FTC Continues Crackdown on Scams Aimed at Hispanic Consumers

As the nation celebrates Hispanic Heritage Month, the Federal Trade Commission today announced a series of law enforcement actions and a new consumer education campaign to attack consumer fraud targeting the Hispanic community.

The FTC announced six actions against companies that marketed bogus weight-loss products, deceptive credit card offers, work-at-home scams, and a scam involving English-language and auto mechanic courses. The companies touted their worthless products and fraudulent services through national Spanish-language publications, on Spanish TV stations, on the Internet, and through telemarketing calls in Spanish.

“Our message to scam artists is clear: the days of hiding behind Spanish language advertisements have come and gone,” said FTC Chairman Deborah Platt Majoras. “Spanish- speaking consumers can be assured that the FTC and our law enforcement partners are on the beat.”

These actions are part of the FTC’s Hispanic Law Enforcement and Outreach Initiative – a comprehensive campaign started in early 2003 to identify and halt fraud targeting Spanish-speaking consumers in the U.S. The ongoing campaign involves: (1) active monitoring of Spanish-language media and complaints received in Spanish; (2) aggressive law enforcement actions against marketers defrauding Hispanic consumers; and (3) extensive outreach to Hispanic consumers to prevent fraud from occurring in the first place and to encourage greater reporting of consumer fraud.

AG Intercraft

The FTC filed a complaint against Amada Guerra, doing business as AG Intercraft, alleging that Guerra perpetrated a classic work-at-home scam targeting Hispanic consumers looking for work opportunities that do not require English-language skills. According to thecomplaint, Guerra or her telemarketers tell consumers that, for a fee, they will receive easy assembly work, such as making greeting cards or Christmas decorations. The defendant’s ads promise that consumers can earn from $600 to $800 a week. Consumers are told that the money required up front (from $96 to $106) will be refunded in full once the consumer assembles and mails in a specified number of craft items. In fact, the FTC alleges, virtually no one can assemble the required number of craft items or earn the income promised by the defendant.

On September 22, the court entered a temporary restraining order prohibiting the defendant from engaging in the deceptive conduct and freezing her assets to preserve the possibility of consumer redress. Since then, the defendant has agreed to a stipulated preliminary injunction continuing the terms of the TRO pending a final resolution.

(The Commission vote authorizing staff to file the complaint was 5-0.)

(The complaint was filed in the U.S. District Court, Middle District of Florida, Orlando Division, on September 21, 2004.)

American Dream Enterprises

The U.S. District Court for the Southern District of Florida entered a stipulated final order on September 23, 2004, against American Dream Enterprises, LLC, and its owner, Andres Fernandez Salvador. The Miami-based defendants marketed a weight-loss dietary supplement – “Fat Seltzer” – which, when added to water, produces bubbles. According to the FTC’s complaint, filed in April 2004, the defendants claimed that the effervescent action, when combined with Fat Seltzer’s ingredients, causes substantial and permanent weight loss without the need to exercise or diet. The settlement prohibits the defendants from, among other things, making claims that Fat Seltzer, or any dietary supplement, over-the-counter drug or cosmetic causes substantial weight loss without the need to diet or exercise, or causes permanent weight loss. The order requires the defendants to pay $185,000 in monetary relief, and contains an approximately $1.5 million avalanche clause that will become due if the court finds that the defendants misrepresented their financial condition.

(The Commission vote authorizing staff to file the stipulated final order was 5-0. The FTC filed the complaint in federal district court on April 16, 2004. See press release dated April 27, 2004.)

Call Center Express

The FTC charged three companies and six individuals with promoting bogus offers of unsecured major credit cards for an advance fee. The FTC alleges that Call Center Express Corporation; Abreu Advertising, Inc., doing business as La Familia Group; Pro Line Card LLC; Edgar Alirio Gonzalez; Pablo Jose Martinez; Liens Abreu; Rafael L. Abreu; Julio Cesar Sandoval; and Carlos Felipe Mendez; deceptively led consumers to believe that they would receive unsecured major credit cards, like MasterCard or Visa credit cards, with a guaranteed $2,000 minimum credit limit. When consumers call to order the cards, they are told that they must pay a fee ranging from $149 to $299 before they receive the cards. After the consumers receive the card, they realize that the defendants’ cards are not major unsecured credit cards, but, in fact, are cards that can only be used to purchase items from the defendants’ own catalogs and Web sites. According to the FTC, the defendants market their cards under the names La Familia Gold Card, Destiny MasterCard, Advantage Platinum Card and Pro Line Card, names that misrepresent that the defendants’ cards are unsecured major credit cards issued by MasterCard or Visa. The complaint also alleges that the defendants refuse to provide refunds to consumers, which is contrary to their own written card agreements.

The court granted the FTC a temporary restraining order with an asset freeze and appointment of a temporary receiver on September 16, 2004. The FTC obtained preliminary relief as to all the defendants, except Julio Sandoval, requiring them to stop the marketing and sale of credit-related products, programs, or services. This relief continues the freeze on the assets of the defendants to preserve the possibility for consumer redress and continues the appointment of a receiver over the corporate defendant. The stipulated preliminary injunction will be in effect until the litigation is complete. As to defendants Pro Line Card and Carlos Mendez, the court continued the TRO until an October 13 hearing to determine whether this order stays in place. The FTC will proceed with its lawsuit against Julio Sandoval.

(The Commission vote to authorize staff to file the complaint was 5-0. The complaint was filed in the U.S. District Court for the Southern District of Florida, in Miami, on September 14, 2004.)

Compañía Americana

A Los Angeles-based operation cited by the FTC with perpetrating a classic work-at-home scam has stipulated to a preliminary injunction, entered by the court on September 21, 2004. USS Elder Enterprises, Inc., America Vespucia Corporation, Ricardo Elder Partners, Inc., and Ricardo E. Gonzalez, doing business under a series of fictitious names and operating as a common enterprise, targeted Spanish-speaking consumers looking for well-paying jobs that do not require English-language skills.

The FTC alleged that the defendants, through ads in various Spanish-language newspapers and magazines, offered easy product assembly work, such as key chains or jewelry, if consumers paid a fee ranging from $50 to $180. Interested consumers were led to believe that they could earn between $112 and $700 a week for such work. In fact, consumers who paid the fee did not receive the promised assembly project work or substantial assistance getting such work. Few, if any, realized the promised earnings. Instead, consumers received a booklet in Spanish that contained lists of companies to contact that allegedly offered work-at-home opportunities. These companies no longer exist; or they required payment of additional fees; or they had no relationship with the defendants. Many consumers were unable to obtain the refunds promised by the defendants.

The preliminary injunction, which will be in effect until the court issues a final ruling on the FTC’s allegations, prohibits the practices alleged in the FTC’s complaint and freezes the defendants’ assets. The injunction prevents the defendants from misrepresenting that consumers will obtain assembly project work for pay or substantial assistance in obtaining such work; that consumers are likely to earn a substantial amount of money; and that the defendants will provide refunds to consumers. It also prohibits the defendants from failing to comply with the Telemarketing Sales Rule.

(The FTC filed the complaint in the U.S. District Court, Central District of California, on September 1, 2004. See press release dated September 7, 2004.)

FGH International

The FTC filed a complaint against FGH International Corporation, Inti California, Inc., and their principals, Jaime Jhonny Rojas Villaneueva, also known as Jhonny Rojas, Wilson Rojas, and Franco Morales. The complaint alleges that the defendants engaged in deceptive practices in marketing and selling at-home instructional programs, which purportedly teach consumers how to speak English or become an auto mechanic.

The complaint alleges that the Van Nuys, California-based defendants represent themselves as affiliated with a government program. The defendants allegedly tell consumers that the government has selected them to receive subsidized training to learn English or to become an auto mechanic. In many instances, the FTC alleges, regardless of whether the consumer agrees to pay the purported discount cost for the training materials, the defendants send the instructional programs to consumers. Those who refuse to pay are threatened with legal action or with being reported to the immigration authorities. Many consumers fear the threatened actions and wire transfer the money.

On September 28, 2004, the FTC obtained an ex parte temporary restraining order prohibiting the defendant from engaging in the conduct challenged in the complaint and an order freezing assets to preserve the possibility of consumer redress.

(The Commission vote authorizing staff to file the complaint was 5-0. The complaint was filed in the U.S. District Court, Central District of California, on September 27, 2004.)

Rosario Partnership

Rosario Partnership and its partners, Leonardo Spelzini and Maite DeNegris; and Funes, Inc., and its president, Hector De Nigris have agreed to settle FTC charges that they made false and unsubstantiated weight loss claims for “Celu-Fat Reductor.” The FTC’s complaint alleges that the Montclair, California-based defendants made several “red flag” false weight loss claims, including promises that consumers would “shrink two sizes in only 10 days,” and would be able to lose weight without dieting or exercising.

The proposed stipulated final order prohibits the defendants from making claims that any weight loss product causes users to lose a substantial amount of weight without reducing caloric intake or increasing exercise. In addition, the order prohibits the defendants from making false and unsubstantiated efficacy or safety claims for any health-related service, product, or program, weight loss product, dietary supplement, food, drug or device. The settlement contains a judgment of $157,000 that has been suspended because of the defendants’ financial condition.

(The Commission vote to authorize staff to file the complaint and the proposed stipulated final judgment and order was 5-0. The complaint and the proposed stipulated final judgment and order were filed in the U.S. District Court, Central District of California, on October 5, 2004. The stipulated order is subject to court approval.)

FTC Partners

The FTC is working with state and local officials to address ways to prevent and stop these illegal practices. The FTC’s state and local law enforcement partners include the California Attorney General’s Office, the Illinois Attorney General’s Office, the New York Attorney General’s Office, the Texas Attorney General’s Office, the New York State Consumer Protection Board, and the Montgomery County, Maryland, Division of Consumer Affairs. These partners have launched various consumer education campaigns and/or filed lawsuits against perpetrators of fraud directed to the Hispanic community. The lawsuits included a bogus high school diploma case; fraudulent credit card/check processing services; and bogus immigration assistance services.
On the consumer education side, the Montgomery County, Maryland, Division of Consumer Affairs is sponsoring a Hispanic Consumer Protection Symposium in October and has printed “coupons” in local Hispanic newspapers that consumers can mail back to Montgomery County indicating the kinds of consumer frauds that they are experiencing. (See the attached list highlighting the partners’ accomplishments.)

In addition, “We want to thank the U.S. Postal Inspection Service for its valuable support and collaboration,” Chairman Majoras stated. “We have worked effectively together in the past and look forward to continuing our partnership.”

FTC’s Consumer Education Campaign

As part of its outreach program to Spanish speakers, the FTC launched a Spanish language consumer fraud awareness campaign: ¡Ojo! Mantente alerta contra el fraude. Infórmate con la FTC (“Be on the alert against fraud. Stay informed with the FTC.”) to complement its law enforcement initiative against frauds targeting Hispanic consumers. The campaign includes a series of radio public service announcements sent to 217 radio stations nationwide and banner ads on Web sites that are geared to Latino audiences. This information tells consumers how to file fraud complaints and how to get free information on consumer topics from the FTC. A pilot program of the Spanish-language outreach campaign was launched in 11 cities with large or quickly growing Hispanic populations: New York; Washington, D.C.; Atlanta; Miami; Raleigh; Chicago; Phoenix; Dallas; Houston; San Antonio; and Los Angeles.

On Wednesday, October 13, the FTC’s Midwest Region will host a one-day conference to discuss Hispanic outreach and law enforcement efforts, in conjunction with the City of Chicago, the Illinois Attorney General’s Office, the Cook County State’s Attorney’s Office, the U.S. Postal Inspection Service, the Federal Bureau of Investigation, and the Better Business Bureau.

The FTC has information about a number of consumer frauds in English at www.ftc.gov and in Spanish at www.ftc.gov/espanol. The FTC today is announcing new Spanish-language publications on credit repair, telemarketing, choosing a credit counselor, and general tips to avoid fraud.

In addition, the FTC is releasing a report summarizing the proceedings of the Hispanic Outreach Forum and Law Enforcement Workshop, hosted by the FTC and the Department of Justice’s Office for Victims of Crime on May 12 and 13, 2004. Copies of the report will be available on the FTC’s Web site.

Copies of the FTC’s complaints and the proposed settlements announced in this sweep are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint in English or Spanish (bilingual counselors are available to take complaints), or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

(American Dream Enterprises: FTC File No. 032 3193; FTC Matter No. X040042; Civil Action No. 04-20904-CIV-Highsmith/Turnoff)
(Call Center Express: FTC File No. 042-3117 ; Civil Action No. 04-222-89 CIV-Martinez)
(Rosario, Inc.: FTC File No. 042 3058; Civil Action No. not available at press time)
(FGH: FTC File No. 042 3173; Civil Action No. CV04-8013)
(AG Intercraft: FTC File No. 042 3156; Civil Action No. 6:04-CV-1395-ORL-18 KRS)
(Compania Americana: FTC File No. 032-3128; Civil Action No. SACV-04-1039 AHS (ANx))