| JEFFREY KLURFELD, Bar No. 53903 RAYMOND E. MCKOWN, Bar No. 150975 Federal Trade Commission 10877 Wilshire Boulevard, Ste. 700 Los Angeles, California 90024 (310) 824-4343 ph. (310) 824-4380 fax Attorneys for Plaintiff FEDERAL TRADE COMMISSION UNITED STATES DISTRICT COURT FEDERAL TRADE COMMISSION, Plaintiff, v. RALPH LEWIS MITCHELL, JR., also known as Ralph Lewiss Mitchell, Jr., an individual doing business as Mitchell Enterprises, Millennium Group, Diamante Marketing Group, and DMG, Defendant. COMPLAINT FOR INJUNCTIVE AND OTHER EQUITABLE RELIEF Plaintiff, the Federal Trade Commission ("FTC" or "Commission") for its Complaint alleges: 1. The Commission brings this action under Sections 13(b) and 19 of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. §§ 53(b) and 57b, and Section 410(b) of the Credit Repair Organizations Act, 15 U.S.C. § 1679h(b) to obtain preliminary and permanent injunctive relief, restitution, rescission, disgorgement and other equitable relief for the defendant's deceptive acts or practices in connection with the sale and offering for sale of credit repair products in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), and Section 404(a)(2) of the Credit Repair Organizations Act, 15 U.S.C. § 1679b(a)(2). JURISDICTION AND VENUE 2. This Court has jurisdiction of this matter pursuant to 28 U.S.C. §§ 1331, 1337(a), and 1345, and 15 U.S.C. §§ 53(b), 57b, and 1679h(b). 3. Venue is proper under 28 U.S.C. § 1391 and 15 U.S.C. § 53(b). THE PARTIES 4. Plaintiff, the Federal Trade Commission, is an independent agency of the United States Government created by statute. 15 U.S.C. §§ 41 et seq. The Commission is charged, inter alia, with enforcement of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), which prohibits unfair or deceptive acts or practices in or affecting commerce. The Commission also enforces the Credit Repair Organizations Act. 15 U.S.C. § 1679h(a). The Commission is authorized to initiate federal district court proceedings, by its own attorneys, to enjoin violations of the FTC Act and the Credit Repair Organizations Act in order to secure such equitable relief, including consumer redress, as may be appropriate in each case. 15 U.S.C. §§ 53(b), 57b, and 1679h(b). 5. Defendant Ralph Lewis Mitchell, Jr., also known as Ralph Lewiss Mitchell, Jr., does business at 1201 University Avenue, #106-109, Riverside, California, and 1606 East Washington, Colton, California. At all times material to this complaint, acting alone or in concert with others, he has formulated, directed, controlled or participated in the acts and practices set forth in this complaint. Defendant Mitchell resides or has transacted business in this District. COMMERCE 6. At all times relevant to this complaint, defendant has maintained a substantial course of trade in the offering for sale and selling of credit repair products, in or affecting commerce, as "commerce" is defined in Section 4 of the FTC Act, 15 U.S.C. § 44. DEFENDANT'S BUSINESS PRACTICES 7. Since at least January 1998, through various entities including but not limited to Mitchell Enterprises, Millennium Group, Diamante Marketing Group, and DMG, the defendant has advertised, promoted, offered for sale, and sold credit repair products to consumers through the use of the Internet using banner advertising, website links, and unsolicited commercial electronic messages ("e-mail") popularly known as "spamming." 8. Defendant claims he and his products can improve consumers' credit histories, credit records, or credit ratings by advising them how to establish new credit files. Defendant further claims these recommendations for creating new files are legal. 9. Typical and illustrative of defendant's claims about his credit products can be found at defendant's Internet sites, respectively, "www.edmg.com/credit/homea3.htm," and "www.edmg.com/credit/credit.htm," which include the following:
10. Consumers who send the requested amount [$32.95 after discounts] to defendant as instructed by defendant's advertisements receive a booklet, "Credit Secrets, The Credit Bureaus Don't Want You To Know!!!!," which advises consumers "There are 3 ways that people create a new credit file. One is to use their same name with different personal information. Another is to use the same personal information with a different first or last name. And last of all, they use an alias name with the same or different personal information. When I speak of personal information I'm talking about a person's birthdate, social security number, address etc. It's up to you to decide which way is best for you." The booklet advises consumers to "adjust" their social security number by selecting different numbers according to the author's formula. The booklet also discloses techniques to obtain a new Social Security card, a new driver's license or state identification card, a new home address, or a new name, all of which are false, in order to obtain a new credit profile. VIOLATIONS OF THE CREDIT REPAIR ORGANIZATIONS ACT 11. The Credit Repair Organizations Act, 15 U.S.C. §§ 1679a-j (1997), was enacted on September 30, 1996, and has been in full force and effect since April 1, 1997. 12. Section 404(a)(2) of the Credit Repair Organization Act prohibits all persons from making any statement, or counseling or advising any consumer to make any statement, the intended effect of which is to alter the consumer's identification to prevent the display of the consumer's credit record, history, or rating for the purpose of concealing adverse information that is accurate and not obsolete to any consumer reporting agency, as defined in 15 U.S.C. § 1681(f), or to any person who has extended credit to the consumer or to whom the consumer has applied or is applying for an extension of credit. 15 U.S.C. § 1679b(a)(2). 13. Pursuant to Section 410(b)(1) of the Credit Repair Organizations Act, 15 U.S.C. § 1679h(b)(1), any violation of any requirement or prohibition of the Credit Repair Organizations Act constitutes an unfair and deceptive act or practice in commerce in violation of Section 5(a) of the FTC Act, 15 U.S.C.§ 45(a). COUNT ONE 14. In numerous instances, defendant has counseled or advised consumers to make statements, the intended effect of which has been to alter the consumer's identification to prevent the display of the consumer's credit record, history, or rating for the purpose of concealing adverse information that is accurate and not obsolete to consumer reporting agencies, as that term is defined in 15 U.S.C. § 1681(f), or to persons who have extended credit to those consumers or to whom those consumers have applied or are applying for extensions of credit. 15. Defendant has thereby violated Section 404(a)(2) of the Credit Repair Organizations Act, 15 U.S.C. § 1679b(a)(2). VIOLATIONS OF THE FEDERAL TRADE COMMISSION ACT COUNT TWO 16. In connection with the advertising, marketing, promotion, offering for sale, or sale of credit repair products, to induce consumers to purchase his products, defendant has, expressly or by implication, represented that, through the use of his products, consumers can legally alter their identifications to conceal adverse credit information from consumers' credit records, credit histories, or credit ratings. 17. In truth and in fact, through the use of defendant's products, consumers cannot legally alter their identifications to conceal adverse credit information from their credit records, credit histories, or credit ratings. 18. Therefore, the representation set forth in paragraph 16 is false and misleading and constitutes a deceptive act or practice in or affecting commerce, in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a). CONSUMER INJURY 19. Consumers throughout the United States have suffered or are likely to suffer substantial monetary loss as a result of defendant's unlawful acts or practices. Absent injunctive relief by this Court, defendant is likely to continue to injure consumers and harm the public interest. THIS COURT'S POWER TO GRANT RELIEF 20. Sections 13(b) and 19 of the FTC Act, 15 U.S.C. §§ 53(b) and 57b, and Section 410(b) of the Credit Repair Organizations Act, 15 U.S.C. § 1679h(b), empower this Court to issue a permanent injunction against defendant's violations of the Credit Repair Organizations Act and the FTC Act and, in the exercise of its equitable jurisdiction, to order such ancillary relief as preliminary injunction, rescission, restitution, disgorgement of profits resulting from defendant's unlawful acts or practices, and other remedial measures. PRAYER FOR RELIEF 21. WHEREFORE, plaintiff requests that this Court, as authorized by Section 410(b) of the Credit Repair Organizations Act, 15 U.S.C. § 1679h(b), Sections 13(b) and 19 of the FTC Act, 15 U.S.C. §§ 53(b) and 57b, and pursuant to its own equitable powers:
Respectfully Submitted, DEBRA A. VALENTINE Dated: , 1999 Raymond E. McKown |