Million Dollar Settlement with Office Supply Telemarketer

A Florida telemarketing operation that conned thousands of consumers into ordering merchandise, charged them inflated prices and pressured them to collect bills will pay $1 million to settle Federal Trade Commission charges that their business practices violated federal laws. The mastermind of the operation, Michael Chierico, and his wife, Teri Chierico, will be required to post a $100,000 bond before engaging in telemarketing in the future.

The defendants were targeted in "Operation CopyCat," a joint federal, state and local government crackdown on allegedly bogus office and cleaning supply telemarketing sales schemes that was coordinated by the Federal Trade Commission. The defendants are based in Miami, Florida, but their boiler room telemarketing operation allowed them to target victims across the country.

According to the FTC complaint detailing the charges, Michael Chierico’s operation used a variety of deceptive tactics to obtain so-called "orders" for copy machine toner. The defendants allegedly claimed to be updating their records, in a ploy to learn the model and serial numbers for photocopying machines used by businesses. The defendants then allegedly misrepresented that they were the business’ regular supplier and pretended that they were offering a special deal on copier toner. They also allegedly obtained reorders through false representations that a balance remained from a previous order or that the victims had agreed to be placed on a regular shipment plan. The defendants then used unfounded threats to ruin credit or take legal action to collect charges for the overpriced merchandise, according to the FTC.

On June 28, 1996, at the request of the FTC, the U.S. District Court for the Southern District of Florida froze the defendants’ assets and issued a Temporary Restraining Order to bar the deceptive practices pending a trial. The settlement announced today resolves the FTC suit.

To settle the FTC charges, Michael Chierico’s firms, American Business Supplies, Inc., Interstate Office Systems, Inc., Nationwide Office Products, Inc., and Creative Business Consultants, Inc. will pay $1 million which will be used to provide consumer refunds. The settlement prohibits the defendants from misrepresenting:

• the existence of a prior business relationship with consumers;
• the purpose of their calls to consumers;
• the price of their merchandise;
• the existence and terms of any sales agreement;
• that they have a tape recording demonstrating that a consumer ordered the goods; and
• that a consumer has an obligation to pay a "restocking fee" before returning unordered merchandise.

In addition, they are barred from using threats or intimidation to get victims to pay for merchandise; from shipping unordered merchandise unless it is accompanied by a statement saying it may be treated as a gift; from seeking payment for unordered goods; from selling their victim lists; and from providing assistance to others engaged in the supplier scams.

Finally, the Chiericos are required to obtain a $100,000 performance bond before engaging in future telemarketing. The amount of the bond goes up to $200,000 after six months and remains at the $200,000 level for one year. After that, the bond goes to $400,000 and stays at that level as long as the Chiericos stay in the telemarketing business. The settlement contains standard reporting requirements designed to assist the Commission in monitoring the defendants’ compliance.

The Commission vote to file the settlement was 5-0.

NOTE: This consent judgment is for settlement purposes only and does not constitute an admission by the defendants of a law violation. Consent judgments have the force of law when signed by the judge.

Copies of the complaint, stipulated final judgment and other documents related to this case are available from the FTC’s Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY 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. FTC news releases and other materials also are available on the Internet at the FTC’s World Wide Web site at: http://www.ftc.gov

(FTC File No. X960074)
(Civil Action No. 96-1754-Civ-Moore)