TODD M. KOSSOW
THERESA M. McGREW
Federal Trade Commission
55 East Monroe Street, Suite 1860
Chicago, Illinois 60603
(312) 960-5634 [ph.]
(312) 960-5600 or 960-5605 [fax]

JOHN D. JACOBS (CA Bar # 134154)
Federal Trade Commission
10877 Wilshire Boulevard, Suite 700
Los Angeles, California 90024
(310) 824-4343 [ph.]
(310) 824-4380 [fax]
Attorneys for Plaintiff
FEDERAL TRADE COMMISSION

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
WESTERN DIVISION

FEDERAL TRADE COMMISSION,

Plaintiff,

v.

ARLINGTON PRESS, INC., d/b/a CONSUMER DATA SERVICE, a California corporation, GOLDEN WEST ADVERTISING, INC., a California corporation, DAVID T. UMHOLTZ, individually and as an officer of the corporations, WENDY J. FOSTER, individually and as an officer of the corporations, and GEORGE W. UMHOLTZ, individually and as an officer of the corporations, Defendants.

Civ. No. 98-9260 MMM (CWx)

STIPULATED ORDER FOR PERMANENT INJUNCTIVE
RELIEF WITH CONSUMER REDRESS AND OTHER
EQUITABLE RELIEF

Plaintiff, the Federal Trade Commission ("FTC" or "Commission"), has filed a first amended complaint for a permanent injunction and other 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 Arlington Press, Inc., d/b/a Consumer Data Service, Golden West Advertising, Inc., David T. Umholtz, Wendy J. Foster, and George W. Umholtz (collectively "defendants") with deceptive acts and practices in connection with the advertising and telemarketing of "how-to" guides to consumers throughout the United States. The Commission's first amended complaint alleges that defendants' deceptive acts and practices violate Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), and Sections 310.3(a)(1)(i), 310.3(a)(1)(iii), and 310.3(a)(4) of the Commission's Telemarketing Sales Rule ("the Telemarketing Rule" or "the Rule"), 16 C.F.R. §§ 310.3(a)(1)(i), 310.3(a)(1)(iii), and 310.3(a)(4). The Commission and defendants have consented to the entry of this Stipulated Order for Permanent Injunctive Relief with Consumer Redress and Other Equitable Relief ("Stipulated Order") without a trial or adjudication of any issue of law or fact herein.

NOW, THEREFORE, the Commission and defendants having requested the Court to enter this Stipulated Order, it is ORDERED, ADJUDGED, AND DECREED as follows:

FINDINGS

1. This is an action by the Commission instituted under Sections 13(b) and 19 of the FTC Act, 15 U.S.C. §§ 53(b) and 57b, and Sections 3 and 6 of the Telemarketing Act, 15 U.S.C. §§ 6102(c) & 6105(b). Pursuant to these sections of the FTC Act and the Telemarketing Act, the Commission has the authority to seek the relief requested.

2. This Court has jurisdiction over the subject matter of this case and all parties hereto. Venue in the Central District of California is proper.

3. The Commission's first amended complaint states a claim upon which relief may be granted against defendants under Sections 5, 13(b), and 19 of the FTC Act, 15 U.S.C. §§ 45, 53(b), and 57b, and the Commission's Telemarketing Rule, 16 C.F.R. Part 310.

4. The alleged activities of defendants are in or affecting commerce, as defined in Section 4 of the FTC Act, 15 U.S.C. § 44.

5. Defendants, without admitting the allegations set forth in the first amended complaint, agree to entry of this Stipulated Order.

6. Defendants have waived all claims under the Equal Access to Justice Act, 28 U.S.C. § 2412, and all rights to seek judicial review, or otherwise to challenge the validity of this Stipulated Order.

7. Entry of this Stipulated Order is in the public interest.

DEFINITIONS

For purposes of this Stipulated Order, the following definitions shall apply:

1. "Assets" means all real and personal property of defendants Arlington Press, Inc., Golden West Advertising, Inc., David T. Umholtz, Wendy J. Foster, or George W. Umholtz, or held for the benefit of any of the defendants, including but not limited to "goods," "instruments," "equipment," "fixtures," "general intangibles," "inventory," "checks," or "notes" (as these terms are defined in the Uniform Commercial Code), lines of credit, and all cash, wherever located.

2. "Customer" means any person who is or may be required to pay for goods or services offered through telemarketing. 16 C.F.R. § 310.2(i).

3. "Defendants" means Arlington Press, Inc., Golden West Advertising, Inc., David T. Umholtz, Wendy J. Foster, George W. Umholtz, and their successors, assigns, officers, agents, servants, employees, and those persons in active concert or participation with them who receive actual notice of this Stipulated Order by personal service or otherwise, whether acting directly or through any entity, corporation, subsidiary, division, or other device.

4. "Material" means likely to affect a person's choice of, or conduct regarding, goods or services.

5. "Person" means any individual, group, unincorporated association, limited or general partnership, corporation, or other business entity.

6. "Document" is synonymous in meaning and equal in scope to the usage of the term in Federal Rule of Civil Procedure 34(a) and includes writings, drawings, graphs, charts, photographs, audio and video recordings, computer records, and other data compilations from which information can be obtained and translated, if necessary, through detection devices into reasonably usable form. A draft or non-identical copy is a separate document within the meaning of the term.

7. "Telemarketing" means a plan, program, or campaign which is conducted to induce the purchase of goods or services by use of one or more telephones and which involves more than one interstate telephone call. 16 C.F.R. § 310.2(u).

I.

PROHIBITED BUSINESS ACTIVITIES PURSUANT TO THE FTC ACT

IT IS THEREFORE ORDERED that, in connection with the advertising, promotion, offering, or sale of any auction information packages, foreclosed home information packages, job opportunity packages, or any other goods or services, defendants are hereby permanently restrained and enjoined from:

A. Misrepresenting, expressly or by implication, that customers who purchase defendants' publications on seized cars and other items frequently are able to purchase vehicles in good condition for a fraction of their wholesale values, including as little as $200;

 

B. Misrepresenting, expressly or by implication, that customers who purchase defendants' publications on foreclosed homes frequently are able to purchase foreclosed homes in reasonably good condition for substantially below their market values;

 

C. Misrepresenting, expressly or by implication, that customers who purchase defendants' publications on at-home typing jobs will receive listings of businesses currently seeking to hire individuals to type at home for such businesses;

 

D. Misrepresenting, expressly or by implication, that customers who purchase defendants' publications on government jobs will receive listings of actual positions that government agencies currently are seeking to fill;

 

E. Making any representation in any manner, expressly or by implication, about the ability of customers who purchase defendants' publications to: (1) purchase vehicles, homes or other goods or services, or (2) obtain employment or other sources of income, unless the representation is true and, at the time it is made, defendants possess and rely upon competent and reliable evidence that substantiates the representation;

 

F. Failing to disclose in a clear and conspicuous manner, prior to charging a customer for any goods or services, the total cost to purchase, receive, or use the goods or services that are the subject of a sales offer, and the nature and quantity of such goods or services;

 

G. Failing to disclose in a clear and conspicuous manner, prior to charging a customer for any goods or services, all material terms, conditions, and limitations of any refund policy or any policy of non-refundability;

 

H. Misrepresenting, expressly or by implication, that the experience of any consumer or consumers with respect to defendants' goods or services is the typical or representative experience of members of the public who use the good or service; or

 

I. Misrepresenting, expressly or by implication, any fact material to a customer's decision to purchase or use defendants' goods or services.

II.

CUSTOMER AUTHORIZATION

IT IS FURTHER ORDERED that, in connection with the sale of any good or service in or affecting commerce, defendants and their successors, assigns, officers, agents, employees, and those persons in active concert or participation with them who receive actual notice of this Stipulated Order by personal service or otherwise, whether acting directly or through any entity, corporation, subsidiary, division, or other device, are hereby permanently restrained and enjoined from obtaining or submitting for payment a check, draft, or other form of negotiable paper drawn on a person's checking, savings, share, or similar account unless that person has provided his express verifiable authorization. Such authorization shall be deemed verifiable if any of the following means are employed:

A. Express written authorization by the customer, which may include the customer's signature on the negotiable instrument; or

 

B. Express oral authorization which is tape recorded and made available upon request to the customer's bank and which evidences clearly both the customer's authorization of payment for the goods and services that are the subject of the sales offer and the customer's receipt of all of the following information:

1. The date of the draft(s);

2. The amount of the draft(s);

3. The payor's name;

4. The number of draft payments (if more than one);

5. A telephone number for customer inquiry that is answered during normal business hours; and

6. The date of the customer's oral authorization; or

C. Written confirmation of the transaction, sent to the customer prior to submission for payment of the customer's check, draft, or other form of negotiable paper, that includes:

1. All of the information contained in subsections B.1 through B.6 of this section, supra; and

2. The procedures by which the customer may obtain a refund from the seller or telemarketer in the event the confirmation is inaccurate.

Provided, however, that this section shall not be construed to prohibit defendants from obtaining or submitting for payment a traditional credit, debit, or other substantially similar charge as to which the Fair Credit Billing Act, 15 U.S.C. §§ 1666-1666j, or any substantially similar provision of state or federal law applies at the time of the transaction.

III.

PROHIBITED BUSINESS ACTIVITIES PURSUANT TO THE TELEMARKETING RULE

IT IS FURTHER ORDERED that, in connection with the advertising, promotion, offering, or sale of any auction information packages, foreclosed home information packages, job opportunity packages, or any other goods or services, defendants are hereby permanently restrained and enjoined from violating the Telemarketing Rule, 16 C.F.R. Part 310, as presently promulgated or as hereinafter amended, including but not limited to the following:

A. Violating Section 310.3(a)(4) of the Telemarketing Rule, 16 C.F.R. § 310.3(a)(4), by making false or misleading statements to induce the purchase of defendants' publications that include, but are not limited to, statements to the effect that:

1. Customers who purchase defendants' publications on seized cars frequently are able to purchase vehicles in good condition for a fraction of their wholesale values, including as little as $200;

2. Government agencies such as the United States Marshals Service and the United States Customs Service regularly seize vehicles, including vehicles in good condition like the red Ford Mustang depicted in defendants' advertisements and solicitations, and regularly sell those vehicles to the general public at prices substantially below their wholesale values;

3. Customers who purchase defendants' publications on foreclosed homes frequently are able to purchase foreclosed homes in reasonably good condition for substantially below their market values; and

4. Entities such as the United States Department of Housing and Urban Development, Fannie Mae, and Freddie Mac regularly foreclose on well-kept homes that are in good condition, and regularly sell those homes to the general public at prices substantially below their market values;

B. Violating Section 310.3(a)(1)(i) of the Telemarketing Rule, 16 C.F.R. § 310.3(a)(1)(i), by failing to disclose in a clear and conspicuous manner, before customers pay for their publications, the total costs to purchase, receive or use, and the quantity of, any goods or services that are the subject of the sales offer; or

 

C. Violating Section 310.3(a)(1)(iii) of the Telemarketing Rule, 16 C.F.R. § 310.3(a)(1)(iii), by making representations about their refund policy but failing to disclose in a clear and conspicuous manner, before customers pay for the products, all material terms and conditions of that policy.

IV.

CONSUMER REDRESS

IT IS FURTHER ORDERED that:

A. Defendants David T. Umholtz, Wendy J. Foster, and George W. Umholtz shall pay to the FTC consumer redress in the amount of fifty-four thousand two hundred dollars ($54,200.00), for which they are jointly and severally liable, within ten days of the entry of this Order. Payment shall be made to the FTC by certified check or other guaranteed funds payable to and delivered to the FTC, or by wire transfer in accord with directions provided by the FTC.

 

B. In addition to the payment required by subsection A of this section, defendant David T. Umholtz shall transfer all rights of ownership in his 1966 Jaguar XKE, vehicle identification number 1E32101, and his 1970 Jaguar XKE, vehicle identification number 1R13011, to the FTC, and the Receiver for Arlington Press, Inc. shall liquidate those assets and transfer the proceeds, net of expenses and compensation to him allowed by the Court pursuant to the terms of Section X of the January 18, 1999 Preliminary Injunction Order, to the FTC. Defendant David T. Umholtz shall maintain possession of these Jaguars, without assessing any charges to the FTC or the Receiver, until such time as the Jaguars are sold or the FTC or the Receiver directs him to relinquish possession. Defendant David T. Umholtz shall also maintain all existing insurance policies relating to these Jaguars so long as he maintains possession, and in the event that either of these Jaguars suffers any loss covered by such insurance policies, defendant David T. Umholtz shall make such claims as are permitted by the insurance policies and shall assign or remit any insurance payment he receives as a result of such loss to the FTC.

 

C. In addition to the payment required by subsection A of this section, defendant George W. Umholtz shall transfer all rights of ownership in his 1974 Jaguar XJ6L, vehicle identification number UE2T51138BW, to the FTC, and the Receiver for Arlington Press, Inc. shall liquidate that asset and transfer the proceeds, net of expenses and compensation to him allowed by the Court pursuant to the terms of Section X of the January 18, 1999 Preliminary Injunction Order, to the FTC. Defendant George W. Umholtz shall maintain possession of this Jaguar, without assessing any charges to the FTC or the Receiver, until such time as the Jaguar is sold or the FTC or the Receiver directs him to relinquish possession. Defendant George W. Umholtz shall also maintain all existing insurance policies relating to this Jaguar so long as he maintains possession, and in the event that this Jaguar suffers any loss covered by such insurance policies, defendant George W. Umholtz shall make such claims as are permitted by the insurance policies and shall assign or remit any insurance payment he receives as a result of such loss to the FTC.

 

D. The funds paid pursuant to subsection A of this section and the proceeds generated pursuant to subsections B and C of this section shall be deposited into a redress fund, administered by the FTC, to be used for equitable relief, including but not limited to consumer redress and any attendant expenses for the administration of any redress fund. If the FTC determines, in its sole discretion, that redress to purchasers is wholly or partially impracticable, any funds not so used shall be paid to the United States Treasury as disgorgement. Defendants shall be notified as to how the funds are disbursed but shall have no right to contest the manner of distribution chosen by the FTC. The FTC, in its sole discretion, may use a designated agent to administer consumer redress. The FTC and defendants acknowledge and agree that this judgment for equitable monetary relief is solely remedial in nature and is not a fine, penalty, punitive assessment, or forfeiture;

 

E. In the event of any default on any obligation to make payment under this section, interest, computed pursuant to 28 U.S.C. §1961(a), shall accrue from the date of default to the date of payment, and shall immediately become due and payable; and

 

F. The defendants are hereby required, in accordance with 31 U.S.C. § 7701, to furnish to the FTC their respective taxpayer identifying numbers (social security numbers or employer identification numbers), which shall be used for purposes of collecting and reporting on any delinquent amount arising out of such persons' relationship with the government.

V.

RIGHT TO REOPEN

IT IS FURTHER ORDERED that within three (3) business days after the date of entry of this Stipulated Order, defendants Arlington Press, Inc., Golden West Advertising, Inc., David T. Umholtz, Wendy J. Foster, and George W. Umholtz shall submit to the Commission a truthful sworn statement in the form shown on Appendix A to this Stipulated Order, that shall reaffirm and attest to the truthfulness, accuracy, and completeness of their respective revised financial statements dated December 16, 1998 that were submitted to the Federal Trade Commission. The Commission's agreement to this Stipulated Order is expressly premised upon the financial condition of defendants, as represented in those revised financial statements, which contain material information upon which the Commission relied in negotiating and agreeing upon this Stipulated Order.

If, upon motion of the Commission, the Court finds that any defendant failed to file the sworn statement required by this section, or that any defendant failed to disclose any material asset, or materially misrepresented the value of any asset, or made any other material misrepresentation in or omission from the financial statement, the Commission may either (1) request that the judgment herein be reopened for the purpose of requiring additional monetary consumer redress or obtaining other equitable relief up to the total amount of consumer injury in this matter, or (2) seek to obtain other equitable relief.

Provided, however, that in all other respects, this judgment shall remain in full force and effect, unless otherwise ordered by the 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 but not limited to contempt proceedings, or any other proceedings that the Commission or the United States might initiate to enforce this Stipulated Order.

VI.

BOND

IT IS FURTHER ORDERED that defendants Arlington Press, Inc., Golden West Advertising, Inc., David T. Umholtz, Wendy J. Foster, and George W. Umholtz, individually and collectively, whether directly, in concert with others, or through any business entity or other device, are hereby permanently restrained and enjoined from engaging or participating in the business of telemarketing, unless at least two weeks prior to such activities, they obtain a performance bond in the principal sum of at least one hundred fifty thousand dollars ($150,000.00). In the event defendants collectively intend to engage or participate in the business of telemarketing, whether directly, in concert with others, or through any business entity or other device, then they may post a single bond under this section in the principal sum of at least one hundred fifty thousand dollars ($150,000.00). In any other case, each defendant shall obtain a separate performance bond under this section.

A. The performance bond required by this section shall be conditioned upon defendants' compliance with Section 5 of the FTC Act, 15 U.S.C. § 45, the Commission's Telemarketing Rule, 16 C.F.R. Part 310, and the provisions of this Stipulated Order. The bond shall be deemed continuous and remain in full force and effect so long as the bonded defendant continues to engage or participate in the business of telemarketing, whether directly, in concert with others, or through any business entity or other device, and for at least three years thereafter. The bond shall cite this Stipulated 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 FTC Act, 15 U.S.C. § 45, the Commission's Telemarketing Rule, 16 C.F.R. Part 310, or the provisions of this Stipulated Order;

 

B. The performance bond required by 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. The 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 made while engaged in the business of telemarketing, and (2) any consumer so injured;

 

C. The performance bond required by this section is in addition to, and not in lieu of, any other bond required by any applicable federal, state, or local law;

 

D. At least ten (10) days prior to the commencement of any activity for which a performance bond is required under this section, the defendant shall provide a copy of the bond to the Director of the FTC's Regional Office in Chicago at the address specified in Section XVII;

 

E. Each defendant, each defendant's agents, or any persons acting in concert or participation with him/her or under his/her authority, supervision, or control shall not disclose the existence of the performance bond to any consumer or other purchaser or prospective purchaser of any product or service without simultaneously disclosing the following: "THE BOND IS REQUIRED BY ORDER OF THE U.S. DISTRICT COURT IN SETTLEMENT OF CHARGES THAT ARLINGTON PRESS, INC., GOLDEN WEST ADVERTISING, INC., DAVID T. UMHOLTZ, WENDY J. FOSTER, AND GEORGE W. UMHOLTZ, ENGAGED IN A PATTERN AND PRACTICE OF MAKING FALSE AND MISLEADING REPRESENTATIONS IN CONNECTION WITH THE PROMOTION, TELEMARKETING, AND SALE OF THEIR PUBLICATIONS." The required written disclosure shall be set forth in a clear and conspicuous manner, separated from all other text, in 100% black ink against a light background, in print at least as large as the main text of the sales material or document, and enclosed in a box containing only the required disclosure. The disclosure, if required, shall appear in all sales material, all publications, and on the front side of all documents sent to customers to acknowledge orders or the receipt of funds;

 

F. The Commission may execute against the performance bond if it demonstrates to the Court by a preponderance of the evidence that, after the effective date of this Stipulated Order, any bonded defendant, individually or through any other person or entity, (1) made a false or misleading representation, directly or by implication, in the course of engaging in telemarketing, in violation of Section 5 of the FTC Act, 15 U.S.C. § 45, (2) violated the Telemarketing Rule, or (3) violated the terms of this Stipulated Order; and

 

G. Proceedings instituted under this section 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 the Commission may initiate to enforce this Stipulated Order.

VII.

RECEIVERSHIP

IT IS FURTHER ORDERED that the appointment of Frank M. Sweeney as Receiver for defendant Arlington Press, Inc., pursuant to this Court's Preliminary Injunction Order entered on January 18, 1999, is hereby continued as modified by this section. The Receiver shall proceed to liquidate all assets of defendant Arlington Press, Inc. For purposes of this section, all assets of defendant Golden West Advertising, Inc. shall be considered to be assets of defendant Arlington Press, Inc.

Upon liquidation of the assets of defendant Arlington Press, Inc., the Receiver shall submit his report and his application for fees and expenses, and upon approval of the same shall pay:

A. the amounts allowed by the Court pursuant to his application for fees and expenses, including but not limited to, professional fees and auctioneers' fees;

 

B. to the extent that funds remain, in the order of priority set forth in 11 U.S.C. § 507; provided that all claims for commissions and claims for wages and salaries by managerial employees (which shall be defined as consisting of defendants and all persons with a title of vice president, manager, executive assistant, or supervisor) shall be specifically excluded from any 11 U.S.C. § 507(a)(3) and (4) distribution; and provided further that claims by the FTC for consumer redress shall be considered within the ambit of any 11 U.S.C. § 507(a)(6) distribution; and

 

C. to the extent that funds remain, to the FTC.

Upon the filing of the Receiver's final report, the Court's approval of the same, and the Receiver's fulfillment of his payment obligations under this section, the Receivership over defendant Arlington Press, Inc. pursuant to this Court's Preliminary Injunction Order of January 18, 1999, shall be terminated and the provisions of that Preliminary Injunction Order relating to the appointment of the Receiver shall be dissolved. Defendant, Arlington Press, Inc., shall indemnify and hold harmless the Receiver for any claim made against the Receiver arising out of the Receiver's activities pursuant to this Stipulated Order or previous orders of this Court.

VIII.

DISSOLUTION OF ASSET FREEZE

IT IS FURTHER ORDERED that:

A. The freeze against the assets of defendants David T. Umholtz and Wendy J. Foster pursuant to Section IV of the Preliminary Injunction Order entered by this Court on January 18, 1999, shall be lifted to the extent necessary for said defendants to make the payments to the Commission required by Section IV of this Stipulated Order, and upon compliance with that section by those defendants and George W. Umholtz, shall be lifted permanently.

 

B. The freeze against the assets of defendant Arlington Press, Inc. pursuant to Section IV of the Preliminary Injunction Order entered by this Court on January 18, 1999, shall remain in effect until such time as the Receiver receives payment of all Court-approved fees and expenses of the Receiver, and the Receiver is discharged by the Court.

 

//

//

//

IX.

CUSTOMER LISTS

IT IS FURTHER ORDERED that defendants are permanently restrained and enjoined from providing or disclosing, whether or not in exchange for payment or other consideration, to any party, the name, address, telephone number, credit card number, bank account number, e-mail address, or other information related to any customers or potential customers of defendants Arlington Press, Inc. or Golden West Advertising, Inc. Provided, however, that defendants may provide such information to a law enforcement agency either voluntarily, or as required by any law, regulation, or court order.

X.

ACKNOWLEDGMENT OF RECEIPT

IT IS FURTHER ORDERED that, within five (5) business days after receipt by each defendant of this Stipulated Order as entered by the Court, each defendant shall submit to the FTC a truthful sworn statement, in the form shown on Appendix B to this Stipulated Order, that shall acknowledge receipt of this Final Order.

XI.

DISTRIBUTION OF STIPULATED ORDER BY DEFENDANTS

IT IS FURTHER ORDERED that, for a period of five (5) years from the date of entry of this Stipulated Order, the defendants shall:

A. Provide a copy of this Stipulated Order to, and obtain a signed and dated acknowledgment of receipt of same from, each officer or director and each individual serving in a management capacity, whether designated as employees, immediately upon employing or retaining any such persons, for any business in which (1) any defendant is an owner of the business or directly or indirectly manages or controls the business, and (2) the business is engaged in or assists others in engaging in telemarketing;

 

B. Provide, in the form shown on Appendix C, a copy of a summary of this Stipulated Order to, and obtain a signed and dated acknowledgment of receipt of same from, all personnel involved in responding to consumer complaints or inquiries, and all sales personnel, whether designated as employees or engaged in telemarketing or the supervision of telemarketing, or otherwise, immediately upon employing or retaining any such persons, for any business in which (1) any defendant is an owner of the business or directly or indirectly manages or controls the business, and (2) the business is engaged in or assists others in engaging in telemarketing; and

 

C. Maintain for a period of three (3) years after execution and, upon reasonable notice, make available to representatives of the Commission the original signed and dated acknowledgments of the receipt of copies of this Stipulated Order and the summary of this Stipulated Order, per Appendix C, as required in subsections A and B of this section.

 

//

//

//

XII.

MONITORING BY DEFENDANTS

IT IS FURTHER ORDERED that defendants, in connection with any business in which (1) any defendant is an owner of the business or directly or indirectly manages or controls the business, and (2) the business is engaged in, or assists others in engaging in telemarketing, are hereby permanently restrained and enjoined from:

A. Failing to take reasonable steps sufficient to monitor and ensure that all employees and independent contractors engaged in sales or other customer service functions comply with Sections I, II, and III of this Stipulated Order. Such steps shall include adequate monitoring of sales presentations or other calls with customers, and shall also include, at a minimum, the following: (1) listening to the oral representations made by persons engaged in sales or other customer service functions; (2) establishing a procedure for receiving and responding to customer complaints; and (3) ascertaining the number and nature of customer complaints regarding transactions in which each employee or independent contractor is involved; provided that this section does not authorize or require any defendant to take any steps that violate any federal, state, or local laws;

 

B. Failing to investigate promptly and fully any customer complaint received by any business to which this section applies; and

 

C. Failing to take corrective action with respect to any sales person whom defendant determines is not complying with this Stipulated Order, which may include training, disciplining, and/or terminating such sales person.

XIII.

RECORD KEEPING

IT IS FURTHER ORDERED that, for a period of five (5) years from the date of entry of this Stipulated Order, the defendants, in connection with any business in which (1) any defendant is an owner of the business or directly or indirectly manages or controls the business, and (2) the business is engaged in or assists others in engaging in telemarketing, are hereby restrained and enjoined from failing to create, and from failing to retain for a period of three (3) 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 employed in any capacity by such business, 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 business subject to this section shall retain such records for any terminated employee for a period of two (2) years following the date of termination;

 

C. Records containing the names, addresses, telephone numbers, dollar amounts paid, quantity of items or services purchased, and description of items or services purchased, for all consumers to whom such business has sold, invoiced, or shipped any goods or services;

 

D. Records that reflect, for every customer complaint or refund request, whether received directly or indirectly, or through any third party:

1. the customer's name, address, telephone number and the dollar amount paid by the customer;

2. the written complaint or refund request, if any, and the date of the complaint or refund request;

3. the basis of the complaint, including the name of any sales person complained against, and the nature and result of any investigation conducted concerning any complaint;

4. each response and the date of the response;

5. any final resolution and the date of the resolution; and

6. in the event of a denial of a refund request, the reason for the denial; and

E. Copies of all sales scripts, training materials, advertisements, or other marketing materials utilized; provided that copies of all sales scripts, training materials, advertisements, or other marketing materials utilized shall be retained for (3) years after the last date of dissemination of any such materials.

XIV.

COMPLIANCE REPORTING BY DEFENDANTS

IT IS FURTHER ORDERED that, in order that compliance with the provisions of this Stipulated Order may be monitored:

A. For a period of five (5) years from the date of entry of this Stipulated Order, defendants shall notify the FTC of the following:

1. Any changes in any defendant's residence, mailing address, or telephone numbers, within ten (10) days of the date of such change;

2. Any changes in any defendant's employment status (including self-employment) within ten (10) days of such change. Such notice shall include the name and address of each business that the defendant is affiliated with or employed by, a statement of the nature of the business, and a statement of the defendant's duties and responsibilities in connection with the business or employment; and

3. Any proposed change in the structure of any business entity owned or controlled by any defendant, such as creation, incorporation, dissolution, assignment, sale, merger, creation or dissolution of subsidiaries, proposed filing of a bankruptcy petition, change in the corporate name or address, or any other change that could affect compliance obligations arising out of this Stipulated Order, thirty (30) days prior to the effective date of any proposed change; provided, however, that, with respect to any proposed change in the business about which the defendants learn less than thirty (30) days prior to the date such action is to take place, the defendants shall notify the FTC as soon as is practicable after learning of such proposed change.

B. One hundred eighty (180) days after the date of entry of this Stipulated Order, each defendant shall provide a written report to the FTC, sworn to under penalty of perjury, setting forth in detail the manner and form in which that defendant has complied and is complying with this Stipulated Order. This report shall include but not be limited to:

1. Defendant's then-current residence address and telephone number;

2. Defendant's then-current employment, business addresses and telephone numbers, a description of the business activities of each employer, and defendant's title and responsibilities for each employer;

3. A copy of each acknowledgment of receipt of this Stipulated Order obtained by the defendant pursuant to Section XI of this Stipulated Order, if any; and

4. A statement describing the manner in which the defendant has complied and is complying with Sections I, II, III, and XIII of this Stipulated Order.

C. Upon written request by a representative of the FTC, the defendants shall submit additional written reports (under oath, if requested) and produce documents on fifteen (15) days' notice with respect to any conduct subject to this Stipulated Order.

 

D. For the purposes of this Stipulated Order, the defendants shall, unless otherwise directed by the FTC's authorized representatives, mail all written notifications to the Director of the FTC's Regional Office in Chicago at the address specified in Section XVII below.

 

E. For 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 a defendant performs services as an employee, consultant, or independent contractor.

XV.

FTC'S AUTHORITY TO MONITOR COMPLIANCE

IT IS FURTHER ORDERED that the FTC is authorized to monitor defendants' compliance with this Stipulated Order by all lawful means, including but not limited to the following:

A. The FTC is authorized, without further leave of Court, to obtain discovery from any person in the manner provided by Chapter V of the Federal Rules of Civil Procedure, Fed. R. Civ. P. 26-37, including the use of compulsory process pursuant to Fed. R. Civ. P. 45, for the purpose of monitoring and investigating any defendant's compliance with any provision of this Stipulated Order;

 

B. The FTC is authorized to use representatives posing as customers and suppliers to any defendant, any defendant's employees, or any other entity managed or controlled in whole or in part by any defendant, without the necessity of identification or prior notice; and

 

C. Nothing in this Stipulated Order shall limit the FTC's lawful use of compulsory process, pursuant to Sections 9 and 20 of the FTC Act, 15 U.S.C. §§ 49 & 57b-1, to investigate whether the defendants have violated any provision of this Stipulated order, any provision of the Telemarketing Rule, 16 C.F.R. Part 310, or Section 5 of the FTC Act, 15 U.S.C. § 45.

XVI.

ACCESS TO BUSINESS PREMISES

IT IS FURTHER ORDERED that, for a period of five (5) years from the date of entry of this Stipulated Order, for the purpose of further determining compliance with this Stipulated Order, the defendants shall permit representatives of the FTC, within three (3) business days of receipt of written notice from the FTC:

A. Access during normal business hours to any office, or facility storing documents, of any business in which (1) any defendant is an owner of the business or directly or indirectly manages or controls the business, and (2) the business is engaged in or assists others in engaging in telemarketing. In providing such access, defendants shall permit representatives of the FTC to inspect and copy all documents relevant to any matter contained in this Stipulated Order, and shall permit FTC representatives to remove documents relevant to any matter contained in this Stipulated Order for a period not to exceed five (5) business days so that the documents may be inspected, inventoried, and copied; and

 

B. To interview the officers, directors, and employees, including all personnel involved in responding to customer 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 section applies, concerning matters relating to compliance with the terms of this Stipulated Order. The persons interviewed may have counsel present.

Provided that, upon application of the Commission, and for good cause shown, the Court may enter an ex parte order granting immediate access to any defendant's business premises for the purpose of inspecting and copying all documents relevant to any matter contained in this Stipulated Order.

XVII.

NOTICES

IT IS FURTHER ORDERED that all notices required of the defendants by this Stipulated Order shall be made to the following address:

Regional Director

Federal Trade Commission

55 East Monroe Street, Suite 1860

Chicago, Illinois 60603

Re: FTC v. Arlington Press, Inc., et al.

or any such other address as the Commission shall specify.

XVIII.

RETENTION OF JURISDICTION

IT IS FURTHER ORDERED that the Court shall retain jurisdiction of this matter for all purposes.

There being no just reason for delay, the Clerk of the Court is hereby directed to enter this Stipulated Order.

The Commission and the defendants hereby stipulate and agree to entry of the foregoing Stipulated Order, which shall constitute a final judgment in this action.

SIGNED AND STIPULATED BY:

APPENDIX A

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
WESTERN DIVISION

FEDERAL TRADE COMMISSION, Plaintiff,

v.

ARLINGTON PRESS, INC., d/b/a CONSUMER DATA SERVICE, a California corporation, GOLDEN WEST ADVERTISING, INC., a California corporation, DAVID T. UMHOLTZ, individually and as an officer of the corporations, WENDY J. FOSTER, individually and as an officer of the corporations, GEORGE W. UMHOLTZ, individually and as an officer of the corporations, Defendants.

Civ. No. 98-9260 MMM (CWx)

I, , hereby state that the information contained in the Financial Statement of defendant and related papers provided to the Federal Trade Commission on [and as amended on , if applicable] was [were] true, accurate, and complete at such time.

I declare under penalty of perjury that the foregoing is true and correct.

Dated:

APPENDIX B

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
WESTERN DIVISION

FEDERAL TRADE COMMISSION, Plaintiff,

v.

ARLINGTON PRESS, INC., d/b/a CONSUMER DATA SERVICE, a California corporation, GOLDEN WEST ADVERTISING, INC., a California corporation, DAVID T. UMHOLTZ, individually and as an officer of the corporations, WENDY J. FOSTER, individually and as an officer of the corporations, GEORGE W. UMHOLTZ, individually and as an officer of the corporations, Defendants.

Civ. No. 98-9260 MMM (CWx)

, being duly sworn, hereby states and affirms as follows:

1. My name is . My current residence address is . I am a citizen of the United States and am over the age of eighteen. I have personal knowledge of the facts set forth in this Affidavit.

2. I am a defendant in Federal Trade Commission v. Arlington Press, Inc., et al., (United States District Court for the Central District of California).

3. On , I received a copy of the Stipulated Order for Permanent Injunctive Relief with Consumer Redress and Other Equitable Relief, which was signed by the Honorable Margaret M. Morrow, and entered by the Court on . A true and correct copy of the Order I received is appended to this Affidavit.

I declare under penalty of perjury under the laws of the United States that the foregoing is true and correct. Executed on , at , California.

[Full name of defendant]

State of California

County of

Subscribed and sworn to before me this day of , 1999.

APPENDIX C

To Whom it May Concern:

The Federal Trade Commission has sued Arlington Press, Inc., Golden West Advertising, Inc., David T. Umholtz, Wendy J. Foster, and George W. Umholtz in the United States District Court for the Central District of California, in case # CV 98-9260-MMM (CWx). The defendants have denied the Commission's allegations, but pursuant to stipulation, the United States District Court for the Central District of California, the Honorable Margaret M. Morrow presiding, has entered a Stipulated Order for Permanent Injunctive Relief with Consumer Redress and Other Equitable Relief ("Stipulated Order") that applies to Arlington Press, Inc., Golden West Advertising, Inc., David T. Umholtz, Wendy J. Foster, and George W. Umholtz, and any corporation or unincorporated business entity owned or controlled by any 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 the Stipulated Order by any means, including through this notice, whether or not such persons act directly or through any corporation, subsidiary, division, or other device.

Violation of the Stipulated Order, which is a federal court order, can be determined to be contempt of court, which can be prosecuted as a crime punishable by fine or imprisonment.

The Court's order includes the following provisions of which you should be aware:

PROHIBITED BUSINESS ACTIVITIES PURSUANT TO THE FTC ACT

IT IS THEREFORE ORDERED that, in connection with the advertising, promotion, offering, or sale of any auction information packages, foreclosed home information packages, job opportunity packages, or any other goods or services, defendants are hereby permanently restrained and enjoined from:

A. Misrepresenting, expressly or by implication, that customers who purchase defendants' publications on seized cars and other items frequently are able to purchase vehicles in good condition for a fraction of their wholesale values, including as little as $200;

 

B. Misrepresenting, expressly or by implication, that customers who purchase defendants' publications on foreclosed homes frequently are able to purchase foreclosed homes in reasonably good condition for substantially below their market values;

 

C. Misrepresenting, expressly or by implication, that customers who purchase defendants' publications on at-home typing jobs will receive listings of businesses currently seeking to hire individuals to type at home for such businesses;

 

D. Misrepresenting, expressly or by implication, that customers who purchase defendants' publications on government jobs will receive listings of actual positions that government agencies currently are seeking to fill;

 

E. Making any representation in any manner, expressly or by implication, about the ability of customers who purchase defendants' publications to: (1) purchase vehicles, homes or other goods or services, or (2) obtain employment or other sources of income, unless the representation is true and, at the time it is made, defendants possess and rely upon competent and reliable evidence that substantiates the representation;

 

F. Failing to disclose in a clear and conspicuous manner, prior to charging a customer for any goods or services, the total cost to purchase, receive, or use the goods or services that are the subject of a sales offer, and the nature and quantity of such goods or services;

 

G. Failing to disclose in a clear and conspicuous manner, prior to charging a customer for any goods or services, all material terms, conditions, and limitations of any refund policy or any policy of non-refundability;

 

H. Misrepresenting, expressly or by implication, that the experience of any consumer or consumers with respect to defendants' goods or services is the typical or representative experience of members of the public who use the good or service; or

 

I. Misrepresenting, expressly or by implication, any fact material to a customer's decision to purchase or use defendants' goods or services.

CUSTOMER AUTHORIZATION

IT IS FURTHER ORDERED that, in connection with the sale of any good or service in or affecting commerce, defendants and their successors, assigns, officers, agents, employees, and those persons in active concert or participation with them who receive actual notice of this Stipulated Order by personal service or otherwise, whether acting directly or through any entity, corporation, subsidiary, division, or other device, are hereby permanently restrained and enjoined from obtaining or submitting for payment a check, draft, or other form of negotiable paper drawn on a person's checking, savings, share, or similar account unless that person has provided his express verifiable authorization. Such authorization shall be deemed verifiable if any of the following means are employed:

A. Express written authorization by the customer, which may include the customer's signature on the negotiable instrument; or

 

B. Express oral authorization which is tape recorded and made available upon request to the customer's bank and which evidences clearly both the customer's authorization of payment for the goods and services that are the subject of the sales offer and the customer's receipt of all of the following information:

1. The date of the draft(s);

2. The amount of the draft(s);

3. The payor's name;

4. The number of draft payments (if more than one);

5. A telephone number for customer inquiry that is answered during normal business hours; and

6. The date of the customer's oral authorization; or

C. Written confirmation of the transaction, sent to the customer prior to submission for payment of the customer's check, draft, or other form of negotiable paper, that includes:

1. All of the information contained in subsections B.1 through B.6 of this section, supra; and

2. The procedures by which the customer may obtain a refund from the seller or telemarketer in the event the confirmation is inaccurate.

Provided, however, that this section shall not be construed to prohibit defendants from obtaining or submitting for payment a traditional credit, debit, or other substantially similar charge as to which the Fair Credit Billing Act, 15 U.S.C. §§ 1666-1666j, or any substantially similar provision of state or federal law applies at the time of the transaction.

PROHIBITED BUSINESS ACTIVITIES PURSUANT TO THE TELEMARKETING RULE

IT IS FURTHER ORDERED that, in connection with the advertising, promotion, offering, or sale of any auction information packages, foreclosed home information packages, job opportunity packages, or any other goods or services, defendants are hereby permanently restrained and enjoined from violating the Telemarketing Rule, 16 C.F.R. Part 310, as presently promulgated or as hereinafter amended, including but not limited to the following:

A. Violating Section 310.3(a)(4) of the Telemarketing Rule, 16 C.F.R. § 310.3(a)(4), by making false or misleading statements to induce the purchase of defendants' publications that include, but are not limited to, statements to the effect that:

1. Customers who purchase defendants' publications on seized cars frequently are able to purchase vehicles in good condition for a fraction of their wholesale values, including as little as $200;

2. Government agencies such as the United States Marshals Service and the United States Customs Service regularly seize vehicles, including vehicles in good condition like the red Ford Mustang depicted in defendants' advertisements and solicitations, and regularly sell those vehicles to the general public at prices substantially below their wholesale values;

3. Customers who purchase defendants' publications on foreclosed homes frequently are able to purchase foreclosed homes in reasonably good condition for substantially below their market values; and

4. Entities such as the United States Department of Housing and Urban Development, Fannie Mae, and Freddie Mac regularly foreclose on well-kept homes that are in good condition, and regularly sell those homes to the general public at prices substantially below their market values;

B. Violating Section 310.3(a)(1)(i) of the Telemarketing Rule, 16 C.F.R. § 310.3(a)(1)(i), by failing to disclose in a clear and conspicuous manner, before customers pay for their publications, the total costs to purchase, receive or use, and the quantity of, any goods or services that are the subject of the sales offer; or

 

C. Violating Section 310.3(a)(1)(iii) of the Telemarketing Rule, 16 C.F.R. § 310.3(a)(1)(iii), by making representations about their refund policy but failing to disclose in a clear and conspicuous manner, before customers pay for the products, all material terms and conditions of that policy.

The following definitions apply to this Appendix C:

1. "Customer" means any person who is or may be required to pay for goods or services offered through telemarketing. 16 C.F.R. § 310.2(i).

2. "Defendants" means Arlington Press, Inc., Golden West Advertising, Inc., David T. Umholtz, Wendy J. Foster, George W. Umholtz, and their successors, assigns, officers, agents, servants, employees, and those persons in active concert or participation with them who receive actual notice of this Stipulated order by personal service or otherwise, whether acting directly or through any entity, corporation, subsidiary, division, or other device.

3. "Material" means likely to affect a person's choice of, or conduct regarding, goods or services.

4. "Person" means any individual, group, unincorporated association, limited or general partnership, corporation, or other business entity.

5. "Telemarketing" means a plan, program, or campaign which is conducted to induce the purchase of goods or services by use of one or more telephones and which involves more than one interstate telephone call. 16 C.F.R. § 310.2(u).