FTC and Louisiana Attorney General Shut Down Fraudulent Grant Marketing Service in New Orleans

The Federal Trade Commission and the Louisiana Department of Justice today announced that they had shut down a fraudulent grant marketing service that had cheated consumers out of millions of dollars. The husband-and-wife team cheated thousands of consumers across the country. Working together, the FTC and the Louisiana AG brought separate cases in federal and state court and negotiated settlements in each case with the New Orleans-based defendants. The terms of the court orders were announced today at a joint press event in New Orleans.

The FTC order bars defendants from selling grant services in the future, from misleading consumers regarding the sale of any goods or services, and from violating the Commission's Telemarketing Sales Rule (TSR). It also requires them to pay more than $500,000 in consumer redress, including $400,000 to the FTC, $100,000 to Louisiana, and $5,000 to Wisconsin, which filed a similar civil complaint against the defendants.

Today's action settles the Commission's complaint against the following defendants: 1) U.S. Grant Resources, LLC; 2) National Grants, LLC; 3) John B. Rodgers; and 4) Laurel A. Rodgers. The Rodgers are the managing members of both corporate entities.

"We are pleased to be able to announce this action today jointly with the attorneys general of Louisiana and Wisconsin. It should send a message to grant marketers that we will be watching to ensure their pitches are legitimate," said Lydia Parnes, Acting Director of the FTC's Bureau of Consumer Protection. "This case is an excellent example of how federal and state law enforcement agencies can work together to help stop a fraud affecting thousands of U.S. consumers."

The Commission's Complaint

According to the Commission's complaint - filed on March 2, 2004, concurrently with state actions in Louisiana and Wisconsin - the defendants violated the FTC Act through a deceptive scheme to market grant-procurement services nationwide for a fee. Specifically, the FTC contended that, since at least September 2001, the defendants had bought classified ads in local community newspapers, representing that, after paying a fee, consumers were highly likely to receive a cash grant by using their services. They also falsely stated that they would provide a refund to consumers who did not secure a grant, while failing to disclose that there were several conditions that discouraged consumers from seeking refunds or that restricted their availability.

After consumers called the toll-free number in the ads, the defendants' representatives purportedly determined if the consumer was qualified to receive a grant. According to the FTC, they then collected the consumer's information and told them that they needed to pay a "one-time processing fee" of between $95 and $200. Consumers who expressed doubt or asked if they could get their money back were told that the grant was guaranteed and that they could receive a refund if not satisfied.

The FTC alleged that within a few weeks, most consumers received the defendants' information package in the mail. Instead of grant applications, however, the package typically contained only lists of agencies and foundations to write to seeking funding. Many of the listed sources did not offer grants to individuals, and some provided them only to nonprofit organizations. Unsatisfied consumers - who often were turned down by the grant sources on the lists - found that the terms of the defendants' refund policy were difficult, if not impossible, to meet.

The Final Judgment and Order

The final judgment and order bans the defendants from marketing any grant-procurement services and from telemarketing, as well as assisting anyone else who is engaged in telemarketing activities. They also are barred from making misrepresentations similar to those alleged in the FTC's complaint, including that consumers will make money through the use of their goods or services or any other relevant fact material to a consumer's purchasing decision. Finally, the defendants are barred from violating the TSR in the future and from distributing their customers' lists.

The order also imposes a $5.4 million monetary judgement against the defendants, which will be suspended upon payment of $400,000 to the Commission for use as consumer redress. The defendants will pay an additional $100,000 and $5,000 to Louisiana and Wisconsin, respectively, to settle similar charges brought by those states.

The Commission vote authorizing the staff to file the stipulated final order was 5-0. It was filed in the U.S. District Court for the Eastern District of Louisiana in New Orleans on Monday, November 15, and signed by the judge the same day. The order was entered by the court on November 16, 2004. The FTC appreciates the invaluable assistance of the Louisiana Department of Justice and the Wisconsin Attorney General's Office in bringing the action announced today. Additional support was provided by the New Orleans office of the U.S. Postal Inspection Service.

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

Copies of the Commission's complaint and stipulated final judgment and order 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, DC 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, 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, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies worldwide.

(FTC File No. 032-3082; Civ. No. 04-0596 Sect. N Mag. No. 3)