Telemarketing Scams Closed in Federal-State Crackdown

The defendants behind schemes that targeted consumers hoping to succeed through home-based businesses have settled Federal Trade Commission charges and will surrender assets valued at more than $20 million.

The cases against American Business Builders and The Tax Club are part of a federal-state crackdown on scams promising jobs and opportunities to "be your own boss."

The operators of American Business Builders allegedly sold a home-based business opportunity where consumers could earn income offering payment processing services, credit card terminals and merchant cash advances to small businesses.

According to an FTC complaint filed in November 2012, the American Business Builders defendants falsely claimed that, for fee rangings from $295 to $495, consumers could make generous income in several ways, including earning commissions on terminals sold or leased to merchants in consumers’ communities. They sold sales leads and promised to conduct telemarketing campaigns that would generate customers and income. The defendants charged $10 per lead, with some consumers paying up to $40,000, but they failed to provide the promised customer leads and the consumers did not earn income. The court subsequently halted the operation, froze its assets and put the company into receivership.

Under the settlement announced Tuesday, American Business Builders defendants are banned from selling business and work-at-home opportunities and related services. In addition to the business and work-at-home opportunity ban, the settlement orders permanently prohibit the defendants – American Business Builders LLC, UMS Group LLC, United Merchant Services LLC, Unlimited Training Services LLC, Shane Michael Hanna (also known as Shane Michael Romeo), Stephen Spratt, Universal Marketing and Training LLC and ENF LLC (also known as Network Market Solutions) - from misrepresenting that consumers are likely to earn money and misrepresenting any material fact about a product or service.

The defendants are barred from selling or otherwise benefitting from consumers’ personal information and failing to properly dispose of customer information.

The orders impose a judgment of more than $5.4 million, which will be suspended upon surrender of bank accounts and property, including a 2013 Cadillac Escalade ESV. The full judgment is due if the defendants are found to have misrepresented their financial status.

In the Tax Club case, brought by the FTC and attorneys general in New York and Florida, operators sold services they allegedly falsely claimed would help consumers' home-based businesses succeed.

According to a January 2013 complaint, the operation claimed to be affiliated with companies that consumers already had bought services or products from. The complaint alleges that the defendants’ telemarketers pitched business development services such as business coaching services, corporate formation services and credit development services, falsely claiming the services were essential to the success of consumers’ businesses.

The complaint alleges that after an initial sale, they called consumers numerous times to  sell more "essential" services, typically for several thousand dollars per service, with a large initial fee and recurring smaller monthly "membership" payments. Many of the services offered by the defendants were neither essential nor provided as promised, according to the complaint.

Under the settlement announced Tuesday, the defendants are required to surrender assets valued at more than $15 million, and they are banned from selling business coaching services and work-at-home opportunities, subject to certain exemptions. They are also permanently prohibited from misrepresenting material facts about any product or service, selling or otherwise benefitting from consumers’ personal information, violating the Telemarketing Sales Rule, and failing to clearly disclose the seller’s identity, that the purpose of a call is to sell a good or service and the nature of the good or service.

The settlement includes judgments against three of the former company’s executives. The order against Edward B. Johnson, the company founder, bans him from selling credit development, business planning, and merchant account processing services. He is personally required to pay $2.6 million. The assets to be turned over include bank and brokerage accounts, and proceeds from the sale of real and personal property.

Brendon A. Pack, the former director of marketing at The Tax Club, and Michael M. Savage, the former president of The Tax Club, are required to jointly pay $13 million. They are banned from selling business coaching services, credit development services and work-at-home opportunities and are prohibited from calling consumers unless they have express written consent from a consumer to receive calls, or they are fulfilling or providing services previously purchased by the consumer.

"As a result of this settlement, former Tax Club executives will be giving up a substantial chunk of their personal assets," said New York Attorney General Eric Schneiderman. "Before turning over your hard-earned money to telemarketers, it’s important to make sure they have a reputation for delivering what they promise."

Florida Attorney General Pam Bondi added, "While work-at-home careers are an attractive opportunity for many people, it is imperative that Florida consumers do their research and report any possible scams to my office."