• The Federal Trade Commission issued its seventh quarterly announcement summarizing the agency’s continued enforcement against telemarketing fraud and abuse on January 28. The quarterly enforcement update lists significant case developments in 22 federal court cases between November 2004 and January 2005. A Web page containing the “Quarterly Update for January 2005” also contains a list of enforcement actions involving telemarketing that have seen developments since October 1, 2002, with links to press releases related to each of these actions. The Web page now contains information about 147 actions involving the use of the telephone to market goods or services. This information covers cold-call outbound telemarketing, as well as inbound calls generated from advertisements or other solicitations to purchase products or services. The quarterly enforcement update issued last month can be found on the FTC’s Web site by clicking here.

• Mexico’s consumer protection agency, the Procuradur僘 Federal del Consumidor, and the Federal Trade Commission signed a bilateral Memorandum of Understanding (“MOU”) on January 27 to promote enhanced cooperation in the fight against cross-border fraud. This memorandum marks the first time the FTC has signed a consumer protection MOU with a non-English-speaking nation. The signing took place in Washington, DC. The MOU strengthens the close relationship between the United States and Mexico and will facilitate greater law enforcement coordination in consumer protection matters affecting both nations. This memorandum is a “best efforts” agreement – it is not legally binding and does not alter either country’s existing consumer protection laws.

• On January 24, the FTC announced settlements with three individuals responsible for a scheme that directed an international telemarketing network to defraud hundreds of thousands of consumers through the deceptive telemarketing of bogus advance-fee credit cards. These individuals are banned from telemarketing for life as part of federal court orders settling Federal Trade Commission charges. Another alleged leader of this massive scam, who has a prior history involving telemarketing fraud, also agreed to a lifetime telemarketing ban. The Assail Telemarketing Network engaged in more than $100 million in deceptive telemarketing sales, including the sale of hundreds of thousands of fraudulent advance-fee credit card packages using names such as Advantage Capital, Capital First, and Premier One. The FTC alleged in its complaint that the defendants operated the advance-fee credit card scam through a network of telemarketing boiler rooms, Canadian front men, and outsourced fulfillment and customer service centers. The FTC also alleged that the defendants’ telemarketers contacted consumers with poor credit records and told them that they were guaranteed to receive a MasterCard for an advance fee. Consumers, however, did not receive a MasterCard or any other legitimate payment device. The FTC’s complaint alleged that the defendants maintained their own telemarketing boiler rooms and also kept contract boiler rooms in the United States, Canada, India, and the Caribbean. Three of the settlements were with officers of Assail, Inc.: Joel Best, Vice President; Michael Henriksen, Chief Financial Officer; and Clifford Dunn, General Manager. The fourth settlement was with Lawrence Silverman, who the FTC alleged played a critical role creating the deceptive corporate structure of the scheme, and his company, defendant Lamar Holdings, Inc. (“Lamar”). The FTC alleged that each of these defendants played important roles in planning and implementing the scam.

• The Federal Trade Commission, the Orange County (California) District Attorney, and the California State Attorney General announced on January 18 that they had reached settlements with Body Wise International, Inc. (“Body Wise”), an Orange County business, resolving allegations that Body Wise deceptively advertised the “AG-Immune” dietary supplement. The FTC alleged that Body Wise made unsubstantiated claims that AG-Immune prevents, treats, or cures numerous diseases, including cancer, HIV/AIDS and asthma, in violation of a 1995 FTC order. The FTC’s proposed settlement with Body Wise, if approved by the court, requires Body Wise to pay a $2 million civil penalty to the FTC. California’s proposed settlement would require Body Wise to pay the State of California an additional $1.58 million in penalties and costs for allegedly violating the State’s Business and Professions and Health and Safety Codes. The FTC also reached a settlement with Jesse A. Stoff, M.D., an expert endorser of AG-Immune, to resolve allegations that he made deceptive claims for the product. The FTC complaint names Body Wise International, located in Tustin, California, and Jesse A. Stoff, M.D., a resident of Tucson, Arizona. According to the complaint, in April 2000, Body Wise began marketing AG-Immune, a dietary supplement containing “antigen infused dialyzable bovine colostrum/whey extract” or “AI/E-10.” Body Wise marketed this and other AI/E-10 products directly to consumers and through a network of “consultants” who marketed and sold Body Wise products to consumers. Body Wise sold AG-Immune for approximately $50 for a one-month supply, and had over $14 million in sales.

Authored by:
Camelia Mazard
202-218-0028
CMazard@sheppardmullin.com