FTC Targets Scams Aimed at Hispanics

The Federal Trade Commission, advancing its fight against scams targeting the Hispanic community, today announced six law enforcement actions during the Hispanic Law Enforcement and Outreach Forum in Phoenix, Arizona. The cases target deceptive marketing for a range of products and services, including work-at-home business opportunities, disease cures, and weight-loss supplements.

“We are sending a message to scammers: Our strong commitment to enforcement in this area will not change,” said Tom Syta, Assistant Director for the FTC’s Western Region. “As the cases announced today show, we will stay involved in the Hispanic community and fight fraud when and where it happens.”

Today’s Hispanic Law Enforcement and Outreach Forum was hosted by the FTC, the U.S. Postal Inspection Service, and the U.S. Attorney’s Office in Phoenix as part of the FTC’s ongoing effort to expand outreach into the Hispanic community and bring local law enforcement and Hispanic community leaders together in the fight against fraud. It is the latest in a series of workshops that aim to identify local problems and discuss ways to address them; facilitate open dialogue with local government, consumer groups, and members of the Hispanic community on issues affecting Hispanic consumers; and share consumer education resources to help local communities conduct outreach about fraud and how to report it. Previous workshops were held in Chicago, Dallas, and Miami, with another event planned in Los Angeles for later this year. At today’s workshop, the FTC also announced a new educational outreach partnership with Arizona State University-West Campus, where the workshop is being held.

Law Enforcement Actions

At the Phoenix event, the FTC announced the following law enforcement actions, including a new complaint with a proposed settlement, three settlements of previously filed actions, and a default judgment:

Companía Americana

A district court judge has entered a default judgment against the operators of a classic work-at-home scam that bars them from repeating the law violations alleged by the FTC and forces them to pay $885,196 in consumer redress. The defendants targeted Spanish-speaking consumers who were looking for well-paying jobs that did not require English-language skills. The FTC alleged in a September 2004 complaint that the defendants, through ads in various Spanish-language newspapers and magazines, offered easy product-assembly work, such as making key chains or jewelry, if consumers paid a fee ranging from $50 to $180. Instead, consumers received a booklet in Spanish that contained lists of companies to contact that allegedly offered work-at-home opportunities. These companies either no longer existed, required payment of additional fees, or had no relationship with the defendants.

The FTC alleged that the defendants, USS Elder Enterprises, Inc.; America Vespucia Corporation; Ricardo Elder Partners, Inc.; and Ricardo E. Gonzalez, doing business under a series of fictitious names including Companía Americana and Salomon Press Financial Publications and operating as a common enterprise, misled the consumers who contacted them by falsely promising that consumers would obtain assembly project work for pay or substantial assistance in obtaining such work; that consumers were likely to earn a substantial amount of money; and that the defendants would provide refunds to unsatisfied consumers.

The default judgment bars the defendants from these deceptive practices and also prohibits them from violating the Telemarketing Sales Rule (TSR). In addition to the required payment of $885,196 in consumer redress, the default judgment also contains monitoring provisions to ensure compliance. The Clerk of the U.S. District Court for the Central District of California entered a default against the defendants on March 17, 2005. On June 28, 2005, the Court denied the defendants’ motion to set aside the default and granted the FTC’s motion for a default judgment. The Court entered the order for default judgment on June 29, 2005.

Latinos Group Promotions

The marketers of two herbal supplements are permanently barred from making false claims about any dietary supplement and from deceptively claiming that any product has been approved by the government. In television advertisements on Spanish-language stations, the defendants claimed that their product, “Arcomig,” would cure cancer, leukemia, arthritis, and other serious medical conditions, while “Essiac Formula” would cure cancer, treat diabetes, lower cholesterol, and cause rapid, substantial weight loss. The defendants falsely claimed Arcomig was approved by the Food and Drug Administration.

The FTC charged that Latinos Group Promotions and its president, Jose Carpinteyro, made false claims about the two herbal supplements. The stipulated judgment announced today requires that the defendants have reliable scientific proof to substantiate any claims they make in the future. The defendants also must send notices, in English and Spanish, to consumers and resellers about the stipulated judgment. Part of one notice states, “no scientific studies show that Arcomig fights cancer or any other disease.” The other says, in part, “very little research has been done on Essaic Formula. In fact, the research shows that Essaic does not fight cancer or any other disease.” The order also contains a suspended judgment of $990,017, which will be due immediately if it is found the defendants misrepresented their financial condition. The complaint and stipulated judgment will be filed today in the U.S. District Court for the Northern District of California.

AG Intercraft (AGI)

To settle charges that she duped Spanish-speaking consumers out of $100 each with a bogus greeting card-assembly business opportunity, Amada Guerra is permanently barred from marketing work-at-home business opportunities and misrepresenting the earnings potential, required skills, or refund policy of any business opportunity. Guerra paid $100,000 in consumer redress as part of the settlement.

In September 2004, the FTC filed a complaint against Amada Guerra, individually and doing business as AG Intercraft (AGI), alleging that after consumers paid $96 to $106 for cheap materials and assembly directions, their greeting cards were almost always rejected for failing to precisely match a “sample” card assembled by the company. According to the FTC, Guerra failed to refund consumers’ money. In September 2004, a federal district court entered a temporary restraining order against the defendant, halting her illegal conduct and freezing her assets. The stipulated final order announced today holds the defendant liable for $1 million if it is found that she has misrepresented her financial status. The stipulated final order was filed in the U.S. District Court for the Middle District of Florida, Orlando Division, on June 3, 2005.

CHK Trading Co., Inc.

Several defendants who sold bogus weight-loss and breast creams are required to pay $75,978 in consumer redress to settle FTC charges that they falsely claimed their cellulite cream could cause substantial and permanent weight loss and eliminate cellulite and that their breast cream could prevent cancer. The defendants are permanently barred from making false claims for any dietary supplements or products in the future.

In November 2004, as part of “Operation Big Fat Lie” – a sweep targeting bogus weight-loss claims – the FTC charged that CHK Trading Co., Inc. and CHK Trading Corp. and their principal, Chong Kim, made false and unsubstantiated claims for their product “Hanmeilin Cellulite Cream,” and unsubstantiated claims for their product “Hanmeilin Breast Cream.” The defendants claimed that their cellulite cream, when rubbed into the skin, caused permanent and substantial weight loss, and eliminated fat and cellulite, and that their breast cream, when rubbed into the skin, could prevent breast cancer.

The advertisements for the cellulite cream ran nationally in English, Spanish, Korean, and Chinese. The Spanish-language ads ran in TeleRevista magazine. The ads for the breast cream ran nationally in Chinese. The FTC alleged each ad included at least one of the seven bogus “Red Flag” weight-loss claims. The ongoing “Red Flag” education campaign by the FTC includes guidelines to help media outlets (and others) spot false claims in weight-loss ads. The FTC determined that the defendants bilked consumers out of more than $75,000. The stipulated permanent injunction and order were filed in the U.S. District Court for the Southern District of New York, on June 8, 2005, and entered by the judge.

Call Center Express Corporation

The FTC charged the defendants in this case with deceptively marketing advance-fee credit cards to Hispanic consumers. Rafael Abreu, Liens Abreu, and Abreu Advertising Inc. have agreed to settle charges that they ran television advertisements on national, Spanish-language television networks misrepresenting their cards as major credit cards, guaranteed to have a minimum credit line of $2,000. When consumers called for more information, the FTC alleged the defendants repeated the same misrepresentations, and added that there was a fee of $149 to $299 to get the credit cards. In reality, consumers received cards that could only purchase merchandise from the defendants’ catalogues or Web sites. The FTC alleged that contrary to the written card agreements, the defendants did not provide refunds to most consumers who requested them.

The settlement with these defendants bans them from misrepresenting that consumers will receive an unsecured major credit card after paying a fee, or misrepresenting any feature of any goods or services they are selling. Additionally, they are barred from violating the TSR, including five specific provisions related to their conduct. The defendants have agreed to pay $20,000 in consumer redress. Litigation continues with two other companies and three individual defendants in this case. The stipulated final judgment was filed in the U.S. District Court for the Southern District of Florida.

The Commission vote for Latinos Group Promotions, AG Intercraft, and CHK Trading was 5-0; the vote for Call Center Express was 4-0.

Educational Outreach

The FTC today announced a new partnership with Arizona State University, West Campus, through which the school will provide copies of “Getting Credit” to all incoming students in both English and Spanish. The publication tells how to build and maintain good credit.

The Hispanic Outreach Initiative

Since the Hispanic Outreach Initiative began in April 2004, the FTC has announced 29 cases involving Spanish-language frauds. In addition to a national Hispanic workshop and the follow-up regional workshops, the FTC has translated more than 100 publications into Spanish and posted them on the FTC’s Spanish-language Web site: http://www.ftc.gov/espanol. The Web site receives an average of more than 65,000 monthly hits – an increase of more than 100 percent since the initiative was launched in August 2004.

NOTE: The Commission 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 defendant has actually violated the law. The case will be decided by the court.

NOTE: These stipulated final orders are for settlement purposes only and do not constitute an admission by the defendants of a law violation. Stipulated final orders have the force of law when signed by the judge.

Copies of the documents mentioned in this press release 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 Ave, 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 complain in English or Spanish (bilingual counselors are available to take complaints), 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 civil and criminal law enforcement agencies in the U.S. and abroad