UNITED STATES DISTRICT COURT
DISTRICT OF COLORADO

Civil Action No. 99-WM-783

FEDERAL TRADE COMMISSION, Plaintiff,

v.

JAMES J. RAPP and
REGANA L. RAPP, individually and doing business as
TOUCH TONE INFORMATION, INC., Defendants.

STIPULATED CONSENT AGREEMENT AND FINAL ORDER

Plaintiff, the Federal Trade Commission ("Commission"), filed its complaint for a permanent injunction and other relief in this matter on April 21, 1999, pursuant to Section 13(b) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. § 53(b), against defendants James J. Rapp and Regana L. Rapp, individually and doing business as Touch Tone Information, Inc. The Complaint alleges that defendants violated Section 5 of the FTC Act, 15 U.S.C. § 45(a), by obtaining the private financial information of consumers through misleading and false statements, and by disclosing or selling such information without consumers' knowledge or consent.

The Commission and the defendants, by and through their counsel, have agreed to settlement of this action upon the following terms and conditions, without adjudication of any issues of fact or law.

IT IS THEREFORE ORDERED, ADJUDGED, AND DECREED as follows:

FINDINGS

1. This Court has jurisdiction over the subject matter of this case and has jurisdiction over defendants. Venue in this district is proper.

2. The Commission has the authority under Section 13(b) of the FTC Act, 15 U.S.C. § 53(b), to seek the relief it has requested.

3. The Complaint states a claim upon which injunctive relief may be granted against the defendants under Sections 5(a) and 13(b) of the FTC Act, 15 U.S.C. §§ 45(a) and 53(b). 

4. Defendants' activities as alleged in the Commission's Complaint are in or affecting commerce, as defined in 15 U.S.C. § 44.

5. Defendants waive all rights to seek judicial review or otherwise challenge or contest the validity of this Order. Defendants also waive any claim that they may have held under the Equal Access to Justice Act, 28 U.S.C. § 2412, amended by Pub. L. 104-121, 110 Stat. 847, 863-64 (1996), concerning prosecution of this action to the date of this Order.

6. This agreement is for settlement purposes only and does not constitute an admission by defendants that the law has been violated as alleged in the Complaint or that the facts as alleged in the Complaint, other than the jurisdictional facts, are true.

7. Except as herein provided, this action and the relief awarded herein are in addition to, and not in lieu of, other remedies as may be provided by law.

8. Entry of the Final Order is in the public interest.

DEFINITIONS

For purposes of this Order:

1. "Defendants" means James J. Rapp and Regana L. Rapp, individually and doing business as Touch Tone Information, Inc.

 

2. "Private financial information" means financial information of or relating to consumers, including, but not limited to, current bank or brokerage name and address, account types, account numbers, and account balances.

 

3. "Pretexting" means making false and misleading statements to financial institutions and others to obtain private financial information.

I. PROHIBITED BUSINESS PRACTICES

IT IS THEREFORE ORDERED that defendants and their successors, assigns, officers, agents, servants, employees, and those persons in active concert or participation with them who receive actual notice of this Order by personal service or otherwise, whether acting directly or through any corporation, subsidiary, division, or other device, are hereby restrained and enjoined from violating Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), by:

A. Making, or assisting in the making, directly or by implication, in connection with the collection, disclosure, sale, or offering for sale of any private financial information, any false or misleading representation about defendants' identity;

 

B. Making, or assisting in the making, directly or by implication, in connection with the collection, disclosure, sale, or offering for sale of any private financial information, any statement or representation of material fact that is false or misleading; and

 

C. Disclosing, disseminating, distributing, or selling, without the prior written consent of the consumer to whom such information relates, any private financial information obtained through pretexting, or by others where it is known or there is reason to know that such information was obtained through pretexting; provided, however, that no provision of this Section shall be construed to prevent defendants from engaging in conduct otherwise permissible under Section 521(g) of the Gramm-Leach-Bliley Act, 15 U.S.C. § 6821(g), enacted November 12, 1999.

II. SUSPENDED JUDGMENT

IT IS FURTHER ORDERED that judgment is hereby entered against defendants James J. Rapp and Regana L. Rapp, jointly and severally, in the amount of TWO HUNDRED THOUSAND DOLLARS ($200,000.00); provided, however, that this judgment shall be suspended until further order of the Court, and provided further that this judgment shall be subject to the conditions set forth in Section III of this Order.

III. RIGHT TO REOPEN

IT IS FURTHER ORDERED that the Commission's agreement to and the Court's approval of this Order is expressly premised upon the truthfulness, accuracy, and completeness of the financial statements and information provided by defendants James J. Rapp and Regana L. Rapp to counsel for the Commission on or about December 6, 1999, which contain material information relied upon by the Commission in negotiating and agreeing to the terms of this Order.

IT IS FURTHER ORDERED that if the Commission should have evidence that the above-referenced financial statements and information failed to disclose any material asset the value of which exceeds $1,000, materially misrepresented the value of any asset, or made any other material misrepresentation or omission, the Commission may move that the Court reopen this Order for the sole purpose of allowing the Commission to modify the monetary liability of the defendants. If the Court finds that any defendant(s) failed to disclose any material asset, materially misrepresented the value of any asset, or made any other material misrepresentation or omission in the above-referenced financial statements and information, the Court shall reinstate the judgment against such defendant(s), in favor of the Commission, in the amount of TWO HUNDRED THOUSAND DOLLARS ($200,000.00), and the entire amount of the judgment shall become immediately due and payable. Should this judgment be modified as to the monetary liability of the defendants, this Order, in all other respects, shall remain in full force. Any proceedings instituted under this Section shall be in addition to and not in lieu of any other proceedings the Commission may initiate to enforce this Order. Solely for the purposes of reopening or enforcing this Section, defendants waive any right to contest any of the allegations set forth in the Complaint filed in this matter.

IV. DOCUMENT RETENTION

IT IS FURTHER ORDERED that defendants, and their successors and assigns, shall maintain for at least five (5) years from the date of service of this Order and, upon written request by FTC employees, make available to the FTC for inspection and copying:

A. All records and documents necessary to demonstrate fully their compliance with each provision of this Order, including, but not limited to, financial and other business records, order forms, invoices, employee training materials, and scripts;

 

B. All records and documents necessary to demonstrate their compliance with the requirements of Section 521(g) of the Gramm-Leach-Bliley Act, 15 U.S.C. § 6821(g), in the event that defendants intend to rely upon this exception to the prohibited business practices described in Section I; and

 

C . Copies of any complaints received by defendants regarding defendants' sale of private financial information.

V. NOTICE TO RELATED PERSONS AND ENTITIES

IT IS FURTHER ORDERED that, for a period of five (5) years from the date of entry of this Order, defendants, and their successors and assigns, shall:

A. Deliver a copy of this Order to all current and future principals, officers, directors, and managers, and to all current and future employees, agents, and representatives having responsibilities with respect to the subject matter of this Order, and shall secure from each such person a signed and dated statement acknowledging receipt of the Order. Defendants shall deliver this Order to current personnel within thirty (30) days after the date of service of this Order, and to future personnel within thirty (30) days after the person assumes such position or responsibilities; and

 

B. Maintain for a period of five (5) years after creation, and upon reasonable notice, make available to representatives of the Commission, the original signed and dated acknowledgments of the receipt of copies of the Order.

VI. PRIVACY NOTICE

IT IS FURTHER ORDERED that defendants, directly or through any corporation, subsidiary, division, or other device, in connection with the advertising, promotion, or offering of any Internet service or Web site, shall provide clear and prominent notice to consumers on the Web site of their practices with regard to its collection of personal identifying information through the Web site and the use of such information. Such notice shall include, but is not limited to, disclosure of:

A. What information is being collected (e.g., "name," "home address," "e-mail address," "Social Security Number,");

 

B. Its intended use(s) and the consumer's ability to control such uses (e.g., the consumer's ability to "opt-in" or "opt-out" of particular uses, such as transfers to third parties);

 

C. The third parties to whom it will be disclosed (e.g., "advertisers of consumer products," "mailing list companies," "the general public");

 

D. The consumer's ability to obtain access to or directly access such information and the means by which (s)he may do so;

 

E. The consumer's ability to correct inaccuracies or have inaccuracies corrected and to remove directly or have the information removed from defendants' databases and the means by which (s)he may do so; and

 

F. The steps defendants have taken to ensure the security of the information collected and/or maintained at the site.

Such notice shall appear on the home page of defendants' Web site(s) and at each location on the site(s) at which such information is collected. Alternatively, defendants may comply with this Section by placing a clear and prominent hyperlink or button labeled PRIVACY NOTICE or PRIVACY POLICY on defendants' home page, and at each location on the site at which personal identifying information is collected, which directly links to the privacy notice screen(s) containing the required information.

VII. COMPLIANCE REPORTING

IT IS FURTHER ORDERED that, in order that compliance with the provisions of this Order may be monitored:

A. Sixty (60) days after the date of entry of this Order, defendants shall provide a written report to the FTC, sworn to under penalty of perjury, setting forth in detail the manner and form in which the defendants have complied and are complying with this Order;

 

B. For a period of five (5) years from the date of entry of this Order, defendants shall annually report to the Commission their current employment, business address, business phone number, and a description of business activities; provided, however, that if defendants change positions they shall provide an additional report within thirty (30) days; provided further that if defendants intend to engage in the business of disclosing, selling, or offering for sale any private financial information, they shall provide written notice to the Commission thirty (30) days prior to so doing; and

 

C. For the purposes of this Order, defendants shall, unless otherwise directed by the Commission's authorized representatives, mail all written notifications to the Commission to:

 

Associate Director, Division of Financial Practices
Federal Trade Commission
600 Pennsylvania Ave., N.W.
Washington, D.C. 20580

 

Re: FTC v. Rapp (dba Touch Tone Information)

VIII. RETENTION OF JURISDICTION

IT IS FURTHER ORDERED that the Court retains jurisdiction of this matter for all purposes, including the construction, modification, and enforcement of this Order.

STIPULATED AND AGREED TO BY:

FOR THE PLAINTIFF:

Dated: _____ __, 2000

LAURA MAZZARELLA
Federal Trade Commission
600 Pennsylvania Avenue, N.W.
Washington, D.C. 20580
(202) 326-3424
Attorneys for Plaintiff

FOR THE DEFENDANTS:

Dated: ______ __, 2000

STEPHEN C. LECKAR
Butera & Andrews
1301 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
(202) 347-6875
Attorneys for Defendants

Dated: ______ __, 2000

JAMES J. RAPP
Defendant

Dated: ______ __, 2000

REGANA L. RAPP
Defendant

IT IS SO ORDERED.

Dated: _____ __, 2000

_______________________________
UNITED STATES DISTRICT JUDGE