Court Affirms Ruling: Magazine Seller Will Pay More Than $7 Million

On October 22, the U.S. Court of Appeals for the Eleventh Circuit affirmed a lower court’s judgment ordering a magazine subscription seller to pay a civil penalty of more than $5.4 million and give up more than $1.6 million of his ill-gotten gains for violating a 1996 Federal Trade Commission consent order and the FTC’s Telemarketing Sales Rule.

The defendant, Richard L. Prochnow of Atlanta, had appealed a judgment entered against him on July 31, 2006, by the U.S. District Court for the Northern District of Georgia, Atlanta Division. The court had found that he had violated the FTC consent order through his ownership and control of Direct Sales International (DSI), which either directly or through its dealers failed to disclose or misled consumers about the cost of magazine packages and individual magazines, and made weekly cost representations even though consumers could not make weekly payments for the packages. The court held Prochnow liable for, among other things, DSI’s failure to tell consumers that their credit cards would be billed for membership in a buying club unless they called within 30 days to cancel, and its failure to provide consumers with information that would enable them to cancel, in violation of the TSR.

The district court ordered that, with a few narrow exceptions, Prochnow may not own, control, manage, advise, or assist others engaged in a telemarketing business for five years. This ban does not apply to his ownership in Amerinet, a company that processes payments to telemarketers, and Hotdogger, an infomercial company, provided he does not exercise any control over the companies and places his interest in them in the custody and control of an independent third party approved by the court.

The FTC brought the case with assistance from the U.S. Department of Justice.

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