FTC Charges New York City Vending Machine Company with Fraud

Hi Tech Mint Systems, Inc., a New York-based company that sells peppermint patty vending machine business opportunities, has been charged by the Federal Trade Commission with making false earnings claims in its advertisements, sales pitches and promotional materials, with failing to provide the required documents to substantiate their earnings claims, and with violating the Franchise Rule by misrepresenting the earnings potential of its business opportunities. The FTC filed charges against Hi-Tech Mint and its owner as part of “OPERATION VENDUP BROKE” -- a sweep netting over 40 enforcement actions against fraudulent vending machine business opportunities that offer lucrative earnings.

Hi Tech Mint, located in New York City, sold it peppermint patty vending machine business opportunities through ads in newspapers nationwide. The ads typically offer vending machine distributorships that require few hours of work per week. Typically, when consumers responded to the ads, they were told more that they would make approximately $50,000 per year from selling the mints and from distributing the hand-outs displayed in "promotional boxes" attached to or located on top of the vending machines. These boxes typically consist of: "Take-One" applications for credit cards; "Take-One applications for a discount travel club named Hotel Express; and "Ballot Box" entry forms for a free car drawing. Hi Tech provided the purchasers with these promotional boxes and materials, ranging in price between $6,800 and $14,999. Hi Tech also promised that, for a fee, a successful locating company would find the investor lucrative locations or "hot spots" in which to place the vending machines. The defendants made these claims through their written promotional materials and in their telephone sales presentations. The FTC alleged that the defendants made false earning claims in their ads, sales pitches and promotional materials and violated the Franchise Rule.

The Franchise Rule is a pre-purchase disclosure rule intended to give potential buyers key information about a business opportunity, including the legal and financial history of the seller and its principal officers. Specifically, the rule requires franchisors to provide a detailed document containing this information prior to sale and, where franchisors make claims about the earnings of franchisees, to provide another document containing the substantiating evidence for those claims.

The FTC also charged the defendants with violating the FTC Act which prohibits unfair and deceptive practices.

The Commission filed its complaint under seal, in the U.S. District Court for the Southern District of New York on August 18, 1998, and names as defendants Hi Tech Mint Systems, Inc., and Ron Depuond, also known as Thomas DePung. The seal was lifted today.

The Commission vote to file the complaint was 4-0.

NOTE: The Commission authorizes the filing of a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendants havr actually violated the law. The case will be decided by the court.

Copies of the news release, the complaint, and other documents associated with "Operation VendUp Broke" 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. 982 3509)
(Civil Action No. 98 CIV 5881)