Individual Defendant Agrees to Settle All FTC Charges In Project Mailbox Computer Repair Scam Case

Edward E. Rayden, one of the defendants charged by the Federal Trade Commission with operating a computer repair services contract scam, has agreed to a settlement that would prohibit him from making any false or misleading representations when selling goods and services to consumers over the phone or by mail. As part of the settlement, Rayden also would be required to pay $15,000. Rayden also agreed to a ban that would prevent him from participating in the sale of service contracts where such sales account for more than 10 percent of the revenues generated. Rayden was an officer of National PC Systems, Inc., an Encino, California company named as a defendant in the FTC's "Project Mailbox," a law enforcement effort targeting fraudulent direct mail schemes.

On October 1, 1997, as part of "Project Mailbox," the FTC, Postal Inspection Service, the National Association of Attorneys General, state Attorneys General, local law enforcement officials and AARP announced 190 law enforcement actions against fraudulent direct mail schemes. The scams targeted in the sweep involved a range of deceptive claims, including misrepresentations that a mailing was from the government; deceptive claims that consumers have won something; and false prize promotion claims.

In the National PC Systems case, the FTC charged AKOA, Inc., Jeffrey Rayden, Larry Wayne and Edward Rayden, all doing business as National PC Systems, Inc., with sending invoices to organizations, including churches and non-profit organizations, for unordered computer repair service contracts. Their mailings indicated that they were "renewals" or "upgrades of service" to previous contracts, or warned that an account was "past due." Their solicitations also provided an 800 number for consumers to call for "unlimited maintenance and repair services" including assistance by telephone. The FTC alleged that the defendants rarely, if ever, provided the promised services to consumers. In October, the Commission amended its complaint to add Rayco, Inc., and Easyway International, Inc. as corporate defendants. The FTC litigation against the other defendants in the case continues.

The FTC's settlement with Edward Rayden, which requires the court's approval, would permanently bar him from participating in the sale of any service contract by mail or the telephone for any business in which service contracts constitute more than 10 percent of the revenues of the business, and contains specific prohibitions against the types of false claims allegedly made by Rayden and the other defendants in the case. The settlement would require Rayden, in connection with any business that he owns or controls, when sending mail that looks like a bill, to include the following statement in 30-point type on the envelope: "THIS IS NOT A BILL." In addition, Rayden would be required to make certain disclosures required by the FTC's Telemarketing Sales Rule if he calls consumers without their prior consent for the purpose of soliciting the purchase of goods or services.

The settlement also requires that, in the future, Rayden make full refunds to consumers who paid for goods or services and have not received them within the time represented or, if no specific time was represented, within two weeks of making the request.

Based on the financial disclosure documents Rayden filed with the FTC, the settlement requires him to pay $15,000 immediately to the receiver. Finally, the order contains various recordkeeping and reporting provisions that would assist the FTC is monitoring Rayden's compliance.

The Commission vote to approve the settlement for filing in court was 3-1, with Commissioner Mary L. Azcuenaga dissenting. The stipulation for final judgment was filed in the U.S. District Court for the Central District of California, in Los Angeles, on November 18, 1997.

NOTE: This stipulated final judgment is for settlement purposes only and does not constitute an admission by the defendant of a law violation. The judgment has the force of law when signed by the judge.

Copies of the stipulated final judgment, as well as other documents associated with this case and "Project Mailbox," 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. 972 3129)
(Civil Action No. 97-7084 (C.D. Cal.)(LGB)(Mcx)