John A. Singer
Mona Sedky Spivack
Attorneys for Plaintiff
Federal Trade Commission
Room 238
6th & Pennsylvania Ave. NW
Washington, DC 20580
UNITED STATES DISTRICT COURT
DISTRICT OF MARYLAND
NORTHERN DIVISION
FEDERAL TRADE COMMISSION,
Plaintiff,
v.
THOMAS MAHER, DORIAN REED, AUDREY REED, and INTERNET BUSINESS BROADCASTING, INC., a
Nevada corporation,
Defendants.
Case No.
COMPLAINT FOR PERMANENT INJUNCTION AND OTHER EQUITABLE RELIEF
Plaintiff, the Federal Trade Commission ("FTC" or "the Commission"), for its complaint
alleges:
1. The FTC brings this action under Sections 13(b) and 19 of the Federal Trade Commission
Act ("FTC Act"), 15 U.S.C. §§ 53(b) and 57b, to secure permanent injunctive relief,
rescission of contracts, restitution, disgorgement, and other equitable relief for
defendants' violations of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), and the FTC's Trade
Regulation Rule entitled "Disclosure Requirements and Prohibitions Concerning Franchising
and Business Opportunity Ventures" ("Franchise Rule"), 16 C.F.R. Part 436.
JURISDICTION AND VENUE
2. This Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1331, 1337(a) and
1345, and 15 U.S.C. §§ 53(b) and 57b.
3. Venue in the United States District Court for the District of Maryland, Northern Division,
is proper under 28 U.S.C. §§ 1391(b) and (c), and 15 U.S.C. § 53(b).
PLAINTIFF
4. Plaintiff, FTC, is an independent agency of the United States Government created by
statute. 15 U.S.C. §§ 41 et seq. The FTC is charged, inter alia, with enforcement of Section
5(a) of the FTC Act, 15 U.S.C. § 45(a), which prohibits unfair or deceptive acts or practices
in or affecting commerce, as well as enforcement of the Franchise Rule, 16 C.F.R. Part 436.
The FTC is authorized to initiate federal district court proceedings to enjoin violations of
the FTC Act in order to secure such equitable relief as may be appropriate in each case, and
to obtain consumer redress. 15 U.S.C. §§ 53(b) and 57b.
DEFENDANTS
5. Defendant THOMAS MAHER is an officer, director, manager, or principal owner of the
corporate defendant. He has portrayed himself as president of corporate defendant
INTERNET BUSINESS BROADCASTING, INC., dba INTERNET BUSINESS BUREAU, INC. and dba
INTERACTIVE CONSULTING SYSTEMS, INC. ("IBB"). At all times material to this complaint,
acting alone or in concert with others, he has formulated, directed, controlled or
participated in the deceptive acts and practices set forth in this complaint. He has
transacted business in the District of Maryland.
6. Defendant DORIAN REED is a principal telemarketer of the corporate defendant. He has at
various times portrayed himself as the "Marketing Advisor" of corporate defendant IBB. At
all times material to this complaint, acting alone or in concert with others, he has
participated in the deceptive acts and practices set forth in this complaint. He has
transacted business in the District of Maryland.
7. Defendant AUDREY REED is an officer, director, manager, or principal owner of the
corporate defendant. She has at various times portrayed herself as the president of
corporate defendant IBB. At all times material to this complaint, acting alone or in concert
with others, she has formulated, directed, controlled or participated in the deceptive acts
and practices set forth in this complaint. She has transacted business in the District of
Maryland.
8. Defendant INTERNET BUSINESS BROADCASTING, INC., dba INTERNET BUSINESS BUREAU, INC.
and dba INTERACTIVE CONSULTING SYSTEMS, INC., ("IBB") is incorporated in Nevada and has
been qualified by the California Secretary of State to conduct business in California. IBB
has or has had its principal place of business at 10300 Fourth Street, Suite 200, Rancho
Cucamonga, California. IBB has transacted business in the District of Maryland.
9. Collectively or individually, defendants THOMAS MAHER, DORIAN REED, AUDREY REED, and
IBB have conducted business as IBB.COM and on the Internet as "www.ibb.com."
COMMERCE
10. At all times material to this complaint, the defendants have maintained a substantial
course of trade, in or affecting commerce, as "commerce" is defined in Section 4 of the FTC
Act, 15 U.S.C. § 44.
DEFENDANTS' BUSINESS ACTIVITIES
11. The defendants have been engaged in a common course of conduct designed to sell
business opportunities to consumers for substantial sums. Specifically, the defendants
have sold to investors Internet "billboards" or "banners," which purportedly consist of
multiple slots of classified or yellow page advertising space that appear in the Internet
newspapers that the defendants purported to operate on web sites located on the World
Wide Web (or "Web"). For an additional fee, the defendants have also purported to secure
advertisers to sublease the billboard space from the consumer, collect the rental income
earned, and disburse it (minus their management fee) to the consumers.
12. The defendants have induced potential purchasers to invest in the business opportunity
by sending "spam," or unsolicited advertisements as electronic mail via the Internet. The
defendants' electronic mail advertisements have included income guarantees. For example,
in one such advertisement, the defendants have promised that "monthly income with
Internet billboards [is] guaranteed," that the defendants' "business opportunity offers a
solid return potential of 100.8% the first year with only a 25% occupancy rate," and that
the defendants "guarantee a 25% occupancy rate . . . ." The advertisement further directs
consumers to contact the defendants' home page, located on the Web at "www.ibb.com,"
and/or to call their toll-free telephone number.
13. At their home page, the defendants have further stressed the income guarantee.
Pursuant to their so-called "Media/Occupancy Guarantee," which is set forth in their
"Master Lease" on their home page, the defendants have promised that, if the consumer
hires IBB to act as the "managing agent" of his billboard, IBB "guarantees as the Lease
Manager to achieve a twenty-five percent (25%) occupancy rate within six months
following the media start up period." The defendants have further represented that
"[f]ailure of IBB to produce a 25% occupancy rate within the specified time period or
reasonable proof of advertising shall entitle the Master Leaseholder to recover 100% of the
lease price paid . . . ."
14. Consumers who have called the toll-free telephone number contained in the defendants'
electronic mail advertisements and/or on their home page, have received a sales pitch from
the defendants' telemarketers. Through these sales pitches, the defendants' telemarketers,
including defendant DORIAN REED, have further induced the consumer into buying a business
opportunity by representing the amount of money the consumer can reasonably expect to
earn. The telemarketers have been under the direct control and supervision of individual
defendants THOMAS MAHER, DORIAN REED, and AUDREY REED.
VIOLATIONS OF SECTION 5 OF THE FTC ACT
COUNT ONE
15. In the course of offering for sale and selling their Internet billboard business
opportunities, the defendants have represented, expressly or by implication:
A. that purchasers can reasonably expect to achieve a specific level of
earnings, such as an occupancy rate of 25%; earnings between $240-$800 per
month; and a return of 100.8% within the first year; and
B. that the defendants will provide a full refund of purchasers' investment if
the defendants do not achieve the guaranteed 25% occupancy rate.
16. In truth and in fact:
A. few, if any, purchasers achieve the specific level of earnings claimed by the
defendants; and
B. in numerous instances, when the defendants do not achieve the guaranteed
25% occupancy rate, and purchasers seek a refund, the defendants do not
provide a full refund of the purchasers' investment.
17. Therefore, the defendants' representations as set forth in Paragraph 15 are false and
misleading and constitute deceptive acts or practices in violation of Section 5(a) of the
FTC Act, 15 U.S.C. § 45(a).
VIOLATIONS OF THE FRANCHISE RULE
18. The business ventures sold by the defendants are franchises, as "franchise" is defined in
Section § 436.2(a) of the Franchise Rule, 16 C.F.R. 436.2(a).
19. In the course of offering for sale or selling franchises, the defendants have provided, or
represented they will provide, significant assistance to the purchasers in the purchasers'
method of operation.
20. The Franchise Rule requires a franchisor to provide prospective franchisees with a
complete and accurate basic disclosure statement containing twenty categories of
information, including information about the history of the franchisor, the terms and
conditions under which the franchise operates, as well as the names and addresses of other
franchisees. 16 C.F.R. §§ 436.1(a)(1)-(20). Disclosure of this information enables a
prospective franchisee to assess any potential risks involved in the purchase of the
franchise.
21. The Franchise Rule additionally requires that the franchisor provide to prospective
franchisees a document containing information substantiating any oral, written, or visual
earnings or profit representations it makes to a prospective franchisee. 16 C.F.R. §§
436.1(b)-(e).
22. Pursuant to Section 18(d)(3) of the FTC Act, 15 U.S.C. § 57a(d)(3), and 16 C.F.R. § 436.1,
violations of the Franchise Rule constitute unfair or deceptive acts or practices in or
affecting commerce, in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).
COUNT TWO
23. In numerous instances, in connection with the offering and promotion of franchises, as
"franchise" is defined in the Franchise Rule, 16 C.F.R. § 436.2(a), defendants THOMAS
MAHER, AUDREY REED, and IBB have:
A. failed to provide prospective franchisees with a basic disclosure statement,
thereby violating Section 436.1(a) of the Rule, 16 C.F.R. § 436.1(a), and Section
5(a) of the FTC Act, 15 U.S.C. § 45(a); and
B. made earnings claims within the meaning of the Franchise Rule, 16 C.F.R. §§
436.1(b)-(e), but have failed to provide prospective franchisees with the
earnings claim document required by the Franchise Rule, thereby violating
Sections 436.1(b)-(e) of the Rule, 16 C.F.R. §§ 436.1(b)-(e), and Section 5(a) of
the FTC Act, 15 U.S.C. § 45(a).
CONSUMER INJURY
24. Consumers in many areas of the United States have suffered substantial monetary loss
as a result of defendants' unlawful acts or practices. Absent equitable relief by this Court,
defendants are likely to continue to injure consumers and harm the public interest.
THIS COURT'S POWER TO GRANT RELIEF
25. Section 13(b) of the FTC Act, 15 U.S.C. § 53(b), empowers this Court to grant equitable
relief, including injunctive relief, redress, disgorgement and restitution, to prevent and
remedy any violations of any provision of law enforced by the FTC.
26. Section 19 of the FTC Act, 15 U.S.C. § 57b, authorizes this Court to grant such relief as
the Court finds necessary to redress injury to consumers or other persons resulting from
defendants' violations of the Franchise Rule, including the rescission and reformation of
contracts, and the refund of money.
27. This Court, in the exercise of its equitable jurisdiction, may award other ancillary
relief to remedy injury caused by the defendants' law violations.
PRAYER FOR RELIEF
WHEREFORE, plaintiff requests that this Court, as authorized by Sections 13(b) and 19 of
the FTC Act, 15 U.S.C. §§ 53(b) and 57b, and pursuant to its own equitable powers:
1. Permanently enjoin the defendants from violating the FTC Act and the
Franchise Rule, as alleged herein;
2. Award such relief as the Court finds necessary to redress injury to
consumers resulting from the defendants' violations of the FTC Act and the
Franchise Rule, including but not limited to, rescission of contracts, the
refund of monies paid, and the disgorgement of ill- gotten monies; and
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3. Award plaintiff the costs of bringing this action, as well as such other and
additional relief as the Court may determine to be just and proper.
Respectfully Submitted,
Debra Valentine
General Counsel
_______________________________
John A. Singer (MD Fed. Bar No. 03822)
Mona Sedky Spivack
Attorneys for the Plaintiff
Federal Trade Commission, Room 238
6th Street & Pennsylvania Avenue, N.W.
Washington, D.C. 20580
(202)326-3795, -3234
ftc.gov |
