Current Events in February 2002

WASHINGTON, Feb. 20, 2002 -- The Federal Trade Commission has charged two companies selling devices that purportedly protect users from cell phone radiation with making false and unsubstantiated claims.

In separate court actions, the FTC alleges that Stock Value 1, Inc. and Comstar Communications, Inc. (Comstar) falsely represented that their products block up to 97% or 99% of radiation and other electromagnetic energy emitted by cellular telephones, thereby reducing consumers' exposure to this radiation. According to the FTC, the defendants lacked a reasonable basis to substantiate their claims. The Commission is seeking permanent injunctions, consumer redress, and other equitable relief.

"These companies are using a shield of misrepresentation to block consumers from the facts," said J. Howard Beales III, Director of the FTC's Bureau of Consumer Protection. "There is no scientific evidence that their products work as they claim."

Stock Value 1, Inc., based in Boca Raton, Florida, and also known as SV1, and its president, Deborah Jenkins, marketed and sold two products -- "SafeTShield" and "NoDanger" -- that purportedly block electromagnetic energy emitted from cellular and cordless telephones to consumers throughout the United States.

These products consist of metallic fiber patches that are placed over the earpieces of cellular and cordless telephones. The defendants advertised their products through TV, radio and print ads, and on the Internet. The defendants' ads and promotional materials contained statements such as:

• "'NoDanger' is proven to protect the soft tissue of the ear ducts by filtering out 99% of the Electromagnetic waves emitted from the ear piece of mobile phones up to a frequency of 2,000 MHz."
• "'SafeTShield''prevents electromagnetic waves from penetrating the brain through the ear duct. . . . 'SafeTShield' blocks up to 99% of the electromagnetic waves from penetrating the brain through the ear canal."

Comstar, based in West Sacramento, California, and its president, Randall Carasco, marketed and sold their products under the names "WaveShield," "WaveShield 1000," and "WaveShield 2000." They advertised their products to consumers nationwide through TV, radio and print ads, and on the Internet. To induce consumers to buy WaveShield products, the defendants'ads and promotional materials contained the following statements:

• "STOP Cell Phone Radiation! with the .... WaveShield"
• "When you purchase a WaveShield for each of your cell phones, you can rest assured you have enhanced the safety of your cell phone use. The WaveShield will block up to 99% of the radiation entering the soft tissue of the ear canal."
• "The WaveShield 1000 features a soft comfort cushion design, about the size of a penny that adheres to the ear piece of any cellular phone and acts as a cellular protection system. The WaveShield 1000 blocks up to 99% of the harmful electromagnetic radiation that enters through the antenna into the unprotected ear canal, without affecting the quality of the transmission."

The complaints allege that the defendants, in both cases, failed to disclose in their ads that the vast majority of electromagnetic energy emitted by cellular and cordless phones comes from the antenna and parts of the phone other than the earpiece. The defendants allegedly also failed to disclose that the WaveShield, NoDanger, and SafeTShield products have no effect on this other electromagnetic energy. These facts, the FTC said, would be material to consumers' decision to buy or use their products.

Both complaints further allege that the defendants made false statements that their products had been scientifically "proven" and "tested," when in fact that was not the case.

According to a May 2001 Report by the General Accounting Office, "Scientific research to date does not demonstrate that the radio frequency energy emitted from mobile phones has adverse health effects, but the findings of some studies have raised questions indicating the need for further investigation."

According to the FTC, there is no scientific proof that so-called shields significantly reduce exposure from electromagnetic emissions. Consumers who want to limit their exposure can take steps such as:

• limit cell phone use to short conversations;
• increase the distance between the antenna and the head by using a hands free set or a car phone with the antenna outside the car; and avoid using cell phones where the signal is poor.

These cases were referred to the Commission by the Good Housekeeping Institute, the consumer product evaluation laboratory of Good Housekeeping Magazine. Independent tests conducted by the Good Housekeeping Institute on SafeTShield, WaveShield, and similar products found that the products did not reduce radiation exposure from cellular telephones.

WASHINGTON, Feb. 19, 2002 --
The Federal Trade Commission has settled charges against a Virginia company for numerous allegations of false and unsubstantiated claims concerning weight-loss products, pain-relief magnets, air cleaners, and hair-growth stimulants, and for deceptively "upselling" a buyer's club service.

TechnoBrands, Inc., (TBI) formerly known as Comtrad Industries, and its president, Charles J. Anton, have agreed to settle FTC charges that they engaged in deceptive advertising claims for six products they sold. Under the terms of the proposed consent agreement, the respondents are required to pay $200,000 in consumer redress, and would be required to have competent and reliable scientific evidence to support claims made for the specific products challenged, as well as for other products sold by TBI.

In a separate action, filed in federal district court, TBI has agreed to pay more than $200,000 in consumer redress for its role in the deceptive telemarketing of a buyer's club service after completing the sale of its own products. The Commission charged that the company did not clearly alert consumers that their credit cards would automatically be charged if they did not cancel the membership before the end of a "free" 30-day trial or that their credit card numbers were being turned over to a different company.

TBI, located in Colonial Heights, Virginia, is a mail-order retail seller of various gadgets, electronic items, and diet, health, and beauty products manufactured by third parties. It markets these products through direct mail catalogs, on the Internet, and in magazine and newspaper ads. TBI creates the advertising claims, develops marketing strategy, prints promotional materials, takes orders from consumers, ships the products, and handles returns and consumer complaints.TBI does business as The Lifestyle Resource, TechnoScout, Ennovations, Tech Update, and International Collectors' Society.

The claims challenged in the FTC's complaint against TBI relate to six of its products: the Hollywood 48-Hour Miracle Diet; the Enforma System, a dietary supplement for weight loss; the BMI Magnetic Kit, an analgesic device; Nisim New Hair Biofactors System, a preparation to stimulate hair growth; the Clarion Ionic Filter Ceiling Fan, an air cleaning device; and the Sila Ionic Air Purifier, another air cleaning device.

The FTC alleged that TBI made numerous false and unsubstantiated claims concerning the weight loss that consumers can achieve with the Hollywood Diet and Enforma; the pain relief that can be achieved with the BMI Magnetic Kit; the effectiveness of Nisim in stopping hair loss and stimulating hair growth; the ability of the air cleaners to eliminate various pollutants from indoor space; and the health benefits of using the Clarion Fan.

In a separate action, the FTC has filed a complaint and stipulated order in federal district court alleging that TBI engaged in the deceptive telemarketing of a buyer's club service to consumers who ordered TBI products. The stipulated order includes a permanent injunction and requires TBI to pay more than $200,000 in consumer redress.

According to the FTC, TBI (then Comtrad) sold memberships in Triad Discount Buying Service, later, Best Price USA. TBI's telemarketers promoted a so-called "no obligation free trial" in Triad's buying club at the end of the call after a consumer had completed an order to buy TBI's product and provided credit card information.

The telemarketer allegedly failed adequately to disclose, however, the following material facts: the consumer had to cancel the service before 30 days elapsed in order to avoid being charged for a year's membership; renewals each year were billed automatically to a credit card; and the credit card number provided by the consumer for the TBI product order would be turned over to Triad for the purpose of charging the membership.

BOSTON, Feb. 19, 2002 -- A new study from the Harvard School of Public Health (HSPH) finds that in states and regions with higher levels of household firearm ownership, many more children are dying from homicide, suicide and gun accidents.

"In states with more guns, more children are dying. They are dying in suicides, in homicides, and in gun accidents. This finding is completely contrary to the notion that guns are protecting our children," Matthew Miller, M.D., ScD, associate director of the Harvard Injury Control Research Center at HSPH and lead author of the study, said.

The differences in violent death rates to children are large, and are closely tied to levels of gun ownership, he said. The differences cannot be explained by poverty, education or urbanization.

The study focused on children aged 5 to 14, and compared data across all 50 states over a 10-year period (1988-1997). In one table, the authors compare the five states with the highest gun ownership levels with the five states with the lowest levels. While these states have equal numbers of children, they have very different rates of violent death.

In the 10-year period, 253 children died from firearm accidents in the high gun states, compared to 15 in the low gun states. While the numbers of non-gun suicides were similar, 153 children killed themselves with guns in the five high gun states, compared to 22 who committed suicide in the five low gun states.

Children in the high gun states were also at much higher risk of being murdered with a firearm. During this 10-year period, 298 children aged 5 to 14 were murdered with guns in the high gun states, compared to 86 in the low gun states. The non-gun homicide rates were fairly similar (a little over 100 non-gun homicides in both sets of states).

Miller emphasized that, while no study that is a snapshot of the U.S. over a short period of time can prove causation, the strong and robust association between gun ownership and childrens violent death is compelling.

These results are also consistent with international comparisons. The U.S. level of private firearm ownership is much higher than in other developed nations and U.S. children aged 5 to 14 are far more likely to be murdered, commit suicide, and die from gun accidents than children in other developed countries. Indeed, for children aged 5 to 14 in the United States, death from firearms is the third leading cause of mortality, following only motor vehicle crashes and cancer.

The article Firearm Availability and Unintentional Firearm Deaths, Suicide, and Homicide among 5-14 Year Olds is published in the February, 2002 issue of The Journal of Trauma (www.jtrauma.com) and a table from the study appears on the journal cover.

The study was supported in part by the Joyce Foundation, the Packard Foundation, the Robert Wood Johnson Foundation, the Open Society Institute, and the Centers for Disease Control and Prevention.

Harvard School of Public Health is dedicated to advancing the public's health through learning, discovery, and communication. More than 300 faculty members are engaged in teaching and training the 800-plus student body in a broad spectrum of disciplines crucial to the health and well being of individuals and populations around the world. Programs and projects range from the molecular biology of AIDS vaccines to the epidemiology of cancer; from risk analysis to violence prevention; from maternal and children's health to quality of care measurement; from health care management to international health and human rights.

Thousands of Toyota owners, like Doug of Destrehan, LA, are facing costly engine repairs and replacements because of a problem with sludge build-up. Toyota has been refusing to cover the repairs but is now having second thoughts.

Doug had to spend $5,000 to replace the engine in his 2000 Sienna minivan after just 24,000 miles of use. Gregory of Lilburn GA had a similar problem with his 1998 Sienna. He had to replace the engine at 60,000 miles and, like Doug and about 3,000 others, got no help from Toyota, which said he had not maintained the vehicle properly.

The sludge problem occurs when oxidized oil builds up in an engine. Its forms a mucky goo that can cause the engine to seize up. Because the problem can be caused by failure to change the oil. Toyota has been refusing to cover repairs under its five-year/60,000-mile power train warranty.

But last week, Toyota sent letters to 3.3 million owners of vehicles equipped with the two engines affected by the problem -- the 1MZ V-6 and the 5SFE inline 4 -- saying it will pay for repair costs in cases where owners can prove they made "reasonable efforts" to maintain the vehicle.

Under the "special policy adjustment," which will be effective for only one year, Toyota says it will cover the cost of repairs if owners can show they made at least one oil change per year. The company, however, is refusing to back down from its contention that negligent owners are the cause of the problem, not a design defect or quality problem.

Toyota and Lexus owners manuals specify that the oil should be changed every 7,500 miles or every six months, whichever comes first. Under severe driving conditions, oil should be changed every 5,000 miles or four months.

It's not clear why the engines are susceptible to sludge buildup, although excessive heat is known to cause oil to become more "goopy," experts quoted by Automotive News said. Some suggested that changes in the design of the cylinder head in the affected engines is causing heat buildup. Others said leaky head gaskets could also be contributing to the problem.

Toyota maintains that with millions of vehicles on the road in the U.S., the 3,100 complaints are microscopic and shouldn't be construed as representing a widespread problem.

WASHINGTON, Feb. 8, 2002 -- Federal regulators have closed NextBank, N.A., a unit of NextCard Inc., for "unsafe and unsound" financial practices. The bank is now under the control of the Federal Deposit Insurance Corp. (FDIC).

The Office of the Comptroller of the Currency (OCC) said NextBank had extended too much credit to its 1.2 million credit card customers.

In a statement, the company said efforts to find a buyer had been unsuccessful and said its business strategy was being "reevaluated." NextBank is the first Internet-only bank to be closed by federal regulators.

Visa said NextBank Visa cards will remain valid for now, although no new applications will be taken.

Like most Internet banks, Phoenix-based NextCard did not offer a full range of banking services. Its product line consisted of credit cards and $100,000 certificates of deposit. It had amassed deposits of $554 million, not much by regular banking standards but large compared with other Internet banks.

The comptroller's office said that NextBank had failed to develop policies to would protect itself if large numbers of credit card customers defaulted, which in fact is what has happened as the economy has soured over the last two years.

The FDIC said that depositors who had $100,000 or less in NextBank will get all of their money back. Those with larger deposits will get more than $100,000 back only if there is money left over after the bank is liquidated. Regulators said accounts totaling $29 million exceeded the $100,000 limit. (Information for depositors).

Trading of NextCard shares was halted on the Nasdaq. The stock closed at 14 cents, a fraction of its onetime high of more than $40.