Ftc Filing On Feature Films For Families Lawsuit 6a4h52

Case 2:11-cv-00419-RJS-DBP Document 304 Filed 07/08/16 Page 1 of 10

JOHN W. HUBER, United States Attorney (#7226) JARED C. BENNETT, Assistant United States Attorney (#9097) 185 South Street, Suite 300 Salt Lake City, UT 84111 Phone: (801) 524-5682 MICHAEL S. BLUME Director, Consumer Protection Branch U.S. Department of Justice, Civil Division DAVID A. FRANK ARTURO DECASTRO Trial Attorneys P.O. Box 386 Washington, D.C. 20044 Phone: (202) 307-0061, (202) 353-3940

UNITED STATES DISTRICT COURT DISTRICT OF UTAH, CENTRAL DIVISION

UNITED STATES OF AMERICA, Plaintiff,

Case 2:11-cv-00419-RJS-DBP Judge Robert J. Shelby

v. CORPORATIONS FOR CHARACTER, L.C., et al., Defendants.

United States of America’s Motion for Entry of Permanent Injunction

Summary The United States respectfully asks that the Court enter the attached proposed order (“Proposed Order”) granting a permanent injunction and monetary judgment for disgorgement against Feature Films for Families, Corporations for Character, Family Films of Utah, and

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Forrest S. Baker III (collectively “Defendants”). 1 The May 25, 2016, jury verdict and this Court’s March 31, 2015, summary judgment ruling resolved the issues of Defendants’ liability for engaging in widespread deceptive and abusive telemarketing practices. The only remaining issues concern the remedy. The United States seeks three forms of relief: (1) a permanent injunction, (2) an equitable monetary judgment to disgorge Defendants’ gains from their misconduct, (3) and civil penalties. Determining the amount of civil penalties involves the Court weighing multiple factors under 15 U.S.C. § 45(m), and proceedings for resolving factual issues relating to these factors have not yet been scheduled. However, because Defendants have already been found liable for their unlawful conduct, the Court may enter injunctive relief and an equitable monetary judgement of disgorgement independent of further civil penalties proceedings. Further, because evidence adduced at trial showed that Defendants’ illegal practices are apparently ongoing, the Court should enter the Proposed Order without delay. The Proposed Order permanently ens Defendants from engaging in the illegal practices addressed by the verdict and summary judgment ruling. In addition, it directs Defendants to disgorge their gross receipts from the deceptive Kids First campaign – $487,735 – as equitable monetary relief. The Proposed Order also includes ancillary injunctive relief provisions to ensure Defendants’ compliance with the law.

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This motion requests only equitable relief. Accordingly, the Proposed Order does not include a proposed civil penalties provision. Page 2 of 10

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Background In May 2011, the United States filed a seven-count Complaint alleging that, since 2007, Defendants have engaged in deceptive and abusive practices in the course of telemarketing and charitable solicitation call campaigns. (Dkt. No. 1). 2 Count 1 alleged that Defendants violated the Federal Trade Commission (“FTC”) Act by making various deceptive claims, including misrepresentations about the sales purpose of the Kids First campaign calls and the use of the proceeds from DVD sales that Defendants made during those calls. (Id. at ¶¶ 21-23, 41-46, 5456). Count 2 alleged that those deceptive claims also violated the Telemarketing Sales Rule (“TSR”). (Id. at ¶¶ 71, 72). Counts 3 through 7 alleged, respectively, that, during the Kids First, Velveteen Rabbit, and DVD sales campaigns, Defendants called phone numbers on the National Do Not Call (“DNC”) Registry, ignored consumers’ prior do-not-call requests, transmitted inaccurate caller-identification information, failed to make required oral disclosures, and abandoned calls. (Id. at ¶¶ 73-78). The Complaint sought injunctive relief (including ancillary injunctive relief), disgorgement, and civil penalties as remedies for Defendants’ violations. (Id. at ¶¶ 80, 82, 83). On March 31, 2015, following multiple partial summary judgment motions from the parties, this Court ruled that, during the Kids First and Velveteen Rabbit campaigns, Defendants violated the TSR provisions that prohibit placing calls to phone numbers on the DNC Registry, transmitting inaccurate caller-identification information, and failing to make required oral

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United States v. Feature Films for Families, Inc., Case 4:11-cv-00197-RH-WCS (N.D. Fla. 2011). Page 3 of 10

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disclosures. United States v. Corporations for Character, L.C., 116 F. Supp. 3d 1258, 1275, 1276, 1278 (D. Utah 2015). The Court reserved for trial, however, fact issues concerning, among other things, whether Defendants made deceptive claims, 3 ignored consumers’ prior do-not-call requests, abandoned calls, and committed TSR violations with the requisite knowledge to a civil penalty award. (Id. at 1273, 1276-79). A jury trial began on May 17, 2016. (Dkt. No. 292). During trial, the United States presented evidence of each violation alleged in the Complaint, the number of violations, Defendants’ knowledge of the violations, and Mr. Baker’s authority to control or participation in the business practices that gave rise to the violations. The evidence included data summaries of Defendants’ violations, testimony from consumers who repeatedly received unsolicited calls from Defendants after the United States filed its lawsuit (testimony of Deanna Brewer and Suzanne Cridland), documents showing complaints and inquiries that Defendants received from consumers and various state law enforcement agencies, and information about Defendants’ earnings from the Kids First campaign. In addition, the jury heard testimony regarding telemarketing campaigns that Defendants currently conduct that are similar to the campaigns addressed in the Complaint. On May 25, 2016, the jury returned a verdict finding that Defendants knowingly violated

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The Court also found that Defendants were entitled to summary judgment on certain alleged representations associated with solicitations for donations. 116 F. Supp. 3d at 1279. At the Final Pretrial Conference, the Court entered judgment in favor of Defendants on the United States’ allegations that Defendants made deceptive claims during charitable solicitation call campaigns. (Dkt. No. 266). Page 4 of 10

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the TSR 4 by making deceptive claims during the Kids First campaign, calling phone numbers on the DNC Registry, ignoring consumers’ prior do-not-call requests, repeatedly violating calleridentification and oral disclosure requirements, and abandoning calls. (Dkt. No. 300). In addition, the jury determined that Forrest Baker had authority to control or participated in the corporate business practices and had knowledge of the violations. 5 (Id.). Defendants committed a total of more than 117 million TSR violations. (Id.). The verdict did not address the amount of the civil penalty. 6 After the jury was dismissed, the Court indicated that it would schedule a hearing for consideration of such relief. Argument I.

The Court Has The Authority To Enter The Proposed Injunctive Relief. Section 13(b) of the FTC Act gives the Court broad authority to issue a permanent

injunction and fashion appropriate remedies for Defendants’ violations of the Act. 15 U.S.C. § 53(b); FTC v. Freecom Commn’s, Inc., 401 F.3d 1192, 1202 n.6 (10th Cir. 2005). The authority includes the “authority to grant any ancillary relief necessary to accomplish complete justice.” FTC v. H.N. Singer, Inc., 668 F.2d 1107, 1113 (9th Cir.1982). 4

Because Count 1 of the complaint alleges a violation of the FTC Act and seeks equitable relief, the Court reserved for itself the determination of whether Defendants’ deceptive claims also violate the FTC Act. 5

An individual defendant is personally liable for injunctive relief if he has authority to control the corporate defendants or participated in their acts or practices. FTC v. Freecom Commn’s, Inc. 401 F.3d 1192, 1204 (10th Cir. 2005) (citation omitted). Further, an individual defendant is personally liable for equitable monetary relief if he knew or should have known of defendants’ material misrepresentations. Id. at 1207. 6

The Court, not the jury, has the authority to determine the appropriate amount of civil penalties. Tull v. United States, 481 U.S. 412 (1987). Page 5 of 10

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Section I of the Proposed Order permanently ens Defendants from making material misrepresentations or omissions in the course of marketing entertainment products or services, audio recordings, or video recordings. The injunction prohibits misrepresentations concerning the purpose for which Defendants consumers and Defendants’ use of proceeds from sales to consumers. Thus, Section I addresses the misconduct in the Kids First campaign identified in Count 1 of the Complaint, which seeks relief against deceptive practices that violate the FTC Act. Dkt. No. 1, ¶¶ 21-23, 54-56. Because the jury determined that Defendant’s representations in the Kids First campaign were deceptive, and Count I is based on the same conduct, the jury’s determination resolves Count I against the Defendants. Ag Services of America, Inc. v. Nielsen, 231 F.3d 726, 730 (10th Cir. 2000) (jury determination governs common factual questions when legal and equitable claims are tried together). Consequently, the Court should enter the permanent injunction set forth in Section I of the Proposed Order to en Defendants from deceptive practices similar to those that Defendants practiced in the Kids First calls. Section II of the Proposed Order permanently ens Defendants from violating any provision of the TSR, 7 including those prohibiting false or misleading statements, calls to numbers on the DNC Registry and internal do-not-call lists, transmittal of inaccurate caller-

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In accordance with Federal Rule of Civil Procedure 65(d), a copy of the TSR – 16 C.F.R. Part 310 – is appended to the Proposed Order. Page 6 of 10

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identification information, failure to make required oral disclosures, and abandoned calls. 8 Section III prohibits Defendants from failing to: (1) ensure that its telemarketers comply with Sections I and II of the order, (2) investigate and respond to complaints regarding possible order violations, (3) take corrective action against any agent not complying with the order, and (4) review the accuracy of scripts or recordings relating to their call campaigns. The injunctions in Sections II and III are proper because the jury and the Court have found Defendants liable for violating multiple TSR provisions. See FTC v. Five-Star Auto Club, Inc., 97 F. Supp. 2d 502, 536 (S.D.N.Y. 2000) (citations omitted) (the commission of past illegal conduct is highly suggestive of the likelihood of future violations). Moreover, given the egregiousness of Defendants’ violations and Defendants’ ongoing telemarketing practices, the broad scope of the injunction is warranted to prevent future violations. See, e.g., FTC v. John Beck Amazing Profits, LLC, 888 F. Supp. 2d 1006, 1011 (C.D.C.A. 2012) (finding “fencing in” provisions are necessary to prevent similar and related violations from occurring in the future) (citations omitted); FTC v. Kitco of Nevada, Inc., 612 F. Supp. 1282, 1296 (D. Minn. 1985) (“[T]he egregious nature of past violations is a factor ing the need for permanent injunctive relief of a broad nature.”). The Proposed Order also includes several ancillary injunctive relief provisions. Section VI requires Defendants to maintain certain types of business records. Sections V and VII establish compliance and monitoring procedures that they must follow. And Section VIII directs 8

Section II expressly incorporates the TSR’s language concerning prior consent, safe harbor, and established business relationship requirements for do-not-call violations, and safe harbor requirements for abandoned call violations. Page 7 of 10

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Defendants to acknowledge receipt of the order and distribute it to their agents. Courts have repeatedly observed that such monitoring and reporting provisions are appropriate under the FTC Act to ensure Defendants’ future compliance with the law. See, e.g., FTC v. Ideal Financial. Solutions., Inc., No. 213CV00143JADGWF, 2016 WL 756527, at *6 (D. Nev. Feb. 23, 2016) (“Courts routinely order this kind of recordkeeping and compliance-reporting in FTC cases.”); FTC v. Pacific First Benefit, LLC, 472 F. Supp. 2d 981, 982 (N.D. Ill. 2007) (approving monitoring and other ancillary relief for violations of TSR); FTC v. Direct Mktg. Concepts, Inc., 648 F. Supp. 2d 202, 216-17 (D. Mass. 2009) (monitoring and ancillary provisions of injunction “are both reasonable and necessary”); FTC v. SlimAmerica, Inc., 77 F. Supp. 2d 1263, 1276 (S.D. Fla. 1999) (record-keeping and monitoring provisions in the permanent injunction are also appropriate to permit the Commission to police the defendants’ compliance with the order). II.

The Court Has The Authority To Enter The Proposed Monetary Relief. Included in the Court’s authority to grant ancillary relief is the power to order

disgorgement of revenue Defendants received in the course of their unlawful conduct. See FTC v. Gem Merch. Corp., 87 F.3d 466, 468–69 (11th Cir.1996); FTC v. LoanPointe, LLC, 525 F. App’x 696, 699 (10th Cir. 2013) (unpublished). Defendants’ gross receipts from their deceptive telemarketing campaign is the proper measure for monetary relief. See FTC v. Washington Data Res., Inc., 704 F.3d 1323, 1327 (11th Cir. 2013). Section IV of the Proposed Order requires Defendants to disgorge $487,735 as equitable monetary relief for the deceptive claims they made during the Kids First campaign. The requested disgorgement amount represents the total fees that Defendants received for conducting Page 8 of 10

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the campaign. 9 See PX 269-002 (itted on May 17, 2016). As explained above, the jury’s verdict establishes that Defendants engaged in deceptive conduct that violated both the FTC Act and the TSR. Therefore, disgorgement of these fees is an appropriate remedy for these violations. Conclusion Defendants have been found liable for engaging in widespread deceptive and abusive practices. The severity of their law violations necessitates the broad injunctive relief and the equitable monetary relief proposed by the United States. Accordingly, the Court should grant the United States’ motion and enter the Proposed Order. Dated: July 8, 2016 Respectfully submitted, /s/ David A. Frank David A. Frank /s/ Arturo DeCastro Arturo DeCastro

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The document identified as PX 269 was produced to the FTC during its investigation of Defendants by the Coalition for Quality Children’s Media, the non-profit organization for whom Defendants conducted the Kids First campaign. Page 9 of 10

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Certificate of Service I, Arturo DeCastro, certify that on July 8, 2016, I served a true copy of the foregoing document on all counsel of record via ECF. /s/ Arturo DeCastro Arturo DeCastro U.S. Department of Justice

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Case 2:11-cv-00419-RJS-DBP Document 304-1 Filed 07/08/16 Page 1 of 17

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH, CENTRAL DIVISION

UNITED STATES OF AMERICA,

Case No. 2:11-cv-419-RJS

Plaintiff,

Judge Robert J. Shelby

v. [PROPOSED] ORDER AWARDING INJUNCTIVE RELIEF AND DISGORGEMENT

CORPORATION FOR CHARACTER, L.C., et al., Defendants.

Upon consideration of the evidence presented at trial commencing on May 17, 2016 and the jury’s verdict, the Court hereby awards injunctive relief and equitable monetary relief to the United States as set forth below. FINDINGS 1.

This Court has jurisdiction over the subject matter and the parties pursuant to 28 U.S.C. §§ 1331, 1337(a), 1345, and 1355, and 15 U.S.C. §§ 45(m)(1)(A),53(b), 56(a), and 57b.

2.

The activities of Defendants are in or affecting commerce, as defined in Section 4 of the FTC Act, 15 U.S.C. § 44.

3.

Defendants violated the Telemarketing Sales Rule, 16 C.F.R. Part 310, in the course of making telephone calls in the name of “Kids First,” and calls to promote the movie The Velveteen Rabbit. The Court has ruled that in both of these telephone campaigns, Defendants engaged in “telemarketing” under the Telemarketing Sales Rule, 16 C.F.R. § 310.2(dd) (2016), and that Defendants’ conduct in these campaigns violated Sections 310.4(b)(1)(iii)(B), 310.4(a)(8), and 310.4(d) of the Telemarketing Sales Rule. United States v. Corporations for Character, 116 F.Supp.3d 1258, 1279 (D. Utah 2015).

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4.

The verdict of the jury establishes that Defendants engaged in deceptive practices in the course of making telephone calls in the name of “Kids First.” These practices violate Sections 310.3(a)(4) of the Telemarketing Sales Rule. The verdict of the jury also establishes that Defendants engaged in abusive telemarketing practices that violated the Telemarketing Sales Rule in the course of making telephone calls in the name of “Kids First,” calls to promote the movie The Velveteen Rabbit, and calls to sell DVDs on behalf of Feature Films for Families, Inc., including violating sections 310.4(b)(1)(iii)(A), and 310.4(b)(1)(iv) of the Rule.

5.

Defendants’ deceptive practices in the course of making telephone calls in the name of “Kids First” also violate Section 5 of the FTC Act. 15 U.S.C. § 45(a).

6.

Defendant Feature Films for Families, Inc., received $487,735.05 as a result of telephone calls made by Defendant Corporations for Character, L.C., under the name “Kids First.”

7.

The Corporate Defendants operated as a common enterprise and are tly and severally liable for the violations committed in the calls made by Defendants Feature Films for Families, Inc., and Corporations for Character, LC. Defendant Family Films of Utah, Inc., provided the management personnel that directed the sales and telemarketing activities of Defendants Feature Films for Families, Inc., and Corporations for Character, L.C. The Corporate Defendants shared personnel and resources, and were bound together by common ownership through trusts that Defendant Forrest Baker, III, managed as trustee.

8.

Defendant Baker exercised control over the Corporate Defendants, was aware of theillegal telemarketing calls made by Defendants Feature Films for Families, Inc., and

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Corporations for Character, LC, and materially participated in shaping and approving these telemarketing campaigns. 9.

Injunctive relief to prevent further violations of the law is warranted by Defendants’ past conduct, ongoing telemarketing activity during the pendency of this action, and the risk that Defendants will continue or resume their illegal practices.

10.

Entry of this Permanent Injunction (“Order”) is in the public interest. DEFINITIONS

For the purpose of this Order, the following definitions shall apply: 1.

“Abandoning outbound telephone call” means failing to connect outbound telephone call to a sales representative within two (2) seconds of the person's completed greeting.

2.

“Caller identification service” means a service that allows a telephone subscriber to have the telephone number and, where available, name of the calling party transmitted contemporaneously with the telephone call, and displayed on a device in or connected to the subscriber’s telephone.

3.

“Clear(ly) and conspicuous(ly)” means that a required disclosure is difficult to miss (i.e., easily noticeable) and easily understandable by ordinary consumers, including in all of the following ways: a. An audible disclosure, including by telephone or streaming video, must be delivered in a volume, speed, and cadence sufficient for ordinary consumers to easily hear and understand it. b. The disclosure must use diction and syntax understandable to ordinary consumers and must appear in each language in which the representation that requires the disclosure appears.

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c. The disclosure must not be contradicted or mitigated by, or inconsistent with, anything else in the communication. d. In any communication using an interactive electronic medium, such as the Internet or software, the disclosure must be unavoidable. e. A visual disclosure, by its size, contrast, location, the length of time it appears, and other characteristics, must stand out from any accompanying text or other visual elements so that it is easily noticed, read, and understood. 4.

“Corporate Defendants” means Defendants Feature Films for Families, Inc., Corporations for Character, L.C., Family Films of Utah, Inc., and their successors and assigns.

5.

“Customer” means any person who is or may be required to pay for goods or services offered through telemarketing.

6.

“Defendants” means the Corporate Defendants and Forrest Sandusky Baker III, individually, collectively, or in any combination.

7.

“Donor” means any person solicited to make a charitable contribution.

8.

“Established business relationship” means a relationship between the seller and a person based on: (a) the person’s purchase, rental, or lease of the seller’s goods or services or a financial transaction between the person and seller, within the eighteen (18) months immediately preceding the date of the telemarketing call; or (b) the person’s inquiry or application regarding a product or service offered by the seller, within the three (3) months immediately preceding the date of a telemarketing call.

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9.

“National Do Not Call Registry” means the National Do Not Call Registry, which is the “Do Not Call” registry the Federal Trade Commission (“Commission”) maintains pursuant to 16 C.F.R. § 310.4(b)(1)(iii)(B).

10.

“Outbound telephone call” means a telephone call initiated by a telemarketer to induce the purchase of goods or services or to solicit a charitable contribution.

11.

“Person” means any individual, group, unincorporated association, limited or general partnership, corporation, or other business entity.

12.

“Seller” means any person who, in connection with a telemarketing transaction, provides, offers to provide, or arranges for others to provide goods or services to the customer in exchange for consideration whether or not such person is under the jurisdiction of the Commission.

13.

“Telemarketer” means any person who, in connection with telemarketing, initiates or receives telephone calls to or from a customer or donor.

14.

“Telemarketing” means a plan, program, or campaign which is conducted to induce a charitable contribution, by use of one or more telephones and which involves more than one interstate telephone call. The term does not include the solicitation of sales through the mailing of a catalog which: contains a written description or illustration of the goods or services offered for sale; includes the business address of the seller; includes multiple pages of written material or illustrations; and has been issued not less frequently than once a year, when the person making the solicitation does not solicit customers by telephone but only receives calls initiated by customers in response to the catalog and during those calls takes orders only without further solicitation. For purposes of the previous sentence, the term “further solicitation” does not include providing the customer

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with information about, or attempting to sell, any other item included in the same catalog which prompted the customer’s call or in a substantially similar catalog. 15.

“Telemarketing Sales Rule” or “Rule” means the Federal Trade Commission (FTC) Rule entitled “Telemarketing Sales Rule,” 16 C.F.R. § 310, attached hereto as Appendix A or as it may be hereafter amended.

16.

“Upsell” means to solicit the purchase of goods or services following an initial transaction during a single telephone call regardless of whether the upsell solicitation is made on behalf of a seller different from the seller in the initial transaction or on behalf of the same seller as in the initial transaction. ORDER I.

PROHIBITION ON DECEPTIVE PRACTICES

IT IS ORDERED that, in connection with advertising, promotion, offering for sale, or sale of entertainment products or services, audio recordings, or video recordings, Defendants and Defendants’ officers, agents, servants, employees, and attorneys, and all other persons in active concert or participation with any of them who receive actual notice of this Order, whether acting directly or through any corporation, subsidiary, division, or other device, are permanently restrained and ened from: A. Making, or assisting others to make, expressly or by implication, any representation or omission of material fact that is false or misleading, including but not limited to, any false or misleading representation: 1. That a prospective customer or donor has been ed just for the purpose of conducting a survey, poll, or other effort to request recommendations or opinions;

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2. That proceeds from sales will be used to fund an organization, program, or activity; or 3. That all or most of the proceeds from sales will be used to fund an organization, program, or activity; B. Failing to disclose clearly and conspicuously at the beginning of any telephone call or other communication with a potential customer or donor, that the purpose of the communication is to solicit the sale of goods or services when the individual making the call plans to: (i) solicit the sale of goods or services, or arrange for a subsequent telephone call or other communication that may involve such solicitation; (ii) offer a prospective customer a credit, discount, guarantee, or other inducement to purchase; or (iii) provide information about goods or services that are available for purchase; C. Failing to disclose clearly and conspicuously at the beginning of a telephone call or other communication conducted as part of a plan, program, or campaign to solicit persons who accept complimentary merchandise or participate in a survey or poll, that individuals who accept complimentary merchandise or participate in the survey or poll may be solicited to purchase goods or services. II.

COMPLIANCE WITH THE TELEMARKETING SALES RULE

IT IS FURTHER ORDERED that, in connection with telemarketing, Defendants and Defendants’ officers, agents, servants, employees, and attorneys, and all other persons in active concert or participation with any of them who receive actual notice of this Order, whether acting directly or through any corporation, subsidiary, division, or other device, are permanently restrained and ened from:

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A. Making a false or misleading statement to induce any person to pay for goods or services, including misrepresenting the manner in which all or part of the proceeds of a sale will be used; B. Initiating any outbound telephone call to a person when that person has previously stated that he or she does not wish to receive an outbound telephone call made by or on behalf of the seller whose goods or services are being offered or made on behalf of the charitable organization for which a charitable contribution is being solicited, unless Defendants can demonstrate that: 1. the call was not the result of failure to obtain any information necessary to comply with the persons’ previous request he or she not receive further outbound telephone calls on behalf of the seller or charitable organization; and 2. the person or entity that initiated the call took the steps set forth in 16 C.F.R. § 310.4(b)(3)(i) to (v) as part of its routine business practice, and the call was the result of error that occurred despite these steps; C. Initiating any outbound telephone call as part of a plan, program, or campaign to induce the purchase of goods or services to any person at a telephone number on the National Do Not Call Registry unless Defendants can demonstrate that: 1. the seller has obtained the express agreement, in writing, of such person to place calls to that person. Such written agreement shall clearly evidence such person's authorization that calls made by or on behalf of a specific party may be placed to that person, and shall include the telephone number to which the calls may be placed and the signature of that person; or

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2. the seller has an established business relationship with such person, and that person has not previously stated that he or she does not wish to receive an outbound telephone call made by or on behalf of either the seller whose goods or services are being offered. Proof of an established business relationship requires evidence that the person either (i) purchased, rented, or leased the seller’s goods or services or participated in a financial transaction between the consumer and seller, within the eighteen (18) months immediately preceding the date of a telemarketing call; or (ii) inquired or made an application regarding a product or service offered by the seller, within the three (3) months immediately preceding the date of a telemarketing call; or 3. the person or entity that initiated the call took the steps set forth in 16 C.F.R. § 310.4(b)(3)(i) to (v) as part of its routine business practice, and the call was the result of error that occurred despite these steps. D. Failing to disclose truthfully, promptly, and in a clear and conspicuous manner the following when making an outbound telephone call or upsell to induce the purchase of goods or services or to induce a charitable contribution: (1) the identity of the seller or charitable organization; (2) that the purpose of the call is to sell goods or services or to solicit a contribution; and (3) if the call is to induce a purchase, the nature of the goods or services; and E. Initiating a outbound telephone call without making arrangements to transmit or cause to be transmitted to any caller identification service in use by a recipient of the call: (i) the telephone number of the telemarketer making the call and the name of the telemarketer; (ii) the name and telephone number for customer service of the seller on

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behalf of which a telemarketing call is placed; or (iii) the name and donor service number of the charitable organization on behalf of which a telemarketing call is placed. F. Abandoning, or causing others to abandon, any outbound telephone call to a person by failing to connect the call to a live operator within two seconds of the person’s completed greeting, unless Defendants prove that the following four conditions are met: 1. The person initiating the calls employ technology that ensures abandonment of no more than three percent of all calls answered by a person, measured over the duration of a single calling campaign, if less than thirty days, or separately over each successive 30-day period or portion thereof that the campaign continues; 2. The technology employed allows the telephone to ring for at least fifteen seconds or four rings before disconnecting an unanswered call; 3. Whenever a live operator is not available to speak with the person answering the call within two seconds after the person’s completed greeting, the person initiating the call promptly plays a recorded message that states the name and telephone number of the seller or charitable organization on whose behalf the call was placed; 4. Defendants retain records, in accordance with 16 C.F.R. § 310.5(b)-(d), establishing compliance with the preceding three conditions. G. Violating the Telemarketing Sales Rule attached hereto as Appendix A.

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III.

TRAINING, MONITORING, AND REVIEWS OF ACCURACY

IT IS FURTHER ORDERED that Defendants and Defendants’ officers, agents, servants, employees, and attorneys, and all other persons in active concert or participation with any of them who receive actual notice of this Order, in connection with telemarketing, are permanently restrained and ened from failing to: A. Take steps sufficient to train and monitor each of their solicitors so that the solicitor complies with the requirements of the Sections of this Order titled “PROHIBITION ON DECEPTIVE PRACTICES” and “COMPLIANCE WITH THE TELEMARKETING SALES RULE.” Such steps shall include, but not be limited to, daily random monitoring of solicitation calls made by each solicitor; C. Investigate promptly and fully any complaint or inquiry received about a solicitation made by any employee or independent contractor and to create and maintain a written record of the investigation and any results; D. Take corrective action with respect to any employee or independent contractor that is not complying with this Order, which may include training, disciplining, or terminating such employee or independent contractor; E. Review the accuracy of each script or recording that is used or is proposed for use in ing customers, and refrain from using any script or recording that misrepresents, expressly or by implication, the programs, activities, services, if any, that will be ed by payments from customers. IV.

MONETARY RELIEF

IT IS FURTHER ORDERED that:

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Defendants are ordered to disgorge to the United States Four Hundred Eighty-Seven Thousand, Seven Hundred Thirty-Five Dollars ($487,735), as equitable monetary relief, and judgment is hereby entered against the Defendants, tly and severally, in this amount. V.

COMPLIANCE REPORTING

IT IS FURTHER ORDERED that Defendants make timely submissions to the Commission: A. One year after entry of this Order, each Defendant must submit a compliance report, sworn under penalty of perjury: 1. Each Defendant must: (a) identify the primary physical, postal, and email address and telephone number, as designated points of , which representatives of the Commission and Plaintiff may use to communicate with Defendant; (b) identify all of that Defendant’s businesses by all of their names, telephone numbers, and physical, postal, email, and Internet addresses; (c) describe the activities of each business, including the goods and services offered, the means of advertising, marketing, and sales, and the involvement of any other Defendant (which Defendant Forrest Sandusky Baker III must describe if he knows or should know due to his own involvement); (d) describe in detail whether and how that Defendant is in compliance with each Section of this Order; and (e) provide a copy of each Order Acknowledgment obtained pursuant to this Order, unless previously submitted to the Commission. 2. Additionally, each Individual Defendant must: (a) identify all telephone numbers and all physical, postal, email and Internet addresses, including all residences; (b) identify all business activities, including any business for which he performs

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services whether as an employee or otherwise and any entity in which such Defendant has any ownership interest; and (c) describe in detail the involvement in each such business, including title, role, responsibilities, participation, authority, control, and any ownership. B. For 20 years after entry of this Order, each Defendant must submit a compliance notice, sworn under penalty of perjury, within 14 days of any change in the following: 1. Each Defendant must report any change in: (a) any designated point of ; or (b) the structure of any Corporate Defendant or any entity that Defendant has any ownership interest in or controls directly or indirectly that may affect compliance obligations arising under this Order, including: creation, merger, sale, or dissolution of the entity or any subsidiary, parent, or that engages in any acts or practices subject to this Order. 2. Additionally, Defendant Forrest Sandusky Baker III must report any change in: (a) name, including aliases or fictitious name, or residence address; or (b) title or role in any business activity, including any business for which such Defendant performs services whether as an employee or otherwise and any entity in which such Defendant has any ownership interest, and identify the name, physical address, and any Internet address of the business or entity. C. Each Defendant must submit to the Commission notice of the filing of any bankruptcy petition, insolvency proceeding, or similar proceeding by or against such Defendant within 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 28 U.S.C. § 1746, such as by

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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. E. Unless otherwise directed by a Commission representative in writing, all submissions to the Commission pursuant to this Order must be emailed to [email protected] 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: United States v. Corporations for Character. VI.

RECORDKEEPING

IT IS FURTHER ORDERED that, for a period of twenty (20) years from the date of entry of this Order, Corporate Defendants and Defendant Forrest Sandusky Baker III, for any business engaged in telemarketing activities for which he is majority owner or directly or indirectly controls, must create and retain the following records: A. ing records that showing the revenues from all goods or services sold, contributions collected, and the disbursement of revenues and contributions; B. personnel records showing, for each person providing services, whether as an employee or otherwise, that person’s: name, address, telephone numbers; job title or position; dates of service; and (if applicable) the reason for the termination; C. records of all complaints regarding telemarketing activities, whether received directly or indirectly, such as through a third party, and any responses to those complaints or requests; D. copies of all scripts and recordings used in making calls;

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E. training materials, ments or other marketing materials; F. records of investigations of complaints and corrective action, and any financial statements, budgets or other documents examined or created to comply with the requirements of the Section of this Order titled “TRAINING, MONITORING, AND REVIEWS OF ACCURACY” and G. all records and documents necessary to demonstrate full compliance with each provision of this Order, including but not limited to, copies of acknowledgments of receipt of this Order required by the Section titled “ORDER ACKNOWLEDGMENTS” and all reports submitted to the FTC pursuant to the Section titled “COMPLIANCE REPORTING.” VII.

COMPLIANCE MONITORING

IT IS FURTHER ORDERED that, for the purpose of monitoring Defendants’ compliance with this Order: A. Within 14 days of receipt of written notice from a representative of the Commission or the Plaintiff, each Defendants must: submit additional written 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 and Plaintiff are 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. The Commission and Plaintiff may use all other lawful means, including posing, through its representatives as consumers, suppliers, or other individuals or entities, to Defendants or any individual or entity d with Defendants, without the

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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. VIII. ORDER ACKNOWLEDGEMENTS IT IS FURTHER ORDERED that Defendants distribute and obtain acknowledgements of receipt of this Order: A. Each Defendant, within seven (7) days of entry of this Order, must submit to the Commission a truthful sworn statement acknowledging receipt of this Order under penalty of perjury. B. For five (5) years after entry of this Order, each Corporate Defendant and Defendant Forrest Sandusky Baker III for any business that he, individually or collectively with any Corporate Defendant or Defendants, is the majority owner or controls directly or indirectly, must deliver a copy of this Order to: (1) all principals, officers, directors, and managers; (2) all of its employees, agents, and representatives who participate in conduct related to telemarketing or the sale of goods or services; and (3) any business entity resulting from any change in structure set forth in the Section titled “COMPLIANCE REPORTING.” For current personnel, delivery must occur within five (5) days of entry of this Order. For all others, delivery must occur before they assume their responsibilities. C. From each individual or entity to which a Defendant delivered a copy of this Order, that Defendant must obtain a signed and dated statement acknowledging receipt of the Order.

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IX.

RETENTION OF JURISDICTION

IT IS FURTHER ORDERED that this Court shall retain jurisdiction of this matter for purposes of construction, modification and enforcement of this Order. SO ORDERED this _____ day of _____________, 2016. BY THE COURT:

_________________________ ROBERT J. SHELBY United States District Judge

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