Friday, August 11, 2017
The Federal Trade Commission has charged 12 defendants with laundering millions of dollars in credit card charges through fraudulent merchant accounts. According to the complaint filed by the FTC, the defendants arranged for a deceptive operation known as Money Now Funding (MNF) to obtain and maintain merchant accounts that allowed it to process almost $6 million through the credit card networks.
In September 2013, the FTC charged MNF with running a deceptive business opportunity scheme that promised consumers they would make thousands of dollars helping small businesses get loans. The court in the MNF matter determined that MNF’s promises were false.
Today’s case alleges that the defendants – an Independent Sales Organization (ISO), sales agents, and their principals – provided the MNF scheme access to the credit card networks by submitting and approving fraudulent applications in the names of more than 40 fictitious MNF companies. According to the FTC’s complaint, the defendants did so despite obvious signs that the companies were likely fictitious and being used to conceal the true identity of the underlying merchant. By processing the fraudulent MNF scheme’s transactions through merchant accounts opened in the names of fictitious companies, the ISO defendants allegedly also evaded the anti-fraud monitoring efforts of the credit card networks.
In the case announced today, the defendants are charged with violating the FTC Act and the FTC’s Telemarketing Sales Rule.
The ISO defendants are Electronic Payment Systems LLC, Electronic Payment Transfer LLC, John Dorsey, Thomas McCann and Michael Peterson. The sales agent defendants are Electronic Payment Solutions of America Inc., Electronic Payment Services Inc., KMA Merchant Services LLC, Dynasty Merchants LLC, Jay Wigdore, Michael Abdelmesseh, also known as Michael Stewart, and Nikolas Mihilli.
The Commission vote authorizing the staff to file the complaint was 2-0. It was filed in the U.S. District Court for the District of Arizona.
NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest. The case will be decided by the court.
Eighteen elusive marketers who cheated American and Canadian consumers out of more than $7 million are banned from selling business or work-at-home opportunities under court orders obtained by the Federal Trade Commission.
These orders, along with court orders against 14 other people and companies named in the FTC’s lawsuit, resolve charges that the defendants conned consumers into thinking they could make money by referring merchants in their area to a non-existent money-lending service. Many victims affected by this scam were seniors with limited income and savings.
“The defendants tricked people into purchasing worthless ‘business opportunities,’ and manipulated the credit card system to hide their tracks,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “We’re pleased the court stopped this deception, which harmed many older people just trying to make a living.”
The defendants, who began operating as “Money Now Funding,” tried to avoid detection by law enforcement by changing product names, office locations, and merchant identities. They falsely claimed consumers would earn up to $3,000 per month by referring small businesses to the defendants to obtain loans. After consumers paid up to $499 to buy the business opportunity, the defendants told them that, to succeed, they had to buy sales leads that cost tens of thousands of dollars but turned out to be worthless.
Today’s announcement describes the court’s summary judgment orders against three defendants (the court found the facts of the case indisputable), settlements with six defendants, and default judgment against 23 defendants who did not respond to charges made against them.
The various judgments and settlements impose a ban on selling business or work-at-home opportunities on Lukeroy K. Rose, Leary Darling, Solana DePaola, Lance Himes, Cordell Bess, Cynthia Miller, Clinton Rackley, and Richard Frost, and 10 corporate defendants: Money Now Funding LLC, Rose Marketing LLC, DePaola Marketing LLC, Affiliate Marketing Group LLC, Affinity Technologies LLC, Global Network Marketing LLC, Precise Payroll Services LLC, Strategic Media Advertising LLC, Legal Doxs LLC, and US Doc Assist LLC. Some defendants are also banned from telemarketing. In addition, the judgments and settlements include provisions that apply specifically to certain defendants, prohibiting them from engaging in the types of misconduct alleged by the FTC.
The judgments and settlements also impose monetary judgments of $7.3 million against 12 defendants, and smaller judgments against others. The judgments against some defendants are suspended due to their inability to pay and, in some cases, pending the transfer of assets frozen by the court or held in receivership. The full judgments will become due immediately if the defendants are found to have misrepresented their financial condition.
The Commission votes authorizing the staff to file the proposed stipulated final orders against DePaola, Himes, Claspell, Beckman, Duckett and Hobbs were 5-0. The orders were entered by the U.S. District Court for the District of Arizona on June 3 and June 24. The court entered summary judgment orders against defendants Rose, Darling, and Rackley on June 3, and against the default defendants between July 15 and 20.