Current Events in October 2000

October 23, 2000
A federal court in Tampa, Florida has ordered a temporary halt to the allegedly deceptive sales practices of three Sarasota-based companies marketing work-at-home paralegal business opportunities.

The court order follows a complaint filed by the Federal Trade Commission against Para-Link International, Inc., AAA Family Centers, Inc., The Liberty Group of America, Inc., and the companies' three owners and operators. The FTC said the companies marketed and sold their paralegal training kits and other work-at-home opportunities - at a cost of $395 - $495 each - to consumers across the United States, with claims that these "paralegals" achieve incomes of over $200 per hour or as much as $2,000 per week, and that the defendants would provide a steady stream of case referrals.

According to the FTC, few consumers who purchased the "kits" or other business opportunities from the defendants ever realized such incomes. In addition to the temporary restraining order, the court ordered an asset freeze, and appointed a receiver to take charge of the companies.

According to the FTC's complaint, the defendants used sites on the World Wide Web, unsolicited e-mail, and newspaper advertisements to promote and sell their paralegal training and employment opportunity kits.

Many of the ads and/or e-mails contained representations such as: "Make Over $200 An Hour," and "You Can Process Simple Divorces and Bankruptcies From Home and Make Over $200 An Hour in as little as 30 Days!!!"; and urged consumers to call a toll-free number. Consumers who called were told that in exchange for a payment of $395-$495, they would receive a work-at-home kit that would provide all they needed to get started in performing paralegal services, such as preparing divorce or bankruptcy petitions.

Consumers were told by the defendants that no advance degrees or prior paralegal experience were needed, and that the defendants would provide all the necessary training and support and would issue kit purchasers a paralegal diploma.

The kits included (1) computer software; (2) a set of six audio tapes that "explains everything about the industry;" (3) a training video; (4) over 88 sample forms, including forms for creating a simple divorce or bankruptcy; and (5) training manuals. The defendants also promised to provide kit buyers with ongoing assistance, and assured kit buyers that once they passed various qualifying tests, they would provide a steady stream of case referrals - as many as "10-20 cases per week" - and would pay them $30 per case. Purchasers of the kits also were promised that they would be assigned personal "trainers" who would help them correctly complete the qualifying exams.

The FTC has asked the court to issue a permanent injunction, and to order the defendants to pay redress to consumers. A hearing on the FTC's request for a preliminary injunction has been scheduled for November 9, 2000.

October 20, 2000
Two companies that allegedly used high-pressure sales tactics to sell various home-based business opportunities have agreed to settle charges that they made false and unsubstantiated earnings claims to entice consumers and violated the Federal Trade Commission's Cooling-Off Rule, which gives consumers three days to cancel certain purchases of $25 or more.

The proposed settlement would prohibit the defendants from violating the Cooling-Off Rule and from making false or misleading income, profit, or sales volume claims in connection with the sale of any franchise, business opportunity, or investment, and requires them to pay a $22,000 civil penalty.

According to the FTC's complaint, Visions Group of America, Inc., SOHO Technologies, Inc., and their principals held high-pressure sales seminars in hotel conference rooms and other places in which they touted a variety of business opportunities. At the seminars, the defendants claimed inflated earnings that potential purchasers could expect, and promised discounts, limited time rebates and money-back guarantees to lure consumers into signing-up.

Visions Group, based in Rochester, New York, and SOHO (Small Office, Home Office), marketed their home-based business opportunities through advertisements, televised infomercials, and direct mail solicitation. The defendants' promotional materials contained numerous testimonials that led consumers to believe that they could have the same fantastic earnings experiences as the people in the testimonials. Consumers also were told to call an 800 number and transform "your life, your income, your future" by reserving seats for the next seminar. At the seminars, the defendants reiterated the false and unsubstantiated earnings claims and promised discounts, limited time rebates, and money-back guarantees to get consumers to sign up. To reinforce the earnings claims, the defendants promoted purchasers' "success" stories. The defendants sold various business opportunities including: "Inside Trader," a business that allegedly allowed purchasers to buy brand name merchandise at or below wholesale cost; "Net More Worth" and "Vision Net," businesses that allegedly allowed purchasers to sell classified ads on the Internet for a profit; and "Coupons on Demand" and "Fortunes in Coupons," businesses that allegedly allowed purchasers to buy and resell grocery coupons for profit. The cost of each business opportunity was approximately $499, but purchasers were frequently offered "sales" where they could buy multiple opportunities for a "reduced" fee of $599.

According to the FTC's complaint, consumers who signed-up for these business opportunities could not reasonably expect to achieve the specific levels of earnings contained in the come-on materials and advertisements and the defendants did not have a reasonable basis that substantiated the earnings claims that were made. In addition, the FTC alleged that the defendants violated the Cooling-Off Rule by not furnishing consumers with information that allows buyers to cancel a sales contract within three days following the sale.

The proposed settlement, which requires the court's approval, would prohibit the defendants from making deceptive income, profit, or sales volume claims in connection with the sale of any franchise, business opportunity, or investment. Also, it prohibits the defendants from violating the Cooling-Off Rule, which includes providing various cancellation notices to prospective purchasers, and would require them to pay a $22,000 civil penalty.

The settlement also contains various record keeping and reporting requirements designed to assist the FTC in monitoring the defendants' compliance.

The Commission vote to forward the complaint and consent order to the Department of Justice for filing was 4 to 1. They were filed by DOJ at the request of the FTC, in the U.S. District Court for the Western District of New York, on October 18. The settlement is subject to court approval.

Ford Motor Co. is recalling more than 351,000 Focus subcompacts. There are three potential problems with the cars -- involving the cruise control, rear wheel and brake drum assemblies and the A-pillar interior trim. There have been no reports of accidents resulting from the possible defects.

Owners of 33,225 model year 2000 Focus cars will be asked to return them to dealers to have the cruise control cable inspected and, if necessary, replaced. Ford has received 12 reports of the throttle sticking open following wide-open throttle application, the statement said.

Owners of 260,390 model year 2000 Focus vehicles will be asked to have the vehicles' rear wheel hub assemblies inspected and replaced if necessary. Ford said it has received 15 reports of rear wheel and brake drum assemblies separating when the hub retaining nut that secures the rear wheel bearings became loose.

Ford also asked owners of 351,102 Focus vehicles to have them upgraded to meet new federal standards for interior head impact protection. Dealers will install new A-pillar trim panels with improved energy-absorbing material.

The automaker will notify owners of the affected vehicles to arrange with dealers for free repairs.

The latest recall adds to Ford's recent problems. Last week, a California state judge ordered Ford to recall 1.7 million Fords in that state to check ignition systems. Ford is also involved in recalling 6.5 million Firestone tires -- standard equipment on Ford Explorers -- that are being investigated in connection with more than 100 highway deaths. -- -- --

Allstate is being sued by Florida policyholders who claim the company is unfairly charging higher rates to drivers who've had accidents, bad driving records or credit problems, even after the problems are resolved.

The Florida Attorney General has also been investigating the company but has not yet taken any action. In 1997, the state of Alaska found that Allstate overcharged some of its policyholders because of past problems on their record.

The Pinellas County Circuit Court suit challenge Allstate's corporate structure in Florida. The company maintains two separate corporate entities -- Allstate Insurance Co., which issues policies to drivers with good driving records and good credit ratings; and Allstate Indemnity Co., which insures drivers with problems and charges higher rates.

The suit says that when a policy comes up for renewal, Allstate Insurance Co. automatically examines a motorist's record. If it finds any problems, it shifts the policy to the higher-price Allstate Indemnity Co.

But when a policy comes up for renewal at Allstate Indemnity Co., there is no automatic check to see if the motorist's record has been clear for the last year and, thus, no automatic procedure to award lower rates to those drivers.

Florida law provides that insurance companies cannot charge surcharges for accidents and moving violations for more than three years. The suit argues that assigning customers to Allstate Indemnity and leaving them there indefinitely amounts to an illegal surcharge.

The suit was filed by James, Hoyer, Newcomer & Smiljanich of Tampa.

Policyholders eligible for the potential class action would include any Florida policyholder who has been with Allstate Indemnity since 1984, those who were transferred into Allstate Indemnity from Allstate Insurance and Allstate policyholders who have been improperly surcharged for accidents or moving violations.

WASHINGTON, Oct. 13, 2000 -- Dell Computer Corp. is voluntarily recalling about 27,000 batteries used in notebook-style personal computers. The batteries can short circuit, even when the battery is not in use, causing them to become very hot, release smoke and possibly catch fire.

The recall is being conducted in cooperation with the U.S. Consumer Products Safety Commission (CPSC).

Dell has received one report of a battery short-circuiting and catching fire. The incident resulted in minor property damage. No injuries were reported.

The recalled batteries were sold with the following Dell notebook computers: Latitude CPiA, CPiR, CPtC, CPtS, CPtV, CPxH and CPxJ, and Inspiron 3700 and 3800. The batteries also were sold separately, including in response to service calls. The batteries insert into the front-left and/or front-right of the computer. "DELLTM" and "MADE IN JAPAN" are written on the batteries. The batteries' identification number is written on a white sticker. Consumers should have this number available when they contact Dell to determine if their battery is part of the recall.

Dell's web site and catalogs sold computers with these batteries, customer kits containing the batteries, and individual batteries from June 2000 through mid-September 2000. The computers with these batteries were sold for between $1,500 and $3,000, and individual batteries were sold for between $100 and $170.

Consumers should contact Dell immediately to determine if their notebook computer battery is part of this recall. To contact Dell, call toll-free at (877) 741-6420 anytime, or go to the firm's Web site. Consumers also can write to: Dell Computer Corp., One Dell Way, Round Rock, Texas 78682, or fax them at (512) 283-7261.

WASHINGTON, Oct. 9, 2000 -- An analysis by The Washington Post finds that the Ford Explorer has a higher rate of tire-related accidents than other sport utility vehicles, regardless of whether the Explorer is equipped with Firestone or Goodyear tires.

Ford CEO Jacques Nasser testified before Congress that there had not been "one single tread separation problem" on Explorers equipped with Goodyear tires. "So we know this is a tire issue, not a vehicle issue," he said.

In fact, the Post analysis found that:

• Explorers equipped with Goodyear tires had a higher rate of tire-related accidents than other SUVs in the national fatal accident records.
• No other SUV has an equipment problem as strongly related to accidents as the Explorer's blowout problem. Explorers were found to be up to four times more likely to have an accident caused by a tire blowout than other SUVs.
• The Explorer's higher fatality rate in accidents is directly related to its propensity to roll over. In a study of 5,870 single-vehicle accidents in Florida, the Post found the Explorer was 13 percent more likely to roll than other compact SUVs. It was 53 percent more likely to roll than other compact SUVs when an equipment failure, such as a blowout, occurred. National data show than in 187 blown-tire accidents that killed someone in an SUV, the Explorer rolled over 95 percent of the time, compared with 83 percent for other SUVs.

Commenting on the Post study, James Fell, the retired chief of the National Highway Transportation Safety Administration (NHTSA), said it was "an indication there may be a factor with the Ford Explorer beyond the tire issue. It's a first indicator that they may have a stability problem."

At least 101 persons are known to have died in tire-related Explorer rollovers in the United States.

In Venezuela, where Ford replaced Firestone tires on its Explorers prior to the U.S. recall, consumer protection agency head Samuel Ruh Rios has said the 47 fatal accidents there resulted from "a lethal combination" of the Explorer's design and certain Firestone tires.

The Post reported that internal Ford documents show the company's own analysis of the Venezuela accidents found the problem unique to the Explorer.

"High incidence of vehicle rollover after a tire blowout or tread loss has not been detected for other vehicle brands," the document said.