FTC Obtains Judgment of More Than $17 Million for Consumers

John Stefanchik and his company, the Beringer corporation, have been ordered to pay over $17 million to consumers for falsely representing that the consumers would make easy money using the “Stefanchik Program” to buy and sell privately held promissory notes and mortgages. United States District Court Judge Ricardo S. Martinez granted the Federal Trade Commission’s motion for summary judgment and ruled that the defendants’ false claims violated federal law. The judge ordered a permanent halt to the false claims and ordered John Stefanchik and Beringer to pay restitution to consumers.

John Stefanchik and Beringer, together with the other defendants, telemarketed and sold a package of products and services as part of the “Stefanchik Program” – course materials, seminars, workshops, video tapes, audio tapes, and personal coaches – which purported to teach consumers how to buy and sell privately held mortgages, commonly known as “paper.” Consumers typically paid between $5,000 and $8,000, depending on which package they bought.

According to the Federal Trade Commission, the defendants’ telemarketers led consumers to believe that they would make a large amount of money in their spare time, as much as $10,000 every 30 days, if they purchased and followed the Stefanchik program. The defendants’ telemarketers also encouraged consumers to purchase a year-long coaching service that they told consumers would be staffed by coaches who were substantially experienced in the paper business, and who would be readily available by telephone to assist consumers in finding and completing business transactions.

The FTC charged that the earnings claims were false and unsubstantiated and that most consumers did not make any money at all. The FTC also charged that the coaches did not have substantial experience in the paper or real estate business, and many times, were not readily available to assist consumers at all.

The Court’s ruling states:

“Undisputed facts show that in the marketing and selling of the Stefanchik Program, [the defendants] falsely represented, directly or by implication, to consumers that:

A. consumers who purchased defendants’ materials, attended defendants’ seminars and workshops, or used defendants’ personal coaches, would quickly make large amounts of money in their spare time by learning and using the methods taught; and

B. defendants’ personal coaching service was staffed by persons substantially experienced in the paper business who were readily available by telephone to assist consumers in finding and completing paper transactions.”

The order requires John Stefanchik and Beringer to pay $17,775,369.00, the total amount of consumer loss. It also bars them from misrepresenting: that consumers will make a substantial amount of money; the income, profit, or sales volume that consumers may or are likely to achieve or that previous consumers achieved; that services are provided by substantially experienced persons, or that such persons are readily available to assist consumers; or any other material fact. John Stefanchik and Beringer are also required to possess and rely upon a reasonable basis to substantiate earnings representations. Finally, John Stefanchik and Beringer are barred from violating the Telemarketing Sales Rule.

The court entered summary judgment against John Stefanchik and Beringer Corporation, formerly doing business as The Stefanchik Organization. The other defendants, the telemarketers of the Stefanchik program – Justin W. Ely, Scott B. Christensen, Premier Consulting Group, Inc., and Atlas Marketing, Inc. – had previously settled the charges against them.

The Honorable Ricardo S. Martinez, United States District Judge for the Western District of Washington at Seattle, entered the order granting summary judgment and the final judgment on April 3, 2007.

Copies of the documents 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 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 more than 1,600 civil and criminal law enforcement agencies in the U.S. and abroad.