CD-Rom Display Rack Franchisors To Pay Redress Under Settlement of FTC Fraud Charges

The Federal Trade Commission has negotiated a settlement with the marketers of CD- ROM display rack businesses that will require them to turn over an estimated $340,000 for a consumer redress fund, dissolve the two corporate defendants, and bar one individual defendant from selling or assisting others to sell any business venture in the future. The settlement stems from charges the FTC filed in June against Infinity Multimedia, Inc., Quality Marketing Associates, Inc., and Joseph A. Wentz, of Pompano Beach, Florida. The FTC alleged that, in the course of selling their pre-packaged businesses for between $8,000 and $80,000, the defendants made false earnings and success claims, had one of their employees pose as an independent reference for potential investors to call, and used a variety of other deceptive practices.

The agency said about 300 people purchased the defendants’ business opportunities, which they had advertised on the World Wide Web. The defendants’ home page (address: mediaplus.com/infinity) currently links visitors to information about the FTC’s case. FTC charges against the one other individual defendant in the case, William B. Chappie (who has used a number of aliases, including William Brono Czaplewski, William Bruno Chapple, Bill Stack and Ken Olson), are still pending at this time.

The consent judgment negotiated by the FTC requires the court’s approval to become binding. Specifically, it would:

• permanently ban Wentz from participating in any way in the marketing or sale of any franchise or business venture;
• require Wentz to pay $40,000 to the FTC for consumer redress and relinquish his interest in the corporate defendants, whose assets after liquidation may total more than $300,000; and
• provide for the court-appointed receiver in the case to dissolve the corporate defendants and liquidate their assets for consumer redress.

The FTC in recent years has brought charges against dozens of firms for allegedly using false promises or deceptive claims to sell vending machine or display rack distributorships, and cautions potential investors to make every effort before purchasing such a distributorship to veri fy claims made by the company about earnings, location assistance and sales, and to visit actual locations of the machines or racks owned by the company’s reference distributors. The FTC’s Franchise Rule requires companies selling franchises to give potential buyers a detailed disclo sure document containing information about the business and its directors, including their litiga tion history, the full cost of the business, and the names of former franchisees that consumers can contact. If a franchisor chooses to make earnings claims, it must be able to substantiate them and is required to give potential buyers a copy of a document containing that substantiation.

The FTC filed the proposed consent judgment in this case in U.S. District Court for the Southern District of Florida, Fort Lauderdale Division. The Commission vote to authorize filing was 5-0.

NOTE: This consent judgment is for settlement purposes only and does not constitute an admission by the defendant of a law violation. Consent judgments have the force of law when signed by the judge.

Copies of the proposed consent judgment 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 news as it is announced, call the FTC NewsPhone recording at 202-326-2710. FTC news releases, related documents 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. 952 3355, X960073)
(Civil Action No. 96-6671-CIV-Gonzalez)