Opinion
22-cv-11120
08-05-2024
FEDERAL TRADE COMMISSION, Plaintiff, v. FINANCIAL EDUCATION SERVICES, INC., et al., Defendants.
ORDER FOR PERMANENT INJUNCTION, MONETARY JUDGMENT, AND CIVIL PENALTY AS TO DEFENDANTS VR-TECH MGT, LLC, STATEWIDE COMMERCIAL LENDING LLC, AND MICHAEL TOLOFF AND RELIEF DEFENDANT GAYLE TOLOFF
MATTHEW F. LEITMAN UNITED STATES DISTRICT JUDGE
Plaintiff, the Federal Trade Commission (“FTC”), filed its First Amended Complaint for Permanent Injunction, Monetary Relief, Civil Penalties, and Other Relief (“Complaint”) on March 27, 2023, pursuant to Sections 5(a), 5(m)(1)(A), 13(b), 16(a), and 19 of the FTC Act, 15 U.S.C. §§ 45(a), 45(m)(1)(A), 53(b), 56(a), and 57b, Section 410(b) of the Credit Repair Organizations Act (“CROA”), 15 U.S.C. § 1679h(b), Section 6(b) of the Telemarketing and Consumer Fraud and Abuse Prevention Act, 15 U.S.C. § 6105(b), Section 621(a) of the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681s(a), and Section 522(a) of the Gramm-Leach-Bliley Act (“GLB Act”), 15 U.S.C. § 6822(a), seeking permanent injunctive relief, monetary civil penalties, and other monetary relief for Defendants' acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), multiple provisions of CROA, 15 U.S.C. §§ 1679-16791 , multiple provisions of the FTC's Telemarketing Sales Rule (“TSR”), 16 C.F.R. Part 310, Section 604(f)(2) of the FCRA, 15 U.S.C. § 1681b(f)(2), and Section 521(a) of the GLB Act, 15 U.S.C. § 6821(a), in connection with Defendants' marketing and sale of Credit Repair Services and Business Ventures. (ECF No. 121.)
Now, the FTC and Defendants VR-Tech MGT, LLC, Statewide Commercial Lending LLC, and Michael Toloff and Relief Defendant Gayle Toloff, by and through their undersigned counsel, hereby stipulate, agree, and move the Court for entry of a Stipulated Order for Permanent Injunction, Monetary Judgment, and Civil Penalty (“Order”) to resolve all matters in dispute in this action between them.
FINDINGS
By stipulation of the parties, the Court finds that:
A. This Court has jurisdiction over this matter.
B. The Complaint charges that Settling Defendants participated in deceptive and unlawful acts or practices in violation of Section 5 of the FTC Act, multiple provisions of CROA and the TSR, Section 604(f)(2) of the FCRA, and Section 521(a) of the GLB Act in connection with Defendants' marketing and sale of Credit Repair Services and Business Ventures.
C. The Complaint also charges that Relief Defendant has received funds derived from Defendants' unlawful acts and practices and for which Relief Defendant has no legitimate claim to those funds.
D. Settling Defendants and Relief Defendant neither admit nor deny any of the allegations in the Complaint, except as specifically stated in this Order. Only for purposes of this action, Settling Defendants and Relief Defendant admit the facts necessary to establish jurisdiction.
E. Settling Defendants and Relief Defendant waive any claim that they may have under the Equal Access to Justice Act, 28 U.S.C. § 2412, concerning the prosecution of this action through the date of this Order, and agree to bear their own costs and attorney fees.
F. Settling Defendants, Relief Defendant, and the FTC waive all rights to appeal or otherwise challenge or contest the validity of this Order.
G. Entry of this Order is in the public interest.
DEFINITIONS
For the purpose of this Order, the following definitions shall apply:
A. “Benefit” means any consideration, including: (a) any reward, payment, discount, commission, compensation, bonus, product, or product credit; (b) eligibility to receive any reward, payment, discount, commission, compensation, bonus, product, service, or service or product credit; or (c) eligibility to receive rank or change in rank.
B. “Business Venture” means any written or oral business arrangement, however denominated, whether or not covered by 16 C.F.R. Part 437, that consists of providing payment or other consideration for the right or means to offer, sell, or distribute a product or service.
C. “Clear(ly) and conspicuous(ly)” means that a required disclosure is difficult to miss (i.e., easily noticeable) and easily understandable by ordinary consumers, including in all of the following ways:
1. In any communication that is solely visual or solely audible, the disclosure must be made through the same means through which the communication is presented. In any communication made through both visual and audible means, such as a television advertisement, the disclosure must be presented simultaneously in both the visual and audible portions of the communication even if the representation requiring the disclosure is made in only one means.
2. A visual disclosure, by its size, contrast, location, the length of time it appears, and other characteristics, must stand out from any accompanying text or other visual elements so that it is easily noticed, read, and understood.
3. An audible disclosure, including by telephone or streaming video, must be delivered in a volume, speed, and cadence sufficient for ordinary consumers to easily hear and understand it.
4. In any communication using an interactive electronic medium, such as the Internet or software, the disclosure must be unavoidable.
5. The disclosure must use diction and syntax understandable to ordinary consumers and must appear in each language in which the representation that requires the disclosure appears.
6. The disclosure must comply with these requirements in each medium through which it is received, including all electronic devices and face-to-face communications.
7. The disclosure must not be contradicted or mitigated by, or inconsistent with, anything else in the communication.
8. When the representation or sales practice targets a specific audience, such as children, the elderly, or the terminally ill, “ordinary consumers” includes reasonable members of that group.
D. “Consumer” means any Person.
E. “Credit Repair Service” means any service, in return for payment of money or other valuable consideration, for the express or implied purpose of: (1) improving any Consumer's credit report, credit record, credit history, credit profile, credit score, or credit rating; or (2) providing advice or assistance to any Consumer with regard to any activity or service the purpose of which is to improve a Consumer's credit report, credit record, credit history, credit profile, credit score, or credit rating.
F. “Defendants” means Financial Education Services, Inc., United Wealth Services, Inc., VR-Tech, LLC, VR-Tech MGT, LLC, CM Rent Inc., Youth Financial Literacy Foundation, LK Commercial Lending LLC, Statewide Commercial Lending LLC, Parimal Naik, Michael Toloff, Christopher Toloff, and Gerald Thompson, individually, collectively, or in any combination.
G. “Financing Product or Service” means any product or service represented, expressly or by implication, to provide or assist in providing, directly or indirectly, (1) a loan or other extension of credit; or (2) funds in exchange for future receivables, revenues, proceeds, or other payments or amounts.
H. “Multi-Level Marketing Program” means any marketing program in which participants have the right to: (a) recruit additional participants, or have additional participants placed into the participant's downline, tree, cooperative, income center, or other similar program grouping; (b) sell goods or services; and (c) receive any Benefit for the activity of those in the participant's downline, tree, cooperative, income center, or similar program grouping.
I. “Person” means a natural person, an organization or other legal entity, including a corporation, partnership, sole proprietorship, limited liability company, association, cooperative, or any other group or combination acting as an entity.
J. “Receiver” means Patrick A. Miles, Jr.
K. “Receivership Entities” means Corporate Settling Defendants and any other entity involved in the marketing or sale of any Credit Repair Service or MultiLevel Marketing Program that the Monitor determines in a written report to the Court is owned in whole or in part or is otherwise controlled by any Settling Defendant. Receivership Entities does not include the Individual Settling Defendant or Relief Defendant.
L. “Relief Defendant” means Gayle L. Toloff individually and in her capacity as trustee, grantor, and beneficiary of the Gayle L. Toloff Revocable Living Trust.
M. “Settling Defendants” means the Corporate Settling Defendants and the Individual Settling Defendant, individually, collectively, or in any combination. “Corporate Settling Defendants” means VR-Tech MGT, LLC, Statewide Commercial Lending LLC, and their successors and assigns, individually, collectively, or in any combination. “Individual Settling Defendant” means Michael Toloff.
ORDER
BAN ON CREDIT REPAIR
I. IT IS THEREFORE ORDERED that Settling Defendants, whether acting directly or indirectly, are permanently restrained and enjoined from:
A. Advertising, marketing, promoting, offering for sale, or selling any Credit Repair Service; and
B. Assisting others in the advertising, marketing, promoting, offering for sale, or selling any Credit Repair Service.
BAN ON MULTI-LEVEL MARKETING PROGRAMS
II. IT IS FURTHER ORDERED that Settling Defendants, whether acting directly or indirectly, are permanently restrained and enjoined from advertising, marketing, promoting, engaging in, participating in, operating, or assisting others in the advertising, marketing, promoting, engaging in, participating in, or operating of any Multi-Level Marketing Program, including any product- or service-based pyramid scheme.
PROHIBITED BUSINESS ACTIVITIES
III. IT IS FURTHER ORDERED that Settling Defendants, Settling Defendants' officers, agents, employees, and attorneys, and all other persons in active concert or participation with any of them, who receive actual notice of this Order, whether acting directly or indirectly, in connection with advertising, marketing, promoting, distributing, servicing, offering, or selling any product or service, are permanently restrained and enjoined from engaging in, or assisting others engaged in, the following:
A. Misrepresenting, expressly or by implication:
1. That participants of any Business Venture will or are likely to achieve substantial sales, income, or profit;
2. The amount of sales, income, or profit that participants of any Business Venture have actually earned;
3. The amount of time or effort required to earn an amount of compensation or to advance in any Business Venture;
4. The reason participants of any Business Venture do not earn substantial compensation, including representations that participants fail because they do not devote substantial or sufficient effort or are not active;
5. The terms or rates that are available for any Financing Product or Service, including, but not limited to: (a) the type of Financing Product or Service (such as a credit card, line of credit, loan, or merchant cash advance); (b) closing costs or other fees and how such costs or fees will be assessed; (c) the payment schedule, monthly, weekly, or daily payment amount(s), any balloon payment, or other payment terms; (d) the interest rate(s), annual percentage rate(s), or finance charge(s), and whether they are fixed or adjustable; (e) the loan amount, credit amount, draw amount, funding amount, or outstanding balance; the loan term, draw period, or maturity; or any other term of credit; (f) the amount of cash or funds to be disbursed to the Consumer out of the proceeds, or the amount of cash or funds to be disbursed on behalf of the Consumer to any third parties; (g) whether any specified minimum payment amount covers both interest and principal, and whether the credit has or can result in negative amortization; (h) that the credit does not have a prepayment penalty or whether subsequent refinancing may trigger a prepayment penalty and/or other fees; or (i) whether the Consumer is required to provide any Person with a personal guarantee, security interest, collateral, confession of judgment, or any other rights or remedies;
6. Any benefit of such product or service;
7. Any requirements for obtaining such product or service;
8. The existence, amount, or timing of any fees or charges, or the total cost to purchase, receive, or use such product or service;
9. Any Person's identity;
10.That any Person is non-profit, charitable, or otherwise not in business to generate profits for its employees, independent contractors, managers, directors, officers, or owners; or
11.Any other fact material to Consumers, including any material restrictions, limitations, or conditions to purchase, receive or use such product or service; or any material aspect of performance, efficacy, nature, or central characteristics of such product or service.
B. Requesting or receiving payment of a fee or other consideration in advance of obtaining a loan or other extension of credit for a Consumer.
C. Creating or causing to be created, directly or indirectly, a remotely created payment order as payment for such product or service.
D. Failing to disclose Clearly and Conspicuously, in connection with any representation regarding the availability of any Financing Product or Service: (1) the type of Financing Product or Service (such as a credit card, line of credit, loan, or merchant cash advance); (2) all costs and fees associated with such Financing Product or Service, how such costs shall be assessed, and the specific amount of funds Consumers will receive after payment of such costs and fees; (3) the interest rate(s), annual percentage rate(s), or finance charge(s), and whether they are fixed or adjustable; (4) the loan amount, funding amount, credit amount or limit, draw amount, outstanding balance; and (5) if the Consumer is required to provide any Person with a personal guarantee, security interest, collateral, confession of judgment, or any other rights or remedies, that fact; or
E. Failing to disclose Clearly and Conspicuously the fact, if true, that a Consumer must activate, request, initiate, or otherwise take some affirmative action in order to receive or use such product or service.
INJUNCTION RELATING TO TELEMARKETING
IV. IT IS FURTHER ORDERED that Settling Defendants, Settling Defendants' officers, agents, employees, and attorneys, and all other persons in active concert or participation with any of them, who receive actual notice of this Order, whether acting directly or indirectly, in connection with the telemarketing of any product or service, are hereby permanently restrained and enjoined from violating the FTC's Telemarketing Sales Rule, 16 C.F.R. Part 310, a copy of which is attached.
INJUNCTION RELATING TO CONSUMER CREDIT REPORTS
V. IT IS FURTHER ORDERED that Settling Defendants, Settling Defendants' officers, agents, employees, and attorneys, and all other persons in active concert or participation with any of them, who receive actual notice of this Order, whether acting directly or indirectly, are hereby permanently restrained and enjoined from:
A. Obtaining any Person's consumer credit report without having a permissible purpose;
B. Misrepresenting to any Person the purpose for which any Person's consumer credit report is being obtained or used; or
C. Violating the Fair Credit Reporting Act, 15 U.S.C. §§ 1681-1681x, a copy of which is attached.
INJUNCTION RELATING TO CONSUMER FINANCIAL INFORMATION
VI. IT IS FURTHER ORDERED that Settling Defendants, Settling Defendants' officers, agents, employees, and attorneys, and all other persons in active concert or participation with any of them, who receive actual notice of this Order, whether acting directly or indirectly, are hereby permanently restrained and enjoined from:
A. Making any false, fictitious, or fraudulent statement or representation to any Person to obtain or attempt to obtain information of a Consumer, including, but not limited to, credit or debit card numbers, bank account numbers and routing numbers, and consumer credit reports; or
B. Violating the Gramm-Leach-Bliley Act, 15 U.S.C. §§ 6801-6809, §§ 68216827, a copy of which is attached.
CONVERSION OF MONITORSHIP TO LIMITED RECEIVERSHIP
VII. IT IS FURTHER ORDERED that the monitorship over Defendant VR-Tech MGT established pursuant to the Order Denying Motion for Preliminary Injunction, Vacating Temporary Restraining Order, Terminating Asset Freeze, and Converting Receivership to Monitorship entered by the Court on July 18, 2022 (ECF No. 76, PageID.5547-5560) is hereby terminated and Patrick A. Miles, Jr. is hereby discharged as Monitor and appointed Receiver over the Receivership Entities, with full powers of an equity receiver for the sole purpose of liquidating certain assets specified in Section VIII.B of this Order (“Receivership Estate”). The Receiver shall be solely the agent of this Court in acting as Receiver under this Order. The Receiver shall have all of the powers, duties, and authorities as set forth Sections XIII - XIX of the Temporary Restraining Order entered by the Court on May 24, 2022 (ECF No. 76, PageID.2258-2272). The Receiver shall wind up the Receivership Estate and liquidate all assets within 365 days after entry of this Order. Any party or the Receiver may request that the Court extend the Receiver's term for good cause. Upon termination of the receivership and final payment to the Receiver of any approved fees, costs, and expenses, the Receiver shall turn over to the FTC or its designated agent all remaining assets in the receivership estate.
MONETARY JUDGMENT, CIVIL PENALTY, AND PARTIAL SUSPENSION
VIII. IT IS FURTHER ORDERED that:
A. Judgment in the amount of THREE HUNDRED AND TWENTY FOUR MILLION, FORTY THREE THOUSAND, EIGHT HUNDRED, AND EIGHTY EIGHT Dollars ($324,043,888) is entered in favor of the FTC against Settling Defendants, jointly and severally with any other Defendant against whom judgment may be entered, as monetary relief pursuant to Section 19 of the FTC Act, 15 U.S.C. § 57b, for Settling Defendant's violations of CROA, the TSR, and Section 521(a) of the GLB Act.
B. In partial satisfaction of the judgment set forth in Section VIII.A:
1. Defendant Michael Toloff is ordered to pay to the FTC $200,000, which, as he stipulates, his undersigned counsel holds in escrow for no purpose other than payment to the FTC. Such payment must be made within 7 days of entry of this Order by electronic fund transfer in accordance with instructions previously provided by a representative of the FTC;
2. Citizens Bank shall, within ten (10) business days of receipt of a copy of this Order, transfer to the Receiver or its designated agent all funds, if any, in account number xxxx8278 in the name of VR-Tech MGT, LLC;
3. TD Bank shall, within ten (10) business days of receipt of a copy of this Order, transfer to the Receiver or its designated agent all funds, if any, in account number xxxx5922 in the name of Statewide Commercial Lending LLC;
4. Defendant Michael Toloff shall, within thirty (30) days after the date of entry of this Order, either (a) transfer to the FTC or its designated agent cash in the amount of $55,000 or (b) transfer to the Receiver title to the 2018 Porsche Panamer identified on his financial statement, in which case Defendant Michael Toloff shall cooperate fully with the Receiver and shall execute any instrument or document presented by the Receiver, and do whatever else the Receiver deems necessary or desirable to effect such transfer. Upon such transfer, the vehicle shall be an asset of the Receivership Estate, to be governed by Section VII of this Order, provided that Defendant Michael Toloff shall have the right of first offer on any sale of such vehicle.
5. Defendant Michael Toloff shall, within thirty (30) days after the date of entry of this Order, either (a) transfer to the FTC or its designated agent cash in the amount of $40,000 or (b) transfer to the Receiver title to the 2022 Lincoln Corsair identified on his financial statement, in which case Defendant Michael Toloff shall cooperate fully with the Receiver and shall execute any instrument or document presented by the Receiver, and do whatever else the Receiver deems necessary or desirable to effect such transfer. Upon such transfer, the vehicle shall be an asset of the Receivership Estate, to be governed by Section VII of this Order, provided that Defendant Michael Toloff shall have the right of first offer on any sale of such vehicle.
6. Defendant Michael Toloff shall, within thirty (30) days after the date of entry of this Order, either (a) transfer to the FTC or its designated agent cash in the amount of $10,000 or (b) transfer to the Receiver title to the Bennington pontoon boat identified on his financial statement, in which case Defendant Michael Toloff shall cooperate fully with the Receiver and shall execute any instrument or document presented by the Receiver, and do whatever else the Receiver deems necessary or desirable to effect such transfer. Upon such transfer, the vehicle shall be an asset of the Receivership Estate, to be governed by Section VII of this Order, provided that Defendant Michael Toloff shall have the right of first offer on any sale of such boat.
7. Defendant Michael Toloff shall, within one hundred and eighty (180) days after the date of entry of this Order, either (a) transfer to the FTC or its designated agent cash in the amount of $1,200,000 or (b) transfer to the Receiver title to the real property located at 877 South Shore, The Villages, Florida, in which case Defendant Michael Toloff shall cooperate fully with the Receiver and shall execute any instrument or document presented by the Receiver, and do whatever else the Receiver deems necessary or desirable to effect such transfer. Upon such transfer, the real property shall be an asset of the Receivership Estate, to be governed by Section VII of this Order, provided that Defendant Michael Toloff shall have the right of first offer on any sale of such property.
8. Defendant Michael Toloff shall, within one hundred and eighty (180) days after the date of entry of this Order, either (a) transfer to the FTC or its designated agent cash in the amount of $350,000 or (b) transfer to the Receiver title to the real property located at 3600 Village Harbor Drive, #8, Petoskey, Michigan, in which case Defendant Michael Toloff shall cooperate fully with the Receiver and shall execute any instrument or document presented by the Receiver, and do whatever else the Receiver deems necessary or desirable to effect such transfer. Upon such transfer, the real property shall be an asset of the Receivership Estate, to be governed by Section VII of this Order, provided that Defendant Michael Toloff shall have the right of first offer on any sale of such property.
C. Upon completion of the asset transfers set forth in Section VIII.B of this Order, the remainder of the judgment entered in Section VIII.A is suspended, subject to Subsections H, I, and J below.
D. Judgment in the amount of THREE HUNDRED AND TWENTY FOUR MILLION, FORTY THREE THOUSAND, EIGHT HUNDRED, AND EIGHTY EIGHT Dollars ($324,043,888) is entered in favor of the FTC against Settling Defendants, jointly and severally with any other Defendant against whom judgment may be entered, as a civil penalty pursuant to Section 5(m)(1)(A) of the FTC Act, 15 U.S.C. § 45(m)(1)(A), for Settling Defendants' violations of Section 521(a) of the GLB Act and pursuant to Section 621(a)(2)(A) of the FCRA, 15 U.S.C. § 1681s(a)(2)(A), for Settling Defendants' violations of the FCRA. The judgment entered in this Section VIII.D is suspended, subject to Subsections H, I, J, and P below.
E. Judgment in the amount of EIGHT MILLION, NINE HUNDRED AND FIFTY THOUSAND Dollars ($8,950,000) is entered in favor of the FTC against Relief Defendant, jointly and severally with Settling Defendants, as equitable monetary relief.
F. In partial satisfaction of the judgment set forth in Section VIII.E, Relief Defendant is ordered to pay to the FTC $2,600,000 which, as Relief Defendant stipulates, her undersigned counsel holds in escrow for no purpose other than payment to the FTC. Such payment must be made within 7 days of entry of this Order by electronic fund transfer in accordance with instructions previously provided by a representative of the FTC.
G. Upon completion of the asset transfers set forth in Section VIII.F of this Order, the remainder of the judgment entered in Section VIII.E is suspended, subject to Subsections H, I, and J below.
H. The FTC's agreement to the suspension of part of the judgments is expressly premised upon the truthfulness, accuracy, and completeness of Settling Defendants' and Relief Defendant's sworn financial statements and related documents (collectively, “financial representations”) submitted to the FTC, namely: (i) the Financial Statement of Corporate Defendant VR-Tech MGT signed by Michael Toloff on March 18, 2024, including the attachments, (ii) the Financial Statement of Individual Defendant Michael Toloff signed on March 18, 2024, including the attachments, (iii) the Financial Statement of Relief Defendant Gayle Toloff signed on March 18, 2024, including the attachment, and (vi) the representation of counsel that Defendant Statewide Commercial Lending LLC has no assets.
I. The suspension of the judgments will be lifted as to any Settling Defendant or Relief Defendant if, upon motion by the FTC, the Court finds that such Settling Defendant or Relief Defendant failed to disclose any material asset, materially misstated the value of any asset, or made any other material misstatement or omission in the financial representations identified above.
J. If the suspension of the judgments is lifted, the judgments become immediately due as to that Settling Defendant in the amounts specified in Section VIII.A and VIII.D above (which the parties stipulate only for purposes of this Section represents the consumer injury and the amount of the civil penalty, respectively, for the violations alleged in the Complaint) or as to Relief Defendant in the amount specified in Section VIII.E (which the parties stipulate only for purposes of this Section represents the unjust enrichment received by Relief Defendant), less any payment previously made pursuant to this Section, plus interest computed from the date of entry of this Order.
K. Settling Defendants and Relief Defendant relinquish dominion and all legal and equitable right, title, and interest in all assets transferred pursuant to this Order and may not seek the return of any assets.
L. The facts alleged in the Complaint will be taken as true, without further proof, in any subsequent civil litigation by or on behalf of the FTC, including in a proceeding to enforce its rights to any payment or monetary judgments pursuant to Section VIII.A and VIII.E of this Order, such as a nondischargeability complaint in any bankruptcy case.
M. The facts alleged in the Complaint establish all elements necessary to sustain an action by the FTC pursuant to Section 523(a)(2)(A) of the Bankruptcy Code, 11 U.S.C. § 523(a)(2)(A), and this Order will have collateral estoppel effect for such purposes.
N. Settling Defendants agree that the judgment entered in Section VIII.D represents a civil penalty owed to the government of the United States, is not compensation for actual pecuniary loss, and, therefore, as to the Individual Settling Defendant, it is not subject to discharge under the Bankruptcy Code pursuant to 11 U.S.C. § 523(a)(7).
O. Settling Defendants and Relief Defendant acknowledge that their Taxpayer Identification Numbers (Social Security Number or Employer Identification Number), which Settling Defendants and Relief Defendant previously submitted to the FTC, may be used for collecting and reporting on any delinquent amount arising out of this Order, in accordance with 31 U.S.C. §7701.
P. All money received by the FTC pursuant to Sections VIII.B and VIII.F of this Order may be deposited into a fund administered by the FTC or its designee to be used for consumer relief, such as redress and any attendant expenses for the administration of any redress fund. If a representative of the FTC decides that direct redress to consumers is wholly or partially impracticable or money remains after such redress is completed, the FTC may apply any remaining money for such related relief (including consumer information remedies) as it determines to be reasonably related to Defendants' practices alleged in the Complaint. Any money not used for such relief shall be deemed in payment of the civil penalty judgment entered in Section VIII.D of this Order and deposited to the U.S. Treasury. Defendants and Relief Defendant have no right to challenge any actions the FTC or its representatives may take pursuant to this Subsection.
CUSTOMER INFORMATION
IX. IT IS FURTHER ORDERED that Settling Defendants, Settling Defendants' officers, agents, employees, and attorneys, and all other persons in active concert or participation with any of them, who receive actual notice of this Order are permanently restrained and enjoined from directly or indirectly:
A. Failing to provide sufficient customer information to enable the FTC to efficiently administer consumer redress. If a representative of the FTC requests in writing any information related to redress, Settling Defendants must provide it, in the form prescribed by the FTC, within 14 days;
B. Disclosing, using, or benefitting from customer information, including the name, address, telephone number, email address, social security number, other identifying information, or any data that enables access to a customer's account (including a credit card, bank account, or other financial account), that Settling Defendants obtained prior to entry of this Order in connection with the marketing and sale of Credit Repair Services and Business Ventures; and
C. Failing to destroy such customer information in all forms in their possession, custody, or control within 30 days after receipt of written direction to do so from a representative of the FTC.
D. Provided, however, that customer information need not be disposed of, and may be disclosed, to the extent requested by a government agency or required by law, regulation, or court order.
COOPERATION
X. IT IS FURTHER ORDERED that Settling Defendants must fully cooperate with representatives of the FTC in this case and in any investigation related to or associated with the transactions or the occurrences that are the subject of the Complaint. Settling Defendants must provide truthful and complete information, evidence, and testimony. Individual Settling Defendant must appear and Corporate Settling Defendants must cause their officers, employees, representatives, or agents to appear for interviews, discovery, hearings, trials, and any other proceedings that a FTC representative may reasonably request upon 5 days written notice, or other reasonable notice, at such places and times as a FTC representative may designate, without the service of a subpoena.
ORDER ACKNOWLEDGMENTS
XI. IT IS FURTHER ORDERED that Settling Defendants and Relief Defendant obtain acknowledgments of receipt of this Order:
A. Each Settling Defendant and Relief Defendant, within 7 days of entry of this Order, must submit to the FTC an acknowledgment of receipt of this Order sworn under penalty of perjury.
B. For 5 years after entry of this Order, Individual Settling Defendant for any business that Individual Settling Defendant, individually or collectively with any other Defendants, is the majority owner or controls directly or indirectly, and each Corporate Settling Defendant must deliver a copy of this Order to: (1) all principals, officers, directors, and LLC managers and members; (2) all employees having managerial responsibilities for conduct specified in Sections I-VI and all agents and representatives who participate in conduct specified in Sections I-VI; (3) any business entity resulting from any change in structure as set forth in the Section titled Compliance Reporting. Delivery must occur within 7 days of entry of this Order for current personnel. For all others, delivery must occur before they assume their responsibilities.
C. From each individual or entity to which a Settling Defendant delivered a copy of this Order, such Settling Defendant must obtain, within 30 days, a signed and dated acknowledgment of receipt of this Order.
COMPLIANCE REPORTING
XII. IT IS FURTHER ORDERED that Settling Defendants and Relief Defendant make timely submissions to the FTC:
A. One year after entry of this Order, each Settling Defendant must submit a compliance report, sworn under penalty of perjury:
1. Each Settling Defendant must: (a) identify the primary physical, postal, and email address and telephone number, as designated points of contact, which representatives of the FTC may use to communicate with such Settling Defendant; (b) identify all of such Settling Defendant's businesses by all of their names, telephone numbers, and physical, postal, email, and Internet addresses; (c) describe the activities of each business, including the goods and services offered, the means of advertising, marketing, and sales, and the involvement of any other Defendant (which Individual Settling Defendant must describe if he knows or should know due to his own involvement); (d) describe in detail whether and how such Settling Defendant is in compliance with each Section of this Order; and (e) provide a copy of each Order Acknowledgment obtained pursuant to this Order, unless previously submitted to the FTC.
2. Additionally, Individual Settling Defendant must: (a) identify all telephone numbers and all physical, postal, email and Internet addresses, including all residences; (b) identify all business activities, including any business for which Individual Settling Defendant performs services whether as an employee or otherwise and any entity in which Individual Settling Defendant has any ownership interest; and (c) describe in detail Individual Settling Defendant's involvement in each such business, including title, role, responsibilities, participation, authority, control, and any ownership.
B. For 12 years after entry of this Order, each Settling Defendant must submit a compliance notice, sworn under penalty of perjury, within 14 days of any change in the following:
1. Each Settling Defendant must report any change in: (a) any designated point of contact; or (b) the structure of any Corporate Settling Defendant or any entity that such Settling Defendant has any ownership interest in or controls directly or indirectly that may affect compliance obligations arising under this Order, including: creation, merger, sale, or dissolution of the entity or any subsidiary, parent, or affiliate that engages in any acts or practices subject to this Order.
2. Additionally, Individual Settling Defendant must report any change in: (a) name, including aliases or fictitious name, or residence address; or (b) title or role in any business activity, including any business for which Individual Settling Defendant performs services whether as an employee or otherwise and any entity in which Individual Settling Defendant has any ownership interest, and identify the name, physical address, and any Internet address of the business or entity.
C. Each Settling Defendant and Relief Defendant must submit to the FTC notice of the filing of any bankruptcy petition, insolvency proceeding, or similar proceeding by or against such Settling Defendant or Relief Defendant within 14 days of its filing.
D. Any submission to the FTC required by this Order to be sworn under penalty of perjury must be true and accurate and comply with 28 U.S.C. § 1746, such as by concluding: “I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. Executed on: ” and supplying the date, signatory's full name, title (if applicable), and signature.
E. Unless otherwise directed by a FTC representative in writing, all submissions to the FTC pursuant to this Order must be emailed to DEbrief@ftc.gov or sent by overnight courier (not the U.S. Postal Service) to: Associate Director for Enforcement, Bureau of Consumer Protection, Federal Trade Commission, 600 Pennsylvania Avenue NW, Washington, DC 20580. The subject line must begin: FTC v. Financial Education Services, Inc., Matter No. X220024.
RECORDKEEPING
XIII. IT IS FURTHER ORDERED that Settling Defendants must create certain records for 12 years after entry of the Order, and retain each such record for 5 years. Specifically, each Corporate Settling Defendant and Individual Settling Defendant, for any business that Individual Settling Defendant, individually or collectively with any other Defendants, is a majority owner or controls directly or indirectly, must create and retain the following records:
A. accounting records showing the revenues from all goods or services sold;
B. personnel records showing, for each person providing services, whether as an employee or otherwise, that person's: name; addresses; telephone numbers; job title or position; dates of service; and (if applicable) the reason for termination;
C. records of all consumer complaints and refund requests, whether received directly or indirectly, such as through a third party, and any response;
D. all records necessary to demonstrate full compliance with each provision of this Order, including all submissions to the FTC; and
E. a copy of each unique advertisement or other marketing material.
COMPLIANCE MONITORING
XIV. IT IS FURTHER ORDERED that, for the purpose of monitoring Settling Defendants' and Relief Defendant's compliance with this Order, including the financial representations upon which part of the judgments were suspended and any failure to transfer any assets as required by this Order:
A. Within 14 days of receipt of a written request from a representative of the FTC, each Settling Defendant and Relief Defendant must: submit additional compliance reports or other requested information, which must be sworn under penalty of perjury; appear for depositions; and produce documents for inspection and copying. The FTC is also authorized to obtain discovery, without further leave of court, using any of the procedures prescribed by Federal Rules of Civil Procedure 29, 30 (including telephonic depositions), 31, 33, 34, 36, 45, and 69.
B. For matters concerning this Order, the FTC is authorized to communicate directly with each Settling Defendant and Relief Defendant. Settling Defendants and Relief Defendant must permit representatives of the FTC to interview any employee or other person affiliated with Settling Defendants or Relief Defendant who has agreed to such an interview. The person interviewed may have counsel present.
C. The FTC may use all other lawful means, including posing, through its representatives, as Consumers, suppliers, or other individuals or entities, to Settling Defendants or Relief Defendant or any individual or entity affiliated with Settling Defendants or Relief Defendant, without the necessity of identification or prior notice. Nothing in this Order limits the FTC's lawful use of compulsory process, pursuant to Sections 9 and 20 of the FTC Act, 15 U.S.C. §§ 49, 57b-1.
D. Upon written request from a representative of the FTC, any consumer reporting agency must furnish consumer reports concerning Settling Defendants and Relief Defendant, pursuant to Section 604(1) of the Fair Credit Reporting Act, 15 U.S.C. §1681b(a)(1).
RETENTION OF JURISDICTION
XV. IT IS FURTHER ORDERED that this Court retains jurisdiction of this matter for purposes of construction, modification, and enforcement of this Order.
IT IS SO ORDERED.
COPY OF THE GRAMM-LEACH-BLILEY ACT 15 U.S.C. §§ 6801-6809, 6821-6827
(Attachment omitted)
COPY OF THE FAIR CREDIT REPORTING ACT 15 U.S.C. §§ 1681-1681x
(Attachment omitted)