| LINDA M. STOCK JOHN D. JACOBS Federal Trade Commission Attorneys for Plaintiff UNITED STATES DISTRICT COURT FEDERAL TRADE COMMISSION, v. EQUIFIN INTERNATIONAL, INC., a corporation, FINANCIAL FRONTIERS, INC., a
corporation, and F. JERALD HILDRETH, an individual, Case No. CV-97-4526-DT(CWx) CONSENT JUDGMENT AND ORDER FOR PERMANENT INJUNCTION AND MONETARY RELIEF WITH RESPECT TO DEFENDANT F. JERALD HILDRETH Plaintiff Federal Trade Commission ("Commission") has filed herein a Complaint for a permanent injunction and other equitable relief pursuant to Sections 13(b) and 19 of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. §§ 53(b) and 57b, and the Telemarketing and Consumer Fraud and Abuse Prevention Act ("Telemarketing Act"), 15 U.S.C. § 6101, et seq., charging defendants Equifin International, Inc., Financial Frontiers, Inc., and F. Jerald Hildreth ("Hildreth") with violations of Section 5(a) of the FTC Act, as amended, 15 U.S.C. § 45(a), and the Commission’s Telemarketing Sales Rule, 16 C.F.R. Part 310. Plaintiff Commission and defendant Hildreth, having been represented by the attorneys whose names appear hereafter, have agreed to entry of this Consent Judgment and Order for Permanent Injunction and Monetary Relief (“Consent Judgment” or "Order") by the Court to resolve all matters in dispute in this action. Defendant Hildreth has waived defenses set forth in Fed. R. Civ. P. 12(h)(1). Defendant Hildreth has consented to entry of this Order without trial or adjudication of any issue of law or fact herein and has agreed that entry of this Order by the Court and its filing by the Clerk will constitute notice to him of the terms and conditions of the Order. Plaintiff Commission and defendant Hildreth having requested the Court to enter this Order, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED as follows: FINDINGS
DEFINITIONS A. "Investment opportunity" means anything, tangible or intangible, that is offered, offered for sale, sold, or traded based wholly or in part on representations, either express or implied, about past, present, or future income, profit, or appreciation. B. "Genuine stamp" means an officially issued stamp decreed to be legal for postage by the issuing country. ORDER PROHIBITED BUSINESS ACTIVITIES I. IT IS THEREFORE ORDERED that defendant Hildreth and his representatives, agents, servants and employees, and all other persons or other entities in active concert or participation with him, who receive actual notice of this Order by personal service or otherwise, directly or through any corporation, subsidiary, division, or other device, in connection with the advertising, promotion, offering for sale, sale, or distribution of any product or service in or affecting commerce, as commerce is defined in the FTC Act, are hereby restrained and enjoined from: A. Falsely representing, expressly or by implication, that any stamps or related items are excellent investments likely to provide customers substantial rates of return; B. Falsely representing, expressly or by implication, that any stamps or related items are safe investments that customers can readily liquidate at or near the prices they paid; C. Representing, expressly or by implication, that any stamp is an Error by virtue of a misperforation, a color misregistration, underinking or overinking, or a miscut; D. Representing, expressly or by implication, that any stamp is an Error unless the particular stamp has a separate listing in the Scott Standard Postage Stamp Catalog apart from the listing for the normal version of the stamp; E. Falsely representing, expressly or by implication, that any item is a genuine stamp; F. Falsely representing, expressly or by implication, the risk of investing in any product or service, including stamps and related items; G. Falsely representing, expressly or by implication, the amount of profit made in selling a customer any item, including stamps or related items; H. Falsely representing, expressly or by implication, the rarity or number in existence of any item, including stamps or related items; I. Violating any provision of the Telemarketing Sales Rule, 16 C.F.R. Part 310 (a copy of which is attached hereto as Attachment 1), including but not limited to misrepresenting, expressly or by implication, any material aspect of an investment opportunity, including but not limited to risk, liquidity, earnings potential, or profitability; or J. Falsely representing, expressly or by implication, any other fact material to a consumer's decision to purchase any item, including but not limited to stamps or related items for investment purposes. CUSTOMER LISTS II. IT IS FURTHER ORDERED that Defendant Hildreth and his representatives, agents, servants and employees, and all other persons or other entities in active concert or participation with him, who receive actual notice of this Order by personal service or otherwise, directly or through any corporation, subsidiary, division, or other device, are hereby restrained and enjoined from using or providing or arranging for the provision to any person (other than a federal state or local law enforcement agency or pursuant to a court order) of any mailing or telephone list of customers of either corporate defendant or of any of their affiliates or subsidiaries, or any other list containing identifying information relating to any customer of either corporate defendant or of any of their affiliates or subsidiaries, including but not limited to a customer’s name, address, telephone number, bank account number or credit card number or names of a customer’s employees. For purposes of this Paragraph, the term "customer" shall include any person or entity who was contacted by any corporate defendant in this lawsuit, or by any of their affiliates or subsidiaries, or to whom any item was shipped by any corporate defendant in this lawsuit, or by any of their affiliates or subsidiaries, whether prior to or after the effective date of this Consent Judgment. ASSISTING OTHERS III. IT IS FURTHER ORDERED that Defendant Hildreth, directly or through any corporation, subsidiary, division, or other device or person, is hereby restrained and enjoined from transferring or in any other way providing to any person (other than a federal state or local law enforcement agency or pursuant to a court order), directly or indirectly, any books, records, tapes, disks, accounting data, manuals, electronically stored data, banking records, invoices, telephone records, ledgers, payroll records, or other documents of any kind, including information stored in computer-maintained form, in his possession, custody or control, or any trade secrets or knowledge, whether recorded or otherwise, that are in any way related to defendant Equifin International, Inc., defendant Financial Frontiers, Inc., Greenfield Collectibles, or Greenfield Collectables, Inc. REDRESS IV. IT IS FURTHER ORDERED that A. Judgment in the amount of Three Million Seven Hundred Sixty-One Thousand Eight Hundred and Seventy-Two Dollars ($3,761,872 ) is hereby entered in favor of the Commission against defendant Hildreth, for equitable monetary relief, including but not limited to, consumer redress and/or disgorgement and for paying any attendant expenses of administering any redress fund. 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. The Commission in its sole discretion may use a designated agent to administer consumer redress. Defendant Hildreth acknowledges that this judgment for equitable monetary relief is solely remedial in nature and is not a fine, penalty, punitive assessment, or forfeiture. Defendant Hildreth forever disclaims all right, title, and interest in all sums paid pursuant to this Judgment, and no funds paid pursuant to this Judgment shall be returned to defendant Hildreth. B. The Commission shall file a satisfaction of judgment in the event defendant Hildreth, within five business days following notice of entry of this Order, transfers to the Commission Fifty Thousand Dollars ($50,000) by wire transfer, to an account designated by the Commission, or by certified check. C. Notwithstanding any other provision of this Consent Judgment and Order, defendant Hildreth agrees that, if he fails to meet the conditions for satisfaction set forth in Part B of this Paragraph, he shall pay the costs and attorneys fees incurred by the Commission and its agents in any attempts to collect amounts due pursuant to this Consent Judgment and Order. Defendant Hildreth further waives any right to contest any of the allegations in the Complaint filed in this matter in any subsequent litigation filed by the Commission to enforce its rights pursuant to this Consent Judgment and Order, including but not limited to a nondischargeability complaint in any subsequent bankruptcy proceeding. D. Within five (5) days after receiving notice that this Consent Judgment has been entered, defendant Hildreth shall submit to the Commission a truthful sworn statement, in the form shown on Attachment 2, that shall reaffirm and attest to the truth, accuracy, and completeness of the individual and business financial statements for Fred Jerald Hildreth, Equifin International, Inc., Financial Frontiers, Inc., and "Greenfield Collectable, Inc.," that Hildreth signed on July 18, 1997 and has previously submitted to the Commission. The Commission's agreement to this Consent Judgment is expressly premised upon the truthfulness, accuracy, and completeness of these financial statements. These financial statements contain material information upon which the Commission relied in negotiating and agreeing to the amount and terms of the monetary relief stated in this Consent Judgment. If, upon motion by the Commission, the Court finds that defendant Hildreth failed to submit to the Commission the sworn statements required by this Section, failed to disclose any material asset or materially misrepresented the value of any asset in the financial statements described above, or made any other material misrepresentation or omission in the financial statements described above, defendant Hildreth shall be immediately liable for the entire judgment amount of $3,761,872, less any payments already made. For the purposes of this Paragraph, defendant Hildreth waives any right to contest any of the allegations in the Complaint filed in this matter. E. Defendant Hildreth agrees to cooperate fully with the Commission and its agents in all attempts to collect amounts due pursuant to this Consent Judgment and Order. Should defendant Hildreth fail to satisfy the judgment pursuant to part B of this Paragraph, he agrees to provide the Commission with his federal and state tax returns for the preceding two years, and with full financial disclosure, in the form attached as Attachment 3 hereto, waiving all objections, within ten (10) business days of receiving a request from the Commission to do so. Defendant Hildreth further authorizes the Commission to verify all information provided on the financial disclosure form with all appropriate third parties, including but not limited to financial institutions. ASSET FREEZE V. IT IS FURTHER ORDERED that A. Defendant Hildreth may, for the sole purpose of satisfying the Judgment pursuant to part B of Paragraph IV of this Order, direct and authorize the transfers of funds held in accounts with Union Bank to the Federal Trade Commission or its duly authorized agent (as directed by Commission counsel). To allow defendant Hildreth to satisfy this Judgment, Union Bank may transfer funds in defendant Hildreth’s accounts to the Federal Trade Commission or its duly authorized agent. Funds in these accounts shall not be used for any other purpose. B. Except as provided in Part A of this Paragraph, the asset freeze imposed on defendant Hildreth in Paragraph II.A. of this Court’s July 3, 1997 Preliminary Injunction shall be lifted upon entry of this Order. C. Except as provided in Part A of this Paragraph, the requirements imposed by Paragraph XVIII of the Preliminary Injunction on financial institutions and other entities holding assets of defendant Hildreth shall be lifted upon entry of this Order. D. Defendant Hildreth forever disclaims all rights, interest and title in any assets of defendant Equifin International, Inc., defendant Financial Frontiers, Inc., and Greenfield Collectables, Inc. BOND VI. IT IS FURTHER ORDERED that defendant Hildreth is hereby restrained and enjoined from engaging or participating in the advertising, promotion, marketing, offering for sale, sale, or distribution of stamps, related philatelic items, or investment opportunities, whether directly, in concert with others, or through any business entity or other device, unless at least two weeks prior to such activities the defendant obtains a performance bond in the principal sum of THREE HUNDRED THOUSAND DOLLARS ($300,000) for such business. A. This bond shall be conditioned upon defendant Hildreth’s compliance with Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45, the Commission’s Telemarketing Sales Rule, 16 C.F.R. Part 310, and with the provisions of this Order. The bond shall be deemed continuous and remain in full force and effect until defendant Hildreth ceases to engage or participate in the advertising, promotion, marketing, offering for sale, sale, or distribution of stamps, related philatelic items, or investment opportunities, and for at least three years thereafter. The bond shall cite this Consent Judgment and Order for Permanent Injunction as the subject matter of the bond, and shall provide surety thereunder against financial loss resulting from any violation by defendant Hildreth of Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45, the Telemarketing Sales Rule, the provisions of this Order, or any other law, which occurs during the ten-year period subsequent to entry of this Consent Judgment; B. The performance bond required pursuant to this Section shall be an insurance agreement providing surety for financial loss issued by a surety company that is admitted to do business in each of the states in which the defendant is doing business and that holds a Federal Certificate of Authority As Acceptable Surety On Federal Bond and Reinsuring. Each such performance bond shall be in favor of both (1) the Federal Trade Commission for the benefit of any consumer injured as a result of any violation of Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45, the Telemarketing Sales Rule, the provisions of this Order, or of any other law, made while engaged in the advertising, promotion, marketing, offering for sale, sale, or distribution of stamps, related philatelic items, or investment opportunities, and (2) any consumer so injured; C. The bond required pursuant to this Section is in addition to, and not in lieu of, any other bond required by federal, state or local law; and D. Defendant Hildreth shall provide a copy of the bond required by this Section to the Regional Director of the Los Angeles Regional Office of the Federal Trade Commission at least ten (10) days before commencing the activity invoking the bond requirement of this Section. E. Defendant Hildreth shall not disclose the existence of the performance bond to any consumer, or other purchaser or prospective purchaser of any product or service, without also disclosing clearly and prominently, at the same time, "AS REQUIRED BY ORDER OF THE U.S. DISTRICT COURT IN SETTLEMENT OF CHARGES THAT DEFENDANTS ENGAGED IN A PATTERN AND PRACTICE OF MAKING FALSE AND MISLEADING REPRESENTATIONS IN CONNECTION WITH TELEMARKETING." F. The Commission may execute against the performance bond if it demonstrates to this Court by a preponderance of the evidence that, after the effective date of this Order, defendant Hildreth has, individually or through any other person or entity, (1) made a misleading or false representation, directly or by implication, in violation of Section 5 of the FTC Act, 15 U.S.C. § 45, (2) violated the Telemarketing Sales Rule, (3) violated the terms of this Order, or (4) failed to render any required performance that results in financial loss to any consumer, in connection with the advertising, promoting, marketing, offering for sale, sale or distribution of any stamp, related philatelic item, or investment opportunity; and G. Proceedings instituted under this paragraph are 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. RECORDKEEPING VII. IT IS FURTHER ORDERED that, for a period of five (5) years from the date of entry of this Order, defendant Hildreth, in connection with any and every business entity of which he is a majority owner, or which he otherwise manages or controls, is hereby restrained and enjoined from failing to create, and to retain for a period of five (5) years following the date of such creation, unless otherwise specified: A. Books, records and accounts which, in reasonable detail, accurately and fairly reflect the cost of goods or services sold, and the income, disbursements, transactions and use of funds; B. Records accurately reflecting: the name, address, and phone number of each person that such business entity 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 defendant 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, and dollar amounts paid, for all consumers to whom such business entity has sold, invoiced or shipped any goods or services, or from whom any of the business entities accepted money or other items of value; D. Records that reflect, for every written 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. Defendant shall retain such marketing materials for a period of two (2) years after their last use; and F. All contracts, agreements or written correspondence with every supplier of product or information to be resold to consumers. MONITORING OF COMPLIANCE VIII. IT IS FURTHER ORDERED that defendant Hildreth shall, within five (5) days after receipt of a written request, A. Permit representatives of the Commission access during normal business hours to any office or facility in which documents or records required by this Order to be retained are stored or held, to inspect and copy any such documents in that defendant’s possession or control; and B. Permit representatives of the Commission to interview or depose the officers, directors and employees of any entity owned or controlled in whole or in part by defendant Hildreth for the purpose of determining compliance with the terms of this Order, subject to the reasonable convenience of the defendant and the person to be interviewed, and without restraint or interference from the defendant, at a location reasonably convenient to the person to be interviewed or deposed, the defendant, and the Commission. The person being interviewed or deposed may have counsel present. Provided, however, that the Commission may otherwise monitor the defendant’s compliance with this Order at any time by taking depositions, issuing subpoenas or other requests for the production of documents, or, without any requirement of identification or providing prior notification to the defendant or his counsel, the use of investigators posing as consumers or prospective customers of any business that defendant Hildreth, in whole or in part, owns, manages or controls, as well as by any other lawful means available. NOTIFICATION TO COMMISSION IX. IT IS FURTHER ORDERED that A. Defendant Hildreth shall inform the Commission in writing, within ten (10) days of the date of entry of this Consent Judgment, of his current residence address and employment status, including the names, business addresses, and telephone numbers of any current employers, and, during the five (5) years subsequent to the date of entry of this Final Judgment, shall inform the Commission in writing within thirty (30) days of any changes in his residence address; B. Defendant Hildreth, during the five (5) years subsequent to the date of entry of this Consent Judgment, shall notify the Regional Director of the Los Angeles Regional Office of the Federal Trade Commission in writing within thirty (30) days of each of the following events:
For the purposes of this Section, "employment" includes the performance of services as an employee, consultant, or independent contractor; and "employers" include any individual or entity for whom the defendant performs services as an employee, consultant or independent contractor. COMPLIANCE REPORT X. IT IS FURTHER ORDERED that defendant Hildreth shall, within sixty (60) days following the date of entry of this Consent Judgment and Order, file with the Director of the Los Angeles Regional Office of the Commission a report, in writing, setting forth in detail the manner and form in which he has complied with this Order. SERVICE OF ORDER XI. IT IS FURTHER ORDERED that, for a period of five (5) years from the date of entry of this Order, defendant Hildreth shall: A. Promptly provide a copy of this Order to, and obtain a signed and dated acknowledgment of receipt of the same from, every current and future officer, director, managing agent, employee or independent contractor in any company or other business entity directly or indirectly owned, operated or controlled by defendant Hildreth, and every current and future officer, director, and managing agent of any company or other business entity at which such defendant is employed and which advertises, promotes, markets, offers for sale, sells, or distributes stamps, related philatelic items, or investment opportunities; and B. Maintain, and upon reasonable notice make available to representatives of the Commission, the original and dated acknowledgments of the receipts of copies of this Order required by Paragraph A above. INDEPENDENCE OF OBLIGATIONS XII. IT IS FURTHER ORDERED that the expiration of any requirements imposed by this Order shall not affect any other obligation arising under this Order. COSTS AND ATTORNEYS FEES XIII. IT IS FURTHER ORDERED that, except as set forth in Paragraph IV above, each party to this Consent Judgment and Order bear its own costs and attorneys fees incurred in connection with this action; provided, however, in the event plaintiff or the United States initiates proceedings to enforce the provisions of this Consent Judgment and Order and provided further the Court determines that defendant Hildreth has violated any term or provision of this Consent Judgment and Order, the defendant shall pay the costs and attorneys fees incurred by plaintiff or the United States in connection with proceedings to enforce this Consent Judgment and Order. CONTINUING JURISDICTION XIV. IT IS FURTHER ORDERED that this Court shall retain jurisdiction of this matter for all purposes. WAIVER OF CLAIMS XV. IT IS FURTHER ORDERED that Defendant Hildreth has waived all claims under the Equal Access to Justice Act, 28 U.S.C. § 2412, amended by PL 104-121, 110 Stat. 847, 863-64 (1996). Defendant Hildreth further waives and releases any claims he may have against the Commission, the permanent Receiver, or their employees, agents, or representatives. The permanent Receiver agrees to fulfill any obligations he has under applicable law regarding the filing of tax returns for the recivership estate. ENTRY BY CLERK XVI. There being no just reason for delay, the Clerk of the Court is hereby directed to enter this Order. The parties hereby stipulate and agree to entry of the foregoing Order, which shall constitute a final judgment in this action as to Defendant Hildreth. SIGNED AND STIPULATED BY: Dated:___________________, 1997_____________________________ Linda M. Stock ___________________, 1997 _____________________________ John D. Jacobs ___________________, 1997 _____________________________ F. Jerald Hildreth APPROVED AS TO FORM AND CONTENT: ____________________, 1997______________________________ Steven A. Silverstein The permanent Receiver hereby agrees to be bound by the terms of Paragraph XV of this agreement. Dated:___________________, 1997_____________________________ Louis E. Michelson APPROVED AS TO FORM AND CONTENT: ___________________, 1997 _____________________________ Sheri Bluebond IT IS SO ORDERED. Dated this _______day of __________________, 1997. ____________________________ Attachment 2 UNITED STATES DISTRICT COURT FEDERAL TRADE COMMISSION, Plaintiff, v. EQUIFIN INTERNATIONAL, INC., a corporation, FINANCIAL FRONTIERS, INC., a
corporation, and F. JERALD HILDRETH, an individual, Case No. CV-97-4526-DT(CWx) I, F. Jerald Hildreth, hereby state that the information contained in the financial statement I signed on July 18, 1997 and provided to the Federal Trade Commission shortly thereafter was true, accurate, and complete at such time. I hereby declare under penalty of perjury that the foregoing is true and correct. Dated: _______________________________________________________ |