DOJ, U.S. Attorney, FTC Announce Indictment of Franchisor

United States Attorney Thomas E. Scott, Acting Assistant Attorney General David W. Ogden, and the Federal Trade Commission announced today the indictment of Kenneth Sterling on criminal contempt charges. The Indictment charges Kenneth Sterling with 12 counts of knowingly and willfully disobeying and resisting an Order entered against Sterling in May 1996 by the Honorable Daniel T. K. Hurley of the United States District Court for the Southern District of Florida.

Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection expressed her appreciation to the Department of Justice's Office of Consumer Litigation and the United States Attorney's Office for the Southern District of Florida for pursuing this action at the FTC's request. "The FTC says what it means and means what it says," said Bernstein. "This Indictment sends a loud and clear signal that the FTC enforces its orders."

According to the Indictment, Sterling violated the Order in connection with the sale of coffee rack display business ventures and coffee bar machine business ventures. The Indictment states that the Order prohibits Sterling from violating the FTC's Trade Regulation Rule titled "Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures," commonly referred to as the Franchise Rule, and from making any material misrepresentations in connection with the promotion, offering or sale of franchises or business ventures, or telemarketing. The Indictment also states that the Order was entered against Sterling, then owner of American Vending Group, Inc., after the United States filed a complaint against Sterling and American Vending Group, Inc., alleging that the defendants sold franchises, and that defendants' actions violated the Franchise Rule and the Federal Trade Commission Act.

The Indictment charges that, rather than comply with the Order, Sterling did business as Southern Coffee, Inc., a business venture similar to American Vending Group, Inc. The Indictment also charges that Sterling used similar marketing techniques, and made claims similar to those he made for American Vending Group, Inc., resulting in numerous violations of the Order.

The Indictment is a part of "Project Scofflaw," the FTC's comprehensive law enforcement initiative to enforce United States District Court orders that have been violated. The FTC is committed to utilizing the full range of powers available to it to stop repeat offenders from violating existing court orders and to deter other defendants from ignoring order provisions.

Note: It should be remembered that an Indictment is not evidence of criminal activity, and the defendant is presumed innocent unless and until proven otherwise.

Copies of the FTC's "Project Scofflaw" cases are available from the FTC's web site: 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.