FTC: Consumers Should Not Take Free Money Offers for Granted

The Federal Trade Commission announced today that it has acted to halt a New Orleans-based company and its owners from promising to secure free grants for consumers.

According to the Commission, the defendants used ads in local and community newspapers to promise consumers they could secure free grants of between $500 and $500,000 using their services - with their satisfaction guaranteed. In reality, however, the Commission alleges that applicants had to pay a "processing fee" of up to $200, typically received nothing more than a list of grant prospects that almost never panned out, and had an extremely difficult time meeting the conditions required to get a full refund from the companies offering the "service."

The complaint announced today was filed in federal district court in Louisiana against the following defendants: U.S. Grant Resources, LLC; National Grants, LLC; and John B. Rodgers and Laurel A. Rodgers, individually as owners and managing members of the corporate defendants. In bringing the complaint, the FTC is seeking to stop the defendants' allegedly deceptive behavior and to obtain consumer redress and/or other relief.

"The defendants advertised guaranteed 'free grants.' But the only grant was to them. They took consumers' money, they did not honor their guarantees, and they gave consumers nothing more than empty promises of free money," said Howard Beales, Director of the FTC's Bureau of Consumer Protection. "Consumers should keep in mind that most sources of grant money have strict criteria; they do not give individuals money for nothing."

The Commission's Complaint

According to the Commission's complaint - filed concurrently with state actions in Louisiana and Wisconsin - the defendants violated the FTC Act through a deceptive scheme to market grant procurement services nationwide for a fee. Specifically, the FTC contends, since at least September 2001, the defendants have bought classified ads in local community newspapers, representing that, after paying a fee, consumers are highly likely to receive a cash grant by using their services. They also allegedly falsely state that they will provide a refund to consumers who do not secure a grant, while failing to disclose that there are several conditions or restrictions that would discourage consumers from seeking refunds or that restrict their availability.

The ads placed by the defendants include text such as:

"FREE GRANTS Never Repay - acceptance guaranteed. Government and private sources $500 - $500,000. Education, home repairs, home purchase, business, non-profits. Phone live operators 9 am - 9 pm. Monday - Saturday 1-800-XXX-XXXX, ext. [xxx]."

After a consumer calls the toll-free number, the defendants' representatives purportedly determine if the consumer qualifies to receive a grant. They then collect the consumer's information and tell the consumer that he or she needs to pay a "one-time processing fee" of between $95 to $200. Consumers who express doubt or ask if they can get their money back are told that the grant is guaranteed and that they can receive a refund if not satisfied.

Within a few weeks, most consumers receive the defendants' information package in the mail. Instead of grant applications, however, the package typically only contains lists of agencies and foundations to write to request funding. Many of the listed sources do not offer grants to individuals, and some provide them only to non-profit organizations. Unsatisfied consumers - who often are turned down by the grant sources on the lists - find that the terms of the defendants' refund policy are difficult, if not impossible, to meet. For example, they must apply for grants and be denied by each source within 90 days. However, many consumers never hear back from the sources at all. In most, if not all cases, the FTC contends, consumers never received a grant by using the defendants' "services."

In filing its complaint, the FTC is seeking relief, including - but not limited to - the rescission of contracts and restitution, the disgorgement of ill-gotten gains by the defendants, and other relief, including consumer redress, the Court deems appropriate. In addition, the FTC has issued a new consumer alert cautioning consumers about potential grant scams and how to avoid them. It can be found at www.ftc.gov/bcp/conline/pubs/alerts/grantalrt.htm.

The Commission vote authorizing the staff to file the complaint was 5-0. The complaint was filed under seal in the U.S. District Court for the Eastern District of Louisiana, in New Orleans, on March 2, 2004. The seal was lifted on March 4, 2003. The FTC appreciates the invaluable assistance of the Wisconsin Attorney General's Office and the Louisiana Department of Justice in bringing the action announced today.

On March 4, 2004, Louisiana Attorney General investigators served a criminal warrant on John B. Rodgers, Laurel A. Rodgers, and an additional defendant, with the assistance of the U.S. Postal Inspections Service and the Orleans Parish Civil Sheriff, charging the defendants with theft by fraud of more than $100,000, money laundering, computer fraud, and racketeering. Each was held on $1 million bond.

NOTE: The Commission issues or files a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the named parties have violated the law. The case will be decided by the court.

Copies of the Commission's complaint are available from the FTC's Web site at http://www.ftc.govand also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 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. 032-3082; Civ. No. 04-0596 Sect. N Mag. 3)