FTC Continues Campaign to Halt Deceptive Advertisements & Other Scams Aimed at Hispanics

As part of an ongoing and comprehensive campaign to identify and halt fraud targeting Spanish-speaking consumers, the Federal Trade Commission today announced a new law enforcement action challenging false advertising for the 1-2-3 Diet Kit, a purported weight loss product. The FTC also announced the settlement of two lawsuits: one involving fraudulent work-at-home business opportunities; the other involving fake international driving permits, bogus credit repair services, and sham debt termination programs. These cases are part of the FTC’s Hispanic Law Enforcement and Outreach Initiative, announced in April 2004, which encompasses traditional law enforcement actions and consumer outreach.

“In our continuing effort to maintain a strong enforcement presence in areas affecting the Hispanic community,” said Timothy J. Muris, Chairman of the FTC, “the cases announced today show that we are getting results for Hispanic consumers. Scam artists that target Hispanics should know that the Spanish language is no longer a safe haven.”

Law Enforcement Actions

Kamarfu Enterprises

The FTC filed a complaint and stipulated final order against Kamarfu Enterprises, Inc., a Miami-based company that markets dietary supplements, and its owner, Maritza Fuentes. The defendants nationally advertised that their “1-2-3 Diet Kit” – a trio of dietary supplements – helps users lose weight.

The FTC’s complaint alleges that the defendants falsely claimed that the 1-2-3-Diet Kit:

• causes permanent weight loss;
   
• causes substantial weight loss in a short time (e.g., 10 to 12 pounds per month or 36 pounds in two months); and
   
• causes substantial weight loss by blocking the absorption of dietary fat.

The complaint also alleges that the defendants made unsubstantiated claims that the 1-2-3 Diet Kit causes weight loss by suppressing appetite.

According to the FTC complaint, the “1-2-3 Diet Kit” contains three dietary supplements: “Step 1” Diet Formula, with chromium picolinate, L-carnitine, Citrimax (“HCA”), citrus aurantium extract, and other ingredients; “Step 2” Diet Plus Formula with Super Citrimax (or Fiber Formula with psylium husk, guar gum, oat bran, apple pectin, and other ingredients); and “Step 3” Spirulina Plus Formula. A one-month supply of the product sold for $129 and $143.99.

The defendants marketed their products nationwide through Spanish language ads in Hispanic magazines, such as Prevention en Español and Vanidades; in local newspapers such as El Nuevo Herald; on local radio; in a TV infomercial; and via the Internet. Defendants also advertised in English language newspapers, such as The Miami Herald.

The stipulated final order, entered by the court on June 2, 2004, resolves the complaint’s allegations and prohibits the defendants from making claims that the 1-2-3 Diet Kit or similar products cause permanent or substantial weight loss. The stipulated final order requires that claims about the benefits, performance, efficacy, safety, or side effects of any health-related product, service, or program must be true and substantiated by scientific evidence; and prohibits the defendants from making misrepresentations about tests, studies, or research.

The stipulated final order requires the defendants to pay $30,000 in consumer redress, and contains a $4.3 million “avalanche clause,” which would make the entire amount due immediately if the defendants misrepresented their financial condition. Finally, the settlement contains various recordkeeping requirements to assist the FTC in monitoring the defendants’ compliance. (The complaint and proposed stipulated final order were filed in the U.S. District Court for the Southern District of Florida, in Miami, on May 28, 2004. The court entered the stipulated final order on June 2, 2004.)

Paymentech Promotions

The FTC has accepted a settlement with Esteban Barrios Vega, doing business as EBV Promotions, Paymentech Promotions, and Promotions of Service. The settlement permanently bans him from marketing work-at-home business opportunities and from telemarketing.

In April 2004, the FTC filed a complaint against Vega in federal district court alleging that he violated the FTC Act and the Telemarketing Sales Rule (TSR). The FTC alleged that Vega engaged in numerous deceptive practices in marketing work-at-home opportunities in Spanish-language newspapers and circulars and by telephone. According to the FTC, few, if any, consumers who paid up to $149 received the promised work or realized the promised earnings.

The proposed stipulated final order announced today resolves the allegations in the FTC’s complaint. The proposed order contains a suspended judgment of $280,000, based on the defendant’s inability to pay, and contains an “avalanche clause” that would make the entire amount due immediately if Vega misrepresented his financial condition.

The stipulated final order was filed in the U.S. District Court, Southern District of Texas, on June 1, 2004, and entered by the court on June 8, 2004.

BBCOA (Operation License for Trouble)

In April 2004, a federal district court in California entered a default judgment that permanently bans the defendants from selling identification documents, including international driver’s permits (IDPs), and requires the defendants to pay $444,554.66 in consumer redress. The court granted the FTC’s motion for a default judgment and entered a permanent injunction against defendants Jordan Maxwell and Vic Varjabedian, who did business under various names including BBCOA, BBC of America, and Better Books and Cassettes of America.

In January 2003, the FTC filed a complaint charging that the defendants violated the FTC Act and the Credit Repair Organizations Act (CROA) in connection with their sale of fake IDPs, bogus credit repair services, and sham debt termination programs. The complaint was part of “Operation License for Trouble,” a law enforcement sweep that targeted sellers who, under the guise of “international law,” pitched worthless documents to immigrants and others seeking an alternative to a government-issued license or identification document.

The default judgment permanently bans the defendants from selling, or assisting others in selling, IDPs or other identification documents. The judgment also prohibits any future violations of CROA. The judgment specifically prohibits the defendants from misrepresenting that an IDP: authorizes consumers to drive legally in the United States; allows consumers to avoid points for traffic violations and avoid sanctions for driving with a suspended or revoked driver’s license; may be used in the U.S. as an identification document in the same way as government-issued photo identification; could permanently remove bankruptcies, late payments, foreclosures, and other negative information from consumers’ credit reports, even when the information is accurate and not obsolete; and could legally terminate all of a consumer’s credit card or loan debt.

The default judgment was granted and entered by the U.S. District Court, Central District of California, Western Division.

The Commission vote on the Kamarfu Enterprises and Paymentech matters was 5-0. No Commission vote was required for BBCOA.

CONSUMER EDUCATION

To date, the FTC has translated nearly 70 consumer publications and posted them to the FTC’s En Español Web site at www.ftc.gov/spanish. Among the subjects the publications cover are identity theft, fair debt collection, abusive lending practices, and job scams. Since January 2002, the FTC has disseminated nearly 500,000 Spanish-language consumer publications and logged more than 600,000 accesses to the Spanish-language information on its Web site.

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: Stipulated final orders are for settlement purposes only and do not constitute an admission by the defendants of a law violation. Stipulated final orders have the force of law when signed by the judge.

Copies of the complaints, the stipulated final orders, and the default judgment announced today 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.

(Kamarfu Enterprises: FTC File No. 032 3173; Civil Action No. 04-21280)
(Paymentech: FTC File No. 042 3066; Civil Action No. H-04-1478)
(BCOA: FTC File No. X030030; Civil Action No. 03 0128 NM (CWx)