Markets Wired

Fourteen defendants involved in the massive telemarketing scheme operated by Largo, Florida-based Suntasia Marketing, Inc. have agreed to pay a total of more than $16 million to settle Federal Trade Commission charges. The funds obtained under the four settlements announced today are in addition to approximately $33 million that will be provided to Suntasia victims as part of a previously announced settlement between the Office of the Comptroller of the Currency (OCC) and Wachovia Bank, N.A., which allegedly processed thousands of unauthorized demand drafts on Suntasia’s behalf. Together, the FTC and OCC settlements will provide nearly $50 million in restitution to Suntasia’s consumer victims.

“This is a tremendous victory for consumers who were victimized by Suntasia’s deceptive negative-option telemarketing,” said Lydia Parnes, Director of the FTC’s Bureau of Consumer Protection. “The FTC, the OCC, and the Department of Justice have worked together to secure nearly $50 million for Suntasia’s victims.”

According to the FTC, between 1999 and July 2007, Suntasia deceptively marketed a series of negative option programs, including memberships in discount buyer’s and travel clubs, to nearly one million consumers nationwide. With a negative option program, a company takes consumers’ silence or failure to cancel the program as acceptance of the offer and permission to debit funds from their accounts. The FTC alleged that when Suntasia called consumers to offer supposedly “free” trial memberships in its programs, the company deceived consumers into divulging their bank account information and later charged consumers without authorization for a series of negative option programs. Federal District Court Judge James S. Moody, Jr., of the Middle District of Florida, found in entering a preliminary injunction that the telemarketing scripts Suntasia employed in selling its programs “contained misleading statements and omissions in violation of the FTC Act and the [Telemarketing Sales Rule].”

Consumers complained in near-record numbers about Suntasia’s practices. The FTC collected more than 5,000 formal complaints that consumers submitted to various law enforcement agencies and the Better Business Bureau. The FTC also found in Suntasia’s possession thousands of additional complaint letters and refund requests that consumers submitted to the company directly. In addition to providing over $16 million in restitution to these victims, the four court orders announced today bar the defendants from making the false statements alleged in the complaint, from failing to disclose material information about their programs, and from further violating the FTC’s Telemarketing Sales Rule (TSR).

The court actions announced today settle the charges brought in the FTC’s July 2007 complaint against defendants FTN Promotions, Inc.; Guardian Marketing Services, Corp.; Strategia Marketing, LLC; Co-Compliance, LLC; Bay Pines Travel, Inc.; Suntasia Properties, Inc.; JPW Consultants, Inc.; Travel Agents Direct, LLC; Bryon W. Wolf; Roy A. Eliasson; Alfred H. Wolf; Jeffrey P. Wolf; John Louis Smith II, and Donald L. Booth.

According to the FTC, Suntasia Marketing, Inc., based in Largo, Florida, used at least fifteen different business names to defraud consumers across the U.S. out of approximately $172 million. Eight interrelated companies employing more than 1,000 people ran the scheme, which injured up to a million consumers nationwide.

According to the FTC’s complaint, Suntasia telemarketers began their deceptive sales pitch by misrepresenting that Suntasia was affiliated with consumers’ banks. The telemarketers then offered consumers a series of “free gifts” and quickly attempted to obtain their bank account numbers. Suntasia telemarketers indicated that they needed to “verify” this information to confirm consumers’ eligibility to receive the purportedly free gifts.” Having already pretended to be affiliated with consumers’ banks, the telemarketers then purported to already possess consumers’ bank account numbers, asking that consumers merely “confirm” their information.

The FTC contends many consumers disclosed their account numbers believing that they were simply verifying information that the telemarketers already had. The FTC also alleged that consumers frequently thought their account number was being “verified” solely to confirm their eligibility to receive the free gifts, not to authorize any future charges to their accounts. These false bank affiliation claims, the FTC alleged, were central to Suntasia’s scheme.

In addition, the FTC charged that the defendants misrepresented, or did not disclose, various aspects of their programs relating to if and when consumers would be charged, the operation of the alleged free trial period, and their cancellation policy. The complaint also alleged that the defendants had illegally purchased leads containing consumers’ unencrypted bank account numbers for use in telemarketing.

Terms of the Consent Orders

The four stipulated orders announced today contain provisions to ensure the defendants do not engage in similar illegal acts in the future. The orders bar the defendants, in connection with the advertising, promoting, offering for sale, or sale of any product or service, from misrepresenting any material fact, including, but not limited to: 1) an affiliation with a consumer’s bank or other third party; 2) the purpose for which the consumer’s billing information will be used; 3) whether they already have the consumer’s billing information; 4) that a product or service is offered on a “free” or “no obligation” basis, when, in fact charges will be assessed if the consumer fails to take affirmative action; 5) the length of any free trial period; 6) that the trial period will not begin until the consumer has received informational material in the mail; 7) the amount a consumer will be charged or billed; 8) that a consumer will not be charged or billed; 9) that a consumer has agreed to purchase a product or has authorized a transaction; 10) that a consumer will not be charged or billed without their authorization; and 11) the material terms and conditions of any refund or cancellation policies.

In addition, the orders require the defendants to disclose clearly and conspicuously, before consumers are asked to reveal their billing information: 1) all fees and costs of a product or service; 2) all material conditions, limitations, restrictions applicable to the purchase (including any provisions associated with “free” products or services); 3) the dollar amount of the first payment and when it will be charged; 4) whether a charge will be submitted for payment at the end of a trial period unless the consumer cancels and the details of the trial period; 5) all material conditions, limitations, and restrictions on the consumer’s ability to use any trial membership or related product; and 6) all material conditions, limitations, and restrictions on a consumer’s ability to use any product or service offered as “free” or with “no obligation.”

The orders also bar the defendants from causing billing information to be submitted for payment without the express informed consent of the consumer and requires them to get a consumer’s written or oral consent to sign up for a negative-option program. They also must record these agreements and provide them to the consumer upon request.

Finally, the orders prohibit the defendants from violating the TSR or assisting anyone else in doing so. Specifically, the orders bar the defendants from misrepresenting an affiliation with a third party such as a bank, from failing to disclose the material terms and conditions of their negative option offers, from billing consumers for goods or services without their express informed consent, and from purchasing unencrypted consumer account numbers for use in telemarketing.

The more than $16 million in consumer redress required under the four settlements is comprised of the following:

• Defendants FTN Promotions, Inc.; Guardian Marketing Services, Corp.; Strategia Marketing, LLC; Co-Compliance, LLC; Bay Pines Travel, Inc.; Suntasia Properties, Inc.; Bryon W. Wolf; and Roy A. Eliasson must pay over $11.25 million in consumer redress;
• Those defendants also must turn over real and personal property worth approximately $3.1 million, including the Largo facility where they operated their business;
• Defendants JPW Consultants, Inc.; Jeffrey P. Wolf; and Alfred H. Wolf must liquidate and turn over to the FTC the proceeds of two securities accounts valued in July 2007 at $2 million;
• Defendants Travel Agents Direct LLC and John Louis Smith II must jointly pay $25,000 in consumer redress;
• Defendant Donald L. Booth must pay $35,000 in consumer redress; and
• Bryon Wolf and Roy Eliasson also are required to turn over to the FTC any tax refunds they may derive as a result of making the above redress payments, which may later add as much as $2 million to the consumer redress pool.

In the course of the litigation, the court-appointed receiver also sold Suntasia’s 80-foot corporate yacht and a second telemarketing facility the defendants were building in St. Petersburg, Florida.

The orders include a $171.9 million suspended judgment against defendants FTN Promotions, Inc.; Guardian Marketing Services, Corp. Strategia Marketing, LLC; Co-Compliance, LLC; Bay Pines Travel, Inc.; Suntasia Properties, Inc.; Bryon W. Wolf; and Roy A. Eliasson. The $171.9 million judgment is suspended upon the defendants’ satisfaction of their redress obligations, due to the defendants’ inability to pay the entire judgment. If the defendants are later found to have misrepresented their financial status, they will be responsible for paying the full amount of the judgment. Suspended judgments also were entered against JPW Consultants, Inc., and Jeffrey P. Wolf for $60 million, and against Alfred H. Wolf for $115 million.

The Commission vote approving the consent in settlement of the court action with each defendant was 4-0. Three of the stipulated orders were entered by the U.S. District Court for the Middle District of Florida, Tampa Division, on December 30, 2008. The court entered the stipulated order against Donald L. Booth on August 27, 2008.

The FTC received invaluable assistance in this matter from the United States Postal Inspection Service, the Largo, Florida Police Department, the Better Business Bureau of West Florida, Inc., the Pinellas County Department of Justice and Consumer Services, the University of Central Florida Police Department, the Miami-Dade Police Department, and the Department of Commerce’s Office of Export Enforcement.

Wachovia Bank Redress Program

For more information on the restitution that is being provided to Suntasia victims as a result of the settlement between the OCC and Wachovia Bank, N.A., including information on Wachovia’s recently issued checks to consumers, please see http://www.ftc.gov/opa/2009/01/wachovia.shtm.

NOTE: Stipulated final judgments and orders are for settlement purposes only and do not constitute an admission by the defendants of a law violation. Consent judgments have the force of law when signed by the judge.

Copies of the stipulated final judgments are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. 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 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

(FTC File No. X070036; Civ. No. 8:07-cv-1279-T-30TGW)
(Suntasia.final.wpd)