Defendant in Telemarketing "Recovery Room" Scheme Agrees To Settle Charges

Rena Warden, a defendant in the Federal Trade Commission's lawsuit against Fraudulent Action Network, Inc. (FANS) of Las Vegas, Nevada, has agreed to settle charges stemming from her role in the alleged scheme. In March 1996, the FTC charged that FANS misrepresented to consumers that it would recover all or a substantial portion of the money lost in previous telemarketing scams. Under the settlement, Warden is prohibited from making any material misrepresentations in connection with any telemarketing effort and from violating any provision of the Telemarketing Sales Rule in the future. This case was the FTC's first case challenging violations of the Telemarketing Sales Rule by a so-called recovery service.

The FTC's complaint, which detailed the specific charges in this case, states that FANS, its president, Michael Starrion, and Rena Warden, FAN's office manager, telemarketed recovery room services to consumers throughout the United States. The defendants told consumers that they had obtained their names from a list of victims of previous telemarketing fraud, and that FANS had recovered substantial amounts of money for its former customers, according to the complaint. The defendants then told consumers that for a fee of 10 to 20 percent of the consumer's previous losses -- or a minimum fee of $400 -- FANS would recover their losses within six weeks to three months. Rena Warden was involved in FANS' day-to-day operations.

The FTC's complaint specifically alleged that the defendants falsely represented that:

• they would recover all or a substantial portion of the money that consumers lost in previous telemarketing schemes;

• former customers had recovered all or a substantial portion of the money they lost in previous telemarketing schemes; and

• the defendants would recover those losses within six weeks to three months.

In addition, the FTC had alleged that the defendants violated the Telemarketing Sales Rule by requesting or receiving payment for recovery services before delivery.

On July 30, 1996, Judge Lloyd D. George of the U.S. District Court for the District of Nevada, in Las Vegas, entered a default judgment and permanent injunction against FANS, Starrion and Warden. The Order also required the defendants to pay $378,915 in consumer redress. The judge issued the order after the defendants failed to answer the FTC's charges. In December 1996, Warden asked the court to set aside the default judgment and in October 1997, the court granted her motion. The Court's judgment against FANS and Starrion is not affected by this Order, and still stands.

The FTC filed the settlement in the U.S. District Court for the District of Nevada, in Las Vegas, on February 6. The settlement was subject to approval by the judge, who signed and entered the order on February 10. The Commission vote to file the settlement was 5-0.

NOTE: The Stipulated Final judgment and Order for Permanent Injunction is for settlement purposes only and does not constitute an admission by the defendant of a law violation. Judgments have the force of law when signed by the judge.

Copies of the judgment, as well as other documents associated with this case, and an FTC brochure titled "Telemarketing Recovery Room Scams," that advises consumers on how to protect themselves from such schemes, are available from the FTC's Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-3128; 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 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. CV-S-96-191-LDG (RJJ))
(FTC File No. X96 0023)