UNITED STATES DISTRICT COURT FEDERAL TRADE COMMISSION, Plaintiff, v. LSQ INTERNATIONAL, INC., and ERICA SHEFFIELD, Defendants. Civil Action No. COMPLAINT FOR INJUNCTIVE AND OTHER EQUITABLE RELIEF Plaintiff, the Federal Trade Commission ("FTC" or "Commission") for its Complaint alleges: 1. The Commission brings this action under Sections 13(b) and 19 of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. §§ 53(b) and 57b, and Section 410(b) of the Credit Repair Organizations Act, 15 U.S.C. § 1679h(b), to obtain preliminary and permanent injunctive relief, restitution, rescission, disgorgement and other equitable relief for defendants' deceptive acts or practices in connection with the sale and offering for sale of credit repair products in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), and Section 404(a)(2) of the Credit Repair Organizations Act, 15 U.S.C. § 1679b(a)(2). JURISDICTION AND VENUE 2. This Court has jurisdiction of this matter pursuant to 28 U.S.C. §§ 1331, 1337(a), and 1345, and 15 U.S.C. §§ 53(b), 57b, and 1679h(b). 3. Venue is proper under 28 U.S.C. § 1391 and 15 U.S.C. § 53(b). THE PARTIES 4. Plaintiff, the Federal Trade Commission, is an independent agency of the United States Government created by statute. 15 U.S.C. §§ 41 et seq. The Commission is charged, inter alia, with enforcement of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), which prohibits unfair or deceptive acts or practices in or affecting commerce. The Commission also enforces the Credit Repair Organizations Act. 15 U.S.C. §§ 1679h(a). The Commission is authorized to initiate federal district court proceedings, by its own attorneys, to enjoin violations of the FTC Act and the Credit Repair Organizations Act in order to secure such equitable relief, including consumer redress, as may be appropriate in each case. 15 U.S.C. §§ 53(b), 57b, and 1679h(b). THE PARTIES 5. Defendant LSQ International, Inc., is a Florida Corporation with its principal place of business at 301 Majorca Avenue, Suite 4, Coral Gables, FL 33134. LSQ International, Inc., transacts or has transacted business in this District. 6. Defendant Erica Sheffield is the registered agent of LSQ International, Inc. At all times material to this complaint, acting alone or in concert with others, she has formulated, directed, controlled or participated in the acts and practices of defendant LSQ International, Inc., including the acts and practices set forth in this complaint. She resides and transacts or has transacted business in this District. COMMERCE 7. At all times relevant to this complaint, defendants have maintained a substantial course of trade in the offering for sale and selling of credit repair products, in or affecting commerce, as "commerce" is defined in Section 4 of the FTC Act, 15 U.S.C. § 44. DEFENDANTS' BUSINESS PRACTICES 8. Since at least September 1998, Defendants have advertised, promoted, offered for sale, and sold credit repair products to consumers via classified advertising. 9. Defendants have claimed that they can improve consumers' credit histories, credit records, or credit ratings by assisting them in establishing new credit files using an alternate Social Security Number ("SSN"). 10. Typical and illustrative of Defendants' claims are the following:
11. Consumers who send $44.00 to defendants, as instructed by defendants' advertisements, receive a packet of materials that advises consumers to obtain an Employer Identification Number ("EIN"), Taxpayer Identification Number ("TIN"), or, as an alternative, to obtain a second Social Security Number. The materials instruct consumers how to create a new credit history and credit file under the new identifying number. VIOLATIONS OF THE CREDIT REPAIR ORGANIZATIONS ACT 12. The Credit Repair Organizations Act, 15 U.S.C. §§ 1679a-j (1997), was enacted on September 30, 1996, and has been in full force and effect since April 1, 1997. 13. Section 404(a)(2) of the Credit Repair Organizations Act prohibits all persons from making any statement, or counseling or advising any consumer to make any statement, the intended effect of which is to alter the consumer's identification to prevent the display of the consumer's credit record, history, or rating for the purpose of concealing adverse information that is accurate and not obsolete to any consumer reporting agency, as defined in 15 U.S.C. § 1681(f), or to any person who has extended credit to the consumer or to whom the consumer has applied or is applying for an extension of credit. 15 U.S.C. § 1679b(a)(2). 14. Pursuant to Section 410(b)(1) of the Credit Repair Organizations Act, 15 U.S.C. § 1679h(b)(1), any violation of any requirement or prohibition of the Credit Repair Organizations Act constitutes an unfair and deceptive act or practice in commerce in violation of Section 5(a) of the FTC Act, 15 U.S.C.§ 45(a). COUNT ONE 15. In numerous instances, defendants have counseled or advised consumers to make statements, the intended effect of which has been to alter the consumer's identification to prevent the display of the consumer's credit record, history, or rating for the purpose of concealing adverse information that is accurate and not obsolete to consumer reporting agencies, as that term is defined in 15 U.S.C. § 1681(f), or to persons who have extended credit to those consumers or to whom those consumers have applied or are applying for extensions of credit. 16. Defendants have thereby violated Section 404(a)(2) of the Credit Repair Organizations Act, 15 U.S.C. § 1679b(a)(2). VIOLATIONS OF THE FEDERAL TRADE COMMISSION ACT COUNT TWO 17. In connection with the advertising, marketing, promotion, offering for sale, or sale of credit repair products, to induce consumers to purchase defendants' products, defendants have, expressly or by implication, made representations that consumers can alter their identifications to conceal adverse credit information from credit records, credit histories, or credit ratings by following defendants' recommendations to obtain EINs, TINs, or alternate Social Security Numbers, for credit purposes. 18. Defendants have failed to disclose in a clear and conspicuous manner that the use of an EIN, TIN, or false Social Security Number in the manner recommended violates criminal law, e.g., 18 U.S.C. §§ 1014; 42 U.S.C. § 408(a)(7)(B). 19. Therefore, defendants' failure to disclose this material fact, in light of the representations made, is deceptive, and violates Section 5(a) of the FTC Act, 15 U.S.C. § 45(a). CONSUMER INJURY 20. Consumers throughout the United States have suffered or are likely to suffer substantial monetary loss as a result of defendants' unlawful acts or practices. Absent injunctive relief by this Court, defendants are likely to continue to injure consumers and harm the public interest. THIS COURT'S POWER TO GRANT RELIEF 21. Sections 13(b) and 19 of the FTC Act, 15 U.S.C. §§ 53(b) and 57b, and Section 410(b) of the Credit Repair Organizations Act, 15 U.S.C. § 1679h(b), empower this Court to issue a permanent injunction against defendants' violations of the Credit Repair Organizations Act and the FTC Act and, in the exercise of its equitable jurisdiction, to order such ancillary relief as preliminary injunction, rescission, restitution, disgorgement of profits resulting from defendants' unlawful acts or practices, and other remedial measures. PRAYER FOR RELIEF WHEREFORE, plaintiff requests that this Court, as authorized by Section 410(b) of the Credit Repair Organizations Act, 15 U.S.C. § 1679h(b), Sections 13(b) and 19 of the FTC Act, 15 U.S.C. §§ 53(b) and 57b, and pursuant to its own equitable powers:
Dated:_____________, 1999 Respectfully Submitted, DEBRA A. VALENTINE __________________________________ |