Court Halts Alleged Business Opportunity Scam Following FTC Charges

Seven individuals and four corporations -- collectively called the Urso Group -- that ran a display-rack business opportunity for greeting cards and perfumes have been charged by the Federal Trade Commission with engaging in a host of deceptive practices in violation of the FTC Act and the FTC’s Franchise Rule. According to the FTC, the defendants misrepresented to prospective investors the earnings potential and the availability of profitable locations for their business opportunities. In addition, the FTC alleges, the defendants used phony references to show success for their business opportunities and used a sham better business bureau to purportedly add credibility to their business. A federal district court has ordered a temporary halt to the allegedly deceptive practices pending the outcome of the case. At the FTC's request, the court also has frozen the defendants' assets to preserve funds for possible redress, and appointed a receiver to manage the defendants' business operations.

The FTC’s Franchise Rule requires franchisors to give potential buyers detailed, up-front disclosures about the financial and litigation history of their firms and their current and past franchisees, and also to provide documentation supporting any claims they make about future earnings.

The FTC's complaint detailing the allegations in this case names as defendants: Raymond M. Urso; Bernard Koenig, also known as Bernie King; Marcia Koenig; David Bennett; Jeffrey Shoobs; Scott Gunn, a/k/a Scott Goodson, a/k/a Scott Gates; and Susan Perkins. The corporations through which they defrauded the public were also named: Bridgeport & Associates, Inc.; Prestige Advertising, Inc.; Maria K. Associates, Inc.; and the National Bureau of Better Business, Inc. (NBBB). All of the individual defendants, except Susan Perkins, reside and transact business in the Southern District of Florida.

According to the FTC’s complaint, the defendants advertised their profitable business opportunities or "distributorships" in newspapers and on radio stations throughout the country. When consumers called the phone number listed in the ads, telemarketers for the corporate defendants would entice the consumers to invest in the business opportunity by making numerous false statements concerning the amount of money they could reasonably expect to earn. The telemarketers would also encourage consumers to call a professional locating company for assistance and more information about the availability and profitability of locations for the display racks in the consumers’ geographic area. To further trick consumers, the FTC’s complaint alleges, the telemarketers would urge the consumers to call "singers" -- people who purport to be successful distributors but, in fact, are paid to lie about their success. Defendant Susan Perkins is a "singer,” the FTC alleges.

Finally, to further provide credibility to their deceptive scam, the telemarketers would encourage the consumer to call corporate defendant NBBB, which was portrayed as an independent, third-party reporting organization that provides objective and reliable reports describing its members' business practices. In fact, according to the FTC, NBBB is under the direct control and supervision of defendants Raymond Urso and David Bennett.

The FTC's complaint alleges that all of the defendants, except Susan Perkins, violated the FTC Act by misrepresenting the earnings prospective investors could expect to achieve, the authenticity of references given by the defendants, and the availability and profitability of locations in a particular geographic area. In addition, the complaint alleges that the defendants, except Perkins, misrepresented that NBBB was an independent organization.

In addition, the complaint alleges that certain of the defendants violated the Franchise Rule by failing to provide prospective franchisees with complete and accurate disclosure documents and by failing to provide the earnings-disclosure document when such claims are made.

Finally, the FTC's complaint asks the court to order a permanent halt to the alleged deceptive practices and to order that redress be paid for injured customers.

The Commission vote to file the complaint was 4-0. The complaint was filed under seal in the U.S. District Court for the Southern District of Florida, in Miami, on August 19. The seal was lifted August 21.

The Florida Office of Comptroller, the Florida Division of Consumer Services, the Offices of Florida and Kentucky Attorneys General, the Council of Better Business Bureaus, Inc. and the Better Business Bureau of South Florida, Inc., assisted the FTC with this investigation.

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 defendants have actually violated the law. The case will be decided by the court.

Copies of the FTC's complaint are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest FTC news as it is announced, call the FTC's NewsPhone recording at 202326-2710. FTC news releases and other materials also are available on the Internet at the FTC's World Wide Web Site at: http://www.ftc.gov

(FTC File No. 962 3259)
(Civil Action No. 97-2680 CIV-UNGARO-BENAGES)