$750,000 Performance Bond Requirement Imposed on Remaining Two Defendants Named in FTC Popcorn Vending Machine Case

The remaining two defendants sued by the Federal Trade Commission in 1995 as part of "Project Telesweep" -- a nationwide crackdown on business opportunity fraud -- have agreed to settle the federal charges. As part of the settlement, David Bernstein and Kevin Feldman are required to post a $750,000 performance bond for the protection of future investors before engaging in the sale of any franchise, business opportunity or telemarketing activities. The FTC had alleged that four individuals and eight South Florida corporations made numerous misrepresentations in the sale of their popcorn vending machine business opportunities, and failed to give potential investors either the pre-sale disclosures about their business opportunities or the documentation to support claimed earnings required by the FTC’s Franchise Rule.

The FTC’s Franchise Rule requires franchisors to give potential buyers detailed up-front disclosures about their current and past franchisees, the financial and litigation history of their firms, and substantiation for any representations they make about earnings.

In July 1995, the FTC filed its complaint in federal district court naming Steven F. Gelb, Frank Friedland, David Bernstein, Kevin Feldman, Worldwide Marketing and Distribution Company, Inc., doing business as Hollywood Pop; Titan Management Corp.; Mammoth Holding Corp.; Remote Assembly Corp.; Popcorn Flavors, International Inc.; Popcorn Supply Company, Inc.; Planet Ice Cream, Inc.; Royal Imperial Ltd., Inc.; and Sutton Group of Palm Beach, Inc. The corporate defendants were based in Boca Raton, Florida. In the complaint detailing the charges, the FTC alleged that the four individuals, through a web of corporations, routinely defrauded consumers by misrepresenting the potential sales from the vending machines and the reliability of their machines, and by using phony references to induce consumers to purchase the vending machine opportunities they sold for an average of $20,000.

The consent judgment to settle these charges, which requires the court’s approval to become binding, would require Bernstein and Feldman to comply with all aspects of the FTC’s Franchise Rule. In addition, the settlement would prohibit them from making false statements or misrepresenting material aspects of any franchise or business venture they offer, including the specific misrepresentations made in this case, and would prohibit them from making any misrepresentation in the sale of any product, service or investment opportunity through telemarketing.

In addition to the $750,000 performance bond, the defendants would be banned from providing any identifying information about the victims of their alleged scam to anyone other than a law enforcement authority.

The settlement also includes various reporting and recordkeeping provisions designed to assist the FTC in monitoring the defendants' compliance.

The Commission vote to authorize filing of the stipulated final judgment and order was 5-0. The proposed settlement was filed in the U.S. District Court for the Southern District of Florida, on May 8, 1998. It is subject to court approval.

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

Copies of the stipulated judgment and order will be available shortly, and other documents associated with Project Telesweep, are available from the FTC’s web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TDD 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 File No. X950056)
(Civil Action No. 95-8422-CIV-Roettger)