FTC v. Stephen I. Tashman, et al.

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
FORT LAUDERDALE DIVISION

FEDERAL TRADE COMMISSION, Plaintiff,

STEPHEN I. TASHMAN, individually, and as an officer or manager of the corporate Defendant;
STEPHEN M. MISHKIN, individually, and as an officer or manager of the corporate Defendant;
ERNEST F. LOCKAMY, individually, and as an officer or manager of the corporate Defendant;
MICHAEL S. DUNDEE, individually, and as an officer or manager of the corporate Defendant;
HARRIS M. COHEN, individually, and as an officer or manager of the corporate Defendant;
TELECARD DISPENSING CORP., a Florida Corporation; Defendants.

Case no. ___-CIV-_________

EX PARTE TEMPORARY RESTRAINING ORDER WITH ASSET FREEZE, APPOINTMENT OF A TEMPORARY RECEIVER, IMMEDIATE ACCESS TO DEFENDANTS' BUSINESS PREMISES, AND ORDER TO SHOW CAUSE

Plaintiff, the Federal Trade Commission ("Commission"), having filed its complaint for a permanent injunction and other relief in this matter, pursuant to Section 13(b) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. § 53(b), and having moved ex parte for a Temporary Restraining Order pursuant to Rule 65 of the Federal Rules of Civil Procedure, Fed. R. Civ. P. 65, and the Court having considered the complaint, declarations, exhibits, and memorandum of law filed in support thereof, and now being advised in the premises finds that:

1. This Court has jurisdiction of the subject matter of this case and there is good cause to believe it will have jurisdiction of all parties hereto;
: 2. There is good cause to believe that the Defendants Stephen I. Tashman, Stephen M. Mishkin, Ernest F. Lockamy, Michael S. Dundee, Harris M. Cohen, and Telecard Dispensing Corp., have engaged and are likely to engage in acts and practices that violate Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), and the Commission's Trade Regulation Rule entitled "Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures" (the "Franchise Rule") , 16 C.F.R. Part 436, and that the Commission is therefore likely to prevail on the merits of this action;
: 3. There is good cause to believe that immediate and irreparable damage to this Court's ability to grant effective final relief for consumers in the form of monetary redress will occur from the sale, transfer, or other disposition or concealment by Defendants of their assets or records unless said Defendants are immediately restrained and enjoined by Order of this Court. There is thus good cause for relieving the Plaintiff of the duty to provide Defendants with prior notice of the Plaintiff's motion;
: 4. Good cause exists for appointing a Temporary Receiver for Defendant Telecard Dispensing Corp.;
: 5. Weighing the equities and considering the Plaintiff's likelihood of ultimate success, a temporary restraining order with asset freeze and other equitable relief is in the public interest; and
: 6. No security is required of any agency of the United States for issuance of a restraining order. Fed. R. Civ. P. 65(c).

Definitions

For purposes of this temporary restraining order, the following definitions shall apply:

1. "Franchise" and "Franchisee" are defined in Section 436.2(a) of the Federal Trade Commission Trade Regulation Rule entitled "Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunity Ventures" (the " Franchise Rule"), 16 C.F.R. § 436.2(a);

2. "Business venture" is defined as any written or oral business arrangement, however denominated, whether or not covered by the Franchise Rule, which consists of the payment of any consideration for:

a. the right or 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); and
: b. more than nominal assistance to any person or entity in connection with or incident to the establishment, maintenance, or operation of a new business or the entry by an existing business into a new line or type of business;

3. "Defendants" means individual Defendants Stephen I. Tashman, Stephen M. Mishkin, Ernest F. Lockamy, Michael S. Dundee, Harris M. Cohen, and corporate Defendant Telecard Dispensing Corp., and each of them, and their successors, assigns, officers, agents, servants, employees, and those persons in active concert or participation with them who receive actual notice of this Order by personal service or otherwise, whether acting directly or through any corporation, subsidiary, division, or other device;

4. "Plaintiff" means the Federal Trade Commission; and

5. "Assets" means all real and personal property of any Defendant, or held for the benefit of any Defendant, including but not limited to "goods," "instruments," "equipment," "fixtures," "general intangibles," "inventory," "checks," or "notes," (as these terms are defined in the Uniform Commercial Code), lines of credit and all cash, wherever located.

IT IS THEREFORE ORDERED that, in connection with the offering for sale or sale of any franchise or business venture, Defendants and their successors, assigns, officers, 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, whether acting directly or through any corporation, subsidiary, division, or other devise, are hereby temporarily restrained and enjoined from:

A. Making, or assisting in the making of, directly or by implication, orally or in writing, any statement or representation that is false or misleading including, but not limited to:

1. any misrepresentation that any potential purchaser or investor in a franchise or business venture offered by any Defendant can, or is likely to, achieve a specific level of sales, income or profits in a business venture offered by any of the Defendants;

2. any misrepresentation that any current or former purchaser or investor in a franchise or business venture offered by any Defendant has achieved a specific level of sales, income or profits in a business venture offered by any of the Defendants;

3. any misrepresentation that any potential purchaser or investor in a franchise or business venture offered by any Defendant will receive an exclusive or limited territory in which either no other investor or purchaser, or a defined number of other investors or purchasers, will be permitted to place vending machines;

4. any misrepresentation to a potential purchaser or investor in a franchise or business venture offered by any Defendant that any Defendant or other person has found or will help locate the vending machines in profitable locations; and

5. any misrepresentation that any of the Defendants will provide purchasers or investors in a franchise or business venture offered by any Defendant with substantial assistance including, but not limited to, free relocation of machines, the sale of telephone cards that are "bonded and guaranteed" and the availability of 24 hour restocking of telephone cards.

B. Violating or assisting others to violate any provisions of the Franchise Rule, 16 C.F.R. Part 436, including but not limited to any failure to:

1. Provide potential franchisees with a complete and accurate disclosure document within the times stated in the Franchise Rule, 16 C.F.R. § 436.1(a);
: 2. Possess a reasonable basis for any earnings claim at the time such claim is made, as required by the Franchise Rule, 16, C.F.R. § 436.1(b)-(e), and provide potential franchisees with an earnings claim document when any earnings claim is made, as required by the Franchise Rule, 16 C.F.R. § 436.1(b)-(e).

II.

IT IS FURTHER ORDERED that the Defendants are hereby temporarily restrained and enjoined from:

A. Transferring, converting, encumbering, selling, concealing, dissipating, disbursing, assigning, spending, withdrawing, or otherwise disposing of any funds, property, accounts, contracts, shares of stock, or other assets, wherever located, that are (1) owned or controlled by any Defendant, in whole or in part; or (2) in the actual or constructive possession of any Defendant; or (3) owned, controlled by, or in the actual constructive possession of any corporation, partnership, or other entity directly or indirectly owned, managed, or controlled by, or under common control with, any Defendant, including, but not limited to, any assets held by or for any Defendant at any bank or savings and loan institution, or with any broker-dealer, escrow agent, title company, commodity trading company, precious metal dealer, money broker, check processor or other financial institution or depository of any kind;
: B. Opening or causing to be opened any safe deposit boxes titled in the name of any Defendant, or subject to access by any Defendant; and
: C. Incurring charges on any credit card issued in the name, singly or jointly, of any Defendant.

III.

IT IS FURTHER ORDERED that ____________________ is appointed as Temporary Receiver, with the full power of an equity receiver, for Defendant Telecard Dispensing Corp., and its affiliates and subsidiaries (hereinafter referred to as "the Receivership Defendant"), and of all the funds, properties, premises, accounts and other assets directly or indirectly owned, beneficially or otherwise, by the Receivership Defendant with directions and authority to accomplish the following:

A. Assume full control of the Receivership Defendant by removing Defendants Stephen I. Tashman, Stephen M. Mishkin, Ernest F. Lockamy, Michael S. Dundee, and Harris M. Cohen, and any other officer, independent contractor, employee, or agent of the Receivership Defendant, from control and management of the affairs of the Receivership Defendant.
: B. Take custody, control and possession of all the funds, property, premises, accounts, mail and other assets of, or in the possession or under the control of, the Receivership Defendant, wherever situated, the income and profits therefrom, and all sums of money now or hereafter due or owing to the Receivership Defendant, with full power to: collect, receive and take possession of all goods, chattels, rights, credits, moneys, effects, lands, leases, books and records, work papers, and records of accounts, including computer-maintained information, contracts, financial records, monies on hand in banks and other financial institutions, and other papers and documents of the Receivership Defendant and business venture purchasers whose interests are now held by or under the direction, possession, custody or control of the Receivership Defendant;
: C. Perform all acts necessary to preserve the value of those assets, in order to prevent any irreparable loss, damage and injury to consumers, and all acts incidental thereto, including suspension of operations;
: D. Enter into such agreements in connection with administration of the receivership, including, but not limited to: (1) the retention and employment of investigators, attorneys or accountants of the Temporary Receiver's choice, including without limitation members and employees of the Temporary Receiver's firm, to assist, advise, and represent the receiver, and (2) the movement and storage of any equipment, furniture, records, files or other physical property of the Receivership Defendant;
: E. Institute, prosecute, compromise, adjust, intervene in or become party to such actions or proceedings in state, federal or foreign courts that the Temporary Receiver deems necessary and advisable to preserve the value of the properties of the Receivership Defendant or that the Temporary Receiver deems necessary and advisable to carry out the Temporary Receiver's mandate under the Order, and likewise to defend, compromise or adjust or otherwise dispose of any or all actions or proceedings instituted against the Temporary Receiver or the Receivership Defendant that the Temporary Receiver deems necessary and advisable to preserve the properties of the Receivership Defendant or that the Temporary Receiver deems necessary and advisable to carry out the Temporary Receiver's mandate under this Order.

IV.

IT IS FURTHER ORDERED that, immediately upon service of this Order upon them, Defendants, and any other person or entity served with a copy of this Order, shall forthwith or within such time as permitted by the Temporary Receiver in writing, deliver over to the Temporary Receiver:

A. Possession and custody of all funds, assets, property owned beneficially or otherwise, and all other assets, wherever situated, of the Receivership Defendant;
: B. Possession and custody of all books and records of accounts, all financial and accounting records, balance sheets, income statements, bank records (including monthly statements, canceled checks, records of wire transfers, and check registers), customer lists, title documents and other papers of the Receivership Defendant;
: C. Possession and custody of all funds and other assets belonging to members of the public now held by the Receivership Defendant; all keys, computer passwords, entry codes, combinations to locks required to open or gain access to any of the property or effects, and all monies in any bank deposited to the credit, of the Receivership Defendant, wherever situated;
: D. Information identifying the accounts, employees, properties, or other assets or obligations of the Receivership Defendant;
: E. A statement providing the identity, including the address and telephone number, of any businesses, whether or not incorporated, and wherever situated, with whom the Receivership Defendant transacted business since January 1, 1994; and
: F. A statement providing the identity, including the address and telephone number, of any consumers, wherever situated, with whom the Receivership Defendant transacted business since January 1, 1994.

IT IS FURTHER ORDERED that except by leave of this Court, during the pendency of the receivership ordered herein, the Defendants and all customers, principles, investors, creditors, stockholders, lessors, and other persons, seeking to establish or enforce any claim, right or interest against or on behalf of the Receivership Defendant, or any of its subsidiaries or affiliates, and all others acting for or on behalf of such persons, including attorneys, trustees, agents, sheriffs, constables, marshals, and other officers and their deputies, and their respective attorneys, servants, agents and employees be and are hereby stayed from:

A. Commencing, prosecuting, continuing or enforcing any suit or proceeding against the Receivership Defendant, or any of its subsidiaries or affiliates, except that such actions may be filed to toll any applicable statute of limitations;
: B. Commencing, prosecuting, continuing or entering any suit or proceeding in the name or on behalf of the Receivership Defendant, or any of its subsidiaries or affiliates;
: C. Accelerating the due date of any obligation or claimed obligation, enforcing any lien upon, or taking or attempting to take possession of, or retaining possession of, a property of the Receivership Defendant, or any of its subsidiaries or affiliates or any property claimed by any of them or attempting to foreclose, forfeit, alter or terminate any of the Receivership Defendant's interests in property, including without limitation, the establishment, granting, or perfection of any security interest, whether such acts are part of a judicial proceeding or otherwise;
: D. Using self-help or executing or issuing, or causing the execution or issuance of any court attachment, subpoena, replevin, execution or other process for the purpose of impounding or taking possession of or interfering with, or creating or enforcing a lien upon, any property, wheresoever located, owned by or in the possession of the Receivership Defendant, or the Temporary Receiver appointed pursuant to this Final Order or any agent appointed by said Temporary Receiver; and
: E. Doing any act or thing whatsoever to interfere with the Temporary Receiver taking control, possession or management of the property subject to the receivership, or to in any way interfere with the Temporary Receiver, or to harass or interfere with the duties of the Temporary Receiver; or to interfere with the exclusive jurisdiction of this Court over the property and assets of the Receivership Defendant, or its subsidiaries or affiliates, including the filing by Defendants of a petition for relief under the United States Bankruptcy Code, 11 U.S.C. § 101 et seq., as to the Receivership Defendant.

Provided, however, nothing in this Paragraph shall prohibit any federal of state law enforcement or regulatory authority from commencing or prosecuting an action against the Receivership Defendant.

VI.

IT IS FURTHER ORDERED that the Temporary Receiver and all personnel hired by the Temporary Receiver as herein authorized, including counsel to the Temporary Receiver and accountants, are entitled to reasonable compensation for the performance or duties pursuant to this Order and for the cost of actual out-of-pocket expenses incurred by them, solely from the assets now held by or in the possession or control of or which may be received by the Receivership Defendant. The Temporary Receiver shall file with the court and serve on the parties periodic requests for the payment of such compensation from receivership assets, with the first such request due prior to sixty days after the date of this Order. The Temporary Receiver shall not increase the Temporary Receiver's fee billed to the receivership estate without prior approval of the Court.

VII.

IT IS FURTHER ORDERED that the Temporary Receiver shall file with the Clerk of this Court a bond in the sum of $ with sureties to be approved by the Court, conditioned that the Temporary Receiver will well and truly perform the duties of the office and abide by and perform all acts the Court directs.

VIII.

IT IS FURTHER ORDERED that, pending determination of the Plaintiff's request for a preliminary injunction, any financial or brokerage institution, business entity, or person that holds, controls, or maintains custody of any account or asset in which any Defendant has an interest, or has held, controlled, or maintained custody of any account or asset in which any Defendant has had an interest at any time since January 1, 1994, shall:

A. Prohibit anyone from withdrawing, removing, assigning, transferring, pledging, encumbering, disbursing, dissipating, converting, selling, or otherwise disposing of any such asset except:

1. As directed by further order of the Court; or

2. For accounts or assets held in the name or for the benefit of the Receivership Defendant, as directed by the Temporary Receiver appointed herein;

B. Deny access to any safe deposit box that is:

1. Titled in the name of any Defendant, either individually or jointly; or

2. Otherwise subject to access by any Defendant;

except as directed by further order of the Court or, for safe deposit boxes held in the name or for the benefit of the Receivership Defendant, as directed by the Temporary Receiver appointed herein;

C. Provide counsel for the Plaintiff, within five (5) business days of receiving a copy of this Order, a sworn statement setting forth:

1. The identification number of each such account or asset titled in the name, individually or jointly, of any of the Defendants, or held on behalf of, or for the benefit of, any of the Defendants;
: 2. The balance of each such account, or a description of the nature and value of such asset as of the close of business on the day on which this Order is served, and, if the account or other asset has been closed or removed, the date closed or removed, the total funds removed in order to close the account, and the name of the person or entity to whom such account or other asset was remitted;
: 3. The identification of any safe deposit box that is either titled in the name, individually or jointly, of any defendant, or is otherwise subject to access by any Defendant; and
: 4. Upon the request by the Temporary Receiver or Plaintiff, promptly provide the Temporary Receiver or Plaintiff with copies of all records or other documentation pertaining to such account or asset, including but not limited to originals or copies of account applications, account statements, signature cards, checks, drafts, deposit tickets, transfers to and from the accounts, all other debit and credit instruments or slips, currency transaction reports, 1099 forms, and safe deposit box logs. Any such financial institution, account custodian, or other aforementioned entity may arrange for the Plaintiff to obtain copies of any such records which the Plaintiff seeks, provided that such institution or custodian may charge a reasonable fee not to exceed fifteen cents per page copied;

D. Cooperate with all reasonable requests of the Temporary Receiver relating to implementation of this Order, including transferring funds at the Temporary Receiver's direction and producing records related to the Defendants' accounts.

IX.

A. within three (3) business days following the service of this Order, take such steps as are necessary to repatriate to the territory of the United States of America all funds, documents and assets that were transferred outside of such territory subsequent to January 1, 1994, and are held by them or are under their direct or indirect control, jointly or singly;
: B. within three (3) business days following service of this Order, provide the Plaintiff with a full accounting of all funds, documents and assets that were transferred outside of the territory of the United States of America subsequent to January 1, 1994, and are held by them or are under their direct or indirect control, jointly or singly:

IT IS FURTHER ORDERED that Defendants are hereby temporarily restrained and enjoined from:

A. Failing to create and maintain books, records, accounts, and data that, in reasonable detail, accurately, fairly, and completely reflect their incomes, disbursements, transactions, and use of monies; and
: B. Destroying, erasing, mutilating, concealing, altering, transferring, or otherwise disposing of, in any manner, directly or indirectly, any contracts, accounting data, correspondence, advertisements, computer tapes, discs, or other computerized records, books, written or printed records, handwritten notes, telephone logs, telephone scripts, receipt books, ledgers, personal and business canceled checks and check registers, bank statements, appointment books, copies of federal, state or local business or personal income or property tax returns, audio recordings, video recordings and other documents or records of any kind which relate to their business practices or business or personal finances from January 1, 1994, to the present time.

XI.

IT IS FURTHER ORDERED that the Defendants and the Temporary Receiver shall allow the Plaintiff's representatives, agents, and assistants immediate access to the Defendants' business premises, including, but not limited to the following location:

1909 Tyler St., Hollywood, FL 33020.

The purpose of this access shall be to inspect and copy any materials relevant to this action and to inventory Defendants' assets. The Plaintiff's representatives may remove materials from Defendants' business premises so they may be inspected, inventoried, and copied. The Plaintiff's representatives shall return the materials so removed within five (5) business days of completing said inventory and copying. In no event shall the Plaintiff's representatives retain the materials longer than ten (10) business days.

XII.

IT IS FURTHER ORDERED that, at least three (3) days prior to the preliminary injunction hearing in this matter, and in no event later than ten (10) business days after entry of this Order, each Defendant shall provide the Plaintiff and the Temporary Receiver with a completed financial statement, on the forms attached to this Order, accurate as of the date of service of this Order upon such Defendant.

XIII.

IT IS FURTHER ORDERED that each Defendant shall immediately provide a copy of this Order to each of its parent companies, holding companies, divisions, subsidiaries, corporations, affiliates, successors, assigns, directors, officers, managing agents, employees, representatives, and independent contractors, and shall, within three (3) business days from the date of service of this Order, provide plaintiff with a sworn statement that Defendants have complied with this provision of the Order and provide Plaintiff with a list of the names and addresses of all business entities and individuals that were provided a copy of this Order.

XIV.

IT IS FURTHER ORDERED that in anticipation of the preliminary injunction hearing in this matter, the parties and the Temporary Receiver are granted leave to conduct expedited discovery in this matter. The parties and the Temporary Receiver may depose witnesses at any time after the date of this Order upon five (5) business days notice. The parties shall respond to any requests for admissions within five (5) business days after service of the requests for admissions.

XV.

IT IS FURTHER ORDERED that, at least two (2) business days prior to the preliminary injunction hearing in this matter, all parties shall file with this Court and serve on all opposing parties, a witness list which shall include the name, address, and telephone number of any such witness, and either a summary of the witness' expected testimony, or the witness' affidavit revealing the substance of such witness' expected testimony.

XVI.

IT IS FURTHER ORDERED that parties shall serve affidavits, memoranda, and other evidence on which they intend to rely not less than two (2) business days before the preliminary injunction hearing in this matter. Defendants shall serve copies of all such materials on counsel for the Plaintiff, prior to 4:45 p.m. of that day, by delivery to the following: Ronald E. Laitsch, Federal Trade Commission, Atlanta Regional Office, 60 Forsyth Street, Suite 5M35, Atlanta, GA 30303.

XVII.

IT IS FURTHER ORDERED that agents of the Plaintiff and the Temporary Receiver may serve copies of this Order upon any financial institution or person or entity that may be in possession of any assets, property, or property rights of Defendants or that may be subject to any provision of this Order.

XVIII.

IT IS FURTHER ORDERED that, pursuant to Section 604 of the Fair Credit Reporting Act, 15 U.S.C. § 1681b, any consumer reporting agency may furnish the Plaintiff or the Temporary Receiver with a consumer report concerning any Defendant.

XIX.

IT IS FURTHER ORDERED that Defendants and their successors, assigns, officers, 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, whether acting through any trust, corporation, subsidiary, division, or other device, are hereby temporarily restrained and enjoined from creating, operating or controlling any business entity, including any partnership, limited partnership, joint venture, sole proprietorship, or corporation, without first providing the Plaintiff with a written statement disclosing (1) the name of the business entity, (2) the address and telephone number of the business entity, (3) the names of the business entity's officers, directors, principals, managers and employees, and (4) a detailed description of the business entity's intended activities.

XX.

IT IS FURTHER ORDERED that each of the Defendants shall appear before this Court on the ___________ day of _________, 1998, at ________o'clock ____.m. at the United States Courthouse, Room ___________, to show cause, if any there be, why this Court should not enter a preliminary injunction, pending final ruling on the Complaint, against said Defendants enjoining them from further violations of Section 5(a) of the Federal Trade Commission Act, 15 U.S.C. § 45(a), continuing the freeze of their assets, continuing the appointment of a receiver, and imposing such additional relief as may be appropriate.

XIX.

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

SO ORDERED, this _____day of September, 1998, at __________.

__________________________________
United States District Judge