| ELENA PAOLI JOEL N. BREWER G. BRENT MICKUM PABLO ZYLBERGLAIT Federal Trade Commission 601 Pennsylvania Ave., N.W. Washington, D.C. 20580 (202) 326-2974 JENNIFER LARABEE Attorneys for Plaintiff UNITED STATES DISTRICT COURT FEDERAL TRADE COMMISSION, Plaintiff, v. AKOA, INC., et al., Defendants. Civ. No. 97-7084 LGB (Mcx) STIPULATION OF JEFFREY L. RAYDEN, AKOA, INC., EASYWAY INTERNATIONAL INC., AND RAYCO, INC., TO FINAL JUDGMENT FOR PERMANENT INJUNCTION DATE: N/A Plaintiff, the Federal Trade Commission ("FTC") filed its Amended Complaint against AKOA, Inc., Easyway International, Inc., Rayco, Inc., Jeffrey L. Rayden, Larry D. Wayne, and Edward E. Rayden, all also d/b/a National PC Systems, pursuant to Sections 13(b) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. §§ 53(b), charging Defendants with violations of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a). On September 25, 1997, the Court granted the Plaintiff's ex parte Application for a Temporary Restraining Order with Asset Freeze, Expedited Discovery, Immediate Access, and Appointment of a Temporary Receiver, and ordered Defendants to Show Cause why a preliminary injunction should not issue against them. Plaintiff and Defendants Jeffrey L. Rayden, AKOA, Inc., Easyway International, Inc., and Rayco, Inc., subsequently stipulated to a Preliminary Injunction on November 5, 1997, which was entered December 8, 1997. NOW, Plaintiff FTC and Defendants Jeffrey L. Rayden, AKOA, Inc., Easyway International, Inc., and Rayco, Inc., by and through their counsel, having stipulated to this Final Judgment for Permanent Injunction ("Judgment") to resolve all matters of dispute between them in this action, without Defendants Jeffrey L. Rayden, AKOA, Inc., Easyway International, Inc., and Rayco, Inc., admitting any of the allegations made in the Amended Complaint or admitting that they have violated the FTC Act or any other applicable law, IT IS HEREBY ORDERED, ADJUDGED AND DECREED AS FOLLOWS: DEFINITIONS
FINDINGS
ORDER I. BAN FROM SALE OF SERVICE CONTRACTS IT IS THEREFORE ORDERED that Defendants Jeffrey L. Rayden, AKOA, Inc., Easyway International, Inc., and Rayco, Inc., shall be and hereby are permanently restrained and enjoined from engaging or participating in the advertising, promoting, marketing, offering for sale, sale or distribution to consumers of any service contract by mail or telephone, directly or through any business entity, investment or other device for which service contracts constitute more than ten percent (10%) of the revenues of the business entity, investment, or other device, in any capacity whatsoever, including but not limited to as a business owner, trustee, officer, director, consultant, advisor, or employee. II. PROHIBITED ACTIVITIES IT IS FURTHER ORDERED that, in connection with the advertising, offering for sale, promoting, marketing, sale or distribution to consumers of goods or services by mail or telephone, Defendants are hereby permanently restrained and enjoined from: A. Requesting, demanding or accepting payment by any consumer for any goods or services without the consumer's prior expressed request or consent for such goods or services. B. Sending to any consumer:
C. In telephoning any consumer without the consumer's prior consent, failing to disclose to the consumer, promptly and in a clear and conspicuous manner, the following information:
D. Making any express or implied representation of material fact that is false or misleading, including, but not limited to, misrepresenting, directly or by implication, any of the following:
E. Using or transferring to any person or business entity, in any manner, any books, records, tapes, discs, accounting data, checks (fronts and backs), correspondence, forms, advertisements, brochures, manuals, electronically stored data, banking records, customer files, customer lists, invoices, telephone records, ledgers, payroll records, or other documents of any kind, including information stored in computer-maintained form in their possession, custody or control, or any trade secrets or know-how, whether recorded or otherwise, or assisting, consulting with, or in any way providing any of the foregoing for purposes of engaging or enabling others to engage in any of the above-enumerated prohibited activities. III. PROHIBITED BUSINESS ACTIVITIES IT IS FURTHER ORDERED that, for any business entity which Defendants Jeffrey L. Rayden, AKOA, Inc., Easyway International, Inc., or Rayco, Inc., own in whole or in part, or control or have authority to control, in connection with the advertising, offering for sale, promoting, marketing, sale or distribution to consumers of goods or services by mail or telephone, Defendants are hereby permanently restrained and enjoined from: A. Refusing any refund request from any consumer who pays for any goods or services as a result of any false or misleading representation by Defendants. B. Refusing upon request to make a full refund to any consumer who pays for goods or services and who is not able to obtain them within the time represented or, if no time is represented, within thirty (30) days of the Defendants' receipt of the consumer's payment for the goods or services. C. Failing to make any refund required by this Judgment within seven (7) business days from the date the request for refund is received by Defendants, whether such request was made orally, in writing, or by telephone. D. Using any fictitious, false, or assumed title or name, other than their own proper names or a publicly registered "d/b/a," or otherwise misrepresenting their true identities in the course of business dealings or in publicly filed documents. E. Offering for sale, selling, leasing, or in any manner disclosing to any person or business entity (other than to a federal, state or local law enforcement agency) the name, address, telephone number, bank account number, credit card number, Social Security number, or any other identifying information, of or relating to any consumer who paid money to National PC Systems (or any derivation or abbreviation of the name National PC Systems), or names of a consumer's employees, without the consumer's prior expressed consent. IV. MONETARY JUDGMENT IT IS FURTHER ORDERED that: A. A judgment in the amount of forty thousand dollars ($40,000.00) is hereby entered against Defendants AKOA, Inc., Easyway International, Inc., and Rayco, Inc., their successors and assigns, and Jeffrey L. Rayden. Defendants shall pay this judgment in two installments, as follows:
B. In the event of default in any payment required by paragraph A of this Part, interest as computed under 28 U.S.C. § 1961 shall accrue on the unpaid amount from the date of default until the payment is fully paid. C. Defendants AKOA, Inc., Easyway International, Inc., and Rayco, Inc., their successors and assigns, and Jeffrey L. Rayden, hereby assign to the Receiver all right, title and interest in all receivership accounts identified by the Receiver in the Receiver's Interim Report and Recommendation, filed with the Court November 4, 1997. D. Defendants AKOA, Inc., Easyway International, Inc., and Rayco, Inc., their successors and assigns, and Jeffrey L. Rayden, shall be solely liable, according to their respective legal obligations, if any, for:
E. The Receiver shall apply all amounts paid or assigned under paragraphs A and C of this Part to any unpaid fees of the Receiver. The Receiver will pay any unused balance to the FTC for redress to consumers or disgorgement to the United States Treasury, as provided hereafter. F. Defendants AKOA, Inc., Easyway International, Inc., and Rayco, Inc., their successors and assigns, and Jeffrey L. Rayden, are hereby enjoined from depositing or cashing any checks, money orders, or payments to National PC Systems, Checkwriter Systems, or any variation or abbreviation of these names, for any service contract, or otherwise accepting payment by any consumer to National PC Systems, Checkwriter Systems, or any variation or abbreviation of these names, for any service contract, received after September 25, 1997. The Receiver shall turn over to the Plaintiff all such checks, money orders and other payments for service contracts in his possession, for Plaintiff to return to the payors; and, Defendants AKOA, Inc., Easyway International, Inc., and Rayco, Inc., their successors and assigns, and Jeffrey L. Rayden, shall return to the payors any such checks, money orders and other payments for service contracts received by them any time during the period beginning at the time of the entry of this Judgment and ending six months after the entry of this Judgment. G. Except as provided in Parts VI and VII of this Judgment, payment by Defendants Jeffrey L. Rayden, AKOA, Inc., Easyway International, Inc., and Rayco, Inc., of $40,000.00 and any interest on this amount, assignment of the receivership accounts, and payment of the moving and storage costs incurred by the Receiver in carrying out the Court's December 15, 1997, minute order, shall satisfy all claims for monetary relief against them in this action by the FTC or by the Receiver. V. CLAIMS PROCEDURE IT IS FURTHER ORDERED that after payment of the monetary judgment by Defendants Jeffrey L. Rayden, AKOA, Inc., Easyway International, Inc., and Rayco, Inc., and resolution of this matter as to all the other named Defendants, the FTC shall, if practical, develop a claims procedure that will enable consumers who paid the Defendants in this matter for computer maintenance service contracts to make claims against those funds, and provide for a means of distributing the funds recovered to the consumers who have approved claims. Defendants Jeffrey L. Rayden, AKOA, Inc., Easyway International, Inc., and Rayco, Inc., forever disclaim all right, title, and interest in all sums paid or assigned to the Receiver or paid by the Receiver to the FTC. None of these funds shall be returned to any of the Defendants herein, their successors, heirs, or assigns. If the FTC determines, in its sole discretion, that redress to consumers is wholly or partially impractical, or if any portion of the funds used for redress remains unclaimed by consumers after a period for making claims ends, the remainder shall be deposited in the United States Treasury. No portion of any payments under this Judgment shall be deemed a payment of any fine, penalty, or punitive assessment. VI. RIGHT TO REOPEN IT IS FURTHER ORDERED that the FTC's agreement to this Judgment is expressly premised upon the truthfulness, accuracy, and completeness of the Financial Statement of Defendant Jeffrey L. Rayden, executed by him on November 25, 1997, and his statement, which by his signature hereto he hereby acknowledges and affirms under penalty of perjury, viz., that neither he nor the corporate Defendants possess, hold, control or have access to any assets not disclosed in the aforesaid Financial Statement or identified in the Receiver's Interim Report and Recommendation, filed with the Court November 4, 1997. These two statements contain material information upon which the FTC has relied in negotiating and agreeing to the terms of this Judgment. If, upon motion by the FTC, this Court finds that any part of these two statements of Defendant Jeffrey L. Rayden, was in any material respect untruthful, inaccurate or incomplete, or materially misrepresented the financial condition of any Defendant, the source of any Defendants' income or any asset, the value of or the purpose for which any asset is held by any Defendant, or made any other material misrepresentations or omissions of assets, the FTC may request that the Judgment be reopened for the purpose of modifying the terms of the Judgment to provide a payment of up to seven million and five hundred thousand dollars ($7,500,000.00) by Defendants Jeffrey L. Rayden, AKOA, Inc., Easyway International, Inc., and Rayco, Inc., jointly and severally, in redress to consumers or disgorgement to the United States Treasury; provided, however, that in all other respects this Judgment shall remain in full force and effect unless otherwise ordered by this Court; and, provided further, that proceedings instituted under this Part are in addition to, and not in lieu of, any other civil or criminal remedies that may be provided by law, including any other proceedings that the FTC may initiate to enforce this Judgment. Solely for purposes of this Part, Defendants Jeffrey L. Rayden, AKOA, Inc., Easyway International, Inc., and Rayco, Inc., waive any right to contest liability for the allegations in the Amended Complaint. The FTC shall remain obligated under this Part to prove, by a preponderance of the evidence, that any part of either of Defendant Jeffrey L. Rayden's two statements was inaccurate, that the inaccuracy was material, and the amount of redress owing to consumers. VII. COSTS AND ATTORNEY FEES IT IS FURTHER ORDERED as follows: A. Except as set forth in Part IV and in this Part, each party to this Judgment shall bear its own costs and attorney fees incurred in connection with this action; provided, however, in the event Plaintiff initiates proceedings to enforce the provisions of this Judgment, and, provided further, the Court determines that Defendants have violated any term or provision of this Judgment, Defendants Jeffrey L. Rayden, AKOA, Inc., Easyway International, Inc., and Rayco, Inc., shall pay the costs and attorney fees incurred by Plaintiff in connection with proceedings to enforce this Judgment against them; and, B. Notwithstanding any other provision of this Judgment, Defendants Jeffrey L. Rayden, AKOA, Inc., Easyway International, Inc., and Rayco, Inc., agree that, if they fail to meet the obligations set forth in Part IV or VI, they shall pay the costs and attorneys fees incurred by the FTC and its agents, or the Receiver and his agents, in any attempts to collect amounts due any of them or enforce the rights of either of them under this Judgment. Defendants Jeffrey L. Rayden, AKOA, Inc., Easyway International, Inc., and Rayco, Inc., further agree that the facts as alleged in the Amended Complaint shall be taken as true in any subsequent litigation filed by the FTC or the Receiver to enforce their rights under Part IV or VI (and solely for that purpose), including but not limited to a nondischargeability complaint in any subsequent bankruptcy proceeding. VIII. NOTICE OF AFFILIATION OR CHANGE IN STATUS IT IS FURTHER ORDERED that, for a period of five (5) years from the entry of this Judgment: A. Defendant Jeffrey L. Rayden shall promptly give written notice to the Associate Director for Enforcement, Federal Trade Commission, Washington, D.C. 20580, of any change in his employment status (including self-employment) within ten (10) days of such change. Such notice shall include the name and address of each business that he is affiliated with or employed by, a statement of the nature of the business, and a statement of his duties and responsibilities in connection with the business or employment; and, B. Defendants Jeffrey L. Rayden, AKOA, Inc., Easyway International, Inc., and Rayco, Inc., shall promptly give written notice to the Associate Director for Enforcement, Federal Trade Commission, Washington, D.C. 20580, of any proposed change in the structure of the corporate Defendants, or any business entity owned or controlled in whole or in part by Defendants Jeffrey L. Rayden, AKOA, Inc., Easyway International, Inc., or Rayco, Inc., such as creation, incorporation, dissolution, assignment, sale, creation or dissolution of subsidiaries, or any other change that may affect compliance obligations arising out of this Judgment, thirty (30) days prior to the effective date of any proposed change. IX. MAINTENANCE OF BUSINESS RECORDS IT IS FURTHER ORDERED that, for a period of five (5) years from the entry of this Judgment, in connection with the advertising, promoting, offering for sale, sale, or distribution of any goods or services by mail or telephone, Defendants shall: A. Create and maintain records containing the name, address, telephone number, and Social Security number of each person employed by Defendants in any capacity, that person's job title or position, the date upon which the employee commenced work, and the date and reason for the employee's termination, if applicable; B. Create and maintain records containing the names, addresses, and telephone numbers of consumers to whom Defendants, whether directly or through any business entity or other device, sell, invoice, or ship goods or services; C. Maintain records of all written or tape-recorded communications with consumers to whom Defendants, whether directly or through any business entity or other device, sell, invoice, or ship goods or services; D. Create and maintain records and accounts that, in reasonable detail, accurately and fairly reflect the income, disbursements, transactions, and use of monies by Defendants; E. Create and maintain records of every written or oral consumer complaint or refund request received by Defendants, including the following:
X. MONITORING OF BUSINESS PRACTICES IT IS FURTHER ORDERED that, for purposes of securing compliance with this Judgment, for a period of five (5) years from the entry of this Judgment, in connection with any business owned or controlled in whole or in part by Defendants Jeffrey L. Rayden, AKOA, Inc., Easyway International, Inc., or Rayco, Inc., Defendants shall cooperate with Plaintiff's requests to investigate or monitor business practices, except to the extent that such cooperation would require the waiver of constitutional rights, as follows: A. Within five (5) days after receipt of a written request, permit representatives of Plaintiff access during normal business hours to any office or facility in which Defendants store or hold documents and records, to inspect and copy any such documents and records in Defendants' possession or control, including all documents and records Defendants are required by Part X to maintain; B. Permit representatives of Plaintiff, within five (5) business days after receipt of a written request, to interview the officers, directors, or employees of any such business, subject to the reasonable convenience of the Defendants and the person to be interviewed, and without restraint or interference from Defendants, at a location reasonably convenient to the person to be interviewed, Defendants, and Plaintiff; provided, however, that such officers, directors or employees may have counsel present; C. Produce documents requested by Plaintiff within thirty (30) business days of receipt of such request; D. Permit representatives of Plaintiff to depose any officers, directors, or employees of any such business, subject to the reasonable convenience of the person deposed, but in no event later than twenty (20) business days of receipt of the request for deposition; and, E. Permit representatives of Plaintiff immediate access upon demand (or, in the case of a business operated from Defendant Jeffrey Rayden's home, access upon reasonable notice) to any premises or facilities owned, occupied, or controlled by Defendants to determine compliance with the Judgment. XI. DISTRIBUTION TO DESIGNATED INDIVIDUALS IT IS FURTHER ORDERED that, for a period of five (5) years from the date of entry of this Judgment, Defendants Jeffrey L. Rayden, AKOA, Inc., Easyway International, Inc., and Rayco, Inc., shall: A. Immediately provide a copy of this Judgment to, and obtain a signed and dated acknowledgment of receipt of the same from (or, if not possible, maintain a written verification of delivery to) each officer, director, managing agent, supervisory employee, in any company or other business entity owned in whole or in part by Defendants Jeffrey L. Rayden, AKOA, Inc., Easyway International, Inc., or Rayco, Inc., or which Defendants Jeffrey L. Rayden, AKOA, Inc., Easyway International, Inc., or Rayco, Inc., control or have authority to control, that engages in the advertising, promoting, marketing, offering for sale, sale, or distribution of goods or services by mail or telephone. B. Maintain, and upon reasonable notice make available to any representative of Plaintiff, the original and dated acknowledgments and written verifications of the receipts required by this Part. XII. LIFTING ASSET FREEZE AND RECEIVERSHIP IT IS FURTHER ORDERED that, upon entry of this Judgment and payment by Defendants of $15,000.00 and any interest on this amount to the Receiver: A. The Receiver will file his final report and accounting and seek an order discharging the Receiver and exonerating his bond; B. The Stipulation and Order for Preliminary Injunction, Appointment of a Permanent Receiver, Continuation of Asset Freeze and Other Relief, agreed to on November 5, 1997, and entered on December 8, 1997, shall be lifted in its entirety. XIII. RETENTION OF JURISDICTION IT IS FURTHER ORDERED that this Court shall retain jurisdiction of this matter for the purpose of enabling the parties to apply to the Court at any time for such further orders or directives as may be necessary or appropriate for the interpretation or modification of this Judgment, for the enforcement of compliance therewith, or the punishment of violations thereof. XIV. WAIVER OF CLAIMS Defendants Jeffrey L. Rayden, AKOA, Inc., Easyway International, Inc., and Rayco, Inc., waive all claims under the Equal Access to Justice Act, 28 U.S.C. § 2412, as amended by Pub. L. No. 104-121, 110 Stat. 847, 863-64 (1996), and all rights to seek judicial review or otherwise to challenge or contest the validity of this Judgment, or the temporary or preliminary orders entered in this proceeding, and further waive and release any claim they or any of them may have against the FTC, its employees, agents or representatives, or the Receiver, his employees, agents or representatives. There being no just reason for delay, the Clerk of the Court is hereby directed to enter this Judgment. SO ORDERED, this day of , 1998, at . LOURDES G. BAIRD The parties listed below hereby stipulate and agree to entry of the foregoing Judgment, which shall constitute the Final Judgment in this action as to the undersigned. SIGNED AND STIPULATED BY: FEDERAL TRADE COMMISSION Dated: , 1998 ELAINE D. KOLISH MAUREEN ENRIGHT ELENA I. PAOLI DEFENDANTS Dated: , 1998 JEFFREY L. RAYDEN, individually JEFFREY L. RAYDEN, as President WILLIAMS & CONNOLLY by: |