IN THE UNITED STATES DISTRICT
COURT
COMPLAINT FOR INJUNCTIVE AND OTHER EQUITABLE RELIEF Plaintiff, the Federal Trade Commission ("FTC" or "Commission"), for its complaint alleges: 1. The FTC brings this action under Sections 13(b) and 19 of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. §§ 53(b) and 57b, and the Telemarketing and Consumer Fraud and Abuse Prevention Act ("Telemarketing Act"), 15 U.S.C. § 6101 et seq., to obtain injunctive relief, rescission or reformation of contracts, restitution, disgorgement, and other equitable relief for defendants' deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), and the FTC's Telemarketing Sales Rule 16 C.F.R. Part 310. JURISDICTION AND VENUE 2. This Court has subject matter jurisdiction pursuant to 28 U.S.C. §§ 1331, 1337(a), and 1345, and 15 U.S.C. §§ 45(a), 53(b), 57b, 6102(c), and 6105(b). 3. Venue in the United States District Court for the Northern District of Illinois is proper under 28 U.S.C. § 1391(b), (c), and (d) and 15 U.S.C. §§ 53(b) and 6103(e). PLAINTIFF 4. Plaintiff, FTC, is an independent agency of the United States Government created by statute. 15 U.S.C. §§ 41 et seq. The Commission is charged, inter alia, with enforcement of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), which prohibits unfair or deceptive acts or practices in or affecting commerce. The Commission also enforces the TSR, 16 C.F.R. Part 310, which prohibits deceptive or abusive telemarketing acts or practices. The Commission is authorized to initiate federal district court proceedings, by its own attorneys, to enjoin violations of the FTC Act and the TSR, to secure such equitable relief as may be appropriate in each case, and to obtain consumer redress. 15 U.S.C. §§ 53(b), 57b, 6102(c), and 6105(b). DEFENDANTS 5. Defendant Consumer Alliance, Inc., is incorporated in Delaware. Its office and principal place of business is located at 1992 Yonge Street, Toronto, Ontario, Canada, M4S 1Z7. Consumer Alliance, Inc. transacts or has transacted business in the Northern District of Illinois and throughout the United States. 6. Defendant Consumer Alliance, Inc. a/k/a 1421914 Ontario Inc., is incorporated in Ontario, Canada. Its office and principal place of business is located at 1992 Yonge Street, Toronto, Ontario, Canada, M4S 1Z7. Consumer Alliance, Inc. a/k/a 1421914 Ontario Inc. transacts or has transacted business in the Northern District of Illinois and throughout the United States. 7. Defendant Biosource Financial, Inc., is incorporated in Ontario, Canada. Its office and principal place of business is located at 115 Hurontario Street, Collingwood, Ontario. Biosource Financial, Inc., transacts or has transacted business in the Northern District of Illinois and throughout the United States. 8. Defendant Steven Winter is the founder and director and an officer of both corporations named Consumer Alliance, Inc. Mr. Winter is a citizen and resident of Ontario, Canada. At all times relevant to this complaint, acting alone or in concert with others, Mr. Winter has participated directly in, or has had authority to control the acts and practices of the corporate defendants, including the acts and practices set forth in this complaint. 9. Defendant Gordon Levoy is the founder and director and an officer of Biosource Financial, Inc. Mr. Levoy is a citizen and resident of Ontario, Canada. At all times relevant to this complaint, acting alone or in concert with others, Mr. Levoy has participated directly in, or has had authority to control the acts and practices of the corporate defendants, including the acts and practices set forth in this complaint. 10. Defendant Jason C. Williams is an officer of both corporations known as Consumer Alliance, Inc. and Biosource Financial, Inc. Mr. Williams is a citizen and resident of Ontario, Canada. At all times relevant to this complaint, acting alone or in concert with others, Mr. Williams has participated directly in, or has had authority to control the acts and practices of corporate defendants, including the acts and practices set forth in this complaint. 11. Defendant Danny Longo is an officer of both corporations known as Consumer Alliance, Inc. and Biosource Financial, Inc. Mr. Longo is a citizen and resident of Ontario, Canada. At all times relevant to this complaint, acting alone or in concert with others, Mr. Longo has participated directly in, or has had authority to control the acts and practices of corporate defendants, including the acts and practices set forth in this complaint. COMMERCE 12. At all times relevant to this complaint, defendants have maintained a substantial course of trade in or affecting commerce, as "commerce" is defined in Section 4 of the FTC Act, 15 U.S.C. § 44. DEFENDANTS' BUSINESS PRACTICES 13. Since at least November 1999, and continuing thereafter, defendants have deceptively telemarketed credit card protection services and advance fee credit card services to consumers throughout the United States. 14. To induce consumers to purchase credit card protection services, defendants have represented, either expressly or by implication, that defendants are calling from, or are affiliated with, legitimate credit card companies, such as Visa, Mastercard, or the bank issuing the consumer's credit card. 15. During telephone solicitations, defendants have told consumers that consumers need to purchase defendants' credit card protection service because consumers are not currently protected against unauthorized use of their credit card accounts. Defendants have claimed that, if a consumer's credit card number is stolen or misappropriated, a consumer can be held liable for all unauthorized charges to the consumer's credit card account. 16. Defendants have claimed that purchase of their credit card protection service protects consumers from liability for unauthorized credit card charges. 17. Defendants have persuaded consumers to divulge their credit card numbers by stating that they already know the numbers but need verification. 18. Defendants have offered to provide consumers, or arrange for consumers to obtain, low interest credit cards or lower interest on their current credit cards, in exchange for advance fees. 19. Defendants have obtained consumers' credit card account numbers and, without consumers' authorization, have caused charges to be posted on those accounts. 20. Defendants have represented to consumers that the total cost of their credit card protection services or advance fee credit card services would be significantly less than the amount consumers ultimately were charged. 21. Defendants charged consumers fees ranging from $299 to $400 for their services. SECTION 5 OF THE FTC ACT 22. Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), provides that "unfair or deceptive acts or practices in or affecting commerce, are hereby declared unlawful." VIOLATIONS OF SECTION 5 OF THE FTC ACT COUNT I 23. In numerous instances, in connection with the telemarketing of credit card protection services to consumers, or in the course of billing, attempting to collect, or collecting money from consumers, defendants have represented, expressly or by implication, that:
24. In truth and in fact:
25. Therefore, defendants' representations, as set forth in paragraph 23, are false and misleading and constitute deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a). COUNT II 26. In numerous instances, defendants have expressly represented to consumers that defendants will provide to consumers, or arrange for consumers to receive, low interest credit cards, in return for an advance payment. 27. In truth and in fact, in numerous instances, defendants have not provided, or arranged for consumers to receive, low interest credit cards. 28. Therefore, the representations set forth in Paragraph 26 are false and misleading and constitute deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a). COUNT III 29. In numerous instances, without consumers' knowledge or authorization, defendants have caused charges to be placed on consumers' credit cards. 30. Defendants' acts or practices, as alleged in paragraph 29, cause or are likely to cause substantial injury to consumers that is not reasonably avoidable by consumers themselves and is not outweighed by countervailing benefits to consumers or to competition. 31. Therefore, defendants' acts or practices, as alleged in paragraph 29, are unfair in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a). THE FTC'S TELEMARKETING SALES RULE 32. In the Telemarketing Act, 15 U.S.C. § 6101 et seq., Congress directed the Commission to prescribe rules prohibiting abusive and deceptive telemarketing acts or practices. On August 16, 1995, the Commission promulgated the TSR, 16 C.F.R. Part 310. The TSR became effective on December 31, 1995. 33. Defendants are "sellers" or "telemarketers" engaged in "telemarketing," as those terms are defined in the TSR, 16 C.F.R. §§ 310.2(r), (t), and (u). 34. The TSR prohibits sellers or telemarketers "[b]efore a customer pays for goods or services offered, failing to disclose, in a clear and conspicuous manner, . . . the total costs to purchase, receive, or use, and the quantity of, any goods or services that are the subject of the sales offer." 16 C.F.R. § 310.3(a)(1)(i). 35. The TSR prohibits telemarketers and sellers from "[m]aking a false or misleading statement to induce any person to pay for goods or services." 16 C.F.R. § 310.3(a)(4). 36. The TSR prohibits sellers and telemarketers from "[r]equesting or receiving payment of any fee or consideration in advance of obtaining a[n] . . . extension of credit when the seller or telemarketer has guaranteed or represented a high likelihood of success in obtaining or arranging a[n] . . . extension of credit for a person." 16 C.F.R. § 310.4(a)(4). 37. Pursuant to Section 3(c) of the Telemarketing Act, 15 U.S.C. § 6102(c), and Section 18(d)(3) of the FTC Act, 15 U.S.C. § 57a(d)(3), violations of the TSR constitute unfair or deceptive acts or practices in or affecting commerce, in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a). VIOLATIONS OF THE FTC TELEMARKETING SALES RULE COUNT IV 38. In numerous instances, in connection with the telemarketing of credit card protection services, or in the course of billing, attempting to collect, and collecting money from consumers, defendants have represented, expressly or by implication, that:
39. In truth and in fact:
40. Therefore, defendants' representations, as alleged in paragraph 38, constitute false or misleading statements to induce a person to pay for goods or services, and are deceptive telemarketing acts or practices in violation of Section 310.3(a)(4) of the Telemarketing Sales Rule, 16 C.F.R. § 310.3(a)(4). COUNT V 41. In numerous instances, defendants have expressly represented to consumers that defendants will provide to consumers, or arrange for consumers to receive, low interest credit cards, in return for an advance payment. 42. In truth and in fact, in numerous instances, defendants have not provided, or arranged for consumers to receive, low interest credit cards. 43. Therefore, defendants' representations, as alleged in paragraph 41, constitute false or misleading statements to induce a person to pay for goods or services, and are deceptive telemarketing acts or practices in violation of Section 310.3(a)(4) of the Telemarketing Sales Rule, 16 C.F.R. § 310.3(a)(4). COUNT VI 44. In numerous instances, defendants have requested or received payment from a consumer of a fee in advance of obtaining an extension of credit for the consumer, which the defendants have guaranteed or represented a high likelihood of success in obtaining or arranging for the consumer. 45. Therefore, defendants' representations constitute abusive telemarketing acts and practices in violation of Section 310.4(a)(4) of the Telemarketing Sales Rule, 16 C.F.R. § 310.4(a)(4). CONSUMER INJURY 46. Consumers in many areas of the United States have suffered substantial monetary loss as a result of defendants' unlawful acts and practices. Absent injunctive relief by this Court, defendants are likely to continue to injure consumers and harm the public. THIS COURT'S POWER TO GRANT RELIEF 47. Section 13(b) of the FTC Act, 15 U.S.C. § 53(b), empowers this Court to grant injunctive and other ancillary relief, including consumer redress, disgorgement, and restitution, to prevent and remedy any violations of any provisions of law enforced by the Commission. 48. Section 19 of the FTC Act, 15 U.S.C. § 57b, and Section 6(b) of the Telemarketing Act, 15 U.S.C. § 6105(b), authorize this Court to issue a permanent injunction and grant such relief as the Court finds appropriate to halt and redress injury resulting from defendants' violations of the TSR, including the recission and reformation of contracts, and the refund of money. 49. This Court, in the exercise of its equitable jurisdiction, may award other ancillary relief to remedy injury caused by defendants' law violations. PRAYER FOR RELIEF WHEREFORE, plaintiff requests this Court, pursuant to Sections 13(b) and 19 of the FTC Act, 15 U.S.C. §§ 53(b) and 57b, and Section 6(b) of the Telemarketing Act, 15 U.S.C. § 6105(b), and pursuant to its own equitable powers:
Respectfully Submitted, WILLIAM E. KOVACIC Dated: April 4, 2002 DAVID A. O'TOOLE |