACTICES
IT IS FURTHER ORDERED that, for purposes of securing compliance with this Judgment, for a period of three (3) years from the entry of this Judgment, in connection with any business entity owned or controlled in whole or in part by defendant Edward E. Rayden, Defendant shall:
A. Within five (5) days after receipt of a written request, permit representatives of Plaintiff access during normal business hours to any office or facility in which Defendant stores or holds documents and records, to inspect and copy any such documents and records in Defendant's possession or control, including all documents and records Defendants are required by Paragraph IX to maintain;
B. Permit representatives of Plaintiff, within five (5) business days after receipt of a written request, to interview the officers, directors, or employees of any such business, subject to the reasonable convenience of the Defendant and the person to be interviewed, and without restraint or interference from Defendant, at a location reasonably convenient to the person to be interviewed, Defendant, and Plaintiff; provided, however, that such officers, directors or employees may have counsel present;
C. Produce documents requested by Plaintiff within five (5) business days of receipt of such request;
D. Permit representatives of Plaintiff to depose any officers, directors, or employees of any such business within ten (10) business days of receipt of such request; and,
E. Permit representatives of Plaintiff immediate access upon demand or, in the case of a business operated from defendant Edward E. Rayden's home, access upon reasonable notice, to any premises or facilities owned, occupied, or controlled by Defendant to determine compliance with the Judgment.
F. In connection with any request by Plaintiff or its representatives hereunder, defendant Edward E. Rayden expressly reserves the right to assert any applicable attorney-client, attorney work-product, or constitutional or other privilege.
XI. DISTRIBUTION TO DESIGNATED INDIVIDUALS
IT IS FURTHER ORDERED that, for a period of three (3) years from the date of entry of this Judgment, defendant Edward E. Rayden shall:
A. Immediately provide a copy of this Judgment to, and obtain a signed and dated acknowledgment of receipt of the same from:
B. Maintain, and upon reasonable notice make available to any representative of Plaintiff, the original and dated acknowledgments of the receipts required by this Paragraph.
XII. LIFTING ASSET FREEZE AND RECEIVERSHIP
IT IS FURTHER ORDERED that, upon payment by defendant Edward E. Rayden of $15,000 to the Receiver and entry of this Judgment, the Temporary Restraining Order with Asset Freeze, Expedited Discovery, Immediate Access and Appointment of a Temporary Receiver entered September 25, 1997, is hereby lifted in its entirety as to defendant Edward E. Rayden only. Defendant Edward E. Rayden shall indemnify and hold harmless the Receiver from all claims for acts or omissions occurring during the receivership, except for those acts or omissions resulting from wilful misconduct.
XIII. RETENTION OF JURISDICTION
IT IS FURTHER ORDERED that this Court shall retain jurisdiction of this matter for the purpose of enabling the parties to apply to the Court at any time for such further orders or directives as may be necessary or appropriate for the interpretation or modification of this Judgment, for the enforcement of compliance therewith, or the punishment of violations thereof.
XIV. WAIVER OF CLAIMS
Defendant Edward E. Rayden waives all claims under the Equal Access to Justice Act, 28 U.S.C. § 2412, as amended by Pub. L. No. 104-121, 110 Stat. 847, 863-64 (1996), and all rights to seek judicial review or otherwise to challenge or contest the validity of this Judgment, or the temporary or preliminary orders entered in this proceeding, and further waives and releases any claim he may have against the FTC, the Receiver, or their employees, agents or representatives, except as provided in Paragraph XII.
There being no just reason for delay, the Clerk of the Court is hereby directed to enter this Judgment.
SO ORDERED, this day of , 1997, at .
LOURDES G. BAIRD
The parties listed below hereby stipulate and agree to entry of the foregoing Judgment, which shall constitute the Final Judgment in this action as to the undersigned.
SIGNED AND STIPULATED BY: FEDERAL TRADE COMMISSION
Dated: , 1997
ELAINE D. KOLISH
ELENA I. PAOLI
Dated: , 1997
EDWARD E. RAYDEN