Author: vgraham

As a result of a Federal Trade Commission lawsuit, two defendants who helped operate a sprawling business opportunity scheme known by several names, including Blueprint to Wealth, have agreed to settlements that include lifetime bans from pitching money-making and investment opportunities.

The FTC first sued Robert William Shafer and Samuel J Smith in December, 2023, alleging that the two played key roles in the Blueprint to Wealth scheme, which targeted consumers looking to build their own businesses with a program that offers essentially no value, other than commissions that come from encouraging others to join the scheme.

“The defendants bilked consumers out of their hard-earned money with false promises that they would operate lucrative online businesses on consumers’ behalf,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection.  “As these orders make clear, the FTC will continue to go after those who promote and sell worthless business or investment opportunities with phony earnings claims.”

The scheme took millions of dollars from consumers, according to the FTC’s complaint, charging at least $3,000 and as much as $21,000, plus hundreds of dollars in additional “administrative fees,” for membership in the scheme, which nominally promised its members turnkey online businesses that would be operated on the members’ behalf. Those businesses, however, existed only to sell more supposed businesses to more consumers.

The stipulated final order settling the case against Shafer permanently bans him from telemarketing as well as from any role in selling or marketing money-making or investment opportunities. In addition, he is required to turn over cash and the contents of numerous bank accounts.

The stipulated final order setting the case against Smith permanently bans him from any role in selling or marketing money-making or investment opportunities, as well as banning him from any involvement with robocalling.  Smith is required to turn over cash to the FTC under the stipulated order.

Both Shafer and Smith are subject to monetary judgements totaling more than $7.5 million, which have been partially suspended based on their inability to pay that amount. If they are found to have lied to the FTC about their financial condition, the full amount of the judgment would be immediately due.

The case against the other defendants in this case, Charles Joseph Garis, Jr. and Business Revolution Group, is ongoing.

The Commission votes approving the stipulated final orders were 5-0 for the order against Smith and 5-0 for the order against Shafer. The FTC filed the proposed orders in the U.S. District Court for the Eastern District of Pennsylvania.

NOTE: Stipulated final orders have the force of law when approved and signed by the District Court judge.

The staff attorneys on this matter are Connell McNulty and Lauren Rivard of the FTC’s Bureau of Consumer Protection.

As a result of a Federal Trade Commission lawsuit, the owners and operators of a sprawling credit repair operation known as Financial Education Services (FES) will end the practices that the FTC alleged created a pyramid scheme and also violated the Credit Repair Organizations Act.  In addition, the proposed court orders include substantial monetary penalties.

The FTC first filed suit against the FES scheme in May, 2022, alleging that the company preyed on consumers with low credit scores by luring them in with the false promise of an easy fix and then recruiting them to join a pyramid scheme selling the credit repair services to others, costing them millions of dollars.

“These companies promised to clean up people’s credit but failed to deliver. Meanwhile, honest businesses make money selling products and services, not by recruiting, and the drive to recruit, especially when coupled with inflated income claims, is the hallmark of an illegal pyramid,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “The FTC is committed to stopping deceptive credit repair tactics and shutting down illegal pyramid schemes that prey on struggling consumers.”

The FTC’s complaint charged that FES and its owners, operators and associated companies deceived consumers about their credit repair products and charged them upfront for the service. In addition, the pyramid scheme made overinflated income claims that consumers could make tens of thousands of dollars recruiting others into FES.

The proposed settlements in the case will lead to more than $12 million being turned over to the FTC for use in providing refunds to affected consumers, as well as conduct prohibitions against the defendants as follows:

• Defendant Parimal Naik, along with Financial Education Services, Inc., United Wealth Services, Inc., VR-Tech, LLC, Youth Financial Literacy Foundation, and LK Commercial Lending LLC will be permanently prohibited from numerous forms of unlawful activities related to credit repair services and pyramid schemes, and will be required to put a compliance monitoring system in place to ensure its employees and contractors do not violate the terms of the settlement. In addition, they will be required to turn over $5.5 million in cash
• Defendant Michael Toloff, along with VR-Tech Mgt, LLC, and Statewide Commercial Lending LLC will be permanently banned from providing any credit repair services, as well as being permanently banned from any involvement in multi-level marketing. In addition, they (along with relief defendant Gayle Toloff) will be required to turn over cash and the value of numerous cars, a boat, and multiple real estate properties, totaling millions of dollars.
• Defendant Christopher Toloff, along with CM Rent Inc., will be permanently banned from providing any credit repair services, as well as being permanently banned from any involvement in multi-level marketing. In addition, they will be required to turn over $1.7 million.
• Defendant Gerald Thompson will be permanently banned from providing any credit repair services, as well as being permanently banned from any involvement in multi-level marketing. In addition, he will be required to turn over $215,000.

The Commission vote approving the stipulated final orders was 5-0. The FTC filed the proposed orders in the U.S. District Court for the Eastern District of Michigan.

NOTE: Stipulated final orders have the force of law when approved and signed by the District Court judge.

The Federal Trade Commission and the Department of Justice (DOJ) virtually cohosted the first public meeting of the Strike Force on Unfair and Illegal Pricing (Strike Force) to discuss Strike Force enforcement actions taken to lower prices for Americans.

FTC Chair Lina M. Khan, DOJ Acting Associate Attorney General Benjamin Mizer, Assistant Attorney General Jonathan Kanter, and Principal Deputy Assistant Attorney General Brian Boynton, along with other agencies on the Strike Force convened to highlight the following Strike Force enforcement actions:

• FTC Chair Lina M. Khan highlighted the FTC’s recent work to stop corporate lawbreaking that raises prices for Americans, including uncovering evidence of corporate conduct that may raise the price of gas, working to lower the cost of many asthma inhalers to just $35 out-of-pocket, and making it easier for Americans to cancel online subscriptions they don’t want. Chair Khan announced that she will ask the Commission to launch an inquiry into grocery prices in order to probe the tactics that big grocery chains use to hike prices and extract profits from everyday Americans at the checkout counter.
• DOJ Acting Associate Attorney General Benjamin Mizer described DOJ’s efforts to tackle unlawful behavior that affects the prices Americans pay for their groceries, transportation, and health care. Assistant Attorney General Jonathan Kanter highlighted the historic and concrete actions Antitrust Division staff are undertaking to enforce the law and lower prices in higher education, housing, transportation, food, agriculture, live music, healthcare and other vital industries. Principal Deputy Assistant Attorney General Brian Boynton highlighted the Civil Division’s work to combat fraudulent pricing schemes involving government agencies and financial institutions, as well as schemes designed to defraud consumers through unfair and deceptive marketing or billing practices.
• U.S. Department of Agriculture (USDA) Deputy Secretary Torres Small highlighted the all-of-USDA approach to tackling food and agricultural pricing challenges for farmers and consumers alike, including an ongoing investigative study on retail concentration and market practices as well as landmark efforts to modernize the Packers & Stockyards Act rulebook and build a competition partnership with state attorneys general.
• U.S. Department of Health and Human Services (HHS) Deputy Secretary Andrea Palm spoke on HHS’s work to make health care affordable, transparent, and fair for everyone. Increasing competition and transparency, lowering prescription drug prices, and expanding access to health care are key ways to make sure our health care system is working for all Americans.
• Acting U.S. Department of Transportation (DOT) General Counsel Subash Iyer spoke about DOT’s work to protect airline passengers from unfair practices that can make it more expensive to fly, including by proposing a ban on family seating junk fees and investigating Delta’s refund, reimbursement, and customer service problems during the recent IT meltdown.
• U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler spoke about the SEC’s work to address unfair, deceptive, and anticompetitive business practices. The SEC is the cop on the beat for the securities markets. The agency’s rulemaking projects promote transparency, access, and fair dealing in the markets. And through market oversight, including examining registrants and reviewing tens of thousands of filings each year, the SEC guards against fraud and deceptive practices and promotes competition.
• U.S. Federal Communications Commission (FCC) Chairwoman Jessica Rosenworcel spoke about the FCC’s work to tackle unfair and deceptive pricing tactics in the communications sector, including by implementing new rules that will slash the exorbitant rates that incarcerated people and their families pay to stay connected.
• Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra spoke about the CFPB’s work on junk fees, highlighting a report on school lunch fees, and a recently launched inquiry into junk fees in mortgage closing costs. The CFPB continues its work on all aspects of the credit card market, including looking into bait-and-switch rewards tactics, curbing excessive fees, and ensuring competition, all against the backdrop of interest rate margins hitting an all-time high. Additionally, the agency announced further scrutiny on the role of private equity investors in price gouging.

In March 2024, at the sixth meeting of the White House Competition Council, President Biden announced the launch of the Strike Force to strengthen interagency efforts to root out and stop illegal corporate behavior that hikes prices on American families through anti-competitive, unfair, deceptive, or fraudulent business practices. 

The Federal Trade Commission and the Department of Justice (DOJ) will virtually cohost the first public meeting of the Strike Force on Unfair and Illegal Pricing (Strike Force) on Thursday, August 1, 2024, to discuss Strike Force enforcement actions taken to lower prices for Americans.

The meeting will convene with an open-press session with remarks by FTC Chair Lina M. Khan, Associate Attorney General Benjamin C. Mizer, Assistant Attorney General for the Antitrust Division Jonathan S. Kanter, and Principal Deputy Assistant Attorney General for the Civil Division Brian M. Boynton. Senior officials from other agencies will then offer remarks as well. The remainder of the meeting will move to a closed-door, private discussion of enforcement-related matters.

The Strike Force meeting’s open session will begin at 3:30pm ET. The agenda for the public portion of the event will be posted on the FTC’s website prior to the event. A link to view the open virtual meeting will be posted on the FTC’s website the day of the event.

In March 2024, at the sixth meeting of the White House Competition Council, President Biden announced the launch of the Strike Force to strengthen interagency efforts to root out and stop illegal corporate behavior that hikes prices on American families through anti-competitive, unfair, deceptive, or fraudulent business practices.

The Strike Force’s membership also includes the Department of Agriculture, Department of Health and Human Services, Department of Transportation, Securities and Exchange Commission, Federal Communications Commission, and the Consumer Financial Protection Bureau. 

Today, the Commission issued a statement regarding its referral to the Department of Justice a complaint against TikTok, the successor to Musical.ly, and its parent company ByteDance Ltd.

The Commission vote authorizing the issuance of the statement was 3-0-2, with Commissioners Ferguson and Holyoak recused. 

The Federal Trade Commission, the Department of Justice’s (DOJ) Antitrust Division, and the U.S. Department of Health and Human Services (HHS) are extending the deadline by 30 days for the public to comment on a tri-agency Request for Information (RFI) examining private-equity and other corporations’ increasing control over health care markets. The new deadline is now June 5, 2024.

The cross-government inquiry seeks to understand how certain health care market transactions may increase consolidation and generate profits for firms while threatening patients’ health, workers’ safety, and the quality and affordability of health care for patients and taxpayers.

The RFI requests public comment on deals conducted by health systems, private payers, private equity funds, and other alternative asset managers that involve health care providers, facilities, or ancillary products or services. The RFI also seeks information on transactions that would not be reported to the Justice Department or FTC for antitrust review under the Hart-Scott-Rodino Antitrust Improvements Act.

The public can submit at Regulations.gov. Once submitted, comments will be posted to Regulations.gov. The comment period was originally set to end on May 6, 2024. 

Voice over Internet Protocol (VoIP) provider XCast Labs, Inc., agreed to settle Federal Trade Commission charges that it funneled hundreds of millions of illegal robocalls through its network, even after receiving multiple warnings about the unlawful conduct.

Under the proposed court order, XCast Labs will be required to implement a screening process and end its relationships with firms that are not complying with telemarketing-related laws. The Department of Justice litigated the case and filed the proposed order on the FTC’s behalf.

“XCast was warned several times that illegal robocallers were using its services and did nothing,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Companies that turn a blind eye to illegal robocalling should expect to hear from the FTC.”

“Today’s order is another example of the Justice Department’s efforts to protect American consumers from illegal robocalls and to stop telecommunications providers from enabling those calls,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “We will continue to work with the Federal Trade Commission to enforce the Telemarketing Sales Rule.”

XCast Labs, headquartered in Los Angeles, is a nationwide provider of VoIP technology, providing services that allow its customers to send and receive phone calls, including robocalls, over the internet. Telemarketers who blast illegal robocalls typically use VoIP service providers like XCast Labs to transmit their calls.

According to the May 2023 complaint, the FTC sent letters to several VoIP providers, including XCast Labs, in early 2020 warning them that assisting and facilitating illegal telemarketing or robocalling is against the law. XCast Labs received dozens of “traceback” inquiries from US Telecom’s Industry Traceback Group regarding suspected illegal calls that originated on XCast Labs’ network, as well as inquiries from law enforcement agencies about transmission of suspected illegal traffic on the XCast Labs network.

Even after receiving these direct warnings, XCast Labs transmitted illegal robocalls to consumers. The FTC also discovered that many of these suspect robocalls were part of organized campaigns to generate telemarketing leads by impersonating officials from the Social Security Administration.

The proposed order, to which XCast Labs has agreed, prohibits the company from violating the Telemarketing Sales Rule in the future. It also bans XCast Labs from assisting and facilitating any high-risk customer, including those that are engaged in initiating, causing, or transmitting telemarketing robocalls or calling numbers on the DNC Registry and any telephone call using Caller ID spoofing to display a phone number that the calling party does not have the legal authority to use.

Next, the order permanently bars XCast Labs from providing VoIP services to any company with which it does not have an automated procedure to block calls that display invalid Caller ID phone numbers or that are not authenticated through the FCC’s STIR/SHAKEN Authentication Framework. Further, the order requires XCast Labs to screen current and prospective VoIP customers to ensure they are not violating telemarking-related laws and terminate relationships with any customer that does not pass the screening process.

Additionally, the order requires XCast Labs to pay a $10 million civil penalty, which will be suspended based on its inability to pay. If the company is later found to have misrepresented its financial condition, the full amount will immediately become due.

The Department of Justice filed the proposed order in the U.S. District Court for Central District of California.

Thomas Biesty and Frances Kern of the Bureau of Consumer Protection were the primary FTC staff on this matter.

NOTE: Consent order the force of law when approved and signed by the District Court judge.

California-based lead generator Response Tree LLC and its president, Derek Thomas Doherty, will be banned from making or assisting anyone else in making robocalls or calls to phone numbers on the FTC’s Do Not Call (DNC) Registry under a proposed order settling Federal Trade Commission charges that they operated more than 50 websites designed to trick consumers into providing their personal information for supposed mortgage refinancing loans and other services.

The defendants allegedly sold the personal information of hundreds of thousands of consumers as leads to telemarketers who used them to make millions of illegal telemarketing calls, including robocalls, to consumers nationwide.

Telemarketing campaigns allegedly assisted and facilitated by the defendants’ illegal lead generation operations were used to sell a multitude of products and services, including solar panels, hearing aids, and extended auto warranties. These campaigns, which made robocalls and calls to numbers on the DNC Registry, were illegal, as the telemarketers did not have consumers’ consent to be called, according to a complaint filed by the Department of Justice on referral from the FTC.

“Response Tree fueled millions of illegal telemarketing calls by tricking consumers into turning over their personal information and selling that information to telemarketers,” said Samuel Levine, Director of the Bureau of Consumer Protection. “The FTC will continue to target every corner of the illegal telemarketing ecosystem to protect consumers and hold wrongdoers accountable.” 

The complaint alleges that the defendants’ websites—including PatriotRefi.com, AbodeDefense.com, and TheRetailRewards.com—were actually “consent farms” that used deceptive and manipulative “dark patterns” to induce consumers to provide their personal information, obscuring hard-to-find and inadequate disclosures about how the information would be used. The defendants claimed that, in providing this information, the consumers consented to receive telemarketing calls. Third parties then bought the defendants’ leads and used the personal information to conduct illegal telemarketing campaigns, according to the complaint.

Through their PatriotRefi.com website, for example, the defendants allegedly duped consumers into providing their personal information under the guise of requesting a quote for a home mortgage refinance loan. After consumers input their personal information and clicked a button labeled “GET YOUR FAST FREE QUOTE,” the defendants captured the information and stored it in a database to sell to telemarketers and others.

Many or all consumers who provided their personal information to PatriotRefi.com never received home refinance quotes, according to the complaint. Instead, PatriotRefi.com was designed to compile lead lists by harvesting and selling consumers’ personal information without consumers’ informed consent. The complaint further alleges the defendants sold the leads they obtained, knowing that they did not obtain the requisite consent to receive telemarketing calls, including robocalls.

According to the complaint, at their peak, the defendants’ consent farm operations offered an average of 10,000 “real-time” leads for sale every day, and on some days had up to 50,000 illegally farmed leads for sale. In all, between 2019 and 2022, Response Tree and Doherty sold millions of deceptively collected leads.

The proposed order settling the complaint, which must be approved by the court before it can go into effect, bans the defendants from initiating or helping anyone else initiate telemarketing robocalls. It also bans them from calling, or assisting anyone else in calling, phone numbers on the DNC Registry and from selling, transferring, or disclosing consumer information in connection with lead generation activities.

The order also imposes a $7 million judgment against the defendants, which will be suspended based on their inability to pay. If they are later found to have misrepresented their financial condition, however, the full amount will immediately become due.

The Commission vote approving the complaint and stipulated final order and referring it to the U.S. Department of Justice (DOJ) for filing was 3-0. The DOJ filed the complaint and proposed final order in the U.S. District Court for the District of Central District of California.

The staff attorneys on this matter are Karina A. Layugan, Matthew H. Fine, and Jeffrey Tang of the FTC’s Western Region Los Angeles office.

NOTE: The Commission files a complaint when it has “reason to believe” that the named defendants are violating or are about to violate the law and it appears to the Commission that a proceeding is in the public interest. Stipulated final orders have the force of law when approved and signed by the District Court judge.