FTC Wins Permanent Injunction Against Defendants in Charitable Solicitation Fraud Case; Court Orders $4.1 Million in Consumer Redress

A federal court judge in Nevada has granted the FTC's motion for summary judgment in the Federal Trade Commission's case against International Charity Consultants, Inc., and its cohorts, and issued a permanent injunction against eight of the defendants. These defendants had been charged by the FTC with using a fraudulent prize-promotion pitch to induce consumers, many of them elderly, to donate money to two purportedly charitable organizations. The defendants victimized more than 4,000 consumers. The court order bans three of the individual defendants from participating in telephone prize promotions and requires all of the defendants to post a $5 million performance bond before engaging in telemarketing activities in the future.

The defendants organized and promoted a scheme to solicit donations for purported charities: defendant Regeneration & Renewing, doing business as AWARE; and a Las Vegas foodbank known as The Gleaners. The district court, in entering summary judgment against defendant AWARE-Regeneration & Renewing, found that it was not operated as a true non-profit corporation and thus was subject to the jurisdiction of the FTC.

The eight defendants subject to the permanent injunction are: Regeneration & Renewing, Inc., d/b/a AWARE, Topp Kat, Inc., Toppkat, II. Inc., Future Images, Inc., William Jervis, Joseph Rubbico, Sherri L. Harvey and Michael Kody Sawyer. In addition to the permanent injunction against these eight defendants, the court has entered a default judgment and permanent injunction against three other defendants. Thirteen of the original 24 defendants have settled with the FTC. The fraudulent scheme was headquartered in Las Vegas, Nevada, but the defendants operated telephone solicitation rooms in Woburn, Massachusetts, and Shreveport, Louisiana, as well.

The court order stems from FTC charges filed in March 1994. The court found that the defendants falsely represented that: consumers would win valuable prizes in exchange for donating; AWARE and Gleaners performed certain specific charitable activities; and donations to AWARE were tax-deductible.

The court's final order permanently prohibits defendants William Jervis, Joseph Rubbico and Michael Kody Sawyer from engaging or participating in telephone premium promotions. The defendants also are prohibited from engaging in telemarketing activities unless they first obtain a $5 million performance bond.

The defendants also are prohibited from misrepresenting any material fact about any good or service they offer or about any charitable donation they solicit in the future. Among the prohibited claims are misrepresentations about the value or nature of any premium incentive item offered in connection with any product, service or donation solicitation, the likelihood that the consumer will receive a specific premium and the terms governing a promotion in which consumers have to purchase something or make a donation in order to receive a premium. The defendants also must disclose, up front, all material terms and conditions associated with a transaction, including the odds of receiving a premium and whether a purchase is necessary. If consumers ask, the defendants would be required to disclose the retail value of the premium. The order also prohibits the defendants from resoliciting any consumer to purchase or donate before the consumer receives all merchandise and premiums associated with a prior offer.

The order further prohibits the defendants from misrepresenting any fact material to the consumer's decision to make any charitable donation, including the amount of the donation that defendants will give to the charity; the activities that the funds will be earmarked to; the source of any premium incentive item; and whether the donation is tax deductible. If the consumer asks, the defendants must state what percentage of the consumer's charitable donation will be given to the charity.

The court also has ordered the defendants to pay more than $4.1 million in consumer redress. Because the defendant corporations are out of business and the individuals insolvent, the FTC does not anticipate collecting much, if any, of the court-ordered redress. Finally, the court's order contains various reporting provisions that will assist the FTC in monitoring the defendants' compliance.

The judge granted the FTC's motion for summary judgment (without trial) and entered the order on April 10, 1996. This case was handled by the FTC's Seattle Regional Office.

Copies of the final judgment and order for permanent injunction, and other documents associated with this case are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest FTC news as it is announced, call the FTC's NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the Internet at the FTC's World Wide Web Site at: http://www.ftc.gov

(FTC File No. X940028)

(Civil Action No. CV-S-94-DWH(RLJ))