Americas Shopping Network Defendants Banned From Selling Certain Work-At-Home Business Opportunities

America’s Shopping Network (ASN), Inc., Consumer Services (CS), Inc., Karen Zagami, Louis Gangi, and Carianne Sica are banned from selling any work-at-home opportunities that are chain marketing schemes as part of a settlement with the Federal Trade Commission. In June 2002, the FTC filed a complaint against the defendants as part of “Operation Busted Opportunity,” alleging that they operated a deceptive work-at-home scheme selling consumers a work-at-home envelope stuffing opportunity for a registration fee ranging from $33 to $43. According to the complaint, the defendants claimed that consumers could make a substantial amount of money from the envelope stuffing opportunity, and they offered an unconditional money back guarantee of the registration fee if consumers were not satisfied. The settlement announced today also prohibits the defendants from making misrepresentations in connection with the sale of any business venture or from violating the FTC’s Franchise Rule.

The FTC’s complaint named as defendants ASN, CS, Zagami, Gangi, Sica, HME, Inc. and John Epstein. According to the complaint, the defendants operated a large work-at-home scam under the names America’s Shopping Network and Consumer Services. The defendants advertised their work-at-home opportunities through newspaper ads and direct mail. The pitch varied slightly; the ASN pitch was the old fashioned envelope stuffing scheme which falsely promised to pay consumers 50 cents to $1 for every envelope stuffed, and the CS version falsely promised to pay consumers $635 a week for processing mail, according to the FTC. In fact, the FTC alleged that these schemes turned out to be chain marketing schemes, where consumers could only earn money through commissions for recruiting other consumers to pay defendants in response to the same pitch. The FTC’s complaint alleged that, in the advertising and promotional materials, the defendants misrepresented that:

• consumers would make a substantial amount of money after sending the required payment to the defendants;
• they would pay consumers 50 cents or $1 for every envelope stuffed and mailed, and $30 for every order the defendants received in response to consumers’ mailings;
• they would pay consumers $365 weekly for processing mail; and
• they would provide unconditional refunds if consumers were not satisfied.

Under the terms of the proposed settlement announced today, the defendants are permanently banned from selling any work-at-home opportunities that are chain marketing schemes, and are prohibited from making misrepresentations in connection with the sale of any business venture, work-at-home employment opportunity, or any other good or service, including misrepresenting earnings, the types of employment opportunities promised, or the refund policy offered. Defendants ASN, CS, Zagami, and Gangi are required to pay $30,000 for consumer redress. The settlement includes an avalanche clause making all of the defendants liable for $18 million, if it is found that they made any material misrepresentations or omissions on their financial statements. The settlement further prohibits the defendants from selling their customer lists.

John M. Epstein and HME, Inc.

The Commission also has settled charges with HME, Inc., and its principal, John M. Epstein, two other defendants named in the ASN case. According to the FTC, HME and Epstein played a significant role in the deceptive scheme. The FTC alleged Zagami paid them to manage the advertising for the work-at-home opportunities. They arranged for placing classified ads in newspapers, maintained the toll-free numbers that consumers called in response to those ads, and drafted scripts for voice mail recordings that repeated the deceptive statements made in the ads.

The settlement against these two defendants permanently bans them from marketing work-at-home employment opportunities in the future. The order also prohibits the defendants from making misrepresentations in connection with the sale of any business venture, work-at-home employment opportunity; or any other good or service, including misrepresenting earnings, the types of employment opportunities promised, or the refund policy offered. The order also prohibits the defendants from misrepresenting any material fact in connection with the sale of any other product or service. The order requires Epstein to pay $14,000 for consumer redress, and includes an avalanche clause making him liable for payment of the full $18 million if it is determined that he misrepresented or omitted any material asset on his financial statements. The order further prohibits HME and Epstein from transferring or selling their customer lists.

The order against HME and Epstein was filed with the U.S. District Court for the Southern District of Florida on March 4, 2003, and approved by the court on April 11, 2003.

Finally, both settlements contain various recordkeeping requirements to assist the FTC in monitoring the defendants’ compliance.

The FTC appreciates the excellent assistance provided by the Massachusetts Attorney General’s Office; the Better Business Bureau, Inc. Serving Eastern Massachusetts, Maine and Vermont; and the Jupiter, Florida Police Department in helping the FTC to investigate and file this case.

The Commission vote authorizing staff to file the proposed stipulated final judgment and order against ASN, CS, Zagami, Sica, and Gangi was 5-0. It was filed in the U.S. District Court for the Southern District of Florida, in West Palm Beach, Florida on July 28, 2003, and was approved by the Court on July 31, 2003.

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

Copies of the stipulated final judgment and order 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. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1 877-382-4357), or use the complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

(FTC File No. X020080)
(Civil Action No. 02-80540-CIV-Hurley)