International Law

FTC Obtains $250,000 Settlement?

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From the FTC Press Release about a Vending fraud.

The Federal Trade Commission obtained a $250,000 settlement against a participant in a vending machine scheme, concluding its case against the defendants in this operation, all of whom were charged in 2002 as part of the Project Busted Opportunity law enforcement sweep.

Project Busted Opportunity targeted various business opportunity and work-at-home schemes that used false earnings claims and other deceptive representations to lure unwary consumers into investing their savings with the hope of owning a successful small business.

In this case, the FTC charged Westbrook Marketing Associates, LLC, three affiliated companies, and three individuals with violating the FTC Act and the Commission's Franchise Rule.

These defendants sold business opportunities for vending machines that dispensed either medical supplies or various sodas and snacks.

The complaint alleged that the defendants made profit projections and earnings claims without any reasonable basis in fact.

Also, the defendants told investors they could cancel their purchases if the vending machines were not delivered in 30 days, but the cancellation requests were not honored, even if the vending machines never arrived, according to the complaint.

In October 2008, the U.S. District Court for the Eastern District of New York granted summary judgment against individual Richard Guadagno, and against the companies under which the scheme operated (Westbrook Marketing Associates, LLC, Westbrook Marketing Group, Inc., Essex Marketing Group, Inc., and Manhattan Vending, LLC).

The court entered a litigated judgment of $4,059,235 against these five defendants. With regard to the remaining two defendants, Henry Sanchez agreed to the terms of a $250,000 settlement with the FTC, while the FTC dismissed the case against defendant Jack Schwartz.

On December 17, 2008, the Commission voted 4-0 to authorize filing of the final order dismissing charges against Jack Schwartz and stipulating the settlement with Henry Sanchez. The U.S. District Court for the Eastern District of New York entered the order on the same day.

The final order requires Sanchez to pay $250,000 and prohibits him from further violations of the FTC Act, the Franchise Rule, and the Business Opportunity Rule. The order also includes the standard provisions for monitoring and record keeping.

Specifically, it prohibits Sanchez from false or misleading advertising regarding:

• the income, profits, or sales that investors are likely to obtain;
• the specifics regarding when vending machines or related supplies or services will be delivered; and
• the conditions under which investors may cancel their contracts.

It also prohibits Sanchez from violating the Franchise Rule or the Business Opportunity Rule by failing to provide adequate disclosures or documentation about earnings or financial performance and by failing to let investors know that this information is available.

Full post as published by Misleading Advertising Law on February 04, 2009 (boomark / email).