Falcon Crest Defendants Settle FTC Charges

A company that sold bogus brokerage services to consumers who owned federal telecommunications licenses and four of its principals have agreed to settle Federal Trade Commission charges that their scheme was deceptive and violated federal law. Falcon Crest Communications and its principals will be ordered to pay $760,000 in monetary redress and will be prohibited from misrepresenting investments or any telemarketed products or services. Two of the individual defendants will be barred from telemarketing for five years, and two others will be required to obtain bonds before telemarketing investments.

Falcon Crest Communications, Inc., is based on Long Island, New York. Its principals and individual defendants are Joseph Caridi, Jordan Drew, Joel H. Cohen and Gary Paperman.

The settlement follows a FTC complaint alleging that the defendants and another company controlled by them, Republic Communications Corporation, touted themselves as experienced license brokers with an excellent track record of selling or leasing licenses issued by the Federal Communications Commission. The defendants delivered, "few, if any" offers to buy or lease the licenses, according to the FTC complaint. Arthur D. Spatt, Judge in the U.S. District Court for the Eastern District of New York, enjoined the defendants from the "promotion, advertising, marketing, sale or offering for sale of, brokerage or listing services for licenses issued by the FCC," pending trial.

According to the FTC complaint detailing the charges in the case, many consumers purchased FCC licenses as investments, but lack experience in the telecommunications field. According to the complaint, the defendants contacted license-holders through a nationwide marketing campaign, claiming to be experienced, professional and successful brokers and offering to locate buyers or lessees for the licenses.

Falcon Crest charged consumers an up-front, non-refundable fee of $495 which it claimed to use for engineering studies and other work necessary to market the licenses. The FTC alleged that Falcon Crest had little or no success in obtaining lucrative offers for its clients' licenses. Falcon Crest turned the names over to the Republic Communications Corp., and Republic, in turn, sent management and option agreements to hundreds of Falcon Crest's customers, making it appear to consumers that Republic had the capability and intention to develop wireless communication systems--even though it had no such intent, the FTC alleged.

In February 1997, Republic settled FTC charges that it misrepresented its management of federal wireless communications licenses and paid $38,544 in consumer redress. The agreement to settle the FTC charges with Falcon Crest and the individual defendants would bar misrepresentations about the past performance, likelihood of success, potential future income or profit or any fact material to any telemarketed product or service. The agreement requires Falcon Crest and the individual defendants to pay a total of $760,000 in consumer redress. Under separate judgments, Drew and Caridi are each liable for $350,000 and will be barred from any telemarketing for five years. Cohen and Paperman will each pay $30,000 and be required to obtain $500,000 bonds before engaging in the telemarketing of any investments in the future.

This settlement is the latest in a series of FTC cases involving scams related to FCC licenses. The FTC and the FCC have jointly issued a consumer alert which they sent to holders of paging and SMR licenses. The FCC also is sending the alert to all new licensees when licenses are granted. The FTC and FCC recently formed an interagency working group to coordinate enforcement and consumer education efforts with respect to wireless fraud.

The Commission vote to accept the settlements was 5-0. It was filed in the U.S. District Court for the Eastern District of New York, in Uniondale, June 26.

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

Copies of the complaint, consent and consumer education brochures, "Alert for SMR and Paging Licensees" and "Telecommunication Scams using FCC Licenses" [PDF] are available on the Internet at the FTC's World Wide Web site at: http://www.ftc.gov and also from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, NW, 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 News phone recording at 202-326-2710.

(FTC File No. X960 016)