FTC Continues to Stop Fraud Targeting Hispanics

The Federal Trade Commission today announced a ban from selling business ventures of any kind for a group of Las Vegas companies and their officers following charges they deceptively sold their soda and snack vending machine business ventures. In another case, also announced today, the defendants have provided refunds to all consumers who requested them to settle FTC charges that they deceptively sold their course on “Succeeding in the Construction, Gardening, and Cleaning Industries.” The announcements came during the Hispanic Fraud Prevention Outreach Forum in Las Vegas, Nevada.

“The FTC will not stop in this fight against deception in Spanish-language advertising,” said Tom Syta, Assistant Director for the FTC’s Western Region. “With our partners, we have been actively involved in the Hispanic community and will continue to be actively involved, both by educating consumers and by making fraudsters follow the law.”

Today’s workshop was sponsored by the FTC, the U.S. Postal Inspection Service (USPIS), the U.S. Attorney’s Office in Las Vegas, and the Hispanic Chambers of Commerce. It is the latest in a series of workshops by the FTC and the USPIS that aim to identify local problems and discuss ways to address them; facilitate open dialogue with local government, consumer groups, and members of the Hispanic community on issues affecting Hispanic consumers; and share consumer education resources to help local communities conduct outreach about fraud, how to prevent it, and where to report it. Workshops already have been held in Chicago, Dallas, Miami, Phoenix, Los Angeles, Cleveland, and San Diego. Another workshop will be held in New York City this fall.

Law Enforcement Actions

At the Las Vegas event, the FTC announced the following law enforcement actions, including a summary judgment against a group of defendants based in Las Vegas, and a complaint and settlement in a separate case:

Success Vending

The United States District Court for the District of Nevada ordered the defendants to pay almost $9.3 million after finding that they duped consumers into paying for vending machine business opportunities. The court banned all of the corporate defendants, and three of the four individual defendants from selling business ventures. The fourth individual defendant is prohibited from violating Section 5 of the FTC Act or the Franchise Rule. The relief defendant in the case is ordered to pay more than $560,000. A relief defendant is not accused of wrongdoing, but has allegedly received ill-gotten gains and does not have a legitimate claim to them.

The FTC charged the defendants with deceptively marketing their snack and soda vending machine business venture – with many marketing efforts specifically targeting Spanish-speaking consumers. According to the FTC complaint, the defendants claimed that the vending machines would yield “a 700% - 2000% Return on Investment!,” and that for a $9,995 investment, the vending machines would generate earnings of $700-$900 per week. The FTC also alleged that the defendants used company insiders to pose as successful vending machine operators. Numerous buyers who relied on the scam lost money – and some buyers did not even receive the vending machines they paid for. The FTC also alleged that the defendants failed to provide accurate and complete disclosure documents, which the government requires to help consumers avoid investing in fraudulent business opportunities.

The hotline number for this case, 202-326-2411, provides information in both English and Spanish. Customers who made purchases from these defendants are requested to leave a message on the hotline with their contact information, including their name, address, and daytime and evening telephone numbers.

The defendants’ telemarketing boiler room was based in Las Vegas, Nevada, as were some of the individual defendants. The companies also operated out of Socorro, New Mexico. The defendants in this case are: National Vending Consultants, Inc.; Success Vending Group, Inc.; USA Candy Express, Inc.; Patrick Abeyta, Jr.; Debra Abeyta; Larry Welli; Richard Savard; and Darlene Savard, aka Darlene Robarge. Welli is the defendant excluded from the ban on selling business ventures. Darlene Savard is the relief defendant. The judgment and order were entered in the U.S. District Court for the District of Nevada on March 22, 2006.

HispaNexo

The FTC charged that the defendants used deceptive negative-option marketing techniques and a deceptive refund policy to promote their course, “Succeeding in the Construction, Gardening, and Cleaning Industries,” on Spanish-language radio stations. The advertisements said consumers could try the course for $9 and return it within 15 days without further obligation. The defendants did not mention in their pitch that if a consumer did not return the course within 15 days, however, their credit card would be charged for three additional payments of $86.99 each. According to the FTC, the company’s telemarketers also did not adequately tell consumers about this negative-option feature for the product. The defendants also misrepresented that their product was easy to return. The complaint, announced today, further alleged the defendants submitted charges to consumers’ credit cards without their consent and charged some consumers’ debit cards on a recurring basis without the consumer’s written authorization.

As part of the settlement, the defendants provided refunds to the 135 consumers who had not received them. The order also prohibits each of the law violations alleged in the FTC’s complaint. The order requires the defendants to make clear disclosures about any negative-options and any refund policy when telemarketing any product in the future, and prohibits misrepresentations about them. The defendants also cannot place charges on credit or debit cards without consumers’ express, informed consent. Finally, the order requires the defendants to ensure that customer service representatives are available via the telephone. The order also requires prompt refunds in the future.

If it is found that the defendants failed to provide refunds, they will be responsible for the suspended judgment of $2.6 million. The defendants in the case, HispaNexo, Inc., its president, Rafael Vasquez, and its former vice president Ernesto Ramirez, are based in Falls Church, Virginia. The complaint and stipulated final order were filed in the U.S. District Court for the Eastern District of Virginia on April 20, 2006.

The Commission vote authorizing the staff to file in each case was 5-0.

Educational Outreach

In November 2005, the FTC launched a new Spanish-language consumer education campaign to help consumers stay safe online. The campaign, Alerta en L nea, is part of a broad initiative developed by the FTC, other federal agencies, the technology industry, online marketers, and consumer advocates. This year, the FTC has expanded AlertaenLinea.gov to include sections on P2P file-sharing, internet auctions, international scams, and identity theft. The FTC also expanded this year its Spanish-language Web site on credit, www.ftc.gov/credito, to include new pieces on how to dispute credit errors, consumer’s credit rights, and what to do if credit, debit, or ATM cards are lost or stolen. Also, with summer coming, everyone can use tips on how to conserve energy in their home. The Web site offering tips for each room of the house has been translated into Spanish at ftc.gov/energysavings. These materials, and others available in Spanish, can be found at ftc.gov.espanol.

The Hispanic Outreach Initiative

The Hispanic Law Enforcement and Outreach Initiative, formally introduced in April 2004, aims to detect, stop, and prevent consumer fraud against Hispanics. Since the launch of the Initiative, the FTC has announced 35 cases involving Spanish-language frauds. In addition to a national Hispanic workshop held in May 2004 and a series of follow-up regional workshops throughout the country, the FTC has translated more than 100 publications into Spanish and posted them on the FTC’s Spanish-language Web site: www.ftc.gov/espanol. The Web site was accessed approximately 900,000 times last year and has averaged 150,000 accesses per month in 2006.

NOTE: The Commission files 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 defendant has actually violated the law. The case will be decided by the court.

NOTE: A stipulated final order is for settlement purposes only and does not constitute an admission by the defendant of a law violation. A stipulated final order requires approval by the court and has the force of law when signed by the judge.

Copies of the legal documents associated with these cases 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/ftc/complaint.htm. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to thousands of civil and criminal law enforcement agencies in the U.S. and abroad.