Attorneys for Plaintiff
Federal Trade Commission

Plaintiff, the Federal Trade Commission ("FTC" or "Commission"), commenced this action by filing a Complaint pursuant to Section 13(b) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. § 53(b), charging Defendant Physicians Healthcare Development, Inc. a/k/a Physician Healthcare Development Inc. a/k/a Physicians Healthcare Development a/k/a Physician and Healthcare Development a/k/a PHD a/k/a PHD Billing ("PHD"), Defendant NetBiz, Inc. d/b/a Physicians Healthcare Development ("NetBiz"), and Defendant Antonio Echavez ("Echavez") (collectively, "Defendants") with engaging in unfair or deceptive acts or practices in connection with the offer for sale and sale, of a work-at-home opportunity, in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45.

Now the Commission and Defendants have agreed to a settlement of this action. Accordingly, the Commission and Defendants consent to entry of this Stipulated Final Judgment and Order ("Order") without trial or adjudication of any issue of law or fact herein.

1. This is an action by the Commission instituted under Section 13(b) of the Federal Trade Commission Act, 15 U.S.C. § 53(b). The Complaint seeks permanent injunctive relief against Defendants in connection with the offer for sale and sale of a work-at-home opportunity involving medical billing.

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

3. The Complaint states a claim upon which relief may be granted against Defendants under Sections 5(a) and 13(b) of the FTC Act, 15 U.S.C. §§ 45(a) and 53(b).

4. The Commission has the authority under Sections 13(b) of the FTC Act, 15 U.S.C. § 53(b) to seek the relief it has requested.

5. The Defendants were properly served with the Complaint and Summons in this matter.

6. The activities of Defendants charged in the Complaint are in or affecting commerce, as defined in Section 4 of the FTC Act, 15 U.S.C. § 44.

7. Defendants waive all rights to seek judicial review or otherwise challenge or contest the validity of this Order. Defendants also waive any claim that they may hold under the Equal Access to Justice Act, 28 U.S.C. § 2412 (as amended), concerning the prosecution of this action to the date of this Order. Defendants shall bear their own costs and attorneys' fees.

8. This Order is remedial in nature and shall not be construed as the payment of a fine, penalty, punitive assessment, or forfeiture.

9. Defendants enter into this Order freely and without coercion, and acknowledge that they understand the provisions of this Order and are prepared to abide by its terms. At all times, Defendants have been represented by counsel, including during the negotiations that led to this Order.

10. Entry of this Order is in the public interest.

For purposes of this Final Judgment and Order for Permanent Injunction, the following definitions shall apply:

1. "Telemarketing" means a plan, program or campaign which is conducted to induce the purchase of goods or services by the use of one or more telephones and which involves more than one interstate telephone call.

2. "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 "document."

3. "Defendants" means Defendants PHD, NetBiz and Echavez, and each of them.

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

5. The terms "and" and "or" have both conjunctive and disjunctive meanings.

6. "Assisting others" means knowingly providing any of the following goods or services to another person or entity:

a. performing customer service functions, including, but not limited to, receiving or responding to consumer complaints; or

 

b. formulating or providing, or arranging for the formulation or provision of, any telephone sales script or any other marketing material; or

 

c. providing names of, or assisting in the generation of, potential customers; or

 

d. performing marketing services of any kind.

7. "Business Venture" means any written or oral business arrangement, however denominated, which consists of the payment of any consideration for:

a. the legal right or logistical means to offer, sell or distribute goods or services (whether or not identified by a trademark, service mark, trade name, advertising, or other commercial symbol), including but not limited to the sale of a franchise; or

 

b. assisting others in connection with or incidental to the establishment, maintenance, or operation of an existing business, a new business, or the entry by an existing business into a new line or type of business.

8. "Medical Billing" means the act by which bills or charges for medical or medically-related services or products are sent, directly or indirectly, to a patient or third party payor, including but not limited to, insurance companies, on behalf of the physician, doctor or other provider.

9. "Work-at-home opportunity" means any program, plan, product, or service that enables a participant or purchaser to earn money while working from home.

IT IS THEREFORE ORDERED that Defendants, whether acting directly or through any corporation, limited liability company, subsidiary, division or other device, are hereby permanently restrained and enjoined from engaging in, or receiving any remuneration of any kind whatsoever from, or holding a majority ownership interest, share, or stock in, or serving as an officer, director, trustee, or general manager of, any business entity engaged in whole or in part in the advertising for sale, marketing for sale, promoting for sale, offering for sale, or sale of:

a. any business venture;

 

b. any employment opportunity; or

 

c. any work-at-home opportunity.

IT IS FURTHER ORDERED that Defendants and their agents, servants, employees and all persons or entities directly or indirectly under their control, and all other persons or entities in active concert or participation with them who receive actual notice of this Order by personal service or otherwise, in connection with the advertising for sale, marketing for sale, promoting for sale, offering for sale, or sale of any good or service, are hereby restrained and enjoined from misrepresenting, or assisting others in misrepresenting, expressly or by implication, orally or in writing, any fact material to a consumer's decision to buy or accept the good or service, including but not limited to the income potential, earning potential, profit potential or risk, or any other fact material to a consumer's decision to buy or accept the good or service.

IT IS FURTHER ORDERED that Defendant Echavez, whether acting directly or indirectly through any persons or entities under his control, is hereby permanently enjoined and restrained from engaging in, or assisting others engaged in, telemarketing unless, prior to engaging in or assisting others engaged in such activities, such defendant first obtains a performance bond ("the Bond") in the principal sum of $500,000 (five hundred thousand dollars). The terms and conditions of the Bond requirement are as follows:

A. The Bond shall be conditioned upon compliance with Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), the Telemarketing Sales Rule, 16 C.F.R. Part 310, and with the provisions of this Order. The Bond shall be deemed continuous and remain in full force and effect as long as Defendant Echavez is engaging in or assisting others engaged in telemarketing. Defendant Echavez shall maintain the Bond for a period of five (5) years after Defendant Echavez provides notice to the Commission that he has ceased engaging in or assisting others engaged in telemarketing. The Bond shall cite this 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(a) of the FTC Act, or of the Telemarketing Sales Rule, or the provisions of this Order, or to any other violation of law;

 

B. The Bond required pursuant to this Paragraph shall be an insurance agreement providing surety for financial loss issued by a surety company that is admitted to do business in each state in which Defendant Echavez, or any entity directly or indirectly under Defendant Echavez' control, is doing business and that holds a Federal Certificate of Authority As Acceptable Surety On Federal Bond and Reinsuring. The Bond shall be in favor of both: (1) the Federal Trade Commission for the benefit of any consumer injured as a result of any activities that required obtaining the Bond; and (2) any consumer so injured;

 

C. The Bond required pursuant to this Paragraph is in addition to, and not in lieu of, any other bonds required by federal, state, or local law;

 

D. At least ten (10) days before commencing in any activity that requires obtaining the Bond, Defendant Echavez shall provide notice to the Commission describing in reasonable detail said activities, and include in such notice a copy of the Bond obtained;

 

E. Defendant Echavez shall not disclose the existence of any performance bond required by this Paragraph to any consumer, or other purchaser or prospective purchaser of any product or service that is advertised, promoted offered for sale, sold, or distributed via telemarketing, without also disclosing clearly and prominently, at the same time, "AS REQUIRED BY ORDER OF THE U.S. DISTRICT COURT IN SETTLEMENT OF CHARGES OF FALSE AND MISLEADING REPRESENTATIONS IN THE PROMOTION AND SALE OF MEDICAL BILLING WORK-AT-HOME OPPORTUNITIES."

IT IS FURTHER ORDERED that judgment is hereby entered against Defendants PHD, NetBiz and Echavez, jointly and severally, in the amount of $3,900,000 (three million nine hundred thousand dollars); provided, however, that this judgment shall be suspended subject to the conditions set forth in Paragraph VI of this Order.

IT IS FURTHER ORDERED that:

A. Defendants' assets, frozen pursuant to the Stipulated Preliminary Injunction entered in this proceeding, at Bank of America and at Global Payments, Inc., shall be disgorged and transferred to the Federal Trade Commission upon the entry of this Final Judgment.

 

B. All funds paid pursuant to this Paragraph shall be deposited into a fund administered by the Commission or its agent to be used for equitable relief, including but not limited to consumer redress and any attendant expenses for the administration of any redress fund. In the event that direct redress to consumers is wholly or partially impracticable or funds remain after redress is completed, the Commission may apply any remaining funds for such other equitable relief (including consumer information remedies) as it determines to be reasonably related to the Defendants' practices alleged in the Complaint. Any funds not used for such equitable relief shall be deposited to the Treasury as disgorgement. The Commission shall have full and sole discretion to:

 

1. Determine the criteria for participation by individual claimants in any consumer redress program implemented pursuant to this Order;

 

2. Determine the manner and timing of any notices to be given to consumers regarding the existence and terms of such programs; and

 

3. Delegate any and all tasks connected with such redress program to any individual, partnerships, or corporations; and pay reasonable fees, salaries, and expenses incurred thereby from the payments made pursuant to this Order;

 

C. Defendants expressly waive their rights to litigate the issue of disgorgement. Defendants acknowledge and agree that all money paid pursuant to this Order is irrevocably paid to the Commission for purposes of settlement between Plaintiff and Defendants; and

 

D. No portion of this payment shall be deemed a fine, penalty or punitive assessment, or forfeiture. Defendants shall have no right to challenge the Commission's choice of remedies under this Paragraph.

IT IS FURTHER ORDERED that the Commission's agreement to, and the Court's approval of, this Order is expressly premised upon the truthfulness, accuracy, and completeness of the financial statements provided by Defendants to counsel for the Commission on or about June 7, 2002, and the sworn testimony given by Defendant Echavez on May 7, 2002, which contain material information relied upon by the Commission in negotiating and agreeing to the terms of this Order. If, upon motion by the Commission to the Court, the Court finds that Defendants failed to disclose any material asset with a value exceeding $1,000, or materially misrepresented the value of any asset, or made any other material misrepresentation in or omission from the above-referenced financial statements and information, the suspension of the monetary judgment will be terminated and the entire judgment amount of $3,900,000, less any amounts Defendants have previously paid to the Commission, will be immediately due and payable. Should this judgment be modified as to the monetary liability of Defendants, this Order, in all other respects, shall remain in full force. Any proceedings instituted under this Paragraph shall be in addition to, and not in lieu of, any other proceedings the Commission may initiate to enforce this Order. Solely for the purposes of reopening this judgment or enforcing this Paragraph, Defendants waive any right to contest any of the allegations set forth in the Complaint filed in this matter or the monetary judgment referenced above.

IT IS FURTHER ORDERED that Defendants, and their successors, assigns, directors, officers, agents, servants, employees, and all other persons or entities in active concert or participation with them who receive actual notice of this Order by personal service or otherwise, whether acting directly or through any corporation, subsidiary, division, or other device, are permanently restrained and enjoined from 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 paid any money to Defendants for purchase of any business venture, employment opportunity, or work-at-home opportunity, at any time; provided that such identifying information may be disclosed to a law enforcement agency or as required by any law, regulation, or court order.

IT IS FURTHER ORDERED that Defendants, and their successors, assigns, directors, officers, agents, servants, employees, attorneys, and all other persons or entities in active concert or participation with them who receive actual notice of this Order by personal service or otherwise, whether acting directly or through any corporation, subsidiary, division, or other device, shall:

A. Cease all collection efforts on accounts arising from contracts, agreements, or understandings between Defendants and consumers, including but not limited to directing all third parties engaged in collection efforts regarding such accounts to cease all such collection activities and to cease furnishing any negative information to any consumer credit reporting agencies;

 

B. Within twenty (20) days after the date this Order is entered, return to consumers all uncashed checks or other negotiable instruments, if any, in Defendants' possession that have been received, directly or indirectly, on accounts arising from contracts, agreements, or understandings between Defendants and consumers. Include with each such returned check or other negotiable instrument a notice to the consumer stating that, as a result of an agreement between Defendants and the Federal Trade Commission settling allegations regarding Defendants' offer for sale and sale of a work-at-home opportunity involving medical billing, those consumers' contracts are rescinded; and

 

C. Within sixty (60) days after the date this Order is entered, provide the names and addresses of those consumers to whom checks or other negotiable instruments were returned pursuant to Subsection B above to: Jennifer Larabee, Esq., Federal Trade Commission, 10877 Wilshire Blvd., Suite 700, Los Angeles, California 90024.

IT IS FURTHER ORDERED that, within five (5) business days after receipt by Defendants of this Order as entered by the Court, Defendant Echavez, on behalf of himself and Defendant PHD and Defendant NetBiz, shall submit to the Commission a truthful sworn statement, in the form shown on Appendix A hereto, that shall acknowledge receipt of this Order by Defendants.

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

A. Provide a copy of this Order to, and obtain a signed and dated acknowledgment of receipt of same from, each officer or director, 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 or otherwise, immediately upon employing or retaining any such persons, for any business where (1) any Defendant is the majority owner of the business or directly or indirectly manages or controls the business and where (2) the business is engaged in telemarketing; 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, as required in Subsection A of this Paragraph.

IT IS FURTHER ORDERED that, for a period of seven (7) years from the date of entry of this Order, in connection with any business where (1) any Defendant is the majority owner of the business or directly or indirectly manages or controls the business, and where (2) the business is engaged in telemarketing, Defendants and their agents, employees, officers, corporations, successors, and assigns, and those persons in active concert or participation with them who receive actual notice of this Order by personal service or otherwise, are hereby restrained and enjoined from failing to create and the following records:

(A) Accounting records that reflect the cost of goods or services sold, revenues generated, and the disbursement of such revenues;

 

(B) Personnel 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;

 

(C) Customer files containing the names, addresses, phone numbers, dollar amounts paid, quantity of items or services purchased, to the extent such information is obtained in the ordinary course of business;

 

(D) Complaint and refund requests (whether received directly, indirectly or through any third party) and any responses to those complaints or requests; and

 

(E) Copies of all sales scripts, training materials, advertisements, or other marketing materials.

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

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

 

1. Any changes in Defendants' residence, mailing addresses, and telephone numbers, within ten (10) days of the date of such change;

 

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

 

3. Any proposed change in the structure of any business entity owned or controlled by Defendants, such as creation, incorporation, dissolution, assignment, sale, merger, creation or dissolution of subsidiaries, proposed filing of a bankruptcy petition, or change in the corporate name or address, or any other change that may affect compliance obligations arising out of this Order, thirty (30) days prior to the effective date of any proposed change; and

 

4. Any proposed change in the structure of Defendants PHD or NetBiz, such as creation, incorporation, dissolution, assignment, sale, merger, creation or dissolution of subsidiaries, proposed filing of a bankruptcy petition, or change in the corporate name or address, or any other change that may affect compliance obligations arising out of this Order, thirty (30) days prior to the effective date of any proposed change;

 

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

 

1. Defendants' then current residence addresses, mailing addresses and telephone numbers;

 

2. Defendants' then current employment, business addresses and telephone numbers, a description of the business activities of each such employer, and Defendants' title and responsibilities for each employer;

 

3. A copy of each acknowledgment of receipt of this Order obtained by Defendants pursuant to Paragraph X;

 

4. A statement describing the manner in which Defendants have complied and are complying with the injunctive provisions in Paragraphs I, II, and III of the Order;

 

5. A statement indicating whether any performance bond has been obtained by Defendants pursuant to Paragraph III of the Order and attaching a copy of any such bond so obtained;

 

C. Upon written request by a representative of the Commission, 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 Order;

 

D. For the purposes of this Order, Defendants shall, unless otherwise directed by the Commission's authorized representatives, mail all written notifications to the Commission to:

 

Assistant Regional Director
Federal Trade Commission
10877 Wilshire Blvd., Suite 700
Los Angeles, California 90024

 

Re: FTC v. Physicians Healthcare Development, Inc. et al.

E. For the purposes of this Paragraph, the term "employment" includes the performance of services as an employee, consultant, or independent contractor; and the term "employer" includes any individual or entity for whom Defendants performs services as an employee, consultant, or independent contractor; and

 

F. For purposes of the compliance reporting required by this Paragraph, the Commission is authorized to communicate directly with Defendants.

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

A. 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 Defendants' compliance with any provision of this Order;

 

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

 

C. 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 and 57b-1, to investigate whether Defendants have violated any provision of this Order or Section 5 of the FTC Act, 15 U.S.C. § 45; and

 

D. For purposes of the compliance monitoring required by this Paragraph, the Commission, and its agents, are authorized to communicate directly with Defendants.

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, Defendants shall, within three (3) business days of receipt of written notice from the Commission, permit representatives of the Commission:

A. Access during normal business hours to any office, or facility storing documents, of any business where (1) any Defendant is the majority owner of the business or directly or indirectly manages or controls the business and where (2) the business is engaged in telemarketing, or any business involving the offer and sale of any business venture, employment opportunity, or work-at-home opportunity or assisting others engaged in these activities. In providing such access, Defendants 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;

 

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 Paragraph applies, concerning matters relating to compliance with the terms of this Order. The person interviewed may have counsel present; and

 

C. For purposes of the access request permitted by this Paragraph, the Commission is authorized to communicate directly with Defendants.

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

IT IS FURTHER ORDERED that the expiration of any requirements imposed by this Order shall not affect any other obligation under this Order.

IT IS FURTHER ORDERED that each party to this Order bear its own costs and attorneys' fees incurred in connection with this action.

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

IT IS FURTHER ORDERED that Defendants waive all claims 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), and all rights to seek appellate review or otherwise challenge or contest the validity of this Order, or the temporary or preliminary orders entered in this proceeding, and further waive and releases any claim they may have against the FTC, its employees, agents or representatives.

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

SO STIPULATED:

Dated: ________________, 2002

FEDERAL TRADE COMMISSION

Jennifer Larabee, Esq.
Kenneth H. Abbe, Esq.
Attorneys for Plaintiff

Dated: ________________, 2002

Antonio Echavez, individually and in his capacity as President of PHD and of NetBiz Defendants

Dated: ________________, 2002 ___________________________

Lawrence Strauss, Esq. Attorney for Defendants

IT IS SO ORDERED.

Dated: ___________________

______________________________
United States District Judge

Jennifer Larabee, CA Bar No. 163989
Kenneth H. Abbe, CA Bar No. 172416
Federal Trade Commission
10877 Wilshire Blvd., Ste. 700
Los Angeles, CA 90024
(310) 824-4343 (ph.)
(310) 824-4380 (fax)

Attorneys for Plaintiff
Federal Trade Commission

I, Antonio Echavez, hereby declare as follows:

1. I am a defendant in the action FTC v. Physicians Healthcare Development Inc. et al. My current residence address is ______________________________________________. I am a citizen of the United States and over the age of eighteen. I have personal knowledge of the facts set forth in this Affidavit.

 

2. I agreed to entry of a Stipulated Final Judgment and Order ("Stipulated Order") against me to settle the charges in the Commission's Complaint. I read the provisions of the Stipulated Order, including Attachment A before signing it. I understand all the provisions of the Stipulated Order. By signing the Stipulated Order I agreed to be bound by those provisions.

 

3. On __________________, 20___, I received a copy of the Stipulated Order which was signed by a United States District Judge and entered by the Court on _____________, 20___. A true and correct copy of the Stipulated Order that I received, is appended to this affidavit. The Stipulated Order was _____ pages in length. I reviewed the document and confirmed it was the document I had previously signed.

I declare under penalty of perjury under the laws of the United States that the foregoing is true and correct. Executed on ________________, 20___, at _______________________, California.

                               
Antonio Echavez

State of ___________________, City of ______________________

Subscribed and sworn to before me
this _____ day of __________________, 20___.

Notary Public

My Commission Expires: _____________________________