UNITED STATES DISTRICT COURT FEDERAL TRADE COMMISSION, Plaintiff v. DECO CONSULTING SERVICES INC., UNIMARK INDUSTRIES, INC., DANIA DENIS, and JESSE NIEVES, Defendants. Case No. 96-7196-CIV-NESBITT STIPULATED FINAL JUDGMENT On October 17, 1996, Plaintiff, Federal Trade Commission ("Commission"), pursuant to Section 13(b) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. § 53(b), filed a complaint in this matter seeking injunctive and other relief, including redress to consumers, and moved ex parte for (1) a temporary restraining order; (2) an order freezing all accounts, wherever located, belonging to any defendant or for which any defendant has signature authority and requiring an immediate accounting of defendants’ assets and transfers of assets; (3) an order permitting expedited discovery and immediate access to defendants’ business premises; (4) an order appointing a temporary receiver over defendants Deco Consulting Services, Inc. and Unimark Industries, Inc.; and (5) an order to show cause why a preliminary injunction should not issue pursuant to Fed. R. Civ. P. 65(b). On October 18, 1996, the Court granted the Commission’s motion and issued an ex parte temporary retraining order against defendants and set the preliminary injunction hearing for October 25, 1996. At the hearing, defendant Jesse Nieves consented to extending the TRO for 10 days until November 7, 1996, and the Court determined that good cause existed for extending the TRO for 10 days as to all defendants. The Court reset the preliminary injunction hearing for November 6, 1996, at which time the parties made arguments and plaintiff presented further evidence. On November 7, 1996, the Court issued a preliminary injunction with asset freeze, appointed David Mandel permanent receiver over the corporate defendants and the personal assets of the individual defendants, and granted other equitable relief. The Commission and defendants Deco Consulting Services, Inc., Unimark Industries, Inc., Dania Denis, and Jose M. "Jesse" Nieves ("defendants"), have stipulated to the entry of the following Final Judgment and Order in settlement of the Commission’s complaint against them, and the Court, being advised in these premises, finds:
IT IS THEREFORE ORDERED, ADJUDGED AND DECREED AS FOLLOWS: DEFINITIONS I. For purposes of this Order, the following definitions shall apply: (A) “Scholarship search services” shall mean any business activity that purports to assist consumers with obtaining scholarships, grants, or any other financial assistance for an educational purpose. (B) “Telemarketing” shall mean any business activity (including, but not limited to, initiating or receiving telephone calls, managing others who initiate or receive telephone calls, operating an enterprise that initiates or receives telephone calls, owning an enterprise that initiates or receives telephone calls, or otherwise participating as an officer, director, employee or independent contractor in an enterprise that initiates or receives telephone calls) that involves attempts to induce consumers to purchase any item, product, good or service, to make a charitable contribution, or to enter a contest for a prize, by means of telephone sales presentations, either exclusively or in conjunction with the use of other forms of marketing. Provided, however, that the term “telemarketing” shall not include transactions that are completed only after a face-to-face contact between the seller or solicitor and the consumers solicited. Provided, further, that this definition shall not apply to activities by defendant Nieves within the scope of his employment as an employee of a person or entity engaging in business as a securities broker-dealer registered with the National Association of Securities Dealers and regulated by the United States Securities and Exchange Commission and/or the appropriate state securities administrator (e.g. the California Secretary of State). Provided, further, that this definition shall not apply to activities by defendant Nieves within the scope of his employment as an employee of a person or entity engaging in business as a licensed mortgage broker registered with the state of Florida and regulated by the state of Florida pursuant to Fla. Stat. Ann. Sections 494.001 et seq.. For the purposes of the exemptions set forth in this Paragraph, defendant Nieves may be deemed an "employee" if his employment relationship, acknowledged by both him and the employer, meets the appropriate definitions, standards, and/or criteria set forth by the respective relative regulatory body identified above; and if his employment relationship meets all of the following conditions: (1) the employer has the right to hire and fire defendant Nieves and hire and fire his assistants; (2) the employer provides the methods and procedures for performing defendant Nieves's services; and (3) the employer supervises defendant Nieves in the conduct of his business and supervises his compliance with applicable laws and rules. The exemption set forth in this Paragraph shall not be construed to limit or preempt the regulatory powers of any other federal, state, local, or other government agency. (C) “Assisting others engaged in telemarketing” means knowingly providing any of the following goods or services to any person or entity engaged in telemarketing: (1) performing customer service functions for an entity engaged in telemarketing, including, but not limited to, receiving or responding to consumer complaints; (2) formulating or providing, or arranging for the formulation or provision of, any telephone sales script or any other marketing material for an entity engaged in telemarketing; (3) providing names of, or assisting in the generation of, potential customers for an entity engaged in telemarketing; or (4) performing marketing services of any kind for an entity engaged in telemarketing. (D) "Defendants" means Deco Consulting Services, Inc., Unimark Industries, Inc., Dania Denis, Jesse Nieves, or any combination thereof. PERMANENT BAN AGAINST SCHOLARSHIP SEARCH SERVICES II. IT IS HEREBY ORDERED that defendant Denis and defendant Nieves are hereby permanently restrained and enjoined from the promotion, advertising, marketing, sale or offering for sale of scholarship search services. PERMANENT BAN AGAINST TELEMARKETING III. IT IS FURTHER ORDERED that defendant Nieves is hereby permanently banned from (A) engaging in the business of telemarketing, whether as a business owner, officer, director, employee, or consultant and (B) assisting others engaged in the business of telemarketing. PROHIBITION AGAINST MISREPRESENTATIONS IV. IT IS FURTHER ORDERED that defendants and their officers, agents, servants, employees, and attorneys, and all other persons or entities directly or indirectly under their control or under common control with them, and all other persons or other entities in active concert or participation with them who receive actual notice of this Order by personal service or otherwise, in connection with the advertising, promotion, offer for sale, or sale of any item, product, good, service, investment or beneficial interest of any kind, are hereby permanently restrained and enjoined from: (A) Falsely representing, directly or by implication, that a consumer is likely to obtain a specified amount in scholarships or grants; (B) Falsely representing, directly or by implication, any material aspect of the scholarship search services offered by the defendants; (C) Falsely representing, directly or by implication, that defendants will refund the service fee to each consumer who purchases defendants' scholarship search services and does not obtain scholarships or grants by using defendants' services; (D) Failing to disclose all terms and conditions of any refund policy prior to completing any sale, including but not limited to any aspect of a refund policy offered by a scholarship search service; (E) Falsely representing, directly or by implication, or failing to disclose, any fact material to a consumer's decision to purchase any item, product, good, service, or investment interest of any kind, including, but not limited to, the services of a scholarship search service; and (F) Violating or assisting others to violate any provision of the Telemarketing Sales Rule, 16 C.F.R. Part 310. RECORD KEEPING AND DOCUMENT RETENTION V. IT IS FURTHER ORDERED that, for a period of five years from the date of entry of this Order, defendants and their officers, agents, servants, employees, and attorneys, and all other persons or entities directly or indirectly under their control or under common control with them, and all other persons or other entities in active concert or participation with them who receive actual notice of this Order by personal service or otherwise, in connection with any business where defendant Denis or defendant Nieves is the majority owner of the business or otherwise directly or indirectly manages or controls the business, are hereby restrained and enjoined from failing to create, and from failing to retain for a period of three years following the date of such creation, unless otherwise specified: (A) Books, records and accounts that, in reasonable detail, accurately and fairly reflect the cost of goods or services sold, revenues generated, and the disbursement of such revenues; (B) Records accurately reflecting: the name, address, and telephone number of each person that any of the above-referenced businesses employs in any capacity, including as an independent contractor; that person's job title or position; the date upon which the person commenced work; and the date and reason for the person's termination, if applicable. The businesses subject to this Paragraph shall retain such records for any terminated employee for a period of two years following the date of termination; (C) Records containing the names, addresses, phone numbers, dollar amounts paid, quantity of items or services purchased, and description of items or services purchased, or amounts donated, for all consumers to whom any of the above-referenced businesses has sold, invoiced or shipped any goods or services, or from whom any of the above-referenced businesses accepted money or other items of value; (D) Records that reflect, for every consumer complaint or refund request, whether received directly or indirectly or through any third party:
(E) Copies of all sales scripts, training packets, advertisements, or other marketing materials utilized. MONITORING VI. IT IS FURTHER ORDERED that, in order that compliance with the provisions of this Order may be monitored: (A) Defendant Denis and defendant Nieves shall notify the Commission in writing, within ten days of the date of entry of this Order, of their current residence addresses, mailing addresses, business and home telephone numbers, and employment status, including the names, telephone numbers, and business addresses of any current employers; (B) For a period of five years from the date of entry of this Order, defendant Denis and defendant Nieves shall notify the Commission in writing within thirty days of any changes in their residences or mailing addresses, telephone numbers, or employment status; (C) For the purposes of this Order, all written notifications to the Commission shall be mailed to:
(D) For the purposes of this Paragraph, "employment" includes the performance of services as an employee, consultant, or independent contractor; and "employers" include any individual or entity for whom defendant Denis or defendant Nieves performs services as an employee, consultant, or independent contractor. ACCESS VII. IT IS FURTHER ORDERED that, for a period of five years from the date of entry of this Order, for the purpose of further determining compliance with this Order, defendants and their officers, agents, servants, employees, and attorneys, and all other persons or entities directly or indirectly under their control or under common control with them, and all other persons or other entities in active concert or participation with them who receive actual notice of this Order by personal service or otherwise, shall permit representatives of the Commission, within seven business days of receipt of written notice from the Commission: (A) Access during normal business hours to any office, or facility storing documents of any business where defendant Denis or defendant Nieves is the majority owner of the business or otherwise directly or indirectly manages or controls the business. In providing such access, defendants shall permit representatives of the Commission to inspect and copy all documents relevant to any matter contained in this Order; and (B) To interview or depose the officers, directors, and employees, including all personnel involved in responding to consumer complaints or inquiries, and all sales personnel, whether designated as employees, consultants, independent contractors or otherwise, of any business to which Subsection (A) of this Paragraph applies, concerning matters relating to compliance with the terms of this Order. The person interviewed or deposed may have counsel present. Provided that the Commission may otherwise monitor defendants' compliance with this Order by all lawful means available, including the use of compulsory process seeking production of documents and the use of investigators posing as consumers or suppliers. MONETARY RELIEF VIII. IT IS FURTHER ORDERED that: (A) Judgment is hereby entered against defendant Denis and defendant Nieves, jointly and severally, in the amount of One Hundred Thousand Dollars ($100,000) for satisfaction of the receiver's court-approved fees, and thereafter for equitable monetary relief, including but not limited to consumer redress, and for paying any attendant expenses of administering any redress fund. Payments toward the $100,000 judgment shall be made to the court-appointed, permanent receiver, David Mandel, until his court-approved fees in connection with this case have been paid. After the receiver's court-approved fees have been paid in full, payments will thereafter be made to the Commission. The $100,000 judgment shall be satisfied as follows:
Time is of the essence for the payments specified above. In the event that defendant Denis and defendant Nieves do not fulfill, or only partially fulfill, the conditions set forth above, they shall be immediately liable for the entire judgment amount of One Hundred Thousand Dollars ($100,000), less any payments already made. Provided, however, that if defendants pay $50,000 of the $70,000 in annual installments provided for in Paragraphs VIII(A) 2-8 within five years of the entry of this judgment, the $70,000 in annual installments shall be deemed satisfied in full, and the entire judgment shall be deemed satisfied in full. Payments of the annual installments shall count towards this total. (C) The consumer redress fund shall be distributed to consumers within the sole discretion of the Commission. The Commission, in its sole discretion, may use a designated agent to administer consumer redress. If the Commission, in its sole discretion, determines that redress is wholly or partially impractical, any funds not so used shall be deposited in the United States Treasury. (D) Defendant Denis and defendant Nieves acknowledge and agree that this judgment for equitable monetary relief, as with all other relief provided in this Order, is solely remedial in nature and is not a fine, penalty, punitive assessment, or forfeiture. (E) Except as set forth in Paragraph VIII(G) below, each party to this Order hereby agrees to bear its own costs and attorney fees incurred in connection with this action; provided, however, in the event the Commission determines that defendants have violated any term or provision of this Order, defendants shall pay the costs and attorney fees incurred by the Commission or its agents in connection with proceedings to enforce this Order. (F) Notwithstanding any other provision of this Order, defendant Denis and defendant Nieves agree that if they fail to meet the payment obligations set forth in Paragraph VIII, they shall pay the costs and attorneys fees incurred by the Commission and its agents in any attempts to collect amounts due pursuant to this Order. (G) Defendants further agree that the facts as alleged in the complaint shall be taken as true in any subsequent litigation filed by the Commission to enforce its rights pursuant to this Order, including but not limited to a non-dischargeability complaint in any subsequent bankruptcy proceeding. LIFTING OF ASSET FREEZE AND RECEIVERSHIP IX. IT IS FURTHER ORDERED that, upon payment of the initial payment of $30,000 to David Mandel, as provided for in Paragraph VIII(A)1, or the entry of this Order, whichever is later, the freeze of defendants' assets and appointment of Receiver, as ordered in the Preliminary Injunction entered by the Court on November 7, 1996 is lifted; provided, however, that the Receiver may wind up the affairs of the corporate defendants for as long as necessary beyond the date the receivership is lifted. RIGHT TO REOPEN X. IT IS FURTHER ORDERED that the Commission’s agreement to this Order is expressly premised upon the truthfulness, accuracy, and completeness of defendants’ representations of their financial condition as sworn to in defendant Nieves's depositions dated November 4, 1996, November 6, 1996, and December 12, 1996, and as represented in the sworn financial statements filed with the Court on October 30, 1996, and January 21, 1997, by defendants, which contain material information relied upon by the Commission in negotiating and agreeing to the terms of this Order. If, upon motion by the Commission, this Court finds that through the above-referenced depositions and financial statements, defendants were untruthful, inaccurate or incomplete, or failed to disclose any material asset, or materially misrepresented the value of any asset, or made any other material misrepresentation or omission, the Commission may request that this Order be reopened for the sole purpose of allowing the Commission to modify the monetary liability of the defendants; provided, however, that in all other respects this Order shall remain in full force and effect unless otherwise ordered by the Court and that defendants have no right to contest any of the allegations in the Commission’s complaint in this matter in any proceedings brought pursuant to this subparagraph; and, provided further, that proceedings instituted under this provision would be in addition to and not in lieu of any other civil or criminal remedies as may be provided by law, including any other proceedings the Commission may initiate to enforce this Order. RETENTION OF JURISDICTION XI. IT IS FURTHER ORDERED that this Court shall retain jurisdiction of this matter for purposes of construction, modification and enforcement of this Order. XII. There being no just reason for delay, the Clerk is directed to enter this Final Judgment and Order. STIPULATED AND AGREED TO BY:
Receiver for DECO CONSULTING
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