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Current Events in June 1999

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    Man Sues Gym

    Man Sues Gym in Wife's Death

    NEW YORK, June 29, 1999 -- A Long Island man has filed a $320 million lawsuit against a Manhattan health club, claiming it "recklessly" prescribed nutritional supplements that caused the death of his 37-year-old wife, who had joined the club to lose weight.

    Anne Marie Capati, a fashion designer, suffered a stroke and died Oct. 1, 1998 while working out at Crunch Fitness, 404 Lafayette St.

    Her husband, Donald Hanson, of Huntington, said in the suit that his wife had informed gym personnel that she was taking prescription medication for high blood pressure. 

    Despite that, the suit charges, her personal trainer "gave her improper and dangerous instrucitons for working out and taking various drugs and failed to warn her about the risks of these drugs."

    Among the supplements recommended in a hand-written list supplied by her trainer was ephedra, a stimulant that the Food and Drug Administration is studying in at least 38 deaths across the country, the suit alleges.

    The suit says that Ms. Capati took the supplements for several months, including the morning of Oct. 1.  Later that day, while working out at the gym, she complained of feeling ill.  A few minutes later, she suffered a hypertensive stroke.  She died later that day.  Ms. Capati was the mother of two young children.

    The club denied the charges and said its personal trainers are prohibited from recommending or prescribing nutritional supplements.

    A Long Island man has filed a $320 million lawsuit against a Manhattan health club, claiming it "recklessly" prescribed nutritional supplements that caused...
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    McDonald's to Pay $4 Million Damage Settlement

    WASHINGTON, June 29, 1999 -- McDonald's Corp.has agreed to pay the government $4 million in damages for failing to inform the Consumer Product Ssafety Commission of playground injuries at some of its restaurants.

    The settlement resolves a dispute arising from enforcement of a 1995 Playground Equipment Reporting Agreement between McDonald's and the government. The cooperative agreement announced today also establishes important new playground facility reporting and safety guidelines.

    The injuries involve the "Big Mac Climber," a metal platform resembling a hamburger, that is no longer in any McDonald's playgrounds.

    According to CPSC, from the 1970s through the 1980s, more than 400 children were injured on Big Mac Climbers, mostly in falls, including nearly 20 who suffered concussions or skull fractures and 80 who suffered broken bones. Injuries declined significantly in the 1990s as McDonald's began removing the climbers. All the climbers have now been removed and scrapped.

    According to the CPSC, today's settlement marks the second time that McDonald's has failed to report dangerous playground equipment to CPSC.

    The first violation involved numerous injuries, including broken bones, suffered by children who played on "Tug-N-Turn" merry-go-round rides, another old piece of equipment that no longer exists at McDonald's.

    In 1995, McDonald's settled that case by agreeing to develop, execute and finance a $5 million children's safety campaign with CPSC. Additionally, McDonald's agreed to report other dangerous playground equipment to CPSC, and pay up to $5 million if it failed to do so.

    The new agreement resolves the issues based on McDonald's failure to inform CPSC about risks associated with the Big Mac Climber. In an effort to resolve the dispute amicably, to clarify McDonald's reporting duties so that similar disputes do not arise in the future, and to avoid the cost of taking the dispute to court, McDonald's has agreed to the $4 million settlement announced today.

    McDonald's maintains that it has fully complied with the letter and spirit of the reporting requirements of the 1995 Agreement.

    "McDonald's is pleased to settle old issues about equipment that is no longer in our system. We've resolved our dispute over the Big Mac Climber and we're moving on cooperatively," said Joe Beckwith, McDonald's Corporation Senior Vice President and Corporate Safety Officer. "We regard this settlement as an investment in safety because it establishes important new safety guidelines. We want to add that this resolution has nothing to do with the safety of our current play facilities, nor with making them safe -- they already are."

    CPSC Chairman Ann Brown stated, "Companies that make commitments to CPSC, as McDonald's did in 1995, must keep them. Because McDonald's received a second chance in 1995, we were particularly disturbed that it failed to adhere to the agreement by not telling CPSC about another unsafe piece of playground equipment. The terms of this settlement show that CPSC takes playground safety very seriously and that we will not tolerate the failure of any company to report dangerous products to us. This issue has now been resolved and I'm pleased that McDonald's is working with us to keep kids safer."

    David W. Ogden, Acting Assistant Attorney General of the Civil Division, commented, "I commend the CPSC and McDonald's for resolving their differences without additional litigation. The Playground Equipment Reporting Agreement negotiated in 1995 between McDonald's, the CPSC and the Justice Department, and supplemented today, established an excellent framework for protecting children who play at McDonald's playgrounds."

    McDonalds Pays $4 Million for Not Reporting Playground Injuries ...
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    Snugli Infant Carriers Rcalled

    WASHINGTON, June 24, 1999 -- Following 13 reports of accidents, Evenflo Company Inc., of Vandalia, Ohio, and Hufco-Delaware Inc., of Miamisburg, Ohio, are recalling about 327,000 model 075 and 080 Snugli Front & Back PackTM soft infant carriers. Small infants can shift to one side, slip through the leg openings of these carriers and fall. Infants under 2 months of age are at greatest risk.

    The Consumer Product Safety Commission (CPSC) said it had reports of 13 infants slipping through the leg openings of these carriers. One infant reportedly suffered a fractured skull and two received bruises in falls to the ground from the carrier.

    These soft infant carriers have model numbers beginning with 075 and 080. The model number is on a tag inside the carrier which reads, "SOFT CARRIER/" and the model number. The brand name, "Snugli", is located on the outside of the carrier. The carriers are in color combinations of royal blue with magenta trim, teal with navy blue trim, and navy blue with purple trim. These carriers were designed for use as both a front carrier and a back pack carrier, and feature a unique vertical strap for adjustment of the seat height.

    Retail stores nationwide sold these carriers between January 1996 and May 1999 for about $40.

    Consumers should immediately stop using these carriers and call Evenflo at (800) 398-8636 anytime to receive instructions on how to exchange their carrier for a free, new carrier with smaller leg openings.

    Only the Snugli brand carriers that feature this unique vertical strap for adjustment of the seat height (models 075 and 080) are part of this recall. Carriers currently being sold under the Snugli brand name are not included in this recall

    Snugli Baby Pack Recalled...
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      FTC Warns of Internet Health Scams

      WASHINGTON, June 24, 1999 -- Magnetic therapy, shark cartilage AIDS treatments and arthritis cures made from beef tallow are among the health scams targeted in a Federal Trade Commission crackdown on Internet health scams.

      So far, the FTC says it has identified about 800 Internet sites that contain questionable health information. 

      During its periodic "sweeps," the agency surfs the Web, identifies offending sites and notifies them by e-mail that they are potentially in violation of one or more Federal statutes.

      "We want Americans to continue to use the Internet for truthful information, but we also want them to have their antennas up to be careful about those claims that are exaggered," said Jodie Bernstein, director of the FTC's Bureau of Consumer Protection.

      She said that more than 22 million U.S. adults have searched for health information online as of December 1998.  Twenty-nine percent of Americans have used the Internet for health information, she said.

      FTC Warns of Internet Health Scams...
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      FTC Cracks Down on Small Business Scams

      Internet Cramming Is Costing Companies Millions

      WASHINGTON, June 17, 1999 -- In a crackdown on operations that targeted hundreds of thousands of small businesses, "cramming" charges onto their telephone bills for services that were supposed to be free, the Federal Trade Commission has halted the illegal practices of Internet web site "service" providers who have caused millions of dollars in losses in the last 18 months, alone.

      "Internet cramming has focused on small businesses like a laser," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection.

      "Thousands of small businesses have been ambushed by Internet crammers and it has cost that community millions of dollars in less than two years. Whether consumers signed up for this trial offer or not, they got billed for a service that was supposed to be free."

      "Most were billed through charges that were crammed onto their phone bills -- charges that many found very hard to find. These operations rely on the fact that small businesses, in particular, may not have the rigorous ordering, accounting and bookkeeping procedures that larger businesses have put in place," Bernstein said.

      According to the FTC, the defendants hired telemarketers who targeted small businesses touting the business benefits of having an Internet presence and offering to design and host an Internet web site for the business for a "free" 30-day trial period.

      Some small businesses were told they were under "no obligation" after the trial period; but that they'd be billed at the end of trial period unless they canceled. Others were told that no charges would be incurred unless the business ordered the web site on a permanent basis and approved future charges.

      Other businesses refused to accept the free offer, but agreed to receive an information package. But small businesses were still charged for the "free" trial. Many were billed repeatedly, month after month, even those who had not agreed to accept the trial offer and those who had canceled.

      Two defendants charged a set-up fee for the "free" trial, either failing to disclose the fee or falsely claiming that the fee would not be charged to consumers who canceled during the 30-day trial period, the agency charged. Some of the small businesses were told they'd receive a "welcome package" that would include a printed copy of the web site, instructions for accessing the web site and a phone number they could call to make changes to the site or to cancel the service. They were told the 30-day trial period would start when they received their welcome package. Some never received it and didn't realize their "trial" period had begun until charges started showing up on their phone bills or in invoices.

      The FTC charges were filed against Wazzu Corporation, Jayme Amirie, Kenneth Gharib and Kirk Waldfogel of Fountain Valley, CA; Shared Network Services, LLC and Peter Westbrook, d/b/a 1st Page in Lodi, CA; and WebViper, LLC, Tigerhawk, LLC, Thomas J. Counts, Patrick C. Taylor, and Richard M. Bogdanas, individually and d/b/a Yellow Web Services. All Web Viper corporate and individual defendants are based in Montgomery, AL, except Richard M. Bogdanas who resides in Chalk Lake, TX.

      In the Commission's case against Wazzu, a Federal District Court in Southern California issued a temporary restraining order prohibiting the misrepresentations alleged in the complaint. The defendants and the Commission's staff attorneys are attempting to negotiate a settlement that would address all of the complaint allegations. The parties have agreed to continue until July 19 the hearing on whether a preliminary injunction should issue.

      In the Commission's case against Shared Network Services, the U. S. District Court in Sacramento issued a temporary restraining order prohibiting the misrepresentations alleged in the complaint. Without admitting liability, the defendants agreed to a Stipulated Preliminary Injunction, which was entered by the court on June 7. The parties are working towards a quick resolution of this matter to correct problems with defendants' telemarketing scripts, and to ensure that consumers who were wrongfully billed will receive refunds.

      In the case against WebViper, the Commission has moved for a preliminary injunction before the federal district court in Montgomery, Alabama. The defendants allegedly invoiced small businesses and sent repeated demands for payment for web site services that were never authorized. The defendants and the Commission's staff attorneys are negotiating to resolve this matter.

      In addition to the law enforcement initiative, the FTC has joined with the Small Business Administration, the Council of Better Business Bureaus, the American Chamber of Commerce Executives, the Yellow Pages Publishers Association and the National Federation of Independent Businesses to launch an education campaign. The FTC's Business Alert, "Website Woes: Avoiding Web Service Scams," highlights some common web service scams and offers tips on what small businesses can do to protect themselves, including:

      • Know your rights. If you receive bills for services you didn't order, don't pay. The law allows you to treat unordered services as a gift.
      • Review your phone bills as soon as they arrive. Be on the lookout for charges for services you haven't ordered or authorized
      • Assign purchasing to designated staff. And document all your purchases.
      • Train your staff in how to respond to telemarketers.
      • Buy from people you know and trust.

      The campaign partners will disseminate the Business Alert to their colleagues, members, and other interested parties.

      Wazzu and Shared Network Services represent the sixth and seventh FTC cases involving "cramming" since March 1998. The FTC has issued its Third Annual Fraud Report to Congress, "Fighting Consumer Fraud: The Case Against Cramming," The report says "Con artists have found the telephone billing and collection system to be a fertile area to defraud consumers. Taking advantage of changes in the telecommunications industry that began 15 years ago with the break up of AT&T;, these stealth 'operators' are arranging to put charges on consumers' phone bills for services that were never ordered, authorized, received or used.... In only 18 months, cramming has climbed to the number five spot among the categories that generate the most complaints received by the Federal Trade Commission's Consumer Response Center. In fact, since October 1997, the FTC has received more than 10,000 complaints about cramming. The report tells the story of the FTC's response to cramming: how it occurs, the agency's enforcement actions, federal/state activities, proposed changes to the agency's 900-Number (Pay Per Call) Rule, and activities to educate consumers."

      These cases were filed with the invaluable assistance of the Attorneys General of Alabama, Illinois, Minnesota, South Dakota and Wisconsin and the Better Business Bureau of the Southland, based in Colton, California, the Better Business Bureau of MidCounties in Stockton, California, and the Better Business Bureau of Central Alabama in Birmingham.

      The Commission vote to file the complaints was 4-0. The cases were filed in U.S. District Courts for the Middle District of Alabama (WebViper), Central District of California, Southern Division(Wazzu), and Eastern District of California (Shared Network Services).

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      NOTE: The Commission files a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant has actually violated the law. The case will be decided by the court.

      Copies of the complaints, a free consumer publication, Website Woes: Avoiding Web Service Scams" and the FTC's Third Annual Fraud Report, "Fighting Consumer Fraud: The Case Against Cramming," are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TDD for the hearing impaired 202-326-2502.

      FTC Cracks Down on Small Business Scams...
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      Suit Says Sears Defrauded Tire Customers

      A class-action lawsuit filed in Illinois claims Sears defrauded customers of $400 million by charging for wheel balancing it did not perform. The suit charges that up to 30 million customers were defrauded between 1989 and 1994. A Sears spokesman called the charges "false and unsubstantiated."

      Sears settled a similar case in Florida recently by admitting no wrongdoing while paying $580,000 to the state and offering free wheel balancing to customers.

      The suit also claims that Sears destroyed the machines used in the alleged fraud and paid $30 million in "hush money" to employees and vendors.

      Sears' auto repair operation has been plagued with fraud charges for years. In 1992, the company agreed to distribute over $46 million to customers to settle allegations that it systematically over-charged customers and performed unnecessary repairs.

      Recently, the company settled another suit in Florida, this one claiming that Sears sold used car batteries as new ones. It agreed to pay $985,000 and offered free replacement warranties to customers covered by the action.

      Sears is the nation's second-largest retailer.

      Suit Says Sears Defrauded Tire Customers...
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      Coupon Surf Day

      "Coupon Surf Day" Targets Internet Coupon Fraud

      WASHINGTON, DC, June 10, 1999 --
      Warning that consumers are being "mugged in their own homes," the Federal Trade Commission recently cruised the Internet and found 51 potentially fraudulent coupon schemes. 

      The sites got a wake-up call in the form of an e-mail from the FTC warning them of the legal consequences of their actions.

      The targeted sites fall into two categories of business opportunities. Some of the sites offer a work-at-home coupon clipping scam, where consumers are told that they can earn substantial amounts of money clipping coupons.

      Others advertise a "business opportunity" where consumers are told that they can make money by selling "coupon certificate booklets." The consumers purchase the booklets at a "reduced" price and then supposedly sell them for $20 or $50..

      The problem with the coupon certificate booklet schemes is that they often make exaggerated earnings claims. Also, the certificates in the booklets carry significant restrictions on where and when the coupons can be redeemed.

      Investigators from the FTC along with industry members of the Coupon Information Center (CIC), a non-profit entity that combats coupon fraud, conducted the "Surf Day" on May 20 and May 21.

      The joint effort, FTC officials said, is part of a larger campaign to police fraud on the Internet.

      "People are being mugged in their own homes on their computers," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection.

      "With the use of the Internet, fraud artists have penetrated the sanctity of our homes. Surf Days let the FTC use the Internet to warn potential scammers who would destroy its marketplace credibility.

      While fraud artists might try to take advantage of the Internet to perpetrate a fraud, the Internet also makes them susceptible to very quick and sure detection," Bernstein said. "The bottom line: 'Clean up your act or close down your site.'"

      The FTC has conducted Surf Days targeting other types of scams as well, including pyramid schemes, credit repair schemes and other business opportunity schemes.

      "The Internet is not going to be a new arena where scam artists can roam free," Bernstein added. Bernstein noted that the effort's objective is to educate businesses using the Internet about the law and deter those who may be violating the law from continuing to do so. The FTC has brought dozens of cases in recent years challenging advertising on the Internet.

      "The people who can least afford it are the ones hurt the most by coupon-related scams," said Bud Miller, Operations Manager at the Coupon Information Center.

      Mugged at Home -- Coupon Fraud on the Internet...
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