CDI Pyramid Promoters Settle FTC Charges

The remaining four defendants in a pyramid scheme that promised investors they could earn up to $18,000 a month and receive an unsecured credit card with a high credit limit have agreed to settle Federal Trade Commission charges that their claims were false and their scheme violated federal laws. The settlements, two of which have been approved by the court, would enjoin the defendants, Jaime Martinez, Robert Larson, David Lewis and Jelena Tkalec, from operating pyramid or Ponzi schemes, or any program that promises income primarily from the recruitment of others, rather than the sale of a product. The orders would prohibit misrepresentations in the sale of marketing opportunities and specifically prohibit misrepresentations about earnings and benefits, such as receiving unsecured credit cards, from participating in any such program. The Commission has already obtained settlements with the three other defendants.

In November 1997, the FTC charged the principals and promoters of Credit Development International (CDI) and Drivers Seat Network (DSN), with violating federal laws. The defendants, who operated from Signal Hill, California, claimed that, for an initial investment of $130 and monthly payments of $30, consumers could obtain unsecured Visa or MasterCard credit cards with high credit limits and make as much as $18,000 per month by recruiting participants for the program. The FTC alleged that these claims were false and were used to mask a pyramid scheme.

At the request of the FTC, a Federal District Court in Los Angeles issued a temporary restraining order, froze the defendants' assets and appointed a receiver to preserve them. Following a November 20, 1997 hearing, the court granted the FTC's request for a preliminary injunction, continuing the asset freeze and receivership. Settlement of the charges with other principals provided $2 million for consumer redress, the distribution of which will be handled by the court-appointed receiver. The settlements announced today finalize the litigation in this matter.

The settlements will prohibit the defendants from engaging in any pyramid, Ponzi or other marketing scheme in which a person derives income primarily from recruiting others into the program. They also will prohibit misrepresentations about earnings and the availability of an unsecured credit card. In addition, each defendant is enjoined from assisting other businesses to make such misrepresentations and is barred from releasing the names of any other persons who joined the CDI/DSN program. Finally, the settlements contain standard recordkeeping provisions to allow the Commission to monitor compliance.

The Commission votes to approve the settlements were 4-0. They were filed in the U. S. District Court, Central District of California in Los Angeles.

NOTE: A stipulated final order is for settlement purposes only and does not constitute an admission by the defendant of a law violation. Stipulated final orders have the force of law when signed by the judge.

Copies of the initial complaint, Stipulated Final Orders and a consumer alert, "Don't Get Burned By A Pyramid Scheme," 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, D.C. 20580; 202-FTC-HELP (202-382-4357); TDD 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.

(FTC File No. X98 0004)
(Civil Action No. 97-7947-CAS-(AJWx))