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Court Bars Bogus Ink Cartridge Business
April 2008 -The operators of a fraudulent ink cartridge display rack “opportunity” have been found guilty of several violations by a U.S. District Court and ordered to repay nearly $9 million in reparations to consumers.At the request of the Federal Trade Commission, the U.S. District Court for the Northern District of Georgia issued an order finding that Holiday Enterprises Inc. violated the FTC Act and the Commission’s Franchise Rule and Business Opportunity Rule. The court order against Holiday Enterprises and its principals Richard J. Morrell and Richard J. Cascario permanently bars them from similar violations in the future and requires them to pay $8.98 million.Consumers invested a minimum of $7,950 for three racks, and up to $55,950 for 20 racks, to take part in the business opportunity.As reported in the March 2007 issue of Recharger Magazine, the FTC charged that Holiday Ink Inc. sold ink cartridge display racks by misrepresenting that purchasers would earn a substantial income, misrepresenting the locations available for the racks, and using shills to reinforce those false claims. The FTC also charged that the defendants did not provide complete and accurate disclosure documents, did not provide an earnings claim disclosure, and did not have a reasonable basis for their earnings claims. Consumers invested a minimum of $7,950 for three racks, and up to $55,950 for 20 racks, to take part in the business opportunity.
The summary judgment against the defendants states that the Commission provided ample proof that Holiday Ink violated the FTC Act by “routinely and knowingly” making material misrepresentations to consumers in connection with their sale of business opportunities. These misrepresentations included the assertion that consumers could earn substantial income by buying one of the defendant’s business opportunities and that buyers would receive ink cartridge display racks and cartridges through which they could derive “substantial income and guaranteed profits.”
The court found the defendants had no substantiation for such claims, and also misrepresented that they would provide buyers with “high-traffic, high-volume” locations in which to place their display racks and that they had “references” who were successful and profitable distributors. In fact, the “references” were nothing more than employees of the defendant or unsuccessful distributors. The court also found that the defendants violated the FTC’s Franchise Rule in a variety of ways, including failing to make required disclosures about the company and its principals, failing to disclose information on litigation in which they have been involved since 2001, and failing to provide potential buyers with the names of previous buyers of their business opportunity. The court also found Morrell and Cascario individually liable for their knowing participation in the deceptive acts of the corporate defendant, and relief defendant NMC Properties Inc., liable for its ill-gotten gains.
Through the summary judgment, the court permanently barred Morrell from promoting, advertising, marketing, offering to sell, or selling any franchise, business opportunity, or business venture. The judgment permanently barred both individual defendants from making, or assisting others in making any statement or representation of material fact in connection with the sale of any venture, franchise, business opportunity, or other product or service. The court also barred the defendants from violating the Franchise Rule and the Business Opportunity Rule in the future and from distributing their customer information.
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