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"Surplus Goods" Scam Promoters Settle with Feds

February 23, 2007

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Two individuals have agreed to settle Federal Trade Commission charges for their roles in a fraudulent business opportunity scheme targeted during a crackdown on violations of the FTC's Franchise Rule.

The rule requires that prospective franchisees must be given a full disclosure document about business opportunities they are offered, and Section 5(a) of the FTC Act, which prohibits unfair and deceptive acts or practices affecting commerce.

Jennifer Lynn Klotthor and her sister, Jaime L. Klotthor, a/k/a Jaime Valentine, were involved with the deceptive practices of World Traders Association Inc., a Nevada corporation, and several other corporate and individual defendants.

According to a complaint filed by the FTC in January 2005, the defendants made false and deceptive promises to franchise purchasers who paid as much as $8,000 in return for access to overstocked merchandise, expert training in the surplus goods industry, and substantial income.

Under stipulated judgments and orders for permanent injunction proposed by the FTC, the defendants are permanently prohibited from being involved in any aspect of commerce in business ventures. Jaime Klotthor, however, may work for such a company, provided that her duties do not involve accounts connected with these ventures, and provided that the company is not engaged in commerce in discounted or surplus goods.

The defendants also are permanently prohibited from making misrepresentations in connection with the sale of any goods or services.

Judgments representing the amounts of consumer injury attributed to the two defendants -- more than $12 million for Jennifer Klotthor and more than $1.8 million for Jaime Klotthor -- will be suspended due to their inability to pay.

The judgments will be imposed if they are found to have misrepresented their financial condition. The proposed orders also provide that if a judgment is entered against any of the other defendants, these defendants and the others will share joint and several liability.

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