IN THE UNITED STATES DISTRICT COURT UNITED STATES OF AMERICA, Plaintiff, v. TELEBRANDS CORPORATION, a corporation; and, AJIT KHUBANI individually and as an officer and director of the corporation, Defendants. Civ. Action No. 96-0827-R STIPULATION MODIFYING CONSENT DECREE WHEREAS: 1. On September 18, 1996, plaintiff, the United States of America, filed a complaint in this Court against defendants, Telebrands Corporation and Ajit Khubani, seeking relief for alleged violations of the Federal Trade Commission's Trade Regulation Rule Concerning Mail or Telephone Merchandise, 16 C.F.R. Part 435 ("Rule"). 2. This Court entered a Consent Decree (the "Consent Decree") on September 23, 1996, requiring defendants to pay a civil penalty, permanently enjoining the corporate defendant and its successors and assigns and the individual defendant from violating the Rule, and requiring them, among other things, to maintain detailed records documenting their compliance with the Rule. 3. The Consent Decree provides that this Court retains jurisdiction for the purpose, inter alia, of enabling the parties to apply for further orders or directions regarding the Consent Decree. 4. Pursuant to the Consent Decree, defendants paid the required civil penalty. 5. Since entry of the Consent Decree the Federal Trade Commission ("Commission") has determined that it has reason to believe as follows:
6. Without admitting the allegations or any wrongdoing, defendants have agreed with plaintiff to a settlement of the Commission's allegations and have negotiated a Modified Consent Decree (attached hereto as Exhibit "A"), providing for the following:
NOW, THEREFORE, IT IS HEREBY AGREED AND STIPULATED, by and between the parties, that the Consent Decree is, upon approval by the Court, hereby modified and superseded by the Modified Consent Decree, attached hereto as Exhibit "A." SO ORDERED this day of , 1999. UNITED STATES DISTRICT JUDGE DAVID W. OGDEN United States Attorney Assistant U.S. Attorney EUGENE M. THIROLF, Director Attorney FOR THE FEDERAL TRADE COMMISSION: ELAINE D. KOLISH LAWRENCE HODAPP JOEL N. BREWER FOR THE DEFENDANTS: TELEBRANDS CORPORATION Dated: By: AJIT KHUBANI AJIT KHUBANI, individually ULLMAN SHAPIRO & ULLMAN, L.L.P. By: ROBERT ULLMAN IN THE UNITED STATES DISTRICT COURT UNITED STATES OF AMERICA, Plaintiff, TELEBRANDS CORPORATION, a corporation; and, AJIT KHUBANI individually and as an officer and director of the corporation, Defendants. Civ. Action No. 96-0827-R WHEREAS: 1. On September 18, 1996, plaintiff, the United States of America, filed a complaint in this Court against defendants, Telebrands Corporation and Ajit Khubani, seeking relief for alleged violations of the Federal Trade Commission's Trade Regulation Rule Concerning Mail or Telephone Merchandise, 16 C.F.R. Part 435 ("Rule"). 2. This Court entered a Consent Decree (the "Consent Decree") on September 23, 1996, requiring defendants to pay a civil penalty, permanently enjoining the corporate defendant and its successors and assigns and the individual defendant from violating the Rule, and requiring them, among other things, to maintain detailed records documenting their compliance with the Rule. 3. Since entry of the Consent Decree the Federal Trade Commission ("Commission") has determined that it has reason to believe as follows:
4. Without admitting wrongdoing or any violation of the Rule or the Consent Decree, the defendants have agreed to a settlement of the Commission's allegations and a modification of the Consent Judgment upon the terms and conditions set forth below: DEFINITIONS 1. "Consent Decree" shall mean the Consent Decree entered in the above-captioned matter on September 23, 1996. 2. "Defendants" (except in Part II of this Modified Consent Decree) means Telebrands Corporation, and its officers, directors, agents, servants, employees, subsidiaries, affiliates, successors or assigns, and Ajit Khubani, individually and in his representative capacities, jointly and severally, and all other persons or entities in active concert or participation with them who receive actual notice of this Modified Consent Decree by personal service or otherwise. 3. "Telephone" shall be as the term "telephone" is defined by the Mail or Telephone Order Merchandise Rule ("Rule"), 16 C.F.R. § 435.2(b). 4. "Consumer complaint" refers to any communication by any person directly to defendants, or any communication by any person referred to defendants by a third-party dispute mediation agency or by a state or federal government agency, concerning (a) partial receipt, non-receipt or untimely receipt by any consumer of any merchandise ordered from defendants by mail or telephone, (b) partial receipt, non-receipt or untimely receipt by any consumer of any refund from defendants required by section 435.1(c) of the Rule, or (c) any failure to afford any consumer any timely or complete or accurate notice of delay from defendants required by section 435.1(b) of the Rule. I. FINDINGS 1. This Court has jurisdiction of the subject matter and of the parties. 2. Relief may be granted against the defendants under Sections 5(a)(1), 5(m)(1)(A), 9, 13(b) and 16(a) of the Federal Trade Commission Act, 15 U.S.C. §§ 45(a)(1), 45(m)(1)(A), 49, 53(b), and 56(a). II. CIVIL PENALTY 3. Pursuant to Section 5(m)(1)(A) of the Federal Trade Commission Act, 15 U.S.C. § 45(m)(1)(A), defendants Telebrands Corporation and its successors and assigns, and Ajit Khubani, shall pay plaintiff a civil penalty in the amount of eight hundred thousand dollars ($800,000.00). 4. Defendants shall pay the amount required in Paragraph 3 in the following installments:
5. If, having not at any time meanwhile defaulted in the making of any payment required by Paragraph 4, within one (1) year of the entry of this Modified Consent Decree, Defendants pay altogether seven hundred fifty thousand dollars ($750,000.00), the remaining fifty thousand dollars ($50,000.00) in civil penalties shall be forgiven. 6. Defendants shall make the payments required by Paragraphs 3-5 by electronic fund transfer in accordance with instructions provided by the Office of Consumer Litigation, Civil Division, U.S. Department of Justice, Washington, D.C. 20530, for appropriate disposition. 7. In the event of any default in payment, which default continues for ten (10) days beyond the due date of payment, the entire unpaid amount under Paragraphs 3-5, together with interest, as computed pursuant to 28 U.S.C. § 1961, from the date of default to the date of payment, shall immediately become due and payable. 8. Within five (5) business days of the receipt by defendants of written notice of the entry of this Modified Consent Decree, defendants shall, pursuant to 31 U.S.C. § 7701, furnish the Commission their respective taxpayer identifying numbers (Social Security and employer identification numbers), which shall, if necessary, be used for purposes of collecting and reporting on any delinquent amount arising out of their relationship with the government. Except for purposes of enforcing this Modified Consent Decree, this information shall be treated as exempt from public disclosure to the extent required by Section 21(f) of the Federal Trade Commission Act, 15 U.S.C. § 57b-2(f). III. INJUNCTION 9. Defendants are hereby enjoined from violating, directly or through any corporation, subsidiary, division, fulfillment house, drop shipper, agency or other device, any provision of the Rule, 16 C.F.R. Part 435, or as the Rule may hereafter be amended. A copy of the Rule is attached hereto as "Appendix A" and incorporated herein as if fully set forth verbatim. 10. In connection with the employment of any fulfillment house, drop shipper, agency or other person employed to perform any activities, directly or indirectly, relating to the advertising, sale, or fulfillment of mail or telephone order merchandise, or the keeping of records required by this Modified Consent Decree, defendants shall, among other things:
IV. RECORDKEEPING REQUIREMENTS 11. IT IS FURTHER ORDERED that, for a period of five (5) years from the date of entry of this Modified Consent Decree, defendants shall maintain and preserve from destruction all records from the preceding two (2) years demonstrating compliance with the Rule and this Modified Consent Decree. 12. In addition to the foregoing, with respect to their compliance with the Rule, for a period of five (5) years after the entry of this Modified Consent Decree defendants shall maintain and preserve from destruction all records from the preceding two (2) years as follows:
13. In addition to the foregoing, with respect to their compliance with the Rule, for a period of five (5) years after the entry of this Modified Consent Decree defendants shall maintain and preserve from destruction from the preceding one (1) year each complete written complaint of each consumer, including all documentation or other materials included with the complaint by the consumer, respecting any non-delivery, partial delivery or untimely delivery of the merchandise, any non-payment, partial payment or delayed payment of any refund required by the Rule, or respecting any failure of the defendants to provide notification of delay and to obtain the consumer's consent thereto, and the date of receipt of the complaint by defendants. 14. Defendants shall for a period of five (5) years after the entry of this Modified Consent Decree, permit the Commission or its staff, within seven (7) business days of their receipt of a written request, to inspect and copy all records they are required by this Modified Consent Decree to keep; provided, however, that any documents or records being actively used during the ordinary course of business are to be inspected during non-business hours or at a mutually convenient time. V. MONITORING REQUIREMENTS 15. IT IS FURTHER ORDERED that, in connection with their sale of merchandise ordered by consumers by mail or by telephone, sixty (60) days from the date of the entry of this Modified Consent Decree, defendants shall retain a monitor, subject to the written approval of the Commission's Associate Director for Enforcement, to audit their records and activities for purposes of preparing and providing to this Court, the defendants and to the Commission a written report on defendants' compliance with the Rule and this Modified Consent Decree. Defendants shall pay the monitor his or her customary or usual fees and all reasonable costs and expenses related to his or her performance of his or her duties under this Part. Defendants shall afford the monitor promptly upon request access to, or assistance in gaining access to, any corporation, subsidiary, division, fulfillment house, drop shipper, agency or other person, controlled, employed or acting in concert with defendants, engaged, directly or indirectly, in the advertising, offering for sale, sale, or distribution of any merchandise ordered by consumers by mail or by telephone. The monitor's written report, which shall be provided to the Commission no later than one hundred fifty (150) days after the entry of this Modified Consent Decree, shall address the following issues:
16. A subsequent monitor's report shall thereafter be provided to the Court, the defendants and the Commission, on the first year anniversary of the first monitor's report. The parties may at any time by mutual written agreement, signed by each defendant and the Commission's Associate Director for Enforcement, require additional monitor's reports or rescind the requirement for additional monitor's reports. Defendants shall retain the same monitor to perform such additional monitoring and to prepare additional reports, unless the monitor declines or is unable to perform such work or the Associate Director for Enforcement notifies defendants in writing that, for cause, a new monitor should be retained. Any new monitor shall be approved in writing by the Associate Director for Enforcement. The monitor performing such additional monitoring and preparing such additional reports shall perform the duties and under the terms and conditions set forth in Paragraph 15 of this Part. In the event the defendants do not agree to retain any monitor after the second monitor's report, the Commission may petition this Court pursuant to Rule 53 of the Federal Rules of Civil Procedure, and the Court may, for cause shown, order the appointment of such additional monitors to perform such additional duties at defendants' expense, as may be appropriate. VI. PERSONS AFFECTED; CONTINUING JURISDICTION 17. IT IS FURTHER ORDERED that the corporate defendant shall:
18. For a period of five (5) years from the date of entry of this Modified Consent Decree, the individual defendant shall notify the Commission's Associate Director for Enforcement within thirty (30) days of any change in his affiliation with, or change in his active participation in the management or direction of, any business which is engaged in the sale or distribution of merchandise covered by the Rule. Provided, however, that with respect to any change in his affiliation or participation, as aforesaid, about which defendant learns less than thirty (30) days prior to the date such action is to take place, defendant shall notify the Commission's Associate Director for Enforcement as soon as practicable after obtaining such knowledge. 19. This Court shall retain jurisdiction of this matter for the purpose of enabling any of the parties to this Modified Consent Decree to apply to the Court at any time for such further orders or directives as may be necessary or appropriate for the interpretation, implementation, or modification of this Modified Consent Decree, for the enforcement of compliance therewith, or the punishment of violations thereof. JUDGMENT IS THEREFORE ENTERED in favor of plaintiff and against defendant, pursuant to all the terms and conditions recited above. this day of , 1999. UNITED STATES DISTRICT JUDGE The parties, by their respective counsel, hereby consent to the terms and conditions of the Modified Consent Decree as set forth above and consent to the entry thereof. Defendants waive any rights that may arise under the Equal Access to Justice Act, 28 U.S.C. § 2412, as amended by Pub.L. 104-121, 110 Stat. 847, 863-64 (1996). FOR THE UNITED STATES OF AMERICA: DAVID W. OGDEN United States Attorney Assistant U.S. Attorney EUGENE M. THIROLF, Director FOR THE FEDERAL TRADE COMMISSION: ELAINE D. KOLISH LAWRENCE HODAPP JOEL N. BREWER FOR THE DEFENDANTS: TELEBRANDS CORPORATION DATED: By: AJIT KHUBANI AJIT KHUBANI, individually ULLMAN SHAPIRO & ULLMAN, L.L.P. By: ROBERT ULLMAN / |