"Project Busted Opportunity" Defendants Settle FTC Charges

Komaco International, Inc., a Nevada company doing business as Success Masters International and Max Horizon Securities, and its principal, Kenshin Hayashi, have agreed to settle federal charges of operating a fraudulent work-at-home business opportunity. In June 2002, as part of "Project Busted Opportunity," the Federal Trade Commission filed a complaint against the defendants, alleging that they violated the FTC Act in the sale and marketing of a work-at-home booklet stapling program. Under the terms of the proposed settlement, the defendants would be required to pay over $155,000 in consumer redress and would be prohibited from making any material misrepresentations in connection with the sale of any good or service.

"Project Busted Opportunity" was a law enforcement sweep launched by the Federal Trade Commission, the Department of Justice, and 17 state law enforcement agencies, targeting fraudulent work-at-home and business opportunities. In its complaint, the FTC alleged that the defendants deceptively marketed and sold their booklet stapling opportunity to consumers nationwide. The FTC alleged that the defendants solicited consumers primarily through classified ads and direct mail, touting a lucrative work-at-home business opportunity. According to the FTC, the defendants sent solicitation materials that claimed consumers would be paid $5 to $15 for every booklet stapled and that they could make hundreds or even thousands of dollars a week just by stapling booklets. In addition, the complaint alleged that the defendants offered an unconditional guarantee: if consumers were not making the claimed earnings after 90 days, and mailing 50 booklets, they could get a full refund of their registration fee plus an additional $20 just for trying out the program. The court granted the FTC a temporary restraining order and froze the defendants' assets.

The complaint also named Robert Lee Anderson as a defendant. After filing the complaint, the FTC learned that Anderson was not involved in the work-at-home scheme at all. The FTC has dismissed Anderson from this action without prejudice.

The settlement announced today prohibits the defendants from making false representations or assisting others in making false representations related to the advertising, marketing, or sale of any work-at-home business opportunity. It also prohibits them from misrepresenting any fact material to a consumer's decision to purchase any goods or services.

Specifically, the proposed settlement prohibits the defendants from:

• falsely representing that consumers will make a substantial amount of money after sending the defendants a registration fee;
• falsely representing that the defendants will pay consumers $5 to $15 for every booklet stapled;
• falsely representing the earnings potential of any work-at-home opportunity being promoted; and
• failing to disclose their refund policy, or to comply with any stated refund policy.

The defendants also are prohibited from selling their customer lists.

The proposed settlement further requires the defendants to pay over $155,000 in consumer redress. The settlement contains an avalanche clause making them liable for a $2 million judgment if it is found that they misrepresented their financial conditions.

Finally, the settlement contains various recordkeeping provisions to assist the FTC in monitoring the defendants' compliance.

The Commission vote to authorize staff to file the proposed stipulated final judgment and order was 5-0. It was entered by the U.S. District Court, Central District of California, in Los Angeles, California on December 13, 2002.