FTC SAYS COURT HALTS OFFICE SUPPLY SCAM

FROM:  FEDERAL TRADE COMMISSION 

FTC Stops Deceptive Office Supply Scam That Targeted Small Businesses and Nonprofits

At the Federal Trade Commission’s request, a federal court has temporarily halted and frozen the assets of an operation that bilked nonprofits, businesses, and municipalities out of millions of dollars by deceptively sending them overpriced light bulbs and cleaning supplies that they never ordered. The FTC seeks to permanently stop the illegal practices and make the defendants return victims’ money.

“The FTC is committed to taking action against deceptive schemes that take advantage of people who work in nonprofits and small businesses,” said Jessica Rich, director of the Federal Trade Commission’s Bureau of Consumer Protection. “Scam artists who lie to employees about orders and then demand payment are a magnet for FTC enforcement.”

According to a complaint filed by the FTC, the defendants called organizations throughout the country and falsely indicated that they had previously done business with them; that the call was to confirm a shipping or mailing address or follow up on a supposed previous order; that they were offering a free sample, catalog or gift; or that they needed an employee’s name and contact information for some purpose other than a sale. The defendants often did not identify themselves accurately or clearly disclose that it was a sales call, and sent consumers merchandise after misleading them and without their consent.

Many consumers paid the defendants’ invoices, thinking the employee named on the invoice had ordered the merchandise. The person who processed the invoices was often not the same person who received the shipments and did not know the merchandise was never ordered.  Consumers who paid thinking they were obligated to do so became targets for future shipments of unordered merchandise. Those who questioned the invoices were often pressured into paying by the defendants’ claiming that they had audio recordings verifying the order (which they failed to produce) or stating they would accept a “discounted” price as payment in full.

The defendants are charged with violating the FTC Act, the Telemarketing Sales Rule and the Unordered Merchandise Statute by shipping and billing for unordered merchandise.

The defendants are Midway Industries Limited Liability Company, also doing business as Midway Industries, Midway Industries LLC, and Midway Industries of Delray Beach LLC; Commercial Industries LLC, also d/b/a Commercial Industries, Commercial Industries of Palm Beach LLC, and State Electric & Power LLC; National LLC, also d/b/a National Distributors, National Lighting & Maintenance, National, and National of Delray Beach LLC; State Power & Lighting LLC; Standard Industries LLC, also d/b/a Standard Industries and Standard Industries, LLC; Essex Industries, LLC; Johnson Distributing Limited Liability Company, also d/b/a Johnson Distributing, Johnson Distributing MD, Johnson Distribution, and Johnson Distributors; Hansen Supply LLC; Environmental Industries LLC; Mid Atlantic Industries LLC; Midway Management, LLC; B & E Industries, LLC; Eric A. Epstein; and Brian K. Wallen.

The Commission vote authorizing the staff to file the complaint was 5-0. The complaint was filed in the U.S. District Court for the District of Maryland. The court entered a temporary restraining order against the defendants on July 21, 2014.

The FTC appreciates the assistance of the Better Business Bureau of Greater Maryland in helping to investigate and bring this case.

COURT ORDER BANS DEFENDANTS FROM TIMESHARE RESALE SERVICES

FROM:  U.S. FEDERAL TRADE COMMISSION 

FTC Obtains Court Orders Banning Defendants From Selling Timeshare Resale Services

The defendants behind three deceptive timeshare resale operations are banned from selling timeshare property resale services under settlements resolving charges that they lured consumers into paying hefty up-front fees, falsely claiming they had prospective buyers for properties they wanted to sell.

The settlements stem from a crackdown on travel and timeshare resale fraud last year involving 28 states and law enforcement agencies in 10 other countries.

“Timeshare owners should avoid anyone who wants money up front and claims they have a buyer ready and waiting,” said Jessica Rich, Director of the Federal Trade Commission’s Bureau of Consumer Protection. “If you’re thinking of selling a timeshare unit through a reseller, check them out first. Deal only with licensed real estate brokers and agents, ask for references from satisfied clients, and get everything in writing.”

Avoid scams that promise to recover money you’ve lost in a timeshare resell scam. To learn more, read Callers target timeshare owners for a second scam.

Universal Timeshare

According to the complaint filed by the FTC and Florida’s Attorney General in the Universal Timeshare case, the defendants claimed they had buyers who would pay a specified price for consumers’ timeshare properties, or that the defendants would quickly sell those timeshares, and charged consumers up to $2,200 in connection with the promised sale.  In fact, the defendants did not have buyers lined up to pay any price for consumers’ timeshares. Sheldon Lee Cohen, who resides and operates a telemarketing business in the Dominican Republic, was the mastermind and main perpetrator behind this scam.

The complaint charged the defendants with violating the FTC Act and the Telemarketing Sales Rule (TSR), including calling consumers with numbers listed on the National Do Not Call Registry, as well as the Florida Deceptive and Unfair Trade Practices Act and the Florida Timeshare Resale Accountability Act. The court subsequently halted the defendants’ deceptive practices, froze their U.S. assets, and appointed a receiver over the two companies, and over Cohen, when doing business as Universal Timeshare Sales Associates and M.G.M. Universal Timeshares, pending litigation.

Under the court order, all of the defendants are banned from selling timeshare resale services. They also are prohibited from violating the TSR and two Florida laws, and from misrepresenting material facts about any product or service, including the total cost, any restrictions, the nature or terms of a refund or cancellation policy, and the income likely to be realized. The defaulting defendants (Cohen and his company, Vacation Communications Group LLC) are also banned from telemarketing.

The order imposes a judgment of more than $1.2 million against the settling defendants (Tammie Lynn Cline, Mark Russell Gardner, and their former telemarketing company, Gardner Cline LLC), which will be suspended based on their inability to pay. The full judgment will become due immediately if the defendants are found to have misrepresented their financial condition. The judgment for $10.2 million against the defaulting defendants is immediately due and payable upon entry of the court order.

The Commission vote approving the proposed stipulated final order was 5-0. The judgment was entered by the U.S. District Court for the Middle District of Florida, Orlando Division, on June 16, 2014.

Resort Property Depot and Resort Solution Trust

In May 2013, the FTC alleged that Resort Property Depot Inc. and Narendra “Nick” Patel made unsolicited telemarketing calls to timeshare owners and tricked them into paying fees ranging from $300 to $3,000, and that Resort Solution Trust Inc., Lincoln Renwick II, and Anthony Talavera deceived thousands of consumers into paying advance fees ranging between $800 and $3,400. Consumers did not receive what they were promised, and they were denied refunds. The court subsequently halted the defendants’ allegedly deceptive practices, froze their assets, and put the companies into receivership pending litigation.

Under both settlement orders, in addition to the ban on selling timeshare resale services, the defendants are permanently prohibited from telemarketing, misrepresenting material facts about any product or service, collecting money from customers, selling or otherwise benefitting from consumers’ personal information, and failing to properly dispose of customer information.

The settlement order against Resort Property Depot and Patel imposes a judgment of more than $2.6 million, which will be suspended  when the defendants have paid $175,000 to the Commission and Patel has surrendered his car and certain bank and investment accounts. A default judgment was entered against Resort Solution Trust in December 2013. The settlement order announced today against Renwick and Talavera imposes a judgment of more than $6.4 million, which will be suspended when Renwick has transferred to the FTC possession of bank accounts and a car. The full judgments will become due immediately if the defendants are found to have misrepresented their financial condition.

The Commission vote approving the proposed stipulated final orders was 5-0. The orders against Resort Property Depot, and against Renwick and Talavera, were entered by the U.S. District Court for the Middle District of Florida, Tampa Division, on July 1, 2014, and June 25, 2014, respectively.

To learn more about timeshare resale fraud, read Timeshares and Vacation Plans.  To learn about scams that promise to recover money you’ve lost in a scam, read Refund and Recovery Scams.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them.

COURT AFFIRMS $163 MILLION JUDGEMENT AGAINST "SCAREWARE" SCAM

FROM:  FEDERAL TRADE COMMISSION 
Appeals Court Affirms Ruling in Favor of FTC, Upholds $163 Million Judgment Against ‘Scareware’ Marketer

In a victory for the Federal Trade Commission in its efforts to protect consumers from spyware and malware, a federal appeals court has upheld a district court ruling that imposed a judgment of more than $163 million on Kristy Ross for her role in an operation that used computer “scareware” to trick consumers into thinking their computers were infected with malicious software, and then sold them software to “fix” their non-existent problem.

“This is a huge victory for consumers,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “As this case shows, scareware causes enormous economic injury. We remain committed to protecting consumers against this kind of scam.”

In October 2012, in addition to the imposing monetary judgment, the U.S. District Court for the District of Maryland permanently prohibited Ross from selling computer security software and any other software that interferes with consumers’ computer use, and from any form of deceptive marketing. In 2008, the FTC had charged Ross and six other defendants with conning consumers into buying software to remove malware supposedly detected by computer scans. The other defendants either settled the charges or had default judgments entered against them.

Ross appealed the district court ruling, including its finding in favor of the FTC on the issue of whether Ross was a “control person” who could be held liable for the deceptive practices. On February 25, 2014, the U.S. Court of Appeals for the Fourth Circuit upheld the lower court’s findings, stating, in part, that to rule in her favor “would effectively leave the Commission with the ‘futile gesture’ of obtaining ‘an order directed to the lifeless entity of a corporation while exempting from its operation the living individuals who were responsible for the illegal practices’ in the first place.”