Defendants in "Project $cholar$cam" Case Agree To Settle Charge

The two remaining defendants in a case brought by the Federal Trade Commission under "Project $cholar$cam" have agreed to settle charges they misrepresented their ability to obtain college scholarships for consumers. Conni Canella and Randolph Canella were two of the four principals of Florida-based College Assistance Services, Inc. As with the prior settlement, this settlement would ban the Canellas from selling scholarship search services and would require each to post a $200,000 bond before engaging in a telemarketing business or assisting others engaged in such a business.

In conjunction with the Commission's action, the Florida Department of Agriculture and Consumer Services (DACS) also successfully revoked the defendants' telemarketing license and redeemed the $50,000 telemarketing bond posted by College Assistance Services (CAS) under Florida law. DACS sent claim notices to CAS consumers and will distribute the proceeds of the bonds to consumer claimants. As a result, several hundred consumers will receive partial restitution.

The FTC initiated "Project $cholar$cam" in September 1996 as a law enforcement and consumer education campaign to protect college-bound students and their families from fraudulent college scholarship services that "guarantee" that customers will receive a scholarship -- usually $1,000 -- in return for up-front fees ranging from $10 to $400. College Assistance Services charged a fee of $179, the FTC said.

According to the FTC's complaint, CAS sent tens of thousands of postcards to high school and college students advertising scholarship services and listing an 800 number. Consumers who called the number were told that, for a $179 up-front fee, the service could find "unclaimed" scholarship and grant funds from private companies, and guaranteed to refund the fee if the student did not get at least $1,000. The FTC alleged that consumers received either nothing at all, or a list of "sources" for financial aid for which the students had to apply on their own or which, in fact, were contests, loans or work-study programs. Many sources were no longer available or were not suitable for the student, the FTC alleged. Students seeking refunds had to apply in writing to each source on the list and provide rejection letters; even then, many did not receive refunds, according to the complaint.

Under the proposed settlement, the defendants would be permanently banned from promoting or selling college scholarship services and each would be required to post a $200,000 bond before engaging in any telemarketing or assisting others in telemarketing. The order also would prohibit them from making misrepresentations of material fact in connection with the marketing of any product, service, or investment. In addition, the proposed settlement would prohibit them from violating the FTC's Telemarketing Sales Rule. That rule requires telemarketers, among other things, to give consumers detailed information about the costs and restrictions of any product or service sold via telemarketing. The conduct provisions in the settlement would bar the defendants from selling or transferring their consumer lists.

As of November 1997, the Commission has filed lawsuits against nine college scholarship services and has distributed more than 2.9 million pieces of consumer education materials, including posters, bookmarks, and flyers. The agency's consumer education materials have been circulated to college financial aid offices, high school guidance counselors, state grant and aid program administrators, and college book stores nationwide. These materials are available on the FTC's web site at: http://www.ftc.gov (no period).

The Commission vote to approve the settlement was 4-0, with Commissioner Mary L. Azcuenaga not participating. The settlement was filed in the United States District Court for the Southern District of Florida in Miami on January 29, and is subject to the court's approval. The FTC received assistance from the Florida Department of Agriculture and Consumer Services in this case.

NOTE: This Stipulated Final Judgment and Order for Permanent Injunction is for settlement purposes only and does not constitute an admission by the defendants of a law violation. The order has the force of law when signed by the judge.

Copies of the proposed settlement, a free package of consumer information from the FTC on how to identify a fraudulent scholarship search service, and a news release regarding "Project $cholar$cam" are available from the FTC's web site at: http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, DC 20580, telephone: 202-326-3128; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.