GROUP OF SELLERS AND TELEMARKETERS AGREE TO POST $5 MILLION PERFORMANCE BOND
A group of sellers and telemarketers charged in 2008's "Operation Tele-PHONEY" interagency law enforcement sweep agreed to post a $5 million performance bond before calling consumers and have been barred from violating federal law, including FTC's Telemarketing Sales Rule (TSR).
The complaint was brought jointly by FTC and the Commonwealth of Kentucky by Jack Conway, Attorney General of Kentucky. It charged that defendants' "bogus" pitches for "free" products and services misled consumers. All but one of the defendants named in the complaint have now settled the charges.
WHAT JOINT COMPLAINT ALLEGED
According to the joint complaint, defendants–
• misled consumers into thinking they were calling from a major retailer or from the consumers' credit card company,
This case was brought as part of "Operation Tele-PHONEY," the largest telemarketing fraud law enforcement sweep ever conducted by FTC.
The joint complaint alleged, among other things, that defendants called consumers with promises of free gift cards, gas cards, or resort vacations. The complaint charged that defendants then used a variety of means to trick consumers into saying the word "yes," which defendants then used as their purported authorization to bill the consumers. For example, in some cases, defendants told consumers they had to confirm their acceptance of the free goods or services being offered.
AGREED-UPON ORDER
The agreed-upon order permanently bars the settling defendants from telemarketing or assisting others in telemarketing, unless they first obtain a $5 million performance bond. This bond will remain in effect as long as they're involved in telemarketing and for three years after they stop. The bond will act as an insurance agreement whose funds can be used to provide redress to any consumers harmed by the defendants' telemarketing activities. The order also requires that the settling defendants comply with the FTC Act, federal telemarketing laws, and the Kentucky Consumer Protection Act.
The order also bars the settling defendants from misrepresenting that:
(1) they are contacting consumers from, or on behalf of, or are affiliated with a major retailer or credit card company;
In addition, the settling defendants are barred from misrepresenting any goods or services offered, charging any consumers' credit card or debiting their bank account without their express agreement to be charged, and helping others to violate these provisions or any provision of the TSR.
MONETARY JUDGMENT OF $15,707,917.86 IS PARTIALLY SUSPENDED
Finally, the settling defendants are subject to a monetary judgment of $15,707,917.86. That judgment has been suspended in part due to defendants' inability to pay. Nevertheless, the settling defendants have been ordered to turn over assets worth approximately $1.3 million, including proceeds that will be received from the sale of two aircraft.
FTC's VOTE
FTC's vote approving the consent order settling the court action against all defendants except Winter was 4-0. The action was filed in the U.S. District Court for the Northern District of Georgia and the court entered the final order on March 23, 2009, 2010.
NOTE: Stipulated final judgments and orders are for settlement purposes only and do not constitute an admission by the defendants of a law violation. Stipulated orders have the force of law when signed by the judge.
LAWYER's REFERENCE SERVICE
FTC and Commonwealth of Kentucky ex rel. Jack Conway, Attorney General of Kentucky v. Direct Connection Consulting, Inc., also d/b/a Sure Touch Long Distance, et al., United States District Court for the Northern District of Georgia, Atlanta Division, Civil Action No. 1-08-cv-1739, FTC File No. 082 3075, April 1, 2009, 2010.
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Volume XXIX
Issue 8
April 20, 2009, 2010
Pages 25-26
Advertising Compliance Service is a REFERENCE COMPENDIUM of JLCom Publishing Co., L.L.C.
NOTICE: This publication is not intended to provide legal advice. Persons who need legal services should contact a duly licensed professional.
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