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UNITED STATES DISTRICT COURT FEDERAL TRADE COMMISSION, v. HOLD BILLING SERVICES, LTD., CIVIL NO. SA-98-CA-0629-FB STIPULATED FINAL JUDGMENT AND ORDER FOR PERMANENT INJUNCTION AS TO DEFENDANT MILFORD H. BALABAN Plaintiff, the Federal Trade Commission ("FTC" or "Commission"), has filed its complaint for permanent injunction and other relief pursuant to § 13(b) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. § 53(b), charging Defendant Milford H. Balaban with violating Section 5 of the FTC Act, 15 U.S.C. § 45. The parties have agreed to the entry of this Stipulated Final Judgment and Order for Permanent Injunction ("Order") by this Court to resolve all matters of dispute between them in this action. NOW, THEREFORE, Plaintiff Federal Trade Commission and Defendant Milford H. Balaban having requested the Court to enter this Order, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED as follows: FINDINGS 1. This Court has jurisdiction of the subject matter of this case and of the parties consenting hereto. 2. Venue is proper as to all parties in the Western District of Texas. 3. The activities of Defendant Milford H. Balaban were in or affecting commerce, as defined in the FTC Act, 15 U.S.C. § 44. 4. The Complaint states a claim upon which relief may be granted against Defendant under § 5 of the FTC Act, 15 U.S.C. § 45(a). 5. Defendant has waived all rights that may arise under the Equal Access to Justice Act, 28 U.S.C. § 2412, amended by Pub. L. 104-121, 110 Stat. 847, 863-64 (1996). 6. This Order does not constitute an admission by Defendant that he has engaged in violations of the FTC Act. 7. Nothing in this Order shall be construed as relieving Defendant of any obligations he may have under any other rule or law enforced by the FTC or Federal Communications Commission. DEFINITIONS 1. "Commission" or "FTC" means the Federal Trade Commission. 2. "Contribution" means money or any item of value provided in response to a solicitation made on behalf of, or in the name of, any non-profit or charitable organization or any for-profit organization using a name that implies, directly or indirectly, that it is a non-profit or charitable organization. 3. "Defendant" means Defendant Milford H. Balaban and his successors and assigns. 4. "LEC" or local exchange carrier means the local telephone company from which a Line Subscriber receives his or her telephone bill. 5. "Line Subscriber" means an individual or entity who has arranged with a LEC to obtain local telephone service provided through an assigned telephone number, and to be billed for such service on a monthly or other periodic basis. 6. "Material" means likely to affect a Person's decision-making or conduct. 7. "Person" means any individual, partnership, corporation, association or unincorporated association, government or governmental subdivision or agency, group, or other entity. 8. "Representatives" means Defendant's partners, agents, employees, servants and attorneys and those Persons in active concert or participation with them who receive actual notice of this Order by personal service or otherwise. 9. "Telephone-Billed Transaction" means any purchase or purported purchase of a good or service that is charged to a Line Subscriber's telephone bill, including any voice mail or audiotext service, but excluding: (1) purchases solely of common carrier transmission services; and (2) purchases of services accessed by dialing a 900 number or other number that can be blocked by the Line Subscriber pursuant to 47 U.S.C. § 228(c). I. BAN ON SWEEPSTAKES AND NEGATIVE OPTION BILLING IT IS THEREFORE ORDERED that Defendant and his Representatives are hereby permanently restrained and enjoined from billing or causing to be billed, or collecting or attempting to collect payment, directly or indirectly, from a Line Subscriber for any Telephone-Billed Transaction made in connection with a sweepstakes, prize promotion or negative option marketing plan. II. REQUIRED DISCLOSURES IT IS FURTHER ORDERED that Defendant and his Representatives are hereby permanently restrained and enjoined from billing or causing to be billed, or collecting or attempting to collect payment, directly or indirectly, from a consumer for any purchase without disclosing, clearly and conspicuously, before a potential purchaser authorizes charges for any goods or services:
III. PERFORMANCE BOND FOR CHARITABLE SOLICITATIONS IT IS FURTHER ORDERED that Defendant and his Representatives are permanently restrained and enjoined from soliciting or receiving, or providing others the means and instrumentalities to solicit or receive, contributions or payments for any good or service offered on behalf of, or for the benefit of, any non-profit charitable organization or any for-profit organization using a name that implies, directly or indirectly, that it is a non-profit or charitable organization, without first obtaining a performance bond in the principal amount of ONE HUNDRED THOUSAND DOLLARS ($100,000); maintaining the bond in that principal sum so long as any of them solicits or receives, or provides others the means and instrumentalities to solicit or receive, such contributions or payments; and complying with each of the bonding and other requirements set forth below; Provided, however, that the bonding requirements of this Paragraph shall not be triggered by volunteer fund raising performed without compensation by Defendant or his Representatives on behalf of a bona fide charitable organization meeting the requirements of Section 501(c)(3) of the Internal Revenue Code. The bond shall be conditioned upon compliance by the Defendant and his Representatives, or any of them, with Section 5 of the FTC Act, 15 U.S.C. § 45 ("Section 5"), and with the provisions of this Order. The bond shall be deemed continuous and remain in full force and effect so long as Defendant or any of his Representatives continues to solicit, or provide others the means and instrumentalities to solicit, contributions or payments, and for at least one (1) year after any of them has ceased to engage in any such activity. The bond shall cite this Order as the subject matter of the bond, and shall provide surety thereunder against financial loss due, in whole or in part, to any violation of Section 5 of the FTC Act, or to any violation of the provisions of this Order. The bond shall be an insurance agreement providing surety for financial loss issued by a surety company that holds a Federal Certificate of Authority As Acceptable Surety On Federal Bonding and Reinsuring. Such bond shall inure to the FTC for use as consumer redress or disgorgement owed as a result of any violation of Section 5 of the FTC Act or this Order. The performance bond shall be executed in favor of the FTC if the FTC demonstrates to this Court, or to a Magistrate thereof, by a preponderance of the evidence, that Defendant or his Representatives, or any of them, violated any condition of the bond. Defendant and his Representatives shall not disclose the existence of the performance bond to any Person without also disclosing clearly and prominently at the same time: "THIS BOND IS REQUIRED BY ORDER OF THE U.S. DISTRICT COURT IN SETTLEMENT OF CHARGES THAT DEFENDANT AND HIS REPRESENTATIVES ENGAGED IN A PATTERN AND PRACTICE OF MAKING FALSE AND MISLEADING REPRESENTATIONS IN CONNECTION WITH SOLICITING PAYMENTS ON BEHALF OF A FOR-PROFIT VETERANS' ORGANIZATION." If triggered by a written representation, the required disclosure shall be set forth in a clear and conspicuous manner, separated from all other text in 100 percent 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 Defendant and his Representatives shall provide a copy of any bond required by this Paragraph to the Associate Director, Division of Marketing Practices, Federal Trade Commission, 6th and Pennsylvania Avenue, N.W., Washington, D.C. 20580. The bond required by this Paragraph shall be in addition to, and not in lieu of, any other bond required by law. Proceedings instituted under this Paragraph are in
addition to, and not in lieu of, any other civil or criminal remedies
provided by law, including any other proceedings the FTC may initiate to
enforce this Order.
IV. PROHIBITED CHARITABLE SOLICITATION PRACTICES
IT IS FURTHER ORDERED Making or assisting others to make, expressly or by implication, orally or in writing, any statement or representation of material fact that is false or misleading, including, but not limited to, any false representation about:
Failing to disclose, if asked by any consumer, the percentage or amount of any payment or contribution that is or will be paid to any non-profit organization; and Failing to disclose that a payment or contribution is not tax deductible, if that is the case. V. CONSUMER REDRESS
IT IS FURTHER ORDERED VI. RIGHT TO REOPEN IT IS FURTHER ORDERED that: The Commission's agreement to this Order is expressly premised upon the financial condition of Defendant as represented in the "Financial Statement of Individual Defendant" provided by Defendant to the Commission dated October 21, 1998, which contained material information upon which the Commission relied in negotiating and consenting to this Order. If, at any time following entry of this Order, the Commission obtains information indicating that any of Defendant's representations in his financial statement concerning his assets, income, liabilities or net worth were fraudulent, materially misleading, materially inaccurate or incomplete, the Commission may, upon motion to the Court, request that this Order be reopened for the purpose of requiring payment of consumer redress by Defendant; 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 Paragraph 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 Plaintiff may initiate to enforce this Order. For purposes of this Paragraph, and any subsequent proceedings to enforce payment, including but not limited to a nondischargeability complaint filed in bankruptcy proceedings, Defendant waives any right to contest any of the allegations of the Complaint. A finding by the Court of any material misrepresentation
or omission to the Commission as to the financial condition of Defendant
shall immediately make due and payable to the Commission from Defendant,
the amount of TWO MILLION ONE HUNDRED FIFTY-FOUR THOUSAND DOLLARS
($2,154,000.00) for consumer redress, and a judgment shall issue in that
amount against Defendant. The Court, from the stipulation of the
parties, finds that this sum represents the amount received by Defendant
and Defendants Veterans of America Association, Ltd. and Keith Calil
from consumers, and due to them as redress. The Commission, or any of
its designees, may record and collect said judgment. The Commission will
not seek payment of redress from Defendant except as provided in
Paragraph VI., nor seek an amount in excess of said TWO MILLION ONE
HUNDRED FIFTY-FOUR THOUSAND DOLLARS ($2,154,000.00).
VII. BILLING LIST CONFIDENTIALITY
IT IS FURTHER ORDERED VIII. MAINTENANCE OF BUSINESS RECORDS IT IS FURTHER ORDERED that, for a period of three (3) years from the date of entry of this Order, for each business that Defendant or his Representatives, or any of them, directly or indirectly manage, control, or have a majority ownership interest in, that is engaged in marketing goods or services to consumers, or assisting others engaged in those activities, Defendant and his Representatives are hereby restrained and enjoined from failing to create, and from failing to retain for a period of two (2) years following the date of such creation, unless otherwise specified:
IX. COMPLIANCE REPORTING BY DEFENDANT IT IS FURTHER ORDERED that, in order that compliance with the provisions of this Order may be monitored:
One hundred eighty (180) days after the date of entry of this Order, 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 Defendant has complied and is complying with this Order. The report shall include but not be limited to:
Upon written request by a representative of the Commission, Defendant shall submit additional written reports (under oath, if requested) and produce documents on reasonable notice with respect to any conduct subject to this Order; For the purposes of this Order, Defendant shall, unless otherwise directed by the Commission's authorized representatives, mail all written notifications to the Commission to: Associate Director For the purposes of this Paragraph,
"employment" includes the performance of services as an
employee, consultant, or independent contractor; and
"employers" include any individual or entity for whom
Defendant performs services as an employee, consultant, or independent
contractor.
X. COMMISSION'S AUTHORITY TO MONITOR COMPLIANCE IT IS FURTHER ORDERED that the Commission is authorized to monitor Defendant's compliance with this Order by all lawful means, including but not limited to the following: The Commission 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 Defendant's compliance with any provision of this Order; The Commission is authorized to use representatives posing as consumers, potential clients and suppliers to Defendant, including holding incidental conversations with customer service and other representatives of Defendant, without the necessity of identification, prior notice, or the presence of counsel; and Nothing in this Order shall limit the Commission'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 Defendant has
violated any provision of this Order, Section 5 of the FTC Act, 15 U.S.C.
§ 45, or any applicable rule or regulation promulgated and enforced by
the Commission thereunder.
XI. ACCESS TO BUSINESS PREMISES
IT IS FURTHER ORDERED
XII. DISTRIBUTION OF ORDER IT IS FURTHER ORDERED that, for a period of three (3) years from the date of entry of this Order, Defendant shall:
XIII. ACKNOWLEDGMENT OF RECEIPT OF ORDER BY DEFENDANT IT IS FURTHER ORDERED that within five (5) business days after receipt by Defendant of this Order as entered by the Court, Defendant shall submit to the Commission a truthful sworn statement, in the form shown on Appendix B, that shall acknowledge receipt of this Final Order.XIV. COSTS IT IS FURTHER ORDERED that each party shall bear its own costs and attorney fees incurred in connection with this action.XV. RETENTION OF JURISDICTION IT IS FURTHER ORDERED that this Court will retain jurisdiction of this matter for the purpose of enabling any of the parties to this 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 Order, for the enforcement or compliance therewith, or the punishment of violations thereof.The parties, by their counsel and individually, hereby consent to the terms and conditions of the Stipulated Final Judgment and Order for Permanent Injunction set forth above, and consent to the entry hereof. FOR DEFENDANT MILFORD H. BALABAN: Milford H. Balaban David S. Katz, Esq. FOR PLAINTIFF FEDERAL TRADE COMMISSION: Craig Tregillus The parties, having agreed to the entry of this Order enjoining Defendant and his Representatives from violating Section 5 of the FTC Act, 15 U.S.C. § 45(a), this Stipulated Final Judgment and Order For Permanent Injunction is hereby approved and adopted by the Court. DATED UNITED STATES DISTRICT JUDGE APPENDIX A UNITED STATES DISTRICT COURT FEDERAL TRADE COMMISSION, v. HOLD BILLING SERVICES, LTD., HBS, INC., a Texas corporation; AVERY COMMUNICATIONS, INC., a Texas corporation; VETERANS OF AMERICA ASSOCIATION, LTD., a Pennsylvania corporation; THOMAS M. LYONS, individually and as an officer of HBS, Inc.; KEITH C. CALIL, individually and as an officer of Veterans of America Association, Ltd.; and MILFORD H. BALABAN, individually and as an officer of Veterans of America Association, Ltd., Defendants. AFFIDAVIT OF MILFORD H. BALABAN I, Milford H. Balaban, being duly sworn, hereby state and affirm as follows: My name is Milford H. Balaban. My current 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. I am an individual defendant in FTC v. Hold Billing Services, Ltd., et al., Case No. SA-98-CA-0629-FB, in the United States District Court for the Western District of Texas. On [date], I received a copy of the Stipulated Final Judgment and Order for Permanent Injunction which was signed by the Honorable Fred Biery and entered by the Court on [date of entry of Order]. A true and correct copy of the Order I received is appended to this Affidavit. I swear or affirm, under the penalty of perjury, with knowledge of the penalties for false statements provided by 18 United States Code Section 1001, and with the knowledge that this declaration is submitted by me to affect action by the Federal Trade Commission, that the foregoing is true and correct. Executed on this day of , 1999, at [city], [state]. Milford H. Balaban |