For Release: October 1,
2002 Consumers Duped by
Telemarketers Claiming To Provide Identity Theft Protection
Defendants Allegedly Pitched
Worthless Credit Card "Protection"; Laundered Credit Card Purchases for Products
Sold by Others
Two Canadian citizens and the five corporations they operated
will pay $436,000 to settle Federal Trade Commission charges that they tricked consumers
into paying as much as $299 for one of two worthless credit card "protection"
packages and laundered credit card purchases for other sellers for products including
lottery tickets, British bonds, and consumer benefits packages.
"This case represents another step in the
Commissions crackdown on sellers of bogus credit card protection services. Rather
than protecting consumers, these scams victimize them," said J. Howard Beales, III,
Director of the FTCs Bureau of Consumer Protection. "In this case, the
defendants not only sold worthless credit card protection, but also laundered credit card
receipts for other telemarketers through offshore companies and books."
The five corporate defendants named in the complaint are: 1)
Farpoint Services International, Ltd.; 2) Garrison Corporation, Inc.; 3) American Card
Services, S.A.; 4) Consolidated Group of Companies, LLC; and 5) Hyperion, LLC. Farpoint is
a British corporation, incorporated in the name of defendant Roberta Galway. It allegedly
contracted with telemarketers to sell the Garrison Assurance and American Card Registry
credit card loss- protection packages, and arranged for credit card processing for
telemarketers of products other than those that the defendants sold. The two individual
defendants named in the complaint, Philip Arcand and Galway, allegedly are principles of
the five corporate defendants.
Arcand created the Garrison and American Card Registry
products and scripts, processed transactions for third parties, and kept property in
Galways name. Both Arcand and Galway lived in Las Vegas for at least six months of
the year while they operated the alleged scam. They currently are incarcerated in Los
Angeles awaiting trial on charges of mail fraud and committing fraud against the elderly.
Garrison Corporation, Inc., incorporated in the British
Virgin Islands, allegedly was set up to act as a conduit, through its account at the Bank
of Bermuda, for funds processed through the defendants merchant account at Compass
Bank. Garrison currently is inactive, and Compass Bank has frozen all of its assets.
Hyperion LLC was an assumed business name that was used to obtain a merchant account at
Compass.
American Card Services, S.A. (ACS) was incorporated in
Managua, Nicaragua, to facilitate offshore banking in that country. The company contracted
with telemarketers to sell the credit card loss-protection in the name of Garrison
Assurance and American Card Registry. Like Garrison, ACS is no longer in business.
Consolidated Group of Companies is a Nevada limited liability
corporation that Arcand owns. Originally incorporated with the name Polo Holdings LLC, the
defendants changed its name to CGC in March 2001. The company is a shell with no assets
and never was engaged in any business. Arcand used the company (Polo Holdings) to launder
credit card charges for several telemarketing companies.
According to the FTC, the defendants created and deceptively
marketed two credit card loss protection programs the Garrison Assurance Credit
Card Registry and the American Card Registry in violation of the FTC Act and the
Telemarketing Sales Rule. The defendants telemarketers used sales scripts that
allegedly employed scare tactics, telling consumers that their credit card numbers were
accessible over the Internet and that unless they purchased the "protection,"
they would be liable for unauthorized charges when criminals used their cards to make
purchases. The scripts implied that the defendants protection would cover all
potential losses, and that consumers would not have to pay for the unauthorized charges.
The cost of these "services" was between $279 and $299. In addition, the FTC
alleged that the defendants used merchant accounts established in their names to process
credit card transactions for unrelated companies.
Terms of the Stipulated Order
The stipulated final order bans the defendants from
telemarketing credit card loss-protection packages and from credit card laundering. The
order also bars them from making misrepresentations similar to those alleged in the
complaint and from disclosing their consumer lists to anyone besides the FTC or other
enforcement agencies. The defendants received approximately $3.3 million through their
deceptive practices. The order imposes a judgment for that amount, with all but $436,000
suspended due to the defendants inability to pay. If the defendants are found to
have misrepresented their assets, the full amount will be due immediately.
The Commission vote to accept the proposed settlement of the
court action was 5-0. The court approved the settlement, which was filed in the U.S.
District Court for the Western District of Washington at Seattle, on August 30, 2002. |