Defendants in $cholar$cam Case Agree to Settle Charges

The principal defendant in one of the cases brought by the Federal Trade Commission's "Project $cholar$cam," a nationwide crackdown on fraudulent scholarship search services, has agreed to settle charges that he misrepresented the likelihood of obtaining scholarships and grants through the use of his service. Under the settlement, Anthony Consalvo, vice president of National Grant Foundation, is permanently banned from selling college scholarship services in any manner, and is permanently banned from telemarketing or assisting others in telemarketing in the future. He is also required to pay $585,000 in consumer redress.

National Grant Foundation's complaint named as additional defendants Wallace Millman, Anthony Consalvo, Dennis Colonna, Anthony Lucca, Harriet Kaye, Beverly Jansen, and Carol Clough. The charges against Anthony Lucca were subsequently dismissed, and a stipulated final judgment and order for permanent injunction against telemarketers Kaye, Jansen, and Clough that bans them from selling scholarship search services in the future was approved by the court in March.

Last November, the FTC filed a complaint in U.S. District Court in Florida detailing the charges in this case. The complaint also named Grant Research and Publishing, and a number of principals of NGF and GRP. Two of NGF's principals also were involved with two companies sued late in 1996 by the FTC, Student Assistance Service and College Assistance Services, as were three defendants who provided telemarketing services to NGF. The complaint alleged that the defendants had conducted a program to telemarket college scholarship services to high school and college students, and had mailed more than 1.6 million postcards advertising their college scholarship services to the parents of these students. The postcard gave a toll-free number and said that the student was eligible for a college scholarship or grant. When the consumers called NGF's toll-free number, they were told that, in exchange for an up-front fee of $179, the company would guarantee at least $1,000 in grant or scholarship funds from large private companies or they would refund the fee, the FTC said.

The complaint alleged that the defendants, by these and other means, falsely represented that NGF would provide its customers with names of "sources" from which they were likely

to receive at least $1,000 in scholarships or grants. In fact, the complaint alleged, once consumers paid their fees and completed their applications, they merely received address lists of "sources" of financial aid for which the consumers had to apply on their own, as well as several pre-printed form letters addressed to a number of those sources. NGF directed consumers to send the form letters to the scholarship source to request an application for any scholarship or grant offered by the source. According to the FTC, the lists primarily contained scholarships awarded by the college or university the students attended, or scholarships awarded by the students' state or local government -- not private sources of "free" financial aid. Many of the sources were actually contests, loans, or work-study programs and often no longer existed or had expired deadlines. In order to bolster its credibility, the company falsely claimed to be a non-profit corporation, the FTC said.

Under the settlement, in addition to the permanent ban on the sale of scholarship search services or any future telemarketing activity, Consalvo is prohibited from misrepresenting that any business entity is non-profit, charitable, or otherwise not in business to generate profits. In addition, Consalvo is prohibited from withdrawing money from a consumer’s bank account or billing charges to a consumer's credit card without obtaining either written, or oral authorization that is tape recorded and available for verification. In addition, Consalvo is prohibited from selling, renting, leasing, transferring, or otherwise disclosing any customer lists, or any other identifiable information about previous customers.

The Commission vote to file the proposed settlement was 5-0. It was filed in the U.S. District Court for the Southern District of Florida, Fort Lauderdale Division, on April 29, 1998. The settlement is subject to approval by the court. The telemarketers’ order was entered on March 16, 1998.

NOTE: This stipulated final judgment and order for permanent injunction is for settlement purposes only and does not constitute an admission by the defendant of a law violation. The judgement has the force of law when signed by the judge.

Copies of the settlement, as well as other documents associated with this case, and consumer information about scholarship search services 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, D.C. 20580; 202-382-4357; 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.

(Civil Action No. 97-7339)
(FTC File No. 972 3195)