New Jersey Telemarketers Hit with Largest Consumer Protection Fine in FTC History

New Jersey telemarketers have agreed to pay a record $18.8 million fine for violating a Federal Trade Commission order - the largest FTC penalty ever in a consumer protection case.

The defendants - Civic Development Group, CDG Management and owners Scott Pasch and David Keezer - misled consumers "to believe that they were donating directly to legitimate charities serving police, firefighters, and veterans, when in fact only a small slice of the donations actually went to these charities," according to the FTC, which announced the settlement today.

The case was filed on the FTC’s behalf by the U.S. Department of Justice in the U.S. District Court for the District of New Jersey.

“This scheme packed a one-two punch: it deceived the people who donated, and it siphoned much-needed funds from police, firefighters, and veterans groups,” said David Vladeck, director of the FTC’s Bureau of Consumer Protection in a statement. “The court’s final settlement order packs a one-two punch of its own: a record-breaking financial penalty for violating an FTC order and a lifetime ban on soliciting charitable donations.”

The defendants did not admit to the allegations in the complaint. To pay the fine, they are ordered to turn over assets to a liquidator. These include a pair of $2 million homes, paintings by Picasso and Van Gogh valued collectively at $1.4 million, a guitar collection valued at $800,000, $270,000 in proceeds from a recently sold wine collection, jewelry valued at $117,000, three Mercedes, two Bentleys, a Range Rover, and a Cadillac Escalade.

The FTC first sued Civic Development Group in 1998 for allegedly misleading consumers in solicitations by claiming donations would be used locally to buy bullet-proof vests and provide death benefits for deceased officers’ family members. The defendants were barred from misrepresenting the purpose for which charitable contributions would be used

In 2007, the Justice Department filed a second complaint referred by the FTC, which alleged that the defendants had violated the prior FTC order.

The telemarketers allegedly told consumers they worked directly for the charities, which received “100 percent” of the donations collected. But the charities received only 10% to 15% of the money, and the balance went to Civic Development Group, the complaint alleged.

Pasch and the companies were represented by Matthew Oliver of Lowenstein Sandler in Roseland, N.J. Oliver could not be immediately reached for comment.

Keezer was represented by Edward Dauber of Newark, N.J.’s Greenberg Dauber Epstein & Tucker. Dauber also could not be reached for comment.

FTC lawyers on the case included James Kohm, Robert Kaye, Matthew Wilshire and Willard Tom. Justice Department attorneys on the case included Office of Consumer Litigation lawyers Eugene Thirolf, Kenneth Jost, Mark Josephs, and Roger Gural, Civil Divison head Tony West, as well as Assistant U.S. Attorney Daniel Gibbons and U.S. Attorney Paul Fishman of New Jersey.

Comments

[telemarketing]

Oh my goodness! There have been issues here in the UK but nothing on quite this level!

[Call center companies in the Philippines]

I think that would be hard. Not knowing if it is a real salesman or not.

[Telemarketing services]

Yeah, How are we going to know if it a real salesman or not. I think something is to be done so that the good one can be protected.

[Telemarketing Call Center]

Now if we bother to track the millions of dollars agreed to in the settlement once recovered, we will see that none of it is returned to the original donors, and little if any ends up in the hands of the charities. It will instead go into Federal coffers and disappear behind an impossibly complex accounting scheme that inflates the 'cost of doing business' to the point where it appears the moneys are not enough to cover the FTC's prosecutorial costs.

[Sriram Mohan]

And... even though I live in Massachusetts, there has to be action coming to all states not just NJ

[Sriram Mohan]

It's about time! This isn't the first measure that's been taken to prevent their constant nuisance on the telephone lines... of late, I've been getting way too many! Hopefully now I won't be getting any!

And I've always questioned the intent of these telemarketers. But how do you differentiate between one and a real salesman?