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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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