Markets Wired

A group of business opportunity marketers who told consumers they could make substantial income processing medical claims from home have agreed to settle Federal Trade Commission charges that they misled consumers in violation of federal law.

The settlement is a result of Project Fal$e Hope$, an FTC-led effort that targeted bogus business opportunities and work-at-home scams in 2006, producing more than 100 law enforcement actions by the FTC, the Department of Justice, the U.S. Postal Inspection Service, and law enforcement agencies in 11 states.

According to the FTC, in mass mailings to consumers throughout the nation, the defendants offered a business opportunity – electronically processing health care providers’ medical claims for insurance reimbursement – and that they would help consumers find their first medical billing client and provide them with lists of providers in their area. Consumers were told that they could earn $1,200 per month with one client, and they were promised software training and upgrades, review of all claims processed, and marketing and technical support.

As stated in the complaint, consumers were provided with names and telephone numbers of references represented as current licensees, some of whom were the defendants’ officers and directors. After consumers paid a “licensing fee” of $4,985 to $5,985, the defendants never provided a franchise disclosure statement, an earnings claim document, or any other information substantiating their earnings claims. At their own expense, the complaint notes, consumers attended a training session where they learned that the representations were false, and that they would have to make cold calls and personal visits in order to get clients. Once back home, they learned that obtaining clients was extremely difficult, if not impossible, because the market was saturated, most processors already functioned electronically, and the few who processed manually had little interest in entrusting their billing to inexperienced or unknown persons.

The defendants are Mazzoni & Son, Inc. d/b/a EDI Healthclaims Network and d/b/a Concept Trading Company, Breeze Freeze, Inc., Dolele & Associates, LLC, Four Seasons Beverage & Equipment, Inc., Metro Plymouth Business Park, LLC, Mazzoni & Sons, LLC,
Chester J. Mazzoni, Jr., individually and as an officer or principal of all of the above-named
entities except Dolele & Associates, and Leo Douglas Lepo, a/k/a Douglas L. Lepo, individually
and as an officer or principal of all of the above-named entities except Mazzoni & Sons. They
are charged with violating the FTC Act by falsely representing that they would provide assistance that allows consumers easily to obtain clients, that consumers are likely to earn at least $1,200 per month, and that certain references have purchased one of the defendants’ billing businesses or will provide reliable descriptions of their experience. They also are charged with violating the FTC’s Franchise Rule by failing to provide prospective franchisees with accurate and complete franchise disclosure statements as required, and failing to provide earnings claims documents and make other disclosures required by the Rule.

The proposed stipulated final order prohibits the defendants from engaging in further violations and imposes a monetary judgment of $17,660,000, which will be suspended upon payment of $50,000 by the corporate defendants, and the defendants furnishing information necessary for collecting and reporting any delinquent taxes. The full judgment will be imposed if the defendants are found to have misrepresented their financial condition. A separate stipulated judgment, filed in the U.S. Bankruptcy Court for the Eastern District of Michigan, Southern Division, provides that the debt owed to the FTC by Chester J. Mazzoni, Jr. cannot be erased by filing for bankruptcy. In addition to the $50,000, the corporate defendants will pay any money remaining from assets ordered frozen in 2006.

The Commission vote to authorize staff to file a second amended complaint and execute and file a proposed stipulated final judgment and order for permanent injunction was 5-0. The documents were filed in the U.S. District Court for the Eastern District of Michigan, Southern Division.

NOTE: The Commission files 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 stipulated final order is for settlement purposes only and does not constitute an admission by the defendant of a law violation. A stipulated final order requires approval by the court and has the force of law when signed by the judge.

Copies of the complaint and stipulated judgment and order are available from the FTC’s Web site at http://www.ftc.gov and the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC works for the consumer 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, click http://www.ftc.gov/ftc/complaint.shtm or call 1-877-382-4357. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to more than 1,600 civil and criminal law enforcement agencies in the U.S. and abroad. For free information on a variety of consumer topics, click http://ftc.gov/bcp/consumer.shtm.