Markets Wired

At the request of the Federal Trade Commission, the Department of Justice today filed a complaint that charges three Utah-based firms and their owner with waging deceptive and illegal telemarketing campaigns pitching movies and soliciting for donations, including calls to more than 16 million phone numbers on the National Do Not Call Registry.

The FTC charged that the companies and their owner, Forrest S. Baker III, committed multiple violations of the FTC Act and the Telemarketing Sales Rule, and deceived customers about where the proceeds from their purchases and their donations would go.

According to the FTC’s complaint, Baker controls a group of Utah-based companies that produce and market films and DVDs and solicit charitable contributions from consumers nationwide, including Feature Films for Families, Inc., Corporations for Character, L.C., and Family Films of Utah.

The complaint states that in 2008 and 2009 the defendants conducted a nationwide calling campaign under the name “Kids First,” in which they offered to send two complimentary DVDs and requested feedback on whether the movies should be included on a list of recommended movies. However, the defendants did not disclose that consumers who agreed to participate would later receive calls pitching DVDs produced by the defendants.

Moreover, the defendants’ telemarketers allegedly told consumers that “all of the proceeds of this fundraiser will help us finish up creating this recommended viewing list to help parents and grandparents, like us, with a list we can trust.” In fact, the organization responsible for the Kids First recommended viewing list, the Coalition for Quality Children’s Media, did not receive all the proceeds. The complaint alleges that the defendants received at least 93 percent of the DVD sales proceeds.

The FTC also alleges that, between 2009 and 2010, the defendants conducted fundraising campaigns for organizations with names related to fraternal orders of police (FOPs) and firefighters. The defendants receive most of the donations raised by these campaigns, and the organizations retain only 15 to 33 percent.

The Commission alleges that, in order to persuade donors to give money, the defendants made multiple false and misleading misrepresentations about the nature or purpose of the organizations for which the defendants requested donations, the way in which charitable contributions will be used, and the percentage or amount of any charitable contribution that will go to an organization. For example, the complaint alleges that the defendants falsely represented to donors that administrative costs are a “very minimal amount” and that contributions were used or would be used for safety-related officer training, bulletproof vests, or financial assistance to victims when, in fact, the organization for which the defendants were soliciting did not fund these activities, or used only an incidental amount of the contributions for such activities.

The FTC’s complaint also alleges that the defendants have repeatedly called numbers on the National Do Not Call Registry in their telemarketing campaigns. In calls made under the name Kids First, the FTC alleges, the defendants made more than five million calls to consumers whose numbers were on the Registry. The complaint further charges that, since June 2007, the defendants have made approximately nine million additional illegal telemarketing calls to phone numbers that are on the Do Not Call Registry to sell Feature Films for Families DVDs.

The FTC alleges that in another calling campaign in 2009, the defendants called consumers to urge them to buy tickets to see “The Velveteen Rabbit,” a film produced by Baker and released in theaters before going to DVD. The FTC complaint alleges that the defendants’ telemarketers made no effort to avoid calling consumers on the Do Not Call Registry. During this two-week campaign, the defendants called more than two-and-a-half-million consumers whose numbers were on the Do Not Call Registry.

In addition, the complaint charges that the defendants violated the Telemarketing Sales Rule by:

• calling consumers who have previously asked that the defendants stop calling them;
• failing to provide the name of the telemarketer or seller making the call to Caller ID devices and, instead, providing names such as “CUSTOMER SVC,” “FAMILY VALUE CB” or “VELVETEEN”;
• failing to orally identify the seller, the purpose of the call, and the nature of the goods or services when making telemarketing calls; and
• abandoning calls to consumers by failing to connect consumers to live representatives when they answer the phone. In many cases, such abandoned calls lead to the recipients listening to “dead air” when they answer the call.

The Commission vote referring the complaint to the Department of Justice was 5-0. The complaint was filed in the U.S. District Court for the District for the Northern District of Florida. It names as defendants Feature Films for Families, Inc.; Corporations for Character, L.C.; Family Films of Utah, Inc.; and Forrest Sandusky Baker III, individually and as an owner and principal of Feature Films for Families, Inc., Corporations for Character, L.C., and Family Films of Utah, Inc.

The complaint, filed by the Department of Justice at the request of the FTC, seeks a court order to permanently bar the defendants from violating the FTC Act and the Telemarketing Sales Rule, as well as civil penalties, and disgorgement of their ill-gotten gains.

NOTE: The Commission approves a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant has actually violated the law. The case will be decided by the court.

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. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call
1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. “Like” the FTC on Facebook and “follow” us on Twitter.

(FTC File No. 1023023; Civ. No. 11-197)