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SALT LAKE CITY — A federal lawsuit filed against several Utahns and Utah-based companies alleges that they took part in a scam that advertised the tools to successful online businesses but failed to deliver, leaving their costumers as victims in debt.
The Federal Trade Commission filed the lawsuit in U.S. District Court earlier this month under the FTC Act and Telemarketing and Consumer Fraud and Abuse Prevention Act. Fourteen companies — 12 of them based in Utah — and nine individuals are named in the suit and accused of misrepresenting the amount people would earn and misrepresenting characteristics of a business coaching program and add-on services.
According to the lawsuit, the individuals and their companies offer the training and materials to develop successful, home-based online businesses. They use "deceptive tactics" to convince consumers to pay as much as $12,000, the FTC alleges.
"Consumers make these purchases based on defendants’ representations that they will end up with an online business generating substantial revenue," the lawsuit states. "Yet, despite defendants’ assurances, most consumers who purchase defendants’ services and related goods do not end up with a functional online business, earn little or no money, and end up heavily in debt."
The alleged scheme apparently has three phases, the first of which involves contacting people through email and various websites to tell them about a fairly affordable work-from-home kit.
Then, telemarketers call the individuals and urge them to buy expensive coaching services that will ensure success.
Finally, the telemarketers push additional business services such as website design, website development, and accounting and tax filing services, the lawsuit states. The total costs range from $3,000 and $12,000, and consumers are urged to charge the cost on their credit cards with the assurance they will be able to pay them off quickly once the business is launched.
"In truth and in fact, consumers rarely, if ever, end up with a profitable online business, and defendants’ scheme continues either until consumers realize that they are victims of a scam or until they reach the limits on their credit cards," the lawsuit states.
The kits and services are apparently advertised through bogus testimonials that purport to be from people making between $2,000 and $5,000 each month using the kit and additional coaching services, according to the lawsuit. In reality, stock photos are posted with the testimonials urging those who bought the kit to call a "startup specialist."
Many of the training materials include "commonplace information" on things that can be found for free on the Internet, such as how to set up a PayPal or eBay account. Further, the lawsuit states that the offered add-on services "does not help consumers recoup their original investments, but instead puts them deeper in debt."
The FTC argues the activity amounts to misrepresentations regarding earnings, misrepresenting characteristics of business coaching programs and add-on services, misrepresentations of material aspects of an investment opportunity in connection with telemarketing and misrepresentations regarding the performance, efficacy, nature or essential characteristics of good and services. It is asking for injunctive relief that would prevent those named from continuing the alleged scheme and that the court award monetary relief to consumers as deemed necessary.
The lawsuit contends the corporate defendants make up a "common enterprise" and that the individual defendants either formulated, controlled or participated in the acts of the corporate defendants.
