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FTC Hits "Business Opportunity" Scams

January 21, 2004
The Federal Trade Commission has settled charges with four operations that allegedly lured consumers into investing in businesses that provided little or no return on their investment.

Internet Treasure Chest
In an Internet get-rich-quick scheme, operators claimed to offer a one fee, turn-key get-rich-quick Internet home-business, but tacked on requirements that cost hundreds or thousands of dollars more, have agreed to settle FTC charges that their advertising was deceptive and violated federal laws.

The settlement provides for $500,000 in consumer redress, bars deceptive claims associated with the sale of any goods or services, and requires the defendants to discontinue airing an infomercial they used to generate sales.

In May 2003, the FTC charged that End70 Corporation and its principal, Damien Zamora, used a Web site and infomercials to claim that their Internet Treasure Chest (ITC) business opportunity was very profitable and inexpensive.

Infomercials and a Web site claimed that “Internet Treasure Chest will give you everything you need to start your own exciting Internet Business including your own worldwide Web site all for the unbelievable price of only $59.95.” The Web site and infomercials also made earnings and income claims and testimonials such as: “You don’t need a lot of money to start an Internet Business. In fact, we started out of our home and now we’re on track to do $1 million in sales this year.”

The FTC alleged that the cost and earnings claims were deceptive and misleading in violation of the FTC Act, and that the defendants’ misrepresentations violated the Telemarketing Sales Rule.

Based on financial statements provided by the defendants, they will pay $500,000 in consumer redress. Should their financial statements be found inaccurate, they will be required to pay $36 million.

The FTC has created a hotline for consumers affected by ITC’s deceptive advertising scam. Consumers may call 202-326-3205 for more information

Vendco
In June 2002, the FTC filed a complaint against the operators of a Las Vegas, Nevada-based vending machine business scam. The defendants placed classified ads in newspapers and on the Internet soliciting telephone calls to the company.

The FTC charged that when consumers returned the calls, the defendants claimed that those who purchased an eight-machine package at $3,300 could gross $81,000 a year and net almost $50,000 a year while working only a few hours a week. The defendants also allegedly claimed that the vending machines would be placed in “quality locations,” with heavy customer traffic. They allegedly told consumers that their machines were backed with a “one-year warranty and a 60-day location replacement warranty.”

The FTC charged that the claims were false. According to the agency, investors did not achieve the earnings they had been promised. The FTC alleged that few even recovered the amount they had invested, and that the locations that the defendants provided were not high traffic areas. The agency charged the defendants with violating federal law, including the Franchise Rule, which requires parties covered by the Rule to provide general disclosure documents and an earnings claim document to prospective purchasers.

The settlement with Vendco, LLC and its principal, Curt Briguglio, also known as Curt Briggs, prohibits them from making any representations about the income a consumer will make from a vending machine or about the location at which a vending machine sold or provided by the defendants will be placed.

In addition, the defendants will pay $10,000 for consumer redress, which is based on their ability to pay. Should the representations about their financial condition be found to be inaccurate, $1.8 million, the total of their ill-gotten gains, will be due.

North American Vending
In another vending machine scheme, the FTC charged North American Vending, Inc and its principal, Terry Bird, with making unsubstantiated income claims in ads in business opportunity magazines. The ads included testimonials from apparent customers that said they made between $698 and $3,016. The FTC alleged that when prospective investors called, NAV employees made similar unsubstantiated claims.

The agency alleged that: (1) the ads did not disclose the number and percentage of prior purchasers who had done as well or better that the claims, as required by the Franchise Rule; and (2) the defendants failed to provide the complete basic disclosure documents required by the Rule. The settlement permanently bars the defendants from violating the FTC Act and the Franchise Rule and requires $22,000 for consumer redress.

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