FTC Settles Charges with Telemarketers Who Duped Elderly Consumers

At the request of the Federal Trade Commission, a federal district court has entered orders settling charges against three telemarketers who allegedly duped consumers, most of whom were elderly, into buying grossly overpriced household products such as garbage bags and light bulbs. The FTC’s complaint alleges that the telemarketers falsely claimed that the proceeds from the sales would be used to benefit handicapped and disabled individuals.

According to the FTC, the defendants harassed some consumers into buying these products, charged consumers’ credit and debit cards, debited their bank accounts without the consumers’ authorizations, and called consumers who either had registered their telephone numbers on the FTC’s National Do Not Call (DNC) Registry or had previously told the defendants that they did not want to be called again.

The three settlements announced today prohibit defendants George Thomas, Joshua Abramson, and Bruce Peeples from making deceptive and misleading statements in violation of the FTC Act, and from violating the Unordered Merchandise Statute, which prohibits mailing products to, or billing consumers for, products that they did not agree to purchase. The orders also hold the defendants jointly liable for a judgment of more than $13 million, the majority of which has been suspended due to their inability to pay. Abramson and Thomas also are barred from violating the Telemarketing Sales Rule (TSR), and Peeples is permanently barred from telemarketing. These settlements end the FTC’s case against Handicapped & Disabled Workshops, Inc., Handi-Hope Industries, Inc., and Handi-Ship LLC, and their principals Peeples and Abramson, and manager Thomas.

On May 14, 2008, the U.S. District Court in Arizona granted the Commission’s request for a temporary restraining order and asset freeze against Peeples, Abramson, Thomas and the corporate defendants and appointment of a receiver to take control of the corporate defendants. The court also entered a stipulated preliminary injunction against the individual and corporate defendants on May 27, 2008.

While the case was being litigated, the Commission filed an amended complaint that added two new counts against the individual defendants, the first charging the defendants with violating the FTC Act through their false statements to consumers that buying the defendants’ products would benefit handicapped and disabled people, and the second alleging that these false statements were made to induce consumers to pay for products, in violation of the TSR. These counts were not brought against the corporate defendants because the Commission had already obtained a default judgment against them by the time the amended complaint was filed.

Each final order contains both conduct and monetary relief. First, the orders prohibit each individual defendant from violating the FTC Act by making material misrepresentations to consumers including that: 1) any consumer’s purchase will help handicapped or disabled people, 2) the person soliciting any consumer’s purchase is handicapped or disabled, 3) all or most of the people working for the defendant are handicapped or disabled, 4) any handicapped or disabled person packages the products sold by the defendant, and 5) the defendant operates a charitable organization. The orders also bar the individual defendants from violating the Unordered Merchandise Statute by falsely claiming that any consumer has ordered, purchased, or agreed to order or purchase any products and therefore owes them money.

In addition, the orders prohibit the individual defendants from making false claims about: 1) the total cost to buy, receive, or use any of the goods or services they are selling, 2) any restrictions, limitations, or conditions on the sale, 3) anything material to the terms of a refund, cancellation, exchange, or refund policy, or 4) any material aspect of the performance, efficacy, nature, or characteristics of the products being offered for sale.

The orders also contain a $13,411,918 judgment against each individual defendant, representing the total amount of harm caused to consumers over the past three years. Most of this amount has been suspended based on defendants’ inability to pay, but each defendant must surrender his right to assets already frozen by the court – $33,290 for Peeples, $29,448 for Abramson, and $2,380 for Thomas. In addition, the full amount of the judgment becomes due if any individual defendant is later found to have misrepresented his own or his companies’ financial condition to the FTC.

The Commission vote authorizing the staff to file the amended complaint and approving consents in settlement of the court actions against defendants Peeples, Abramson, and Thomas was 4-0. The documents were filed in the U.S. District Court for the District of Arizona on December 4, 2008, and entered by the court on December 10, 2008.

The court actions announced today settle the FTC’s charges against the three individual defendants in this case. On October 14, 2008, the court entered a default judgment against their companies. The default judgment requires the corporate defendants to pay $13,411,918 and to forfeit all of their assets. Finally, the court also has entered an order winding down the corporate defendants and dissolving the receivership set up in this case.

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

Copies of the stipulated final judgments 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 Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

(FTC File No. X080035; Civ. No. CV-08-0908-PHX-DGC)