USA Channel Systems, Inc. and Two-Way Systems, Inc. Settle FTC Charges over Hight-Tech Investment Claims

The Federal Trade Commission has negotiated settlements in two cases against companies that vastly overstated to consumers the risk and profit potential investment value of federally-issued Federal Communications Commission (FCC) paging licenses, among other misrepresentations. The settlements are with defendants Rick Havil and Charles Bayne, who jointly ran USA Channel Systems, Inc. and Two-Way Systems, Inc. as a single business enterprise. The settlements impose a $50,000 judgment against the two corporate defendants, a $50,000 judgment against defendant Bayne, and a $65,000 judgment against defendant Havil. The settlements also require Havil and Bayne each to post $250,000 performance bonds to protect consumers before they engage in telemarketing activities in the future.

The settlements follow charges filed in January 1996 against these two companies and 83 others for fraudulently telemarketing FCC paging licenses and other types of high-tech investments. The crackdown, called Project Roadblock, was launched by the FTC and state securities regulators. The FTC commenced this action by filing a complaint against USA Channel Systems, Inc., and Charles Bayne. In February 1996, the FTC amended the complaint to add Two-Way Systems, Inc. and Rick Havil.

Today's settlements resolve FTC charges that the defendants telemarketed FCC paging licenses application services based on false promises that the licenses, once obtained from the FCC, could easily be sold or leased at a substantial profit. The FTC alleged that the defendants' representations were false because FCC regulations made the secondary market for selling or leasing such licenses virtually non-existent. Moreover, the FTC alleged, the defendants falsely represented that they were constructing a vast paging system and would be interested in making favorable offers to buy or lease the paging licenses that their customers obtained. The settlements would prohibit the defendants from making a variety of false claims in the future, including specifically:

• the number of FCC licensees that an entity or individual can acquire directly from the FCC for use in a geographic area;
• the likelihood that an entity or individual will lease, buy, or otherwise acquire licenses issued by the FCC;
• the likelihood that a consumer will realize income or profit by leasing, selling, or otherwise transferring licenses issued by the FCC
• the risk or profit potential of an investment in FCC paging licenses;
• the FCC’s fees or requirements to acquire or utilize licenses it issues or the amount of a consumer’s payment for FCC license application services that will be used to pay for application and engineering fees;
• the amount of a consumer's investment that will be used to pay for building and operating a telecommunications business, or the likelihood that a consumer will not need to pay additional money to build and operate a telecommunications business;
• the extent to which any entity or individual has taken steps to build a telecommunication system that would use a consumer’s paging licenses;
• the risk, liquidity, or value of any telemarketed product or service; and
• any other fact material to a consumer's decision to buy any telemarketed product or service.

The settlement would also prohibit the defendants from failing to disclose relevant FCC regulations on licenses or from operating a telemarketing business without fully complying with all applicable federal and state registration and bond requirements.

In addition, the settlement with defendant Havil would require him to post a $250,000 performance bond before engaging or assisting others in telemarketing. The order would also require Havil to pay a $65,000 judgment over a two-year period.

The settlement with defendant Bayne would require him to post a $250,000 performance bond before engaging or assisting others in telemarketing. This order would allow Bayne to telemarket some communications products, such as pagers, without first posting a performance bond. The order would also impose a $50,000 judgment against USA Channel Systems and Two-Way Systems, and require Bayne to pay a $50,000 judgment over a one-year period. The funds from the all of the judgments will be used for consumer redress if practicable.

Both settlements give the FTC the right to reopen the orders in the event the defendants misrepresented their financial condition. Finally, the settlements include various reporting requirements necessary to assist the FTC in monitoring the defendants' compliance.

The Commission vote to approve these settlements for filing in court was 5-0. They were filed in the U.S. District Court for the Central District of California, in Los Angeles, on Nov. 25.

NOTE: These agreements are for settlement purposes only and do not constitute admissions by the defendants of law violations. Settlements have the force of law when signed by the judge.

Copies of the settlements, as well as other documents associated with these cases and with Project Roadblock, 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

(Civil Action No. 96-454 DDP(CTx))
(FTC Matter No. X960017)