UNITED STATES DISTRICT COURT
No. 95-8422-CIV-Roettger Stipulated Final Judgment and Order for Permanent Injunction Against Kevin Feldman and David Bernstein On July 10, 1995, plaintiff, the Federal Trade Commission ( "the FTC" or "the Commission"), filed its complaint for a permanent injunction and other relief in this matter, pursuant to Sections 13(b) and 19(a) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. §§ 53(b) and 57b(a), charging the defendants in this action with violations of Section 5 of the FTC Act, 15 U.S.C. § 45, and the FTC's Trade Regulation Rule entitled "Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures" ("the Franchise Rule"), 16 C.F.R. Part 436. On July 12, 1995, this Court issued an ex parte Temporary Restraining Order that, among other things, froze the defendants' assets and appointed Janice Russell as the receiver for the corporate defendants. On July 21, 1995, this Court entered an order expanding the asset freeze to cover the assets of Rachelle Friedland, certain assets controlled by Lisa Gelb, and the assets of several related entities. The July 21st Order also required the defendants, and Rachelle Friedland, Lisa Gelb and the related entities, to repatriate to the territory of the United States and transfer to the custody of the receiver all assets that were located outside of the territory of the United States. On August 29, 1995, this Court entered a stipulated preliminary injunction against the defendants. On October 23, 1996, this Court entered a Stipulated Final Judgment and Order for Permanent Injunction against Steven Gelb, Frank Friedland, and all of the corporate defendants in this action. The Commission, by and through its counsel, and defendants Kevin Feldman and David Bernstein, (stipulating defendants) by and through their counsel, have agreed to the entry of this Stipulated Final Judgment and Order for Permanent Injunction ("Final Order") in resolution of all matters of dispute between them in this action, and without trial or adjudication of any issue of law or fact herein. Findings 1. This Court has jurisdiction of the subject matter of this case and of the Stipulating Defendants; 2. The Complaint states a claim upon which relief may be granted against the defendants under Sections 5, 13(b), and 19(a) of the FTC Act, 15 U.S.C. §§ 45, 53(b) and 57b(a); 3. The Stipulating Defendants waive any claim they may have under the Equal Access to Justice Act, 28 U.S.C. § 2412, concerning the prosecution of this action. 4. Entry of this Final Order is in the public interest; 5. The Stipulating Defendants have waived all rights to seek appellate review or otherwise challenge or contest the validity of this Final Order; 6. This Final Order does not constitute and shall not be interpreted to constitute either a finding by the Court or an admission by the Stipulating Defendants that any of the Stipulating Defendants have engaged in violations of the FTC Act or the Franchise Rule; and 7. Good cause exists for continuing the receivership of defendants Worldwide Marketing and Distribution, Company, Inc., Titan Management Corporation, Mammoth Holding Corporation, Remote Assembly Corporation, Popcorn Supply Company, Inc., Popcorn Flavors, International, Inc., Planet Ice Cream, Inc., Royal Imperial Ltd., Inc. and Sutton Group of Palm Beach, Inc. Definitions For purposes of this Final Judgment and Order for Permanent Injunction, the following definitions shall apply: 1. "Franchise" and "franchisee" are defined in Sections 436.2(a) and (d) of the Franchise Rule, 16 C.F.R. §§ 436.2(a) and (d), and as the Rule may hereafter be amended. A copy of the Franchise Rule is attached hereto as Attachment A and incorporated herein as if fully set forth verbatim. 2. "Business venture" means any written or oral business arrangement, however denominated, whether or not covered by the Franchise Rule, which consists of the payment of any consideration for:
3. "Telemarketing" is defined in Section 310.2(u) of the Telemarketing Sales Rule, 16 C.F.R. Part 310.2(u), and as the Rule may hereafter be amended. A copy of the Telemarketing Sales Rule is attached hereto as Attachment B and incorporated herein as if fully set forth verbatim. 4. "Defendants" means Worldwide Marketing and Distribution, Company, Inc., Titan Management Corporation, Mammoth Holding Corporation, Remote Assembly Corporation, Popcorn Supply Company, Inc., Popcorn Flavors, International, Inc., Planet Ice Cream, Inc., Royal Imperial Ltd., Inc., Sutton Group of Palm Beach, Inc., International Popcorn Distributors, Inc., Maize Vending Associates, Inc., Steven F. Gelb, Frank Friedland, Kevin Feldman, David Bernstein, and each of them and their successors, assigns, officers, agents, servants, employees, and those persons in active concert or participation with them who receive actual notice of this Final Order by personal service or otherwise, whether acting directly or through any corporation, subsidiary, division, or other device. 5. "Stipulating Defendants" means David Bernstein and Kevin Feldman and each of them and their successors, assigns, officers, agents, servants, employees, and those persons in active concert or participation with them who receive actual notice of this Final Order by personal service or otherwise, whether acting directly or through any corporation, subsidiary, division, or other device. 6. "Receivership Defendants" means Worldwide Marketing and Distribution Company, Inc., Titan Management Corporation, Mammoth Holding Corporation, Remote Assembly Corporation, Popcorn Supply Company, Inc., Popcorn Flavors, International, Inc., Planet Ice Cream, Inc., Royal Imperial Ltd., Inc., Sutton Group of Palm Beach, Inc., and each of them and their successors, assigns, affiliates, subsidiaries, agents, servants, employees, and those persons in active concert or participation with them who receive actual notice of this Final Order by personal service or otherwise, whether acting directly or through any corporation, subsidiary, division, or other device. 7. "Receiver" or "permanent receiver" means Janice L. Russell. 8. "Related entities" means Larlis Management and Consulting, Inc., the FGP Trust, FGP Trust Ltd., St. John's Wood Trading Ltd., and each of them and their successors, assigns, officers, agents, servants, employees, and those persons in active concert or participation with them who receive actual notice of this Final Order by personal service or otherwise, whether acting directly or through any corporation, subsidiary, division, or other device. ORDER I. IT IS THEREFORE ORDERED that, in connection with the advertising, offering for sale, or sale of any franchise or business venture, the Stipulating Defendants are hereby permanently restrained and enjoined from participating or assisting in any manner or capacity in the making of any false or misleading statement or representation to any potential purchaser of such franchise or business venture, either orally or in writing, or directly or by implication, including but not limited to representations about the following: A. The income, profits, or sales volume likely to be achieved; B. The income, profits, or sales volume achieved by other franchise or business venture purchasers; C. The authenticity of any reference purporting to be a franchise or business venture purchaser; and D. The reliability of and amount of required maintenance to service the equipment, if any, sold by the defendants as part of the franchise or business venture. II. IT IS FURTHER ORDERED that, in connection with the offering for sale or sale of any franchise or business venture, the Stipulating Defendants are hereby permanently restrained and enjoined from violating or assisting others to violate any provisions of the Franchise Rule, 16 C.F.R. Part 436, including but not limited to the following: A. Failing to provide potential franchisees with a complete and accurate disclosure document within the times stated in the Franchise Rule, 16 C.F.R. § 436.1(a), or as it may be amended; B. Failing to have a reasonable basis for any earnings claim at the time such claim is made, as required by the Franchise Rule, 16 C.F.R. § 436.1(b)-(e), or as it may be amended; C. Failing to provide potential franchisees with an earnings claim document when any earnings claim is made, as required by the Franchise Rule, 16 C.F.R. § 436.1(b)-(e), or as it may be amended; and D. Failing to disclose, in immediate conjunction with any advertised earnings claim, the material basis for the claim (or the lack of such basis) and a warning that the earnings claim is only an estimate, as required by the Franchise Rule, 16 C.F.R. § 436.1(e)(3)-(4), or as it may be amended. III. IT IS FURTHER ORDERED that in connection with telemarketing, the Stipulating Defendants are hereby permanently restrained and enjoined from participating or assisting in any manner or capacity whatsoever in the making of any false or misleading statement or representation, either directly or by implication, orally or in writing, concerning any product, service, or investment opportunity. IV. IT IS FURTHER ORDERED that the Stipulating Defendants are hereby permanently restrained and enjoined from engaging or participating, whether directly, in concert with others, or through any business entity or other device, in the business of telemarketing, or the offering for sale or sale of any franchise or business venture without first obtaining a performance bond. The principal sum of said bond shall be in the amount of $750,000 (seven hundred and fifty thousand dollars). A. Each performance bond shall be an insurance agreement pledging surety for financial loss issued by a surety company that is admitted to do business in each state in which any bonded Stipulating Defendant does business and that holds a Federal Certificate of Authority As Acceptable Surety On Federal Bond and Reinsuring. Each performance bond shall cite this Order as the subject matter of the bond, and shall provide surety thereunder against financial loss resulting from whole or partial failure of performance due, in whole or in part, to any violation of Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45, or the provisions of this Order. Each performance bond shall be executed in favor of both (1) the Federal Trade Commission for the benefit of any person injured as a result of any false or misleading representation of material fact made by the Stipulating Defendant while engaged in the business of offering for sale or sale of any franchise or business venture, or telemarketing, and (2) any consumer so injured; B. Each bond shall be deemed continuous and shall remain in full force and effect so long as each bonded Stipulating Defendant continues to engage or participate in telemarketing and for at least three years after each such Stipulating Defendant has ceased to engage or participate in telemarketing; C. Each bond required by this Paragraph is in addition to, and not in lieu of, any other bond required by any applicable federal, state, or local law; D. Each Stipulating Defendant shall provide a copy of each such bond to the Associate Director for Marketing Practices at the address specified in Paragraph XIX, at least ten days before the commencement of any activity for which the bond is required; E. Each performance bond may be executed against by the Commission if a Court determines, by a preponderance of the evidence, that, after the effective date of this Order, the bonded Stipulating Defendant made any false or misleading representation of material fact in the course of engaging in telemarketing, or the offering for sale or sale of a franchise or business venture, directly or by implication, prohibited by Section 5 of the FTC Act, 15 U.S.C. § 45(a), or the provisions of this Order; and F. Proceedings instituted under this section 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. V. IT IS FURTHER ORDERED that Janice L. Russell is appointed as permanent receiver, with the full power of an equity receiver, for the Receivership Defendants and their affiliates and subsidiaries (hereinafter referred to as "the Receivership Defendants"), and of all the funds, properties, premises, accounts and other assets directly or indirectly owned, beneficially or otherwise, by the Receivership Defendants, with directions and authority to accomplish the following: A. Assume full control of the Receivership Defendants by removing defendants David Bernstein and Kevin Feldman, and any other officer, independent contractor, employee, or agent of any of the Receivership Defendants, from control and management of the affairs of the Receivership Defendants; B. Take custody, control and possession of all the funds, property, premises, accounts, mail and other assets of, or in the possession or under the control of, the Receivership Defendants, wherever situated, the income and profits therefrom, and all sums of money now or hereafter due or owing to the Receivership Defendants, with full power to: collect, receive and take possession of all goods, chattels, rights, credits, moneys, effects, lands, leases, books and records, work papers, and records of accounts, including computer-maintained information, contracts, financial records, monies on hand in banks and other financial institutions, and other papers and documents of the Receivership Defendants and business venture purchasers whose interests are now held by or under the direction, possession, custody or control of the Receivership Defendants; C. Perform all acts necessary to preserve the value of those assets, in order to prevent any irreparable loss, damage or injury to business venture purchasers, and all acts incidental thereto, including the suspension of operations; D. Enter into such agreements in connection with administration of the receivership, including, but not limited to: (1) the retention and employment of investigators, attorneys or accountants of the receiver's choice, including without limitation members and employees of the receiver's firm, to assist, advise, and represent the receiver; (2) the movement and storage of any equipment, furniture, records, files or other physical property of the Receivership Defendants; and (3) the retention of auctioneers or other professionals to assist in the liquidation of the Receivership Defendants' assets; E. Institute, prosecute, compromise, adjust, intervene in or become party to such actions or proceedings in state, federal or foreign courts that the receiver deems necessary and advisable to preserve or increase the value of the receivership estate, or that the receiver deems necessary and advisable to carry out the receiver's mandate under this Final Order, and likewise to defend, compromise or adjust or otherwise dispose of any or all actions or proceedings instituted against the receiver or the Receivership Defendants that the receiver deems necessary and advisable to preserve the properties of the Receivership Defendants or that the receiver deems necessary and advisable to carry out the receiver's mandate under this Final Order; F. Liquidate assets of the Receivership Defendants and all assets transferred to the receiver in accordance with the terms of this Final Order or any prior or subsequent order of this Court; and to transfer receivership property to storage facilities, cancel leases, and breach and enter contracts; G. To maximize the amount of funds available for consumer redress, formulate a plan for distribution of the assets of the Receivership Defendants to consumers who purchased the defendants' goods and services and to administer the distribution of such assets pursuant to further order of this Court; and H. To execute all bills of sale and deeds to personal and real property belonging to or coming into possession of the Receivership Defendants. VI. IT IS FURTHER ORDERED that defendants David Bernstein and Kevin Feldman shall cooperate fully with the receiver in: (A) pursuing any and all claims by the receivership against third parties; (B) assisting the receiver in defending any and all actions or claims brought against the receivership by third parties; and (C) executing any documents necessary to transfer assets or ownership interests to the receiver pursuant to the terms of this Final Order. VII. IT IS FURTHER ORDERED that, immediately upon service of this Final Order upon them, the Stipulating Defendants and any other person or entity served with a copy of this Final Order, if he or she has not done so already, shall forthwith or within such additional time as permitted by the receiver in writing, deliver over to the receiver: (A) possession and custody of all funds, assets, property owned beneficially or otherwise, and all other assets, wherever situated, of the Receivership Defendants or related entities; (B) all stock, ownership, legal, beneficial or other interests that they hold in any of the Receivership Defendants or the related entities; (C) possession and custody of all books and records of accounts, all financial and accounting records, balance sheets, income statements, bank records (including monthly statements, canceled checks, records of wire transfers, and check registers), client lists, title documents and other papers of the Receivership Defendants or related entities; (D) possession and custody of all funds and other assets belonging to members of the public now held by the Receivership Defendants or related entities; (E) all keys, computer passwords, entry codes, combinations to locks required to open or gain access to any of the property or effects of the Receivership Defendants or related entities; (F) all monies in any financial institution deposited to the credit of the Receivership Defendants, wherever situated; (G) information identifying the accounts, employees, properties, or other assets or obligations of the Receivership Defendants; (H) a statement providing the total number of franchises or business ventures sold by each of the defendants; and (I) a statement providing the names, addresses and telephone numbers of each person who purchased a franchise or business venture, whether directly from one or more of the defendants or through a broker or other entity, and the total dollar amount of money received from each such purchaser by any defendant, broker or other entity. VIII. IT IS FURTHER ORDERED that except by leave of this Court, during the pendency of the receivership ordered herein, the defendants, related entities, and all customers, principals, investors, creditors, stockholders, lessors, and other persons, seeking to establish or enforce any claim, right or interest against or on behalf of any of the Receivership Defendants, or any of their subsidiaries or affiliates, and all others acting for or on behalf of such persons, including attorneys, trustees, agents, sheriffs, constables, marshals, and other officers and their deputies, and their respective attorneys, servants, agents and employees be and are hereby stayed from: A. Commencing, prosecuting, continuing or enforcing any suit or proceeding against any of the Receivership Defendants, or any of their subsidiaries or affiliates, except that such actions may be filed to toll any applicable statute of limitations; B. Commencing, prosecuting, continuing or entering any suit or proceeding in the name or on behalf of any of the Receivership Defendants, or any of their subsidiaries or affiliates; C. Accelerating the due date of any obligation or claimed obligation, enforcing any lien upon, or taking or attempting to take possession of, or retaining possession of, a property of any of the Receivership Defendants, or any of their subsidiaries or affiliates or any property claimed by any of them or attempting to foreclose, forfeit, alter or terminate any of the Receivership Defendants' interests in property, including without limitation, the establishment, granting, or perfection of any security interest, whether such acts are part of a judicial proceeding or otherwise; D. Using self-help or executing or issuing, or causing the execution or issuance of any court attachment, subpoena, replevin, execution or other process for the purpose of impounding or taking possession of or interfering with, or creating or enforcing a lien upon, any property, wheresoever located, owned by or in the possession of any of the Receivership Defendants, or the receiver appointed pursuant to this Final Order or any agent appointed by said receiver; and E. Doing any act or thing whatsoever to interfere with the receiver taking control, possession or management of the property subject to this receivership, or to in any way interfere with the receiver, or to harass or interfere with the duties of the receiver; or to interfere in any manner with the exclusive jurisdiction of this Court over the property and assets of the Receivership Defendants, or their subsidiaries or affiliates, including the filing by the Stipulating Defendants of a petition for relief under the United States Bankruptcy Code, 11 U.S.C. § 101 et seq., as to any receivership defendant. IX. IT IS FURTHER ORDERED that the receiver and all personnel hired by the receiver as herein authorized, including counsel to the receiver and accountants, are entitled to reasonable compensation for the performance of duties pursuant to this Final Order and for the cost of actual out-of-pocket expenses incurred by them, from the assets now held by or in the possession or control of or which may be received by the Receivership Defendants. The receiver shall file with the Court and serve on the parties periodic requests for the payment of such reasonable compensation. The receiver shall not increase the receiver's fee rate billed to the receivership estate without prior approval of the Court. X. IT IS FURTHER ORDERED that the permanent receiver shall maintain the receiver's bond previously filed with the Clerk of this Court in the amount of $3,500. XI. IT IS FURTHER ORDERED that the Stipulating Defendants are hereby permanently restrained and enjoined from providing to any person, except agents of the Commission, the receiver, or other law enforcement authorities, the name, address, telephone number, or credit card or bank account number, of any person who purchased a franchise or business venture from any of the defendants. XII. IT IS FURTHER ORDERED that, within ten (10) days of notice of entry of this Order and for a period of five (5) years commencing with the date of entry of this Final Order, defendants David Bernstein and Kevin Feldman shall each: A. Notify the Commission in writing of his current address and any change in his residential address within ten (10) days of such change; B. Notify the Commission in writing of his current employment and any change in his employment status within ten (10) days of such change. Such notice shall include the name and address of each business that Kevin Feldman and David Bernstein 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; and C. Notify the Commission in writing at least thirty (30) days prior to the effective date of any proposed change in the structure of any business entity owned or controlled by him, such as creation, incorporation, dissolution, assignment, sale, creation or dissolution of subsidiaries, or any other changes that may affect compliance obligations arising out of this Final Order. XIII. IT IS FURTHER ORDERED that for purposes of determining or securing compliance with this Final Order, in connection with any business owned or controlled in whole or in part by David Bernstein or Kevin Feldman, said defendant, upon reasonable written notice, shall permit representatives of the Federal Trade Commission: A. Access during normal business hours to the offices of any such business to inspect and copy all documents relating in any way to any conduct subject to Parts I, II, III, XI and XII of this Final Order; and B. Subject to such defendant's reasonable convenience and without restraint or interference from him, to interview the officers, directors or employees of any such business with regard to compliance with the terms of this Final Order. Such officers, directors or employees may have counsel present. XIV. IT IS FURTHER ORDERED that, for a period of five (5) years from the date of the entry of this Order, Stipulating Defendants, immediately upon being employed or retained, or employing, directing, or managing any person, in connection with that part of any business entity that is engaged in the advertising, offering for sale, promotion or sale of any franchise or business venture to consumers shall provide a copy of this Order to any person or entity by whom Stipulating Defendants are employed or retained, whether as employee, consultant, independent contractor or otherwise, and to any person or entity whom Defendants retain, whether as employee, consultant, independent contractor or otherwise. As to each such person, Stipulating Defendants shall either secure a signed statement acknowledging receipt of such Order or prepare a sworn affidavit attesting to the fact that Stipulating Defendants have provided a copy of the Order to that person. The information in the affidavit shall include, but is not limited to, the name and address of the person or entity to whom the order was provided and the date the order was provided. XV. IT IS FURTHER ORDERED that Stipulating Defendants shall release any claim to all other funds previously frozen by Order of this Court. Such funds shall be released to the receiver pursuant to Part XVII of this Order, and shall be used to provide redress to persons who purchased a Hollywood Pop business opportunity from Defendants, and to pay any attendant expenses associated with distribution of funds. If the Commission determines, in its sole discretion, that redress to injured consumers in this matter is wholly or partially impracticable, any funds not so used shall be deposited into the United States Treasury. No portion of the payment as herein provided shall be deemed a payment of any fine, penalty, forfeiture, or punitive assessment. Stipulating Defendants shall be notified as to how funds are disbursed, but shall have no right to contest the manner of distribution. XVI. IT IS FURTHER ORDERED that Stipulating Defendants waive any right to the proceeds or distribution from any redress fund established to benefit consumers who purchased a business opportunity from the defendants in this case, including but not limited to the redress fund established by the receiver in this matter, and any proceeds which are distributed to consumers from the class action case denominated as Russell, etc. v. Rowe International, Inc. 95-8422, pending in this Court. XVII. IT IS FURTHER ORDERED that the Receiver shall liquidate all assets and maintain the assets previously transferred and the proceeds of the liquidated assets pending the formulation and implementation of a plan to distribute these assets to business venture purchasers pursuant to Paragraph V(G), above. The complete payment of such funds and the complete transfer of such assets shall fully satisfy all monetary claims asserted by the Commission against David Bernstein and Kevin Feldman in the Complaint and shall be used to provide redress to persons injured by the defendants' alleged violations of the FTC Act or the Franchise Rule and to pay any attendant expenses of administering the receivership estate or distribution of funds. No portion of the payment as herein provided shall be deemed a payment of any fine, penalty, forfeiture or punitive assessment. The Stipulating Defendants shall be notified as to how funds are disbursed, but shall have no right to contest the manner of distribution chosen by the Commission or the Receiver. XVIII. IT IS FURTHER ORDERED that the freeze on the assets of David Bernstein and Kevin Feldman shall not be lifted until: (A) the entry of this Final Order; and (B) the Stipulating Defendants' payments and transfers pursuant to Paragraph XV of this Final Order. Financial institutions holding the assets of David Bernstein and Kevin Feldman, including safe deposit boxes, shall release these assets immediately upon receiving a copy of this Final Order and a notarized letter from the receiver stating that these defendants have satisfied the terms and conditions of this Paragraph. XIX. IT IS FURTHER ORDERED that, within sixty (60) days after the date of entry of this Final Order, the Stipulating Defendants shall file with the Commission a preliminary report and on the one hundred-fiftieth day following entry of this Final Order file a supplemental report, in writing, setting forth in detail the manner and form in which they have complied with this Final Order. XX. IT IS FURTHER ORDERED that all notices required of the Stipulating Defendants by this Final Order shall be made to the following address:
XXI. IT IS FURTHER ORDERED that the Commission's acceptance and the Court's approval of this Final Order is expressly premised upon the truthfulness, accuracy, and completeness of the financial statements provided by David Bernstein and Kevin Feldman to counsel for the Commission on November 5, 1996 and October 9, 1996, respectively, and revised disclosures October 1, 1997 and October 7, 1997, respectively. If, upon motion by the Commission, this Court finds that David Bernstein's or Kevin Feldman's financial statements either failed to disclose any material asset, or materially misrepresented the value of any asset, or made any other material misrepresentations in or omissions of assets, the Commission may request that the Judgment herein be reopened for the purpose of requiring full restitution from David Bernstein and Kevin Feldman; 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 section 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 Final Order. Solely for the purposes of reopening or enforcing this Paragraph, David Bernstein and Kevin Feldman waive any right to contest any of the allegations contained in the Complaint in this matter. XXII. IT IS FURTHER ORDERED that each party to this Final Order shall bear its own costs and attorneys' fees. XXIII. IT IS FURTHER ORDERED that this Court retains jurisdiction of this matter for the purpose of enabling any of the parties to this Final Order 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 Final Order, for the enforcement of compliance therewith or the punishment of violations thereof. SO ORDERED, this _____day of _________, 1998. __________________________________ The parties hereby consent to the terms and conditions set forth above and hereby consent to the entry of this Final Order at the Court's convenience and without further notice to the parties. PLAINTIFF: ____________________________________ DEFENDANTS: ____________________________________ ____________________________________ ____________________________________ Dated: |