Telemarketers Charged with Deceptive Marketing to Pay $14 Million Penalty for Violating Injunction Order

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TelecommunicationsIn 2008, Bryon Wolf and Roy Eliasson settled deceptive marketing charges filed against them and their company, Suntasisa Marketing, Inc., by the Federal Trade Commission (FTC).  Mr. Wolf and Mr. Eliasson were ordered to pay $11 million dollars for deceptively marketing their products in violation the Federal Trade Commission Act.  As part of the settlement, defendants were permanently enjoined from engaging in any similar deceptive marketing activities in the future.  Despite this fact, the FTC claims that the defendants continued to engage in almost the exact same illegal activities under a different company name, Membership Services, LLC.  Last week, the U.S. District Court of Florida issued a contempt order, in which they require Mr. Wolf and Mr. Eliasson to pay $14.75 million for violating the terms of their settlement agreement.

Previous FTC Deceptive Marketing Settlement

The FTC previously alleged that the defendants engaged in deceptive marketing in violation of the FTC Act by operating a telemarketing campaign, in which they marketed negative-option programs to consumers and charged their bank accounts without obtaining proper consent.

As part of the defendants’ settlement agreement, they agreed to be enjoined from: 1) participating in any future telemarking campaigns; 2) using the billing information collected from consumers in any way contrary to the order; and 3) making, expressly or by implication, any representation that is false or misleading to consumers.  Additionally, the court ordered the disgorgement of all proceeds derived from the alleged deceptive marketing enterprise.

Defendants Violate Settlement Order

Last week, a U.S. District Court in Florida found that Mr. Wolf and Mr. Eliasson have been engaged in almost identical forms of deceptive marketing through Membership Services, LLC, a company which they control.  According to the contempt order issued by the Court, the defendants violated the permanent injunction that they previously agreed to abide by.  The Court imposed a penalty of $14.75 million against Mr. Wolf and Mr. Eliasson, which is the amount that the Court found was illegally gained through their deceptive marketing.

The contempt order entered against defendants in this case is part of a larger trend within the FTC.  This case marks the fifth (5th) successful contempt case won this year by the FTC.  Please note that, the FTC is not the only governmental agency charged with regulating the telemarketing industry; the Federal Communications Commission (FCC) has similar telemarketing regulations codified in its Telephone Consumer Protection Act (TCPA), which we have previously discussed in this blog.  Entities that fail to comply with applicable telemarketing regulations may find themselves facing investigation and possible injunctive and monetary penalties.

If you are interested in learning more about this topic or need to review your telemarketing practices, please e-mail us at info@kleinmoynihan.com, or call us at (212) 246-0900.

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