FTC Files Contempt Charges Against Attorney for Ponzi Scheme Operators

The Federal Trade Commission has filed civil contempt charges against an attorney who represented the marketers of an “Internet kiosk” business opportunity that turned out to be nothing more than a Ponzi scheme.

In its contempt action, the Commission charged that the attorney representing defendants in the case flouted a March 2009 federal court order that required him to turn over $238,300 to the FTC. The court had previously had determined that money given to the attorney as a retainer for his work on the case derived from the defendants’ proceeds from their illegal scheme. The court found that the FTC was entitled to that money, so that it could be used to reimburse victims of the scam.

In the March 2009 order, the court also imposed an $18.9 million judgment against the operators of the scam – Network Services Depot, Charles Castro, and several other defendants. The judgment upheld FTC charges that the defendants violated the FTC Act and the agency’s Franchise Rule by duping hundreds of consumers into buying Internet kiosk business opportunities with false promises of lucrative earnings. The judgment paved the way for the FTC to distribute more than $2 million to victims.

The civil contempt action against Jeffrey S. Benice and his law firm, Jeffrey S. Benice, a Professional Law Corporation, was filed in the U.S. District Court for the District of Nevada.

Copies of the March 2009 order and other court 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, 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 1,700 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.