The Federal Trade Commission has shut down allegedly deceptive schemes by two operations that targeted consumers hoping to succeed via home-based businesses.
The FTC cases against The Tax Club and American Business Builders are part of a federal-state crackdown on scams that promise jobs and opportunities to “be your own boss”, the agency said. These scams often cost consumers thousands of dollars.
The operators behind both operations have agreed to settlements that essentially keeps them from promoting or selling similar wealth-building opportunities.
In the case of The Tax Club, operators will surrender assets valued at more than $15 million.
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.
“Before you put money into a work-at-home business opportunity, ask questions to determine if it is legitimate,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection, adding, “We encourage consumers to read our consumer information to learn how to recognize schemes that promise more than they deliver.”
The Tax Club
According to the complaint filed in January 2013, The Tax Club called consumers and falsely claimed to be affiliated with companies that consumers had already 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 further 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 settlement orders announced today, the settling 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.
The order against Tax Club’s Edward B. Johnson also bans him from selling credit development, business planning, and merchant account processing services, and imposes a $115 million judgment that will be suspended upon surrender of certain assets valued at approximately $2.6 million.
Financial Accounts to be Forfeited
The assets to be turned over include bank and brokerage accounts, and proceeds from the sale of real and personal property. The full judgment will become due immediately if Johnson is found to have misrepresented his financial condition.
Under a separate settlement order, Brendon A. Pack, Michael M. Savage and all but one of the corporate defendants named in the complaint are also banned from selling credit development services.
They are also prohibited from outbound telemarketing, unless they have a consumer’s express written agreement to receive calls or they are fulfilling or providing services previously purchased by the consumer.
The order imposes a $140 million judgment that will be suspended upon surrender of assets valued at approximately $13 million, including investment accounts and proceeds from the sale of numerous real properties. The full judgment will become due immediately if the defendants are found to have misrepresented their financial condition.
“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.