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FTC Halts "Wal-Mart Shopping Spree" Scam

March 1, 2006
The Federal Trade Commission has won a temporary restraining order against a group of defendants running what has become known as the "Wal-Mart Shopping Spree" scam.

The order prohibits the defendants from making misrepresentations to consumers and from engaging in deceptive or abusive telemarketing practices, freezes the defendants' assets, and appoints a temporary receiver over the corporate defendants.

This is the first time, since establishing the National Do Not Call Registry, that the Commission has sued to enforce consumers' do-not-call rights, without also alleging the telemarketer has violated the Registry.

Regardless of whether consumers have placed their telephone numbers on the National Do Not Call Registry, they have the right to tell specific companies not to call them again.

The FTC's complaint, filed in federal district court in Los Angeles, alleges that the defendants cold-call consumers falsely promising them valuable incentives such as gift cards, "shopping sprees," movie passes, and gas vouchers, purportedly worth $200 to $500, for a nominal shipping and handling fee, in order to induce the consumers to disclose their bank account information.

Once the defendants have this information, they engage in deceptive and abusive telemarketing practices to coerce consumers to pay additional charges for memberships in purported discount buying programs, according to the complaint.

In many cases, the FTC contends the defendants harass consumers by calling them repeatedly and threatening them until they relent and give purported authorization for the defendants to debit their accounts.

The defendants also allegedly do not allow consumers to cancel the charges until they complete a recorded authorization process. In many cases, consumers learn about these additional debits for the first time when they are notified by their banks that the withdrawals have been made.

The FTC contends that Defendants operated this scam through a series of corporate shells in order to prolong the life of their scam despite large numbers of consumer complaints and law enforcement inquiries.

The Charges

According to the Commission, the defendants' conduct violates the FTC Act by making material misrepresentations to consumers, including but not limited to misrepresenting that: consumers will receive the valuable incentive upon payment of a nominal shipping and handling charge, the defendants are affiliated with the government or major retailers, and consumers may easily obtain refunds and cancel their memberships in the defendants' programs.

The complaint also contends that the defendants violated the Telemarketing Sales Rule, by causing consumers' billing information to be submitted for payment without their express informed consent, and engaging in abusive telemarketing tactics to obtain "consent" from consumers, including threatening and harassing consumers and repeatedly calling consumers, even when they asked the defendants to stop calling by making a company-specific do-not-call request.

The complaint was filed against:

1) Universal Premium Services, Inc., also known as (aka) Premier Benefits, Inc., of Orange, California;
2) Consumer Reward Network, Inc., of Canoga Park, California;
3) Star Communications, LLC, of Los Angeles, California;
4) Membership Services Direct, Inc., aka Continuity Partners, Inc., of Las Vegas, Nevada;
5) Connect2USA, Inc., of Las Vegas, Nevada; and
6) Brian K. MacGregor; Harijinder Sidhu; Joseph F. Larosa, Jr.; Pranot Sangprasit; William Thomas Heichert; Michael Howard Cushing; Paul P. Tosi; and Manh D. Cao, individually.

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