Operators of Phoenix Boiler Room Banned from Telemarketing
The latest FTC telemarketing case Phoenix Boiler Room Banned from Telemarketing
The Results Group, L.L.C., and its co-owners are banned from telemarketing, and will give up thousands of dollars in cash, the proceeds from the sale of luxury sports cars, and the value of life insurance policies and a Las Vegas real estate deal, to settle Federal Trade Commission charges that they deceptively sold home-based Internet business opportunities to consumers throughout the United States. The Phoenix-based boiler room operation will return about $435,000 to consumers. The FTC and Arizona Attorney General’s office cooperated extensively on this investigation; the Attorney General also is bringing a parallel case against the same schemers.
In its complaint, the FTC charged that the defendants misrepresented that consumers who purchased their business system were likely to earn a substantial income with little risk, and that they would receive substantial assistance from a staff of business experts. They claimed that some of their purchasers were making over $50,000 per month in commissions. In fact, most consumers never earned any income.
The operation charged between $99 and $599 to build and host Web sites “affiliated” with the Web sites of Fortune 500 retail companies such as Amazon.com and Overstock.com. Supposedly, consumers would make money when those retailers paid commissions for sales made through the consumers’ Web sites. The defendants claimed that tens of thousands of Web users would be driven by advertisements to click on the Web sites.
After consumers purchased the business system, company employees, calling themselves “business coaches,” would call and pressure consumers to spend more money on advertising. They claimed the advertising was necessary to make the business successful; for many consumers, this was the first time they realized the business was not a “turn-key” operation as promised, and that many of the promises made to them were false or misleading.
The settlement with The Results Group, L.L.C., Edward R. Longoria, and Amber R. Halverson bans all three defendants from telemarketing. The order contains a $19,500,500 judgment against them, which will be suspended, based on their sworn financial documents and payment of $435,000 in consumer redress. If it is found that the defendants misrepresented their financial status, or fail to make the payments they agreed to in the order, then the full amount will be due.
In addition, the settlement prohibits the defendants from misrepresenting: that purchasers are likely to earn substantial income with any business venture; that they will receive substantial assistance in the operation of their business venture; the total cost to purchase, receive, or use and the quantity of any goods or services that are for sale; any restrictions, limitations, or conditions to purchase, receive, or use goods or services; the terms of a refund, cancellation, exchange, or repurchase policy; or the income, profits, or sales volume likely to be achieved.
This was part of the FTC's False Hope crackdown on scam biz ops. The original press release noted that
"Working out of a boiler room in Phoenix, the operation charged between $99 and $599 to build and host Web sites “affiliated” with the Web sites of Fortune 500 retail companies such as Amazon.com and Overstock.com. Consumers would make money when those retailers paid commissions for sales made through the consumers’ Web sites. In fact, the large retailers were unaware of any such affiliation, and consumers made no money. The FTC charged that the operation falsely represented that purchasers would receive substantial income as well as substantial assistance from an expert staff, and used false and misleading statements to encourage consumers to buy the business opportunity."
Most of these transaction would not qualify for protection under the FTC's Business Opportunity Rule, since it only applies to transactions over $500.
Indeed, the FTC complaint was pursuant to its jurisdiction according to the Telemarketing Sales Rule.
Is this a win for the consumer: $435,000 versus an almost $20 million loss? Now you know why I recommend buying an answering machine for your telephone.
