DEBRA A. VALENTINE
General CounselRA'OUF M. ABDULLAH
ALICE SAKER HRDY
Federal Trade Commission
600 Pennsylvania Avenue, N.W.
Washington, D.C. 20580
(202) 326-3024; (202) 326-2009
(202) 326-3392 Telecopier
RAYMOND McKOWN
Federal Trade Commission
10877 Wilshire Boulevard, Suite 700
Los Angeles, California 90024
(310) 824-4325
(310) 824-4380 Telecopier
Attorneys for Plaintiff
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
FEDERAL TRADE COMMISSION, Plaintiff,
vs.
SWEET SONG CORPORATION, in its own name and d/b/a WINDSOR & WHITE
TRADING CO. and d/b/a PACIFIC WELLINGTON ASSOCIATES; TSAVORITE SWORD CORPORATION, in its
own name and d/b/a PACIFIC WELLINGTON ASSOCIATES; RON HUDSON INC., in its own name and
d/b/a PACIFIC WELLINGTON ASSOCIATES; HARI JIWAN SINGH KHALSA, a/k/a STEPHEN JON
OXENHANDLER, a/k/a BOB THOMAS; SIRI RAM SINGH KHALSA a/k/a WILLIAM TAYLOR, a/k/a PHILLIP
ANDERSON, Defendants.
CV-97-4544 LGB (JGx)
[proposed]
STIPULATED FINAL ORDER FOR PERMANENT INJUNCTION AND OTHER
EQUITABLE RELIEF AS TO SIRI RAM SINGH KHALSA
The Federal Trade Commission ("Commission" or "FTC") commenced this
action on June 20, 1997. The FTC and defendant Siri Ram Singh Khalsa, a/k/a WILLIAM
TAYLOR, a/k/a PHILLIP ANDERSON ("settling defendant"), have agreed to entry of
this Stipulated Final Order for Permanent Injunction and Other Equitable Relief
("Order") and stipulate to the Court's findings below.
FINDINGS
The Court finds:
- 1. The Court has jurisdiction over the Commission's claim pursuant to 28 U.S.C.
§§ 1331, 1337(a) and 1345, and 15 U.S.C. §§ 45(a), 53(b), 57b(a), 6102(c)
and 6105; and has jurisdiction over the parties.
-
- 2. Venue in the Central District of California, Western Division, United States District
Court, is proper.
-
- 3. This is an action instituted by the FTC under Sections 5(a), 13(b) and 19 of the FTC
Act, 15 U.S.C. §§ 45(a), 53(b) and 57b. The Complaint seeks both permanent
injunctive relief and consumer redress for alleged deceptive practices by defendants in
violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a) and various provisions
of the Telemarketing Sales Rule, 16 C.F.R. Part 310, in connection with the offering for
sale and sale of gemstones as investments.
-
- 4. Plaintiff Commission has the authority to seek the relief it requests, and the Court
has the authority to grant it under Sections 13(b) and 19 of the FTC Act, 15 U.S.C. §§
53(b) and 57b.
-
- 5. The activities of the defendant are in or affecting commerce, as the term is defined
in Section 4 of the FTC Act, 15 U.S.C. § 44.
-
- 6. The settling defendant has stipulated to the entry of this Order but neither admits
nor denies the allegations set forth in the complaint.
-
- 7. This Order constitutes the final adjudication of all claims of plaintiff Commission
in connection with the matters alleged in the Complaint. Other than any enforcement
proceedings brought in connection with this Order, the Commission will not seek any
further relief from the settling defendant arising out of the facts as alleged in the
Complaint filed in this action. Notwithstanding the foregoing, this action and the relief
awarded herein are in addition to, and not in lieu of, other remedies by parties other
than the Commission, as may be provided by law, including both civil and criminal
remedies. All relief set forth in this Order is purely remedial in nature and is not a
fine, penalty, punitive assessment, exemplary damage or forfeiture.
-
- 8. Entry of this Order is in the public interest.
DEFINITIONS
For purposes of this Order, the following definitions shall apply:
A. Assisting others shall mean knowingly providing any of the following
services to any person or entity:
- (1) performing customer service functions, including, but not limited to, receiving or
responding to consumer complaints;
-
- (2) formulating or providing, or arranging for the formulation or provision of, any
telephone sales script or any other marketing material;
-
- (3) hiring, recruiting, or training personnel;
-
- (4) advising or consulting others on the commencement or management of a business
venture;
-
- (5) providing names of, or assisting in the generation of, potential customers; or
-
- (6) performing marketing or telemarketing services of any kind.
B. Collectible Artifacts shall refer to goods whose value is derived solely
from rarity, uniqueness, condition, or historical qualities.
C. Documents shall be synonymous in meaning and equal in scope to the usage of
the term in Rule 34(a) of the Federal Rules of Civil Procedure, and shall include
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. Each
draft or non-identical copy shall constitute a separate document.
D. Investment opportunity shall mean any service, product or interest,
tangible or intangible, that is offered for sale, sold, or traded based wholly or in
substantial part on representations, either express or implied, about past, present, or
future income, profit, or appreciation.
E. 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. The term does not include the
solicitation of, or assisting others in the solicitation of, sales through the mailing of
a catalog which: contains a written description or illustration of the goods or services
offered for sale; includes the business address of the seller; includes multiple pages of
written material or illustrations; and has been issued not less frequently than once a
year, when the person making the solicitation does not solicit customers by telephone but
only receives calls initiated by customers in response to the catalog and during those
calls takes orders only without further solicitation. For purposes of the previous
sentence, the term "further solicitation" does not include providing the
customer with information about, or attempting to sell, any other item included in the
same catalog which prompted the customer's call or in a substantially similar catalog. The
terms telemarketing and assisting others also do not include:
- (i) telephone calls in which the sale of goods or services is not completed, and payment
or authorization of payment is not required, until after a face-to-face sales presentation
by the seller;
-
- (ii) telephone calls initiated by a customer that are not the result of any solicitation
by a seller or telemarketer;
-
- (iii) telephone calls between the defendant and any business, except calls involving the
retail sale of nondurable office or cleaning supplies; and
-
- (iv) telephone calls initiated by a customer in response to an advertisement through any
media, other than direct mail solicitations limited to the offer in the advertisement.
I. INVESTMENT AND COLLECTIBLE ARTIFACT SALES BAN
IT IS THEREFORE ORDERED that defendant Siri Ram Singh Khalsa is hereby
restrained and enjoined from engaging, participating, or assisting others, whether
directly, indirectly, or through any business entity or other device, in the offering for
sale or sale of any Investment Opportunity or Collectible Artifact.
II. TELEMARKETING BAN
IT IS FURTHER ORDERED that Siri Ram Singh Khalsa is permanently
restrained and enjoined from engaging, participating, or assisting others, whether
directly, indirectly, or through any business entity or other device, in the business of
telemarketing to consumers.
III. ADDITIONAL PROHIBITED BUSINESS ACTIVITIES
IT IS FURTHER ORDERED that Siri Ram Singh Khalsa, his officers,
agents, servants, employees, and attorneys and all other persons in active concert or
participation with him who receive actual notice of this Order by personal service or
otherwise, in connection with the advertising, promotion, offering for sale, or sale of
any good or service, including but not limited to gemstones, coins or bullion, is hereby
permanently enjoined from:
A. Falsely representing, expressly or by implication, that any good or service is sold
at a discount from the retail market value or at or below the price at which a consumer
could resell it;
B. Falsely representing, expressly or by implication, the degree of risk of any
purchase;
C. Falsely representing, expressly or by implication, the past appreciation, the future
appreciation, the income potential, or the origin of any good or service;
D. Falsely representing, expressly or by implication, any other fact material to a
consumer's decision to purchase goods or services;
E. Violating or assisting others in violating any provision of the Commission's
Telemarketing Sales Rule, 16 C.F.R. Part 310, as amended from time to time (current
version attached as Appendix B), including but not limited to misrepresenting, directly or
by implication, "[a]ny material aspect of an investment opportunity." 16 C.F.R.
§ 310.3(a)(2)(vi).
F. Falsely representing, expressly or by implication, the terms, effect, basis or
purpose of this Order, and
G. Assisting others in the acts or practices prohibited in subsections A through F, of
this Section III.
IV. CUSTOMER LISTS
IT IS FURTHER ORDERED that defendant Siri Ram and his officers,
agents, servants, employees, attorneys, and all other persons in active concert or
participation with him who receive actual notice of this Order by personal service or
otherwise, are hereby restrained and enjoined from using, selling, renting, leasing,
transferring, or otherwise disclosing the name, address, telephone number, credit card
number, bank account number, e-mail address, or other identifying information of any
person who was a customer of or investor in Windsor and White Trading Compnay, Pacific
Wellington Trading Company, Sweet Song Corporation, Tsavorite Sword Corporation, Ron
Hudson Corporation, or any other entity related to the foregoing entities or any of their
affiliates or subsidiaries, at any time prior to entry of this Order. The foregoing
notwithstanding, Siri Ram Singh Khalsa may disclose such identifying information to a law
enforcement agency or as required by any law, regulation, or court order. For purposes of
this Section IV, the term "customer" shall include any person or entity who was
contacted or solicited to purchase investment goods or services by any defendant in this
civil action, or by any of their agents, affiliates, or subsidiaries, prior to the entry
of this Order.
V. RECORD KEEPING PROVISIONS
IT IS FURTHER ORDERED that, for a period of five (5) years from the
date of entry of this Order, in connection with any business that offers or sells goods
and services to consumers in which the settling defendant is the majority owner or he
otherwise directly or indirectly manages or controls, the settling defendant, his agents,
employees, officers, and servants, corporations, successors, and assigns, and those
persons in active concert or participation with him who receive actual notice of this
Order by personal service or otherwise, 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 legal name, address, and telephone number of each
person that any of the above-referenced businesses employs in any capacity, including as
an employee, consultant, independent contractor, free-lancer or otherwise; that person's
job title or position; duties; the date upon which the person commenced work; and the date
and reason for the person's termination, if applicable. The businesses subject to this
subsection shall retain such records for any terminated employee for a period of three (3)
years following the date of termination;
C. Records containing the names, addresses, phone numbers, dollar amounts paid,
quantity of items or services purchased, and description of items or services purchased,
or amounts donated, for all consumers to whom any of the above-referenced businesses has
sold, invoiced or shipped any goods or services, or from whom any of the above-referenced
businesses has accepted money or other items of value;
D. Records that reflect, for every consumer complaint or refund request, whether
received directly or indirectly or through any third party or other means:
- (1) the consumer's name, address, telephone number and the dollar amount paid by the
consumer;
-
- (2) the original or a true and correct copy of 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 salesperson complained
against, and the nature and result of any investigation conducted concerning the validity
of any complaint;
-
- (4) each response and the date of the response;
-
- (5) the name of the person(s) who investigated the complaint;
-
- (6) any final resolution, and the date of the resolution;
-
- (7) in the event of a denial of a refund request, the reason for such denial; and
-
- (8) Copies of all sales scripts, training packets, advertisements, or other marketing
materials utilized.
VI. EMPLOYEE NOTIFICATION AND ACKNOWLEDGMENTS
IT IS FURTHER ORDERED that, for a period of five (5) years from the
date of entry of this Order, in connection with any business that offers or sells goods
and services to consumers in which the settling defendant is the majority owner or he
otherwise directly or indirectly manages or controls, the settling defendant shall:
A. Provide a copy of this Order to, and obtain a signed and dated acknowledgment of
receipt of same from: each director, each officer, each individual serving in a management
capacity, all personnel involved in responding to consumer complaints or inquiries, and
all sales personnel, whether designated as employees, consultants, independent
contractors, free-lancers or otherwise, immediately upon employing or retaining any such
persons; and
B. Maintain for a period of three (3) years after creation and, upon reasonable notice,
make available to representatives of the Commission, the original signed and dated
acknowledgments of the receipt of copies of this Order that are described in Subsection A
of this Section VI. In making this material available, the settling defendant shall permit
representatives of the Commission to inspect and copy all such original dated
acknowledgments.
VII. REPORTS BY DEFENDANT
IT IS FURTHER ORDERED that:
A. For a period of five (5) years from the date of entry of this Order, the defendant
shall notify the Commission of the following: (1) any changes in his business address,
residential address or telephone number, within fifteen (15)days of the date of such
change; and (2) any changes in his employment status (including self-employment) within
fifteen (15) days of such change. Such notice shall include the name and address of each
business that defendant is employed by, a statement of the nature of the businesses, and a
statement of his duties and responsibilities in connection with the business(es) or
employment(s);
B. One hundred and eighty (180) days after the date of entry of this Order, the
defendant shall submit written reports to the Commission, signed under penalty of perjury,
setting forth in detail the manner and form in which the defendant has complied and is
complying with this 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 address(es) and telephone number(s), a
description of the business activities of each such employer, and defendant's title and
responsibilities for each employer;
-
- (3) A copy of each acknowledgment of receipt of this Order obtained by defendants
pursuant to Section VII of this Order; and
-
- (4) A statement describing the manner in which the defendant has complied and is
complying with the prohibitions of Section III of this Order.
C. For a period of five (5) years from the date of entry of this Order, upon written
request by a representative of the Commission, the settling defendant shall submit written
reports (under oath, if requested) and produce documents on fifteen (15) days notice with
respect to any conduct subject to this Order; D. For the purposes of this Order, all
written notifications to the Commission shall be mailed to:
Associate Director for
Marketing Practices
Room H-238
Federal Trade Commission
600 Pennsylvania Ave., N.W.
Washington, D.C. 20580
Re: FTC v. Sweet Song Corp., et al.
File X970051.
E. For purposes of this Section VII, the term employment includes the
performance of services as an agent, servant, employee, consultant, independent
contractor, free-lancer, or otherwise; and the term employers include any
individual or entity for whom the settling defendant performs services as an employee,
agent, consultant, independent contractor, free-lancer, or otherwise.
F. For purposes of the compliance reporting required by this section, the Commission is
authorized to communicate directly with Siri Ram Singh Khalsa.
VIII. ACCESS TO BUSINESS PREMISES
IT IS FURTHER ORDERED that, for a period of five (5) years from the
date of entry of this Order, for the purpose of further determining compliance with this
Order, the settling defendant shall permit representatives of the Commission, with three
(3) business days of receipt of written notice:
A. Access during normal business hours to any office, or facility storing documents, of
any business where he is an officer, director, manager or majority owner. In providing
such access, the settling defendant shall permit representatives of the Commission to
inspect and copy all documents relevant to any matter contained in this Order; and shall
permit Commission representatives to remove documents relevant to any matter contained in
this Order for a period not to exceed five (5) business days so that the documents may be
inspected, inventoried, and copied. Access to documents does not include access to any
documents that are protected by the attorney-client privilege or the attorney work product
privilege, as those privileges are defined in federal law; and
B. To interview the officers, directors, and employees, including all personnel
involved in responding to consumer 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 Order. The person interviewed is permitted to 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 the settling
defendant's business premises for the purposes of inspecting and copying all documents
relevant to any matter contained in this Order.
IX. AUTHORITY TO MONITOR COMPLIANCE
IT IS FURTHER ORDERED that the Commission is authorized to monitor
defendant's compliance with this Order and with Section 5 of the FTC Act, 15 U.S.C.
§ 45, by all lawful means, including but not limited to:
A. Obtaining discovery from any person in the manner provided by the Federal Rules of
Civil Procedure, including the use of compulsory process pursuant to Fed. R. Civ. P. 45;
B. Using undisclosed representatives posing as consumers and suppliers in contacts with
defendant, his employees, or any other entity managed or controlled in whole or in part by
defendant; and
C. Using compulsory process, pursuant to Sections 9 and 20 of the FTC Act, 15 U.S.C.
§§ 49, 57b-1.
X. RIGHT TO REOPEN
IT IS FURTHER ORDERED that the Commission's agreement to this Order is
expressly premised upon the material truthfulness, accuracy, and completeness of settling
defendant Siri Ram Singh Khalsa's financial condition as represented in his sworn
financial statement he submitted to the Commission, which was dated on or about October
21, 1998. The parties stipulate that this financial statement constitutes material
information relied upon by the Commission in negotiating and agreeing to this Order. If,
upon motion by the Commission, this Court finds that settling defendant Siri Ram Singh
Khalsa failed to disclose on his financial statement any material asset, materially
misrepresented the value of any asset, or made any other material misrepresentation or
material omission, the defendant shall pay to the Commission the sum of five hundred
thousand dollars ($500,000). Provided however, in all other respects, this Order
shall remain in full force and effect unless otherwise ordered by the Court; and, provided
further, that proceedings instituted under this provision by the Commission shall be
in addition to and not in lieu of any other civil or criminal remedies as may be provided
by law, including any other proceedings the Commission may initiate to enforce this Order.
Settling defendant Siri Ram Singh Khalsa waives any and all rights to contest any of the
allegations in the Commission's Complaint in this matter in any subsequent proceeding
conducted under this Section X. In any such reopening, the Commission is empowered to
enforce any modified monetary judgment against any of the settling defendant's assets,
real or personal, tangible or intangible.
XI. REAFFIRMATION OF FINANCIAL INFORMATION AND RECEIPT OF ORDER
IT IS FURTHER ORDERED that, within three (3) business days after
receiving notice of entry of this Order, settling defendant Siri Ram Singh Khalsa shall
submit to the Commission a truthful sworn affidavit, using the format depicted in Appendix
A to this Order, that shall:
A. Reaffirm and attest to the material truth, accuracy and completeness of the
financial statement referenced in Section X, above, and
B. Acknowledge personal receipt of this Order.
XII. ASSET FREEZE
IT IS FURTHER ORDERED that this Order supersedes the Preliminary
Injunction, with asset freeze, entered in this matter on July 10, 1997, as modified by
this Court on October 22, 1997, to the extent specified in this Order. The freeze of
settling defendant Siri Ram Singh Khalsa's assets shall be lifted upon execution of the
sworn affidavit referenced in Section XI, and upon the filing of a Notice of Receipt of
Sworn Affidavit by the Commission in which it acknowledges receipt of the sworn affidavit.
XIII. FEES AND COSTS
IT IS FURTHER ORDERED that each party to this stipulated Order hereby
agrees to bear its own costs and attorneys' fees incurred in connection with this action.
XIV. RECEIVERSHIP AND WAIVER OF CLAIMS
IT IS FURTHER ORDERED that the settling defendant waives all rights to
seek judicial review or otherwise challenge or contest the validity of this Order. The
settling defendant waives any claims he had or may have under the Equal Access to Justice
Act, 28 U.S.C. § 2412, concerning the prosecution of this action to the date of
entry of this Order.
XV. IT IS FURTHER ORDERED that nothing in this Order
shall affect the receivership provisions contained in Sections VIII through XIII of the
Preliminary Injunction entered by this Court on July 10, 1997. The settling defendant
shall cooperate with the Receiver in preparing final income tax returns for the
receivership entities and provide assistance in:
A. Identifying and interpreting computer records of the corporate defendants;
B. Identifying customers and explaining customer transactions;
C. Identifying vendors and explaining vendor transactions; and
D. Identifying and interpreting business records of the corporate defendants.
Settling defendant Siri Ram Singh Khalsa hereby releases and discharges the Receiver
from any and all claims, demands, liabilities, causes of action, actions, damages,
judgments, obligations, costs, losses or expenses of any kind, whether based on tort,
contract, or other theories of recovery, whether now known or unknown, suspected or
unsuspected, matured or unmatured, whether having arisen or hereafter to arise, which the
settling defendant may now or hereafter have against the Receiver.
XVI. IT IS FURTHER ORDERED that the Receiver hereby releases and
discharges settling defendant Siri Ram Singh Khalsa from any and all claims, demands,
liabilities, causes of action, actions, damages, judgments, obligations, costs, losses or
expenses of any kind, whether based on tort, contract, or other theories of recovery,
whether now known or unknown, suspected or unsuspected, matured or unmatured, whether
having arisen or hereafter to arise, which the Receiver may now or hereafter have against
the settling defendant.
XVII. RETENTION OF JURISDICTION
IT IS FURTHER ORDERED that this Court shall retain jurisdiction of
this matter for all purposes.
XVIII. MULTIPLE EXECUTION OF STIPULATION
IT IS FURTHER ORDERED that the parties to this Order may execute it in
multiple counterparts that taken together shall constitute the one and the same Order.
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XIX. ENTRY OF THIS JUDGMENT
IT IS FURTHER ORDERED that pursuant to Fed. R. Civ. P. 54(b) and Local
Rule 14.10, the Clerk shall enter this Order immediately.
STIPULATED AND AGREED TO AS TO FORM AND CONTENT:
___________________________
RA'OUF M. ABDULLAH
Attorney for Plaintiff
Federal Trade Commission___________________________
Steven K. Linkon, Esq.
Receiver for Corporate
Defendants |
___________________________
SIRI RAM SINGH KHALSA
Settling Defendant___________________________
Theodor Albert, Esq.
Attorney for Receiver,
Steven K. Linkon
|
STIPULATED AS TO FORM:
Leonard, Dicker & Schreiber,
Limited Liability Partnership
By Richard C. Leonard, Esq.
Attorney for settling defendant
Siri Ram Singh Khalsa
IT IS SO ORDERED.
Dated, Los Angeles, California, the _____ day of _____________, 1999.
________________________________
The Honorable Lourdes G. Baird
United States District Judge
APPENDIX A
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
FEDERAL TRADE COMMISSION, Plaintiff,
vs.
SWEET SONG CORPORATION, in its own name and d/b/a WINDSOR & WHITE
TRADING CO. and d/b/a PACIFIC WELLINGTON ASSOCIATES; TSAVORITE SWORD CORPORATION, in its
own name and d/b/a PACIFIC WELLINGTON ASSOCIATES; RON HUDSON, INC., in its own name and
d/b/a PACIFIC WELLINGTON ASSOCIATES; HARI JIWAN SINGH KHALSA, a/k/a STEPHEN JON
OXENHANDLER, a/k/a BOB THOMAS; SIRI RAM SINGH KHALSA a/k/a WILLIAM TAYLOR, a/k/a PHILLIP
ANDERSON; Defendants.
CV-97-4544 LGB
AFFIDAVIT OF DEFENDANT SIRI RAM SINGH KHALSA
Siri Ram Singh Khalsa, being duly sworn, hereby states and affirms as follows:
1. My name is Siri Ram Singh Khalsa. 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 FTC v. Sweet Song, et al., CV-97-4544 LGB (C.D. Cal.
1997), a case in the Central District of California.
3. On [please type or write the date you received the Order here], I received
a copy of the STIPULATED FINAL JUDGMENT AND ORDER FOR PERMANENT INJUNCTION AND OTHER FINAL
RELIEF AS SIRI RAM SINGH KHALSA ("Order"), which was signed by the Honorable
Lourdes G. Baird and entered by the Court on [please type or write the date of entry
of Order here]. A true and correct copy of the Order I received, upon which I have
affixed my signature in the presence of the subscribed notary, is appended to this
Affidavit.
4. Also attached to this Affidavit is a true and correct copy of my signed financial
statement dated October 21, 1998 that I provided to the Federal Trade Commission.
5. The above-mentioned financial statement was materially true, accurate, and complete,
to the best of my knowledge, as of the date I signed it.
I declare under penalty of perjury under the laws of the United States that the
foregoing is true and correct. Executed on [date signed], at [city
and state].
___________________________________
[Full name of defendant]
State of ____________________, City of ____________________
Subscribed and sworn to before me this _____ day of _________, 1998.
_____________________________
Notary Public
My Commission Expires:
_________________________
APPENDIX B
PART 310: TELEMARKETING SALES RULE
- Sec.
- 310.1 Scope of regulations in this part.
- 310.2 Definitions.
- 310.3 Deceptive telemarketing acts or practices.
- 310.4 Abusive telemarketing acts or practices.
- 310.5 Record keeping requirements.
- 310.6 Exemptions.
- 310.7 Actions by states and private persons.
- 310.8 Severability.
- Authority: 15 U.S.C. 6101-6108.
§ 310.1 Scope of regulations in this part.
- This part implements the Telemarketing and Consumer Fraud and Abuse Prevention Act, 15
U.S.C. 6101-6108.
§ 310.2 Definitions.
- (a) Acquirer means a business organization, financial institution, or an agent of
a business organization or financial institution that has authority from an organization
that operates or licenses a credit card system to authorize merchants to accept, transmit,
or process payment by credit card through the credit card system for money, goods or
services, or anything else of value.
- (b) Attorney general means the chief legal officer of a State.
- (c) Cardholder means a person to whom a credit card is issued or who is
authorized to use a credit card on behalf of or in addition to the person to whom the
credit card is issued.
- (d) Commission means the Federal Trade Commission.
- (e) Credit means the right granted by a creditor to a debtor to defer payment of
debt or to incur debt and defer its payment.
- (f) Credit card means any card, plate, coupon book, or other credit device
existing for the purpose of obtaining money, property, labor, or services on credit.
- (g) Credit card sales draft means any record or evidence of a credit card
transaction.
- (h) Credit card system means any method or procedure used to process credit card
transactions involving credit cards issued or licensed by the operator of that system.
- (i) Customer means any person who is or may be required to pay for goods or
services offered through telemarketing.
- (j) Investment opportunity means anything, tangible or intangible, that is
offered, offered for sale, sold, or traded based wholly or in part on representations,
either express or implied, about past, present, or future income, profit, or appreciation.
- (k) Material means likely to affect a person's choice of, or conduct regarding,
goods or services.
- (l) Merchant means a person who is authorized under a written contract with an
acquirer to honor or accept credit cards, or to transmit or process for payment credit
card payments, for the purchase of goods or services.
- (m) Merchant agreement means a written contract between a merchant and an
acquirer to honor or accept credit cards, or to transmit or process for payment credit
card payments, for the purchase of goods or services.
- (n) Outbound telephone call means a telephone call initiated by a telemarketer to
induce the purchase of goods or services.
- (o) Person means any individual, group, unincorporated association, limited or
general partnership, corporation, or other business entity.
- (p) Prize means anything offered, or purportedly offered, and given, or
purportedly given, to a person by chance. For purposes of this definition, chance exists
if a person is guaranteed to receive an item and, at the time of the offer or purported
offer, the telemarketer does not identify the specific item that the person will receive.
- (q) Prize promotion means:
(1) A sweepstakes or other game of chance; or
(2) An oral or written express or implied representation that a person has won, has
been selected to receive, or may be eligible to receive a prize or purported prize.
- (r) Seller means any person who, in connection with a telemarketing transaction,
provides, offers to provide, or arranges for others to provide goods or services to the
customer in exchange for consideration.
- (s) State means any State of the United States, the District of Columbia, Puerto
Rico, the Northern Mariana Islands, and any territory or possession of the United States.
- (t) Telemarketer means any person who, in connection with telemarketing,
initiates or receives telephone calls to or from a customer.
- (u) 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. The term does not include the solicitation of sales
through the mailing of a catalog which: contains a written description or illustration of
the goods or services offered for sale; includes the business address of the seller;
includes multiple pages of written material or illustrations; and has been issued not less
frequently than once a year, when the person making the solicitation does not solicit
customers by telephone but only receives calls initiated by customers in response to the
catalog and during those calls takes orders only without further solicitation. For
purposes of the previous sentence, the term "further solicitation" does not
include providing the customer with information about, or attempting to sell, any other
item included in the same catalog which prompted the customer's call or in a substantially
similar catalog.
§ 310.3 Deceptive telemarketing acts or practices.
- (a) Prohibited deceptive telemarketing acts or practices.
-
- It is a deceptive telemarketing act or practice and a violation of this Rule for any
seller or telemarketer to engage in the following conduct:
(1) Before a customer pays(1) for goods or services
offered, failing to disclose, in a clear and conspicuous manner, the following material
information:
(i) The total costs to purchase, receive, or use, and the quantity of, any goods or
services that are the subject of the sales offer;(2)
(ii) All material restrictions, limitations, or conditions to purchase, receive, or use
the goods or services that are the subject of the sales offer;
(iii) If the seller has a policy of not making refunds, cancellations, exchanges, or
repurchases, a statement informing the customer that this is the seller's policy; or, if
the seller or telemarketer makes a representation about a refund, cancellation, exchange,
or repurchase policy, a statement of all material terms and conditions of such policy;
(iv) In any prize promotion, the odds of being able to receive the prize, and if the
odds are not calculable in advance, the factors used in calculating the odds; that no
purchase or payment is required to win a prize or to participate in a prize promotion; and
the no purchase/no payment method of participating in the prize promotion with either
instructions on how to participate or an address or local or toll-free telephone number to
which customers may write or call for information on how to participate; and
(v) All material costs or conditions to receive or redeem a prize that is the subject
of the prize promotion;
(2) Misrepresenting, directly or by implication, any of the following material
information:
(i) The total costs to purchase, receive, or use, and the quantity of, any goods or
services that are the subject of a sales offer;
(ii) Any material restriction, limitation, or condition to purchase, receive, or use
goods or services that are the subject of a sales offer;
(iii) Any material aspect of the performance, efficacy, nature, or central
characteristics of goods or services that are the subject of a sales offer;
(iv) Any material aspect of the nature or terms of the seller's refund, cancellation,
exchange, or repurchase policies;
(v) Any material aspect of a prize promotion including, but not limited to, the odds of
being able to receive a prize, the nature or value of a prize, or that a purchase or
payment is required to win a prize or to participate in a prize promotion;
(vi) Any material aspect of an investment opportunity including, but not limited to,
risk, liquidity, earnings potential, or profitability; or
(vii) A seller's or telemarketer's affiliation with, or endorsement by, any government
or third-party organization;
(3) 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, without that
person's express verifiable authorization. Such authorization shall be deemed verifiable
if any of the following means are employed:
(i) Express written authorization by the customer, which may include the customer's
signature on the negotiable instrument; or
(ii) 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:
(A) The date of the draft(s);
(B) The amount of the draft(s);
(C) The payor's name;
(D) The number of draft payments (if more than one);
(E) A telephone number for customer inquiry that is answered during normal business
hours; and
(F) The date of the customer's oral authorization; or
(iii) 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:
(A) All of the information contained in §§ 310.3(a)(3)(ii)(A)-(F); and
(B) The procedures by which the customer can obtain a refund from the seller or
telemarketer in the event the confirmation is inaccurate; and
(4) Making a false or misleading statement to induce any person to pay for goods or
services.
- (b) Assisting and facilitating. It is a deceptive telemarketing act or practice
and a violation of this Rule for a person to provide substantial assistance or support to
any seller or telemarketer when that person knows or consciously avoids knowing that the
seller or telemarketer is engaged in any act or practice that violates §§ 310.3(a)
or (c), or § 310.4 of this Rule.
-
- (c) Credit card laundering. Except as expressly permitted by the applicable
credit card system, it is a deceptive telemarketing act or practice and a violation of
this Rule for:
(1) A merchant to present to or deposit into, or cause another to present to or deposit
into, the credit card system for payment, a credit card sales draft generated by a
telemarketing transaction that is not the result of a telemarketing credit card
transaction between the cardholder and the merchant;
(2) Any person to employ, solicit, or otherwise cause a merchant or an employee,
representative, or agent of the merchant, to present to or deposit into the credit card
system for payment, a credit card sales draft generated by a telemarketing transaction
that is not the result of a telemarketing credit card transaction between the cardholder
and the merchant; or
(3) Any person to obtain access to the credit card system through the use of a business
relationship or an affiliation with a merchant, when such access is not authorized by the
merchant agreement or the applicable credit card system.
§ 310.4 Abusive telemarketing acts or practices.
- (a) Abusive conduct generally. It is an abusive telemarketing act or practice
and a violation of this Rule for any seller or telemarketer to engage in the following
conduct:
(1) Threats, intimidation, or the use of profane or obscene language;
(2) Requesting or receiving payment of any fee or consideration for goods or services
represented to remove derogatory information from, or improve, a person's credit history,
credit record, or credit rating until:
(i) The time frame in which the seller has represented all of the goods or services
will be provided to that person has expired; and
(ii) The seller has provided the person with documentation in the form of a consumer
report from a consumer reporting agency demonstrating that the promised results have been
achieved, such report having been issued more than six months after the results were
achieved. Nothing in this Rule should be construed to affect the requirement in the Fair
Credit Reporting Act, 15 U.S.C. 1681, that a consumer report may only be obtained for
a specified permissible purpose;
(3) Requesting or receiving payment of any fee or consideration from a person, for
goods or services represented to recover or otherwise assist in the return of money or any
other item of value paid for by, or promised to, that person in a previous telemarketing
transaction, until seven (7) business days after such money or other item is delivered to
that person. This provision shall not apply to goods or services provided to a person by a
licensed attorney; or
(4) Requesting or receiving payment of any fee or consideration in advance of obtaining
a loan or other extension of credit when the seller or telemarketer has guaranteed or
represented a high likelihood of success in obtaining or arranging a loan or other
extension of credit for a person.
- (b) Pattern of calls. (1) It is an abusive telemarketing act or practice and a
violation of this Rule for a telemarketer to engage in, or for a seller to cause a
telemarketer to engage in, the following conduct:
(i) Causing any telephone to ring, or engaging any person in telephone conversation,
repeatedly or continuously with intent to annoy, abuse, or harass any person at the called
number; or
(ii) Initiating an outbound telephone call to a person when that person previously has
stated that he or she does not wish to receive an outbound telephone call made by or on
behalf of the seller whose goods or services are being offered.
- (2) A seller or telemarketer will not be liable for violating § 310.4(b)(1)(ii)
if:
(i) It has established and implemented written procedures to comply with
§ 310.4(b)(1)(ii);
(ii) It has trained its personnel in the procedures established pursuant to
§ 310.4(b)(2)(i);
(iii) The seller, or the telemarketer acting on behalf of the seller, has maintained
and recorded lists of persons who may not be contacted, in compliance with
§ 310.4(b)(1)(ii); and
(iv) Any subsequent call is the result of error.
- (c) Calling time restrictions. Without the prior consent of a person, it is an
abusive telemarketing act or practice and a violation of this Rule for a telemarketer to
engage in outbound telephone calls to a person's residence at any time other than between
8:00 a.m. and 9:00 p.m. local time at the called person's location.
-
- (d) Required oral disclosures. It is an abusive telemarketing act or practice
and a violation of this Rule for a telemarketer in an outbound telephone call to fail to
disclose promptly and in a clear and conspicuous manner to the person receiving the call,
the following information:
(1) The identity of the seller;
(2) That the purpose of the call is to sell goods or services;
(3) The nature of the goods or services; and
(4) That no purchase or payment is necessary to be able to win a prize or participate
in a prize promotion if a prize promotion is offered. This disclosure must be made before
or in conjunction with the description of the prize to the person called. If requested by
that person, the telemarketer must disclose the no-purchase/no-payment entry method for
the prize promotion.
§ 310.5 Recordkeeping requirements.
- (a) Any seller or telemarketer shall keep, for a period of 24 months from the date the
record is produced, the following records relating to its telemarketing activities:
(1) All substantially different advertising, brochures, telemarketing scripts, and
promotional materials;
(2) The name and last known address of each prize recipient and the prize awarded for
prizes that are represented, directly or by implication, to have a value of $25.00 or
more;
(3) The name and last known address of each customer, the goods or services purchased,
the date such goods or services were shipped or provided, and the amount paid by the
customer for the goods or services;(3)
(4) The name, any fictitious name used, the last known home address and telephone
number, and the job title(s) for all current and former employees directly involved in
telephone sales; provided, however, that if the seller or telemarketer permits fictitious
names to be used by employees, each fictitious name must be traceable to only one specific
employee; and
(5) All verifiable authorizations required to be provided or received under this Rule.
- (b) A seller or telemarketer may keep the records required by § 310.5(a) in any
form, and in the manner, format, or place as they keep such records in the ordinary course
of business. Failure to keep all records required by § 310.5(a) shall be a violation
of this Rule.
-
- (c) The seller and the telemarketer calling on behalf of the seller may, by written
agreement, allocate responsibility between themselves for the recordkeeping required by
this Section. When a seller and telemarketer have entered into such an agreement, the
terms of that agreement shall govern, and the seller or telemarketer, as the case may be,
need not keep records that duplicate those of the other. If the agreement is unclear as to
who must maintain any required record(s), or if no such agreement exists, the seller shall
be responsible for complying with §§ 310.5(a)(1)-(3) and (5); the telemarketer
shall be responsible for complying with § 310.5(a)(4).
-
- (d) In the event of any dissolution or termination of the seller's or telemarketer's
business, the principal of that seller or telemarketer shall maintain all records as
required under this Section. In the event of any sale, assignment, or other change in
ownership of the seller's or telemarketer's business, the successor business shall
maintain all records required under this Section.
§ 310.6 Exemptions.
The following acts or practices are exempt from this Rule:
- (a) The sale of pay-per-call services subject to the Commission's "Trade Regulation
Rule Pursuant to the Telephone Disclosure and Dispute Resolution Act of 1992," 16 CFR
Part 308;
-
- (b) The sale of franchises subject to the Commission's Rule entitled "Disclosure
Requirements and Prohibitions Concerning Franchising and Business Opportunity
Ventures," 16 CFR Part 436;
-
- (c) Telephone calls in which the sale of goods or services is not completed, and payment
or authorization of payment is not required, until after a face-to-face sales presentation
by the seller;
-
- (d) Telephone calls initiated by a customer that are not the result of any solicitation
by a seller or telemarketer;
-
- (e) Telephone calls initiated by a customer in response to an advertisement through any
media, other than direct mail solicitations; provided, however, that this exemption does
not apply to calls initiated by a customer in response to an advertisement relating to
investment opportunities, goods or services described in §§ 310.4(a)(2) or (3), or
advertisements that guarantee or represent a high likelihood of success in obtaining or
arranging for extensions of credit, if payment of a fee is required in advance of
obtaining the extension of credit;
-
- (f) Telephone calls initiated by a customer in response to a direct mail solicitation
that clearly, conspicuously, and truthfully discloses all material information listed in
§ 310.3(a)(1) of this Rule for any item offered in the direct mail solicitation;
provided, however, that this exemption does not apply to calls initiated by a customer in
response to a direct mail solicitation relating to prize promotions, investment
opportunities, goods or services described in §§ 310.4(a)(2) or (3), or direct mail
solicitations that guarantee or represent a high likelihood of success in obtaining or
arranging for extensions of credit, if payment of a fee is required in advance of
obtaining the extension of credit; and
-
- (g) Telephone calls between a telemarketer and any business, except calls involving the
retail sale of nondurable office or cleaning supplies; provided, however, that
§ 310.5 of this Rule shall not apply to sellers or telemarketers of nondurable
office or cleaning supplies.
§ 310.7 Actions by States and private persons.
- (a) Any attorney general or other officer of a State authorized by the State to bring an
action under the Telemarketing and Consumer Fraud and Abuse Prevention Act, and any
private person who brings an action under that Act, shall serve written notice of its
action on the Commission, if feasible, prior to its initiating an action under this Rule.
The notice shall be sent to the Office of the Director, Bureau of Consumer Protection,
Federal Trade Commission, Washington, D.C. 20580, and shall include a copy of the State's
or private person's complaint and any other pleadings to be filed with the court. If prior
notice is not feasible, the State or private person shall serve the Commission with the
required notice immediately upon instituting its action.
-
- (b) Nothing contained in this Section shall prohibit any attorney general or other
authorized State official from proceeding in State court on the basis of an alleged
violation of any civil or criminal statute of such State.
§ 310.8 Severability.
- The provisions of this Rule are separate and severable from one another. If any
provision is stayed or determined to be invalid, it is the Commission's intention that the
remaining provisions shall continue in effect.
By direction of the Commission.
Donald S. Clark
Secretary
1. When a seller or telemarketer uses, or directs a customer
to use, a courier to transport payment, the seller or telemarketer must make the
disclosures required by § 310.3(a)(1) before sending a courier to pick up payment or
authorization for payment, or directing a customer to have a courier pick up payment or
authorization for payment.
2. For offers of consumer credit products subject to the
Truth in Lending Act, 15 U.S.C. 1601 et seq., and Regulation Z, 12 CFR 226,
compliance with the disclosure requirements under the Truth in Lending Act, and Regulation
Z, shall constitute compliance with § 310.3(a)(1)(i) of this Rule.
3. For offers of consumer credit products subject to the
Truth in Lending Act, 15 U.S.C. 1601 et seq., and Regulation Z, 12 CFR 226,
compliance with the recordkeeping requirements under the Truth in Lending Act, and
Regulation Z, shall constitute compliance with § 310.5(a)(3) of this Rule. |