MIRANDA M. DU, District Judge.
On December 21, 2010, Plaintiff, the Federal Trade Commission ("FTC" or "Commission") filed a redacted Complaint for permanent injunction and other relief pursuant to Section 13(b) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. § 53(b), and Section 917(c) of the Electronic Fund Transfer Act ("EFTA"), 15 U.S.C. § 1693o(c), alleging that defendants Jeremy Johnson, Duane Fielding, Andy Johnson, Loyd Johnston, Scott Leavitt, Scott Muir, Bryce Payne, Kevin Pilon, Ryan Riddle, Terrason Spinks, I Works, Inc., Anthon Holdings Corp., Cloud Nine Marketing, Inc., CPA Upsell, Inc., Elite Debit, Inc., Employee Plus, Inc., Internet Economy, Inc., Market Funding Solutions, Inc., Network Agenda, LLC, Success Marketing, Inc., Big Bucks Pro, Inc., Blue Net Progress, Inc., Blue Streak Processing, Inc., Bolt Marketing, Inc., Bottom Dollar, Inc., Bumble Marketing, Inc., Business First Inc., Business Loan Success, Inc., Cold Bay Media, Inc., Costnet Discounts, Inc., CS Processing, Inc., Cutting Edge Processing, Inc., Diamond J Media, Inc., Ebusiness First, Inc., Ebusiness Success, Inc., Ecom Success, Inc., Excess Net Success, Inc., Fiscal Fidelity, Inc., Fitness Processing, Inc., Funding Search Success, Inc., Funding Success, Inc., GG Processing, Inc., GGL Rewards, Inc., Highlight Marketing, Inc., Hooper Processing, Inc., Internet Business Source, Inc., Internet Fitness, Inc., Jet Processing, Inc., JRB Media, Inc., Lifestyles For Fitness, Inc., Mist Marketing, Inc., Money Harvest, Inc., Monroe Processing, Inc., Net Business Success, Inc., Net Commerce, Inc., Net Discounts, Inc., Net Fit Trends, Inc., Optimum Assistance, Inc., Power Processing, Inc., Premier Performance, Inc., Pro Internet Services, Inc., Razor Processing, Inc., Rebate Deals, Inc., Revive Marketing, Inc., Simcor Marketing, Inc., Summit Processing, Inc., The Net Success, Inc., Tranfirst, Inc., Tran Voyage, Inc., Unlimited Processing, Inc., and xCel Processing, Inc., have engaged in violations of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), Section 907(c) of EFTA, 15 U.S.C. § 1693e(a), and Section 205.10(b) of Regulation E ("Reg E"), 12 C.F.R. § 205.10(b), in connection with the marketing and sale of Internet-based information products and services. The Commission and defendants Scott Muir and Big Bucks Pro, Inc., Blue Net Progress, Inc., Bolt Marketing, Inc., Business Loan Success, Inc., CS Processing, Inc., GGL Rewards, Inc., Highlight Marketing, Inc., Mist Marketing, Inc., Net Discounts, Inc., Optimum Assistance, Inc., Razor Processing, Inc., and Simcor Marketing, Inc. (hereafter "Muir defendants"), have agreed to the entry of, and request the Court to enter, this Stipulated Final Order for Permanent Injunction and Monetary Judgment as to the Muir defendants ("Order"), to resolve all matters of dispute in this action between them.
1. This Court has jurisdiction over the subject matter of this case and over the Muir defendants;
2. Venue is proper in this District under 28 U.S.C. § 1391(b) and (c) and 15 U.S.C. § 53(b);
3. The activities alleged in the Complaint are in or affecting "commerce" as that term is defined in Section 4 of the FTC Act, 15 U.S.C. § 44;
4. The Complaint states a claim upon which relief may be granted under Sections 5(a) and 13(b) of the FTC Act, 15 U.S.C. §§ 45(a) and 53(b); under Section 918(c) of EFTA, 15 U.S.C. § 1693o(c); and Reg E, 12 C.F.R. § 1005.10(b);
5. The Muir defendants have entered into this Order freely and without coercion, and they acknowledge that they have read the provisions of this Order and are prepared to abide by them;
6. This Order is in addition to, and not in lieu of, any other civil or criminal remedies that may be provided by law;
7. The Muir defendants waive all rights to seek appellate review or otherwise challenge or contest the validity of this Order and waive and release any claim they may have against the Commission, its employees, representatives, or agents, and the Receiver and the Receiver's employees, representatives, or agents;
8. The Muir defendants agree that this Order does not entitle them to seek or to obtain attorney's fees as a prevailing party under the Equal Access to Justice Act, 28 U.S.C. § 2412, as amended by Pub. L. 104-121, 110 Stat. 847, 863-64 (1996), and the Muir defendants further waive any right to attorney's fees that may arise under said provision of law;
9. Defendant Scott Muir filed a petition for relief under Chapter 7 of the Bankruptcy Code on December 9, 2011. In re Scott Wallace Muir, No. 11-37432 (Bankr. D. Utah) ("Bankruptcy Case"). Plaintiff's prosecution of this action, including the entry of a money judgment and the enforcement of a judgment other than a money judgment obtained in this action, are actions to enforce the Plaintiff's police or regulatory powers. As a result, if the Bankruptcy Case is pending as of the date of entry of this Order, then these actions are excepted from the automatic stay pursuant to 11 U.S.C. § 362(b)(4);
10. The Muir defendants neither admit nor deny any allegations in the Complaint. Only for purposes of this action, the Muir defendants admit the facts necessary to establish jurisdiction and as otherwise specifically stated in this Order;
11. This Order is remedial in nature and no portion of any payments paid herein shall be deemed or construed as payment of a fine, damages, penalty, or punitive assessment; and
12. Entry of this Order is in the public interest.
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A. Advertising, marketing, promoting, offering for sale, or selling any Product as a Forced Upsell, or Assisting others engaged in advertising, marketing, promoting, offering for sale, or selling any Product as a Forced Upsell;
B. Holding any ownership or other financial interest in any business entity that engages in or Assists others in the advertising, marketing, promoting, offering for sale, or selling any Product as a Forced Upsell;
C. Serving as an officer, director, or manager of any business entity, unless Defendant Muir actually controls, participates in, or has knowledge of the daily operations of that entity;
D. Acting as a signatory on any account for any business entity unless Defendant Muir controls, participates in, or has knowledge of the daily operations of that entity; and
E. Applying for any Merchant Account for any business entity unless Defendant Muir controls, participates in, or has knowledge of the daily operations of that business entity. Provided further, nothing in this Order shall be construed as an exception to this Section I.
A. In connection with the advertising, marketing, promotion, offering for sale, or sale of any Product, the Muir defendants and their Representatives, whether acting directly or through any entity, corporation, subsidiary, division, affiliate, or other device are hereby restrained and enjoined from:
B. The Muir defendants and their Representatives, whether acting directly or through any entity, corporation, subsidiary, division, affiliate, or other device are hereby restrained and enjoined from charging or debiting a consumer's bank, credit, or other financial account, or otherwise assessing charges to a consumer, without first obtaining the consumer's Express Verifiable Authorization; and
C. In connection with applying for or maintaining Merchant Accounts, the Muir defendants and their Representatives, whether acting directly or through any entity, corporation, subsidiary, division, affiliate, or other device are hereby permanently restrained and enjoined from;
A. Engaging in any recurring debiting of a consumer's account without first obtaining a valid written pre-authorization for preauthorized electronic fund transfers from the consumer's account, which pre-authorization is clear and readily understandable, identifiable as a pre-authorization, and reflects the consumer's assent, as required by Section 907(a) of EFTA, 15 U.S.C. § 1693e(a), and Section 1005.10(b) of Regulation E, as more fully set out in Section 1005.10 of the Consumer Financial Protection Bureau's Official Staff Commentary to Regulation E, 12 C.F.R. § 1005.10(b) (5) and (6), Supp. I;
B. Engaging in any recurring debiting of a consumer's account without first providing a copy of a valid written pre-authorization to the consumer for preauthorized electronic fund transfers from the consumer's account, which copy is clear and readily understandable, identifiable as a pre-authorization, and reflects the consumer's assent, as required by Section 907(a) of EFTA, 15 U.S.C. § 1693e(a), and Section 1005.10(b) of Regulation E, as more fully set out in Section 1005.10 of the Consumer Financial Protection Bureau's Official Staff Commentary to Regulation E, 12 C.F.R. § 1005.10(b)(5) and (6), Supp.I; and
C. Failing to maintain procedures reasonably adapted to avoid an unintentional failure to obtain a written authorization for preauthorized electronic fund transfers, as required in Section 1005.10(b)(7) of Consumer Financial Protection Bureau's Official Staff Commentary to Regulation E.
A. Effective upon the entry of this Order, the Muir defendants shall surrender to the Commission all control, title, dominion, and interest in all Assets of the Muir corporate defendants, including all funds held in any Muir corporate defendant account, and all Muir corporate defendant Assets in the possession of the Receiver.
B. Within ten (10) days of entry of this Order, the Receiver shall cause all Muir corporate defendants' frozen funds previously transferred to the Receiver, to be forwarded to the Commission in a manner as the Commission may direct;
C. Defendant Muir shall, within ten (10) days of entry of this Order, execute such documents as necessary to transfer titles or possession of all Muir corporate defendant Assets in the possession of the Receiver;
D. Defendant Muir agrees:
E. All funds paid to the Commission pursuant to this Order shall be deposited into an account administered by the Commission or its agent to be used for equitable relief, including but not limited to consumer redress, and any attendant expenses for the administration of such equitable relief. In the event that direct redress to consumers is wholly or partially impracticable or funds remain after redress is completed, the Commission may apply any remaining funds for such other equitable relief (including consumer information remedies) as it determines to be reasonably related to I Works Defendants' practices alleged in the Complaint. Any funds not used for such equitable relief shall be deposited to the United States Treasury as disgorgement. The Muir defendants shall have no right to challenge the Commission's choice of remedies under this Section. The Muir defendants shall have no right to contest the manner of distribution chosen by the Commission;
F. The Muir defendants relinquish all dominion, control, and title to the funds paid to the fullest extent permitted by law. The Muir defendants shall make no claim to or demand for return of the funds, directly or indirectly, through counsel or otherwise;
G. The Commission's agreement to this Order is expressly premised upon: (1) the truthfulness, accuracy, and completeness of the Muir defendants' sworn financial statements and supporting documents submitted to the Commission, as well as all subsequent addenda thereto, all of which the Muir defendants assert were truthful, accurate, and complete at the time they were submitted; and (2) the truthfulness, accuracy, and completeness of each Muir defendant's testimony at any asset deposition. The Muir defendants and the Commission stipulate that the Muir defendants' financial statements and supporting documents and testimony, if any, provide the basis for the Assets listed in this Order and include material information upon which the Commission relied in negotiating and agreeing to this Order. The Muir defendants and the Commission stipulate that the Commission has relied on the truthfulness, accuracy, and completeness of the Muir defendants' financial statements and supporting documents and any testimony in agreeing to the terms of this Order and that the Commission would not have entered into this Order but for the truthfulness, accuracy, and completeness of the Muir defendants' financial statements and supporting documents and any testimony;
H. If, upon motion by the Commission, this Court finds that a Muir defendant has failed to disclose any material Asset or materially misstated the value of any Asset in the financial statements or related documents described above, or in their testimony at any asset deposition, or has made any other material misstatement or omission in the financial statements or related documents described above, or in their testimony at an asset deposition, then as to that Muir defendant and defendant Muir, this Order shall be reopened and suspension of the judgment shall be lifted for the purpose of requiring payment of monetary relief in the amount of
I. Upon any reinstatement of the monetary judgment, the Court shall make an express determination that the monetary judgment shall be immediately due and payable as to that Muir defendant and defendant Muir. The Commission shall be entitled to interest on the judgment, computed from the day of entry of this Order, at the rate prescribed by 18 U.S.C. § 1961, as amended, on any outstanding amounts not paid. The Commission shall be permitted to execute on the judgment immediately after the reinstatement of the monetary judgment and engage in discovery in aid of execution;
J. Proceedings instituted under this Section are in addition to, and not in lieu of, any other civil or criminal remedies that may be provided by law, including any other proceedings the Commission may initiate to enforce this Order;
K. The Muir defendants agree that they will not, whether acting directly or through any sole proprietorship, partnership, limited liability company, corporation, subsidiary, branch, division, or other entity submit to any federal or state tax authority any return, amended return, or other official document that takes a deduction for, or seeks a tax refund or other favorable treatment for, any payment by any Muir defendant pursuant to this Order. The Muir defendants further stipulate that they will not seek a credit or refund of any kind for federal or state taxes or penalties for tax years 2006 to 2010. However, if any Muir defendant should otherwise obtain a credit or refund of any federal or state taxes or penalties paid for tax years 2006 to 2010, then such Muir defendant shall promptly pay the Commission the amount of such credit or refund, together with any interest that the Muir defendant has earned in connection with any such credit or refund.
A. Disclosing to any third party, using, or benefitting from consumer information, including the name, address, telephone number, email address, Social Security number, other identifying information, or any data that enables access to a consumer's account (including a credit card, bank account, or other financial account), or would otherwise allow the accessing of a charge against a consumer's account, of any person which the I Works Defendants obtained prior to entry of this Order in connection with the advertising, marketing, promotion, or offering of any Products;
B. Failing to provide to the Receiver such consumer information in all forms that is in any Muir defendants' possession, custody, or control within five (5) business days after entry of this Order.
C. Failing to dispose of such consumer information in all forms that is in any Muir defendants' possession, custody, or control within fifteen (15) days after entry of this Order. Disposal shall be by means that protect against unauthorized access to the consumer information, such as by burning, pulverizing, or shredding any papers, and by erasing or destroying any electronic media, to ensure that the consumer information cannot practicably be read or reconstructed.
Provided, however, that consumer information need not be disposed of, and may be disclosed, to the extent requested by a government agency or required by a law, regulation, or court order.
A. Take any and all steps that the Receiver concludes are appropriate to wind down the Muir corporate defendants;
B. Take any and all steps necessary or advisable to locate and liquidate all Assets of the Muir corporate defendants, cancel the Muir corporate defendants' contracts, collect on amounts owed to the Muir corporate defendants, and take such other steps as may be necessary to terminate and dissolve the Muir corporate defendants efficiently;
C. Provide the FTC, upon request, with any business records of the Muir corporate defendants that: (i) identify customers from whom the Muir corporate defendants collected payments, including the most recent known address, telephone number, and the amount of any fees paid by such customers; and (ii) identify customers who received refunds from the Muir corporate defendants and the amount of the refunds;
D. Continue to exercise full control of the Muir corporate defendants and continue to collect, marshal, and take custody, control and possession of all the funds, property, premises, accounts, documents, mail, and other Assets of, or in the possession or under the control of, the Muir corporate defendants, wherever situated, the income and profits therefrom, and all sums of money now or hereafter due or owing to the Muir corporate defendants, with full power to collect, receive and take possession of all goods, chattels, rights, credits, monies, effects, lands, leases, books and records, limited partnership records, work papers, and records of accounts, including computer-maintained information, contracts, financial records, monies on hand in banks and other financial institutions, and other papers and documents of other individuals, partnerships or corporations whose interests are now held by or under the direction, possession, custody or control of the Muir corporate defendants (collectively, the "Muir Receivership Estate");
E. Dispose of, or arrange for the disposal of, the records of the Muir corporate defendants no later than six months after the case is closed or the Court's approval of the Receiver's final report as to all remaining I Works Defendants, except that:
F. Continue to perform all acts necessary or advisable to complete an accounting of the Assets of the Muir corporate defendants, and prevent unauthorized transfer, withdrawal, or misapplication of the Muir corporate defendants' Assets;
G. Make payments and disbursements from the Muir Receivership Estate that are necessary or advisable for carrying out the directions of, or exercising the authority granted by, this Order. The Receiver shall apply to the Court for prior approval of any payment of any debt or obligation incurred by the Muir corporate defendants prior to the date of entry of the Temporary Restraining Order in this action, except payments that the Receiver deems necessary or advisable to secure and liquidate Assets of the Muir corporate defendant, such as rental payments or payment of liens;
H. Enter into contracts and purchase insurance as advisable or necessary;
I. Perform all incidental acts that the Receiver deems to be advisable or necessary, which include retaining, hiring, or dismissing any employees, independent contractors, and agents as the Receiver deems advisable or necessary in the performance of duties and responsibilities under the statutory authority granted by this Order;
J. Continue to institute, compromise, adjust, appear in, intervene in, or become party to such actions or proceedings in state, federal or foreign courts or arbitration proceedings as the Receiver deems necessary and advisable to carry out the Receiver's mandate under this Order, including but not limited to, actions challenging fraudulent or voidable transfers;
K. Continue to defend, compromise, adjust, or otherwise dispose of any or all actions or proceedings instituted in the past or in the future against the Receiver in his role as Receiver, or against the Muir corporate defendants, as the Receiver deems necessary and advisable to carry out the Receiver's mandate under this Order;
L. Issue subpoenas to obtain documents and records pertaining to the Receivership, and conduct discovery in this action on behalf of the Muir Receivership Estate;
M. Continue to maintain one or more bank accounts as designated depositories for funds of the Muir corporate defendants not disbursed to the FTC pursuant to Section IV of this Order, and make all payments and disbursements from the Muir Receivership Estate from such an account. The Receiver shall serve copies of monthly account statements on all parties;
N. Continue to maintain accurate records of all receipts and expenditures that he makes as Receiver; and
O. Continue to cooperate with reasonable requests for information or assistance from any state or federal law enforcement agency.
A. The Receiver shall liquidate the Assets of the Muir corporate defendants as soon as practicable. No later than sixty (60) days from the date of the entry of this Order, the Receiver shall file and serve on the parties a report (the "Final Report on the Muir Corporate Defendants") to the Court that details the steps taken to dissolve the Muir Receivership Estate. The Final Report on the Muir Corporate Defendants shall include an accounting of the Muir Receivership Estate's finances and total Assets and a description of what other actions, if any, must be taken to wind-down the Receivership. The Receiver shall mail copies of the Final Report on the Muir Corporate Defendants to all known creditors of the Muir corporate defendants with a notice stating that any objections to paying any Assets of the Muir corporate defendants to satisfy the Receiver's costs and expenses and the monetary judgment set forth in this Order must be submitted to the Court and served by mail upon the Receiver and the parties within thirty (30) days of the mailing of the Final Report on the Muir Corporate Defendants. If subsequent actions (such as the completion of tax returns or further actions to recover funds for the Muir Receivership Estate) are appropriate, the Receiver shall file an additional report or reports ("Supplemental Report") describing the subsequent actions and a subsequent application for the payment of fees and expenses related to the subsequent acts.
B. The Court will review the Final Report on the Muir Corporate Defendants and any objections to the Final Report on the Muir Corporate Defendants and, absent a valid objection, will issue an order directing the Receiver to: (1) pay the reasonable costs and expenses of administering the Muir Receivership Estate, including the compensation of the Receiver and the Receiver's personnel authorized by Section VIII (Compensation of Receiver) of this Order or other orders of this Court, and the actual out-of-pocket costs incurred by the Receiver in carrying-out his duties; and (2) pay all remaining funds to the FTC as partial satisfaction of the judgment.
C. With Court approval, the Receiver may hold back funds for a specified period as a reserve to cover additional fees and costs related to actions to be addressed in a Supplemental Report. If the Receiver does not make a supplemental application for fees and expenses within the specified period, or if funds remain in the reserve fund after the payments of fees and expenses approved by the Court in response to such a supplemental application, all funds remaining in the reserve fund shall be immediately paid to the FTC or its designated agent.
A. Obtain contact information from any prospective Marketing Affiliate or Client. In the case of a natural person, the Muir defendants shall obtain the prospective Marketing Affiliate's or Client's first and last name, physical address, country, telephone number, e-mail address, date of birth, and complete bank account information as to where payments are to be made. In the case of business entities, the Muir defendants shall obtain the first and last name, physical address, country, telephone number, e-mail address, and date of birth for the natural person who owns, manages, or controls the prospective Marketing Affiliate or Client, and complete bank account information as to where payments are to be made;
B. Require each Affiliate Network to obtain from its Marketing Affiliates and maintain the identifying information set forth in Subsection A of this Section prior to the Marketing Affiliate's or Affiliate Network's participation in any Muir defendant's Affiliate Program;
C. Provide each prospective Marketing Affiliate or Client prior to such prospective Marketing Affiliate's acceptance into any Muir defendant's Affiliate Program or any Muir defendant providing services to a prospective Client: (1) a copy of this Order; and (2) a Clear and Conspicuous statement in writing that engaging in acts or practices prohibited by this Order will result in immediate termination of any Marketing Affiliate or Client and forfeiture of all monies received from or owed to the Marketing Affiliate or Client;
D. Obtain from each prospective Marketing Affiliate or Client prior to such prospective Marketing Affiliate's acceptance into any Muir defendant's Affiliate Program or any Muir defendant providing services to a prospective Client a signed and dated statement acknowledging receipt of this Order and expressly agreeing to comply with this Order;
E. Routinely monitor any marketing materials, including websites, emails, and pop-ups used by each Marketing Affiliate to advertise, promote, market, offer for sale, or sell any Muir defendant's Product(s);
F. Routinely monitor any marketing materials, including websites, emails, and pop-ups used by each Client to advertise, promote, market, offer for sale, or sell any Product(s) for which any Muir defendant is providing services;
G. Promptly and completely investigate any complaints received by any Muir defendant through any source to determine whether any Marketing Affiliate or Client is engaging in acts or practices prohibited by this Order;
H. Review the sales websites for each Marketing Affiliate advertising, promoting, marketing, offering for sale, or selling any Muir defendant's Product(s) at least once every thirty (30) days to determine whether any Marketing Affiliate is engaging in acts or practices prohibited by this Order;
I. Review the sales websites advertising, promoting, marketing, offering for sale, or selling each Client's Product for which the Muir defendant provides services, at least once every thirty (30) days to determine whether any Client is engaging in acts or practices prohibited by this Order;
J. Immediately halt the processing of any payments or charges generated by any Marketing Affiliate or Client that has engaged in, or is engaging in, acts or practices prohibited by this Order;
K. Fully refund, within five (5) business days of discovery, any consumer whose account any Muir defendant has processed a charge against whose sale originated from any Marketing Affiliate or Client that is discovered to have engaged in, or is engaging in, acts or practices prohibited by this Order since the date of the Muir defendant's most recent review of the Marketing Affiliate's or Client's marketing materials, including the Marketing Affiliate's or Client's websites; and
L. Terminate, immediately, any Marketing Affiliate or Client that has engaged in, or is engaging in, acts or practices prohibited by this Order and cease payments to any such person. Provided, however, that this Section does not authorize or require the Muir defendants to take any action that violates any federal, state, or local law.
A. Each of the Muir defendants, within seven (7) days of entry of this Order, must submit to the Commission an acknowledgment of receipt of this Order sworn under penalty of perjury.
B. For twelve (12) years after entry of this Order, defendant Muir for any business that defendant Muir, individually or collectively with any other I Works Defendant, is the majority owner or directly or indirectly controls, and each Muir corporate defendant, must deliver a copy of this Order to: (1) all principals, officers, directors, and managers; (2) all employees, agents, and Representatives who participate in the type of conduct related to the subject matter of the Order; (3) all third-party facilitators such as list brokers, telemarketers or any entity related to the obtaining or use of a Merchant Account; and (4) any business entity resulting from any change in structure as set forth in the Section titled Compliance Reporting. Delivery must occur within seven (7) days of entry of this Order for current personnel. To all others, delivery must occur before they assume their responsibilities.
C. From each individual or entity to which any Muir defendant delivered a copy of this Order that Muir defendant must obtain, within thirty (30) days, a signed and dated acknowledgment of receipt of this Order.
A. One year after entry of this Order, each Muir defendant must submit a compliance report, sworn under penalty of perjury:
B. For twelve (12) years following entry of this Order, defendant Muir must submit a compliance notice, sworn under penalty of perjury, within fourteen (14) days of any change in the following:
C. Each Muir defendant must submit to the FTC notice of the filing of any bankruptcy petition, insolvency proceeding, or any similar proceeding by or against him or it within fourteen (14) days of its filing;
D. Any submission to the Commission required by this Order to be sworn under penalty of perjury must be true and accurate and comply with 18 U.S.C. § 1746, such as by concluding: "I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. Executed on: _____" and supplying the date, signatory's full name, title (if applicable), and signature; and
E. Unless otherwise directed by a Commission representative in writing, all submissions to the Commission pursuant to this Order must be emailed to DEbrief@ftc.gov or sent by overnight courier (not the U.S. Postal Service) to: Associate Director for Enforcement, Bureau of Consumer Protection, Federal Trade Commission, 600 Pennsylvania Avenue NW, Washington, DC 20580. The subject line must begin: FTC v. SCOTT MUIR, BIG BUCKS PRO, INC., BLUE NET PROGRESS, INC., BOLT MARKETING, INC., BUSINESS LOAN SUCCESS, INC., CS PROCESSING, INC., GGL REWARDS, INC., HIGHLIGHT MARKETING, INC., MIST MARKETING, INC., NET DISCOUNTS, INC., OPTIMUM ASSISTANCE, INC., RAZOR PROCESSING, INC., AND SIMCOR MARKETING, INC. X110011.
A. Accounting records showing the revenues from all Products sold, all costs incurred in generating those revenues, and the resulting net profit or loss;
B. Personnel records showing, for each person providing services, whether as an employee or otherwise, that person's: name, addresses, and telephone numbers; job title or position; dates of service; and, if applicable, the reason for termination;
C. Customer files obtained after entry of this Order showing the names, addresses, telephone numbers, dollar amounts paid, refunds and chargebacks issued, and the quantity and description of Products purchased;
D. Complaints and refund requests, whether received directly or indirectly, such as through a third party, and any response;
E. All records necessary to demonstrate full compliance with each provision of this Order, including all submissions to the Commission; and
F. A copy of each advertisement, marketing email, banner advertisement, pop-up advertisement, mobile advertisement, web page, direct mail piece, telemarketing script, text advertisement, or other marketing material.
Provided, however, nothing in this Section shall relieve any Muir defendant of any responsibility under the Section entitled "Monitoring by the Muir Defendants" above.
A. Within fourteen (14) days of receipt of a written request from a representative of the Commission, defendant Muir must: submit additional compliance reports or other requested information, which must be sworn under penalty of perjury; appear for depositions; and produce documents, for inspection and copying. The Commission is also authorized to obtain discovery, without further leave of court, using any of the procedures prescribed by Federal Rules of Civil Procedure 29, 30 (including telephonic depositions), 31, 33, 34, 36, 45, and 69;
B. For matters concerning this Order, the Commission is authorized to communicate directly with defendant Muir. Defendant Muir must permit representatives of the Commission to interview any employee or other person affiliated with defendant Muir who has agreed to such an interview. The person interviewed may have counsel present; and
C. The Commission may use all other lawful means, including posing, through its representatives, as consumers, suppliers, or other individuals or entities, to defendant Muir or any individual or entity affiliated with defendant Muir, without the necessity of identification or prior notice. Nothing in this Order limits the Commission's lawful use of compulsory process pursuant to Sections 9 and 20 of the FTC Act, 15 U.S.C. §§ 49, 57b-1.
The parties, and their respective counsel, hereby consent to the terms and conditions of the Order as set forth above and consent to the immediate entry thereof.
Plaintiff Federal Trade Commission ("FTC" or "Commission") brings this adversary proceeding pursuant to 11 U.S.C. § 523(a)(2)(A) and (c), seeking an order determining that a judgment obtained by the FTC against Defendant Scott Wallace Muir ("Defendant" or "Muir") is excepted from discharge.
1. This Court has subject matter jurisdiction over this action pursuant to 28 U.S.C. §§ 157 and 1334, and 11 U.S.C. § 523.
2. Venue in the District of Utah is proper under 28 U.S.C. § 1409(a).
3. This Adversary Proceeding is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(I).
4. This Adversary Proceeding relates to In re Scott Wallace Muir & Lynette Holmes Muir, Case No. 11-37432 (Chapter 7), now pending in this Court. The Commission is a creditor with a general unsecured claim against Defendant pursuant to a Judgment and Final Order ("District Court Judgment") entered in the United States District Court for the District of Nevada ("District Court") on ________, in the case styled FTC v. Jeremy Johnson, et al., Case No. 2:10-cv-02203-RLH-GWF (D. Nev.) ("Enforcement Action"). A copy of the District Court Judgment is attached as FTC Exhibit 1 and incorporated by reference.
5. On February 25, 2013, the FTC filed an Amended Complaint in the Enforcement Action against Defendant Muir, his nephew Jeremy Johnson ("Johnson"), eight other individuals, I Works, Inc., and 60 other corporations for engaging in a far-reaching Internet scheme that made more than $275 million by luring consumers into deceptive "trial" memberships, and bogus government-grant and money-making schemes. Since 2006, Muir and his co-defendants generated more than $350 million in sales and caused more than $289 million in unreimbursed consumer injury. See generally, Amended Complaint ¶¶ 4-440. A copy of the Amended Complaint is attached as FTC Exhibit 2 and incorporated by reference.
6. The District Court Judgment includes a money judgment in favor of the Commission and against Defendant in the principal amount of $2,588,313.00. District Court Judgment ¶ ___. Based upon financial statements and supporting documents provided by Defendant to the FTC, enforcement of the money judgment has been suspended. The money judgment may be reinstated by the District Court in accordance with ¶ ___ therein.
7. The FTC is an independent agency of the United States Government created by statute. 15 U.S.C. §§ 41-58. The FTC enforces 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.
8. The FTC is authorized to initiate federal district court proceedings, by its own attorneys, to enjoin violations of the FTC Act, and to secure such equitable relief as may be appropriate in each case, including rescission or reformation of contracts, restitution, the refund of monies paid, and the disgorgement of ill-gotten monies. 15 U.S.C. §§ 53(b), 56(a)(2)(A)-(B), and 57b.
9. Defendant Scott Wallace Muir is the titular owner and officer of at least 12 shell companies that Muir and his co-defendants established to act as fronts on applications to obtain new merchant accounts. These shell companies included his co-defendants Big Bucks Pro, Blue Net Progress, Bolt Marketing, Business Loan Success, CS Processing, GGL Rewards, Highlight Marketing, Mist Marketing, Net Discounts, Optimum Assistance, Razor Processing, and Simcor Processing.
10. The FTC incorporates ¶¶ 4-440 of the Amended Complaint in the Enforcement Action by reference. Muir and his co-defendants operated as a common enterprise while engaging in the deceptive acts and practices set forth below. Muir and his co-defendants conducted the business practices described below through an interrelated network of companies that had common ownership, business functions, employees, and office locations; that commingled funds; and that shared one another's marketing materials. Muir formulated, directed, controlled, had the authority to control, or participated in the acts and practices of his corporate co-defendants.
11. Muir and his co-defendants lured consumers into "trial" memberships for bogus government-grant and money-making schemes, and then repeatedly charged monthly fees for these and other memberships the consumers never ordered.
12. The operation used websites that pitched various money-making programs or touted the availability of government grants to pay personal expenses. The websites offered "free" information at no risk and ask consumers to provide their credit or debit card numbers to pay a small shipping and handling fee such as $1.99. But when consumers provided their billing information, Muir and his co-defendants charged them a hefty one-time fee of up to $129.95 and monthly recurring fees of up to $59.95 for the advertised programs, and other monthly fees for unrelated programs.
13. This scheme caused more than 500,000 consumers to seek chargebacks — reversals of charges to their credit cards or debits to their bank accounts. The high number of chargebacks landed Muir and his co-defendants in VISA's and MasterCard's chargeback monitoring programs, resulted in millions of dollars in fines for excessive chargebacks, and prevented Muir and his co-defendants from getting access to the credit card and debit card billing systems using their own names. To keep the scheme going, Muir and his co-defendants deceived banks into giving them continued access to these billing systems by creating 51 shell companies with figurehead officers, and by providing the banks with false "clean" versions of their websites.
14. On behalf of I Works, Muir obtained merchant accounts in the name of one or more shell companies so that defendants could continue to process the credit and debit card charges for defendants' deceptive scheme from consumers. Muir had signatory authority over at least 12 accounts at three different banks, all of which are titled in the name of shell companies.
15. The sum of the revenues earned by the 12 corporate co-defendants that Muir owned and controlled, and compensation paid to him from the massive common enterprise composed of Muir and all of his co-defendants, through his co-defendant Employee Plus, is $2,588, 313.00, the amount of the District Court Judgment against Muir.
16. The Commission repeats and realleges the allegations set forth in ¶¶ 4-440 of the Amended Complaint in the Enforcement Action, and ¶¶ 4-15 above.
17. In numerous instances, in connection with the marketing and sale of grant-related products or services, Defendant represented, in concert with his co-defendants, directly or indirectly, expressly or by implication, that consumers using their grant product were likely to find and obtain government grants to pay personal expenses.
18. The representation set forth in ¶ 17 of this Complaint is false, misleading, and/or was not substantiated at the time the representation was made because consumers using Defendant's grant product were unlikely to find and obtain government grants to pay personal expenses.
19. Therefore, Defendant's representation set forth in ¶ 17 of this Complaint constitutes a deceptive act or practice in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).
20. In numerous instances, in connection with the marketing and sale of make-money products or services, Defendant represented, in concert with his co-defendants, directly or indirectly, expressly or by implication, to consumers that consumers were likely to earn substantial income such as $200-$943 or more per day by using products marketed and sold by them.
21. The representation set forth in ¶ 20 of this Complaint was false, misleading, and/or was not substantiated at the time the representation was made because consumers using Defendant's and his co-defendants' make-money products were not likely to earn substantial income such as $200-$943 or more per day.
22. Therefore, Defendant's representation set forth in ¶ 20 of this Complaint constitutes a deceptive act or practice in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).
23. In numerous instances, in connection with the marketing and sale of various products or services, including grant and make-money products, Defendant represented, in concert with his co-defendants, directly or indirectly, expressly or by implication, that their offers were free or risk-free.
24. In truth and in fact, Defendant's and his co-defendants' offers were not free or risk-free. Consumers who provided their billing information to pay a nominal fee were likely to be enrolled in Negative Option Plans for a core product and billed high one-time and recurring amounts if they did not cancel during undisclosed or poorly disclosed trial memberships of limited duration. Defendant and his co-defendants also immediately enrolled consumers into Forced Upsells with high monthly fees.
25. Therefore, Defendant's representations as set forth in ¶ 23 of this Complaint constitute a deceptive act or practice in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).
26. In numerous instances, in connection with the marketing and sale of various products or services, including products that purported to enable consumers to obtain government grants for personal expenses and products that purported to enable consumers to earn money, Defendant and his co-defendants represented that consumers needed to pay only a nominal amount, such as $1.99 or $2.99, for a shipping and handling fee.
27. In numerous instances in which Defendant and his co-defendants made the representation set forth in ¶ 26 of this Complaint, they failed to disclose, or disclose adequately, to consumers, material terms and conditions of their offer, including:
A. that they enrolled consumers in Negative Option Plans for not only the product or service that was the subject of the advertised offer, but for other products or services as well;
B. the amount of the one-time and recurring charges and the frequency and duration of the recurring charges associated with the Negative Option Plans;
C. that consumers must cancel the Negative Option Plans within a limited period to avoid the one-time and recurring charges;
D. the period during which consumers must cancel the Negative Option Plans in order to avoid one-time and recurring charges;
E. that each Negative Option Plan must be cancelled separately and the procedure for cancelling the Plans.
28. Defendant's failure to disclose, or disclose adequately, the material information described in ¶ 27 above, in light of the representation described in ¶ 26 above, constitutes a deceptive act or practice in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).
29. In connection with the marketing and sale of grant-related products or services, Defendant and his co-defendants represented, directly or indirectly, expressly or by implication, that consumers who used their grant product were likely to obtain grants such as those obtained by consumers in the testimonials appearing on websites advertising their grant product.
30. The representation set forth in ¶ 29 of this Complaint was false or was not substantiated at the time the representation was made because consumers who uses Defendant's and his co-defendants' grant product were not likely to obtain grants such as those obtained by consumers in the testimonials appearing on websites advertising their grant product.
31. Therefore, Defendant's representations set forth in ¶ 29 above constitute a deceptive act or practice in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).
32. In numerous instances in connection with the marketing and sale of various products or services, including products to obtain government grants to pay personal expenses and make-money opportunities, Defendant and his co-defendants represented that the positive articles and other web pages about their grant and make-money opportunities were independent reviews that reflected the opinions of unbiased consumers who successfully used their products or services.
33. In truth and in fact, the positive articles and other web pages were not independent reviews reflecting the opinions of unbiased consumers. The positive articles and other web pages were created by Defendant, his co-defendants, and their agents.
34. Therefore, Defendant's representation set forth in Paragraph 32 of this Complaint constitutes a deceptive act or practice in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).
35. In numerous instances in connection with the marketing and sale of various products or services, including products to obtain government grants to pay personal expenses and make-money opportunities, Defendant and his co-defendants or their agents created and posted hundreds of positive articles and other web pages about their products or services.
36. In numerous instances in connection with the positive articles and other web pages described in ¶ 35 above, Defendant represented, in concert with his co-defendants, directly or indirectly, expressly or by implication, that these postings reflected endorsements from individuals who have successfully used their products or services.
37. In numerous instances in connection with the representation set forth in ¶ 36, Defendant and his co-defendants have failed to disclose, or disclose adequately, that they or their agents created and posted the positive articles and other web pages.
38. Defendant's failure to disclose, or to disclose adequately, the material information set forth in ¶ 37 above, in light of the representation described in ¶ 36 above, constitutes a deceptive act or practice in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).
39. Defendant's activities described above were conducted with knowledge of the falsity of the representations, or with reckless disregard of the truth or falsity of the representations.
40. Defendant injured consumers by knowingly making false or misleading representations to consumers. These misrepresentations were material to consumers in the course of deciding to pay Defendant, and consumers' reliance on Defendant's misrepresentations was justifiable.
41. The total amount of the monies Defendant obtained from consumers by his misrepresentations was at least $2,588, 313.00, the amount of the judgment against Defendant in the Enforcement Action.
42. Defendant is jointly and severally liable with his co-defendants in the Enforcement Action for these misrepresentations.
43. Consequently, the District Court Judgment against Defendant is a debt for money, property, or services obtained by false pretenses, false representations or actual fraud, and is excepted from discharge pursuant to 11 U.S.C. § 523(a)(2)(A).
WHEREFORE, Plaintiff requests that the Court enter an order:
(a) Determining that the judgment against Defendant under the District Court Judgment in the Enforcement Action in the amount of $2,588, 313.00, is nondischargeable pursuant to 11 U.S.C. § 523(a)(2)(A);
(b) Providing that, as set forth in the District Court Judgment, the enforcement of judgment against Defendant shall be suspended, subject to reinstatement by the District Court in accordance with ¶ ___; and
(c) Granting Plaintiff such other and further relief as this case may require and the Court deems just and proper.
1. On December 21, 2010, the FTC filed a complaint in the United States District Court for the District of Nevada, FTC v. Jeremy Johnson, et al., Case No. CV-02203-MMD-GWF, against various defendants, including debtor Scott Muir.
2. On _______, the FTC and Scott Muir entered into a settlement, which was memorialized by a Stipulated Final Order for Permanent Injunction and Monetary Judgment ("Settlement"). A copy of the Stipulated Final Order for Permanent Injunction and Monetary Judgment is attached hereto as Exhibit A.
3. Pursuant to the Settlement, Plaintiff Federal Trade Commission ("FTC or Commission") filed a Complaint to Determine Nondischargeability of Debt under Section 523 of the Bankruptcy Code, 11 U.S.C. 523 (the "Complaint") on ______, 2014.
4. Debtor Scott Muir has waived service of the Summons and Complaint.
5. Debtor Scott Muir neither admits nor denies the allegations in the Complaint.
6. Pursuant to the Settlement, Debtor Scott Muir agrees to the entry of the Stipulated Judgment for Nondischargeability of Debt filed concurrently herewith.
7. Accordingly, the FTC respectfully requests that the Court enter the Stipulated Judgment.
This matter came before the Court upon the FTC's Motion for Entry of Stipulated Judgment for Nondischargeability of Debt. The Court finds that good cause exists to grant the relief requested in the Motion. Accordingly, it is
ORDERED and ADJUDGED that:
1. The Motion is GRANTED;
2. (a) The judgment against Defendant under Section _______ of the District Court Judgment (as defined in the Stipulation) in the amount of $2,587,313.99 is excepted from discharge under 11 U.S.C. § 523(a)(2)(A); and
(b) Under Sections ____ of the District Court Judgment, the judgment is suspended, subject to reinstatement by the District Court.
