Two Canadian citizens and the five corporations they operated will pay $436,000 to settle Federal Trade Commission charges that they tricked consumers into paying as much as $299 for one of two worthless credit card "protection" packages and laundered credit card purchases for other sellers for products including lottery tickets, British bonds, and consumer benefits packages.
"This case represents another step in the Commission’s crackdown on sellers of bogus credit card protection services. Rather than protecting consumers, these scams victimize them," said J. Howard Beales, III, Director of the FTC’s Bureau of Consumer Protection. "In this case, the defendants not only sold worthless credit card protection, but also laundered credit card receipts for other telemarketers through offshore companies and books."
The five corporate defendants named in the complaint are: 1) Farpoint Services International, Ltd.; 2) Garrison Corporation, Inc.; 3) American Card Services, S.A.; 4) Consolidated Group of Companies, LLC; and 5) Hyperion, LLC. Farpoint is a British corporation, incorporated in the name of defendant Roberta Galway. It allegedly contracted with telemarketers to sell the Garrison Assurance and American Card Registry credit card loss- protection packages, and arranged for credit card processing for telemarketers of products other than those that the defendants sold. The two individual defendants named in the complaint, Philip Arcand and Galway, allegedly are principles of the five corporate defendants.
Arcand created the Garrison and American Card Registry products and scripts, processed transactions for third parties, and kept property in Galway’s name. Both Arcand and Galway lived in Las Vegas for at least six months of the year while they operated the alleged scam. They currently are incarcerated in Los Angeles awaiting trial on charges of mail fraud and committing fraud against the elderly.
Garrison Corporation, Inc., incorporated in the British Virgin Islands, allegedly was set up to act as a conduit, through its account at the Bank of Bermuda, for funds processed through the defendants’ merchant account at Compass Bank. Garrison currently is inactive, and Compass Bank has frozen all of its assets. Hyperion LLC was an assumed business name that was used to obtain a merchant account at Compass.
American Card Services, S.A. (ACS) was incorporated in Managua, Nicaragua, to facilitate offshore banking in that country. The company contracted with telemarketers to sell the credit card loss-protection in the name of Garrison Assurance and American Card Registry. Like Garrison, ACS is no longer in business.
Consolidated Group of Companies is a Nevada limited liability corporation that Arcand owns. Originally incorporated with the name Polo Holdings LLC, the defendants changed its name to CGC in March 2001. The company is a shell with no assets and never was engaged in any business. Arcand used the company (Polo Holdings) to launder credit card charges for several telemarketing companies.
According to the FTC, the defendants created and deceptively marketed two credit card loss protection programs – the Garrison Assurance Credit Card Registry and the American Card Registry – in violation of the FTC Act and the Telemarketing Sales Rule. The defendants’ telemarketers used sales scripts that allegedly employed scare tactics, telling consumers that their credit card numbers were accessible over the Internet and that unless they purchased the "protection," they would be liable for unauthorized charges when criminals used their cards to make purchases. The scripts implied that the defendants’ protection would cover all potential losses, and that consumers would not have to pay for the unauthorized charges. The cost of these "services" was between $279 and $299. In addition, the FTC alleged that the defendants used merchant accounts established in their names to process credit card transactions for unrelated companies.
The stipulated final order bans the defendants from telemarketing credit card loss-protection packages and from credit card laundering. The order also bars them from making misrepresentations similar to those alleged in the complaint and from disclosing their consumer lists to anyone besides the FTC or other enforcement agencies. The defendants received approximately $3.3 million through their deceptive practices. The order imposes a judgment for that amount, with all but $436,000 suspended due to the defendants’ inability to pay. If the defendants are found to have misrepresented their assets, the full amount will be due immediately.
The Commission vote to accept the proposed settlement of the court action was 5-0. The court approved the settlement, which was filed in the U.S. District Court for the Western District of Washington at Seattle, on August 30, 2002.
(FTC File No. X020002; Civ. No. C01-1593P)