IRS Widens 2006 Tax Brackets, Adjusts For Inflation
Personal exemptions and standard deductions will rise, tax brackets will widen and individuals will be able to make larger tax-free gifts in 2006, thanks to inflation adjustments announced today by the Internal Revenue Service.
By law, a variety of tax provisions must be revised each year to keep pace with inflation. As a result, more than three dozen tax benefits, affecting virtually every taxpayer, are being modified for 2006. Key changes affecting 2006 returns, filed by most taxpayers in early 2007, include the following:
The value of each personal and dependency exemption, available to most taxpayers, will be $3,300, up $100 from 2005.
The new standard deduction will be $10,300 for married couples filing a joint return, $5,150 for singles and $7,550 for heads of household. Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes.
Tax-bracket thresholds will increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15% bracket from the 25% bracket will be $61,300, up from $59,400 in 2005.
The annual gift tax exemption will be $12,000, up from $11,000 in 2005.
Revenue Procedure 2005-70, containing a complete rundown of inflation adjustments, is posted on the IRS Web site and will appear in Internal Revenue Bulletin 2005-47, dated Nov. 21, 2005.
Friday, October 28, 2005
Thursday, October 27, 2005
Battery Powered "Ride-On" Vehicles Recalled
Over 140,000 vehicles manufactured for children have been recalled by the United States Consumer Product Safety Commission and the Dorel Juvenile Group. An electronic malfunction can occur in the ride-on vehicle’s circuit board and/or battery connector, resulting in smoking and melting of components. This poses a vehicle fire hazard and a burn hazard to consumers if components are touched while malfunctioning.
The firm has received 49 reports of overheating or melting components on the ride-on vehicles. No injuries have been reported.
The recalled battery-powered ride-on vehicles include the Pink Corvette®, Torch Red Corvette®, Yellow Race Car Corvette®, Red Electroplate Corvette®, Fire Engine, and Batmobile® with the model numbers listed in the chart below. They were sold under the brands Safety 1st and Kid Trax by Safety 1st. The ride-on vehicles were manufactured between January 2004 and August 2005. The manufacture date is located on the underside of the unit and is molded into the plastic body as shown below. The circle on left displays the month of manufacture, the circle on the right displays the year of manufacture. The model numbers are located on the underside of the vehicles near the date code.
Ride-On Vehicle Name - Model
Safety 1st Pink Corvette® - 50503/50503A
Safety 1st Torch Red Corvette® - 50504/50504A
Safety 1st Yellow Race Car Corvette® - 50505/50505A
Safety 1st Red Electroplate Corvette® - 50521/50521A
Kid Trax Fire Engine - 50506/50506A
Safety 1st Batmobile® - 50527
Consumers should take the recalled ride-on vehicles away from children immediately and contact Dorel Juvenile Group’s Ride-On hotline toll-free at (866) 611-3022 between 8 a.m. and 4:30 p.m. ET Monday through Friday.
Over 140,000 vehicles manufactured for children have been recalled by the United States Consumer Product Safety Commission and the Dorel Juvenile Group. An electronic malfunction can occur in the ride-on vehicle’s circuit board and/or battery connector, resulting in smoking and melting of components. This poses a vehicle fire hazard and a burn hazard to consumers if components are touched while malfunctioning.
The firm has received 49 reports of overheating or melting components on the ride-on vehicles. No injuries have been reported.
The recalled battery-powered ride-on vehicles include the Pink Corvette®, Torch Red Corvette®, Yellow Race Car Corvette®, Red Electroplate Corvette®, Fire Engine, and Batmobile® with the model numbers listed in the chart below. They were sold under the brands Safety 1st and Kid Trax by Safety 1st. The ride-on vehicles were manufactured between January 2004 and August 2005. The manufacture date is located on the underside of the unit and is molded into the plastic body as shown below. The circle on left displays the month of manufacture, the circle on the right displays the year of manufacture. The model numbers are located on the underside of the vehicles near the date code.
Ride-On Vehicle Name - Model
Safety 1st Pink Corvette® - 50503/50503A
Safety 1st Torch Red Corvette® - 50504/50504A
Safety 1st Yellow Race Car Corvette® - 50505/50505A
Safety 1st Red Electroplate Corvette® - 50521/50521A
Kid Trax Fire Engine - 50506/50506A
Safety 1st Batmobile® - 50527
Consumers should take the recalled ride-on vehicles away from children immediately and contact Dorel Juvenile Group’s Ride-On hotline toll-free at (866) 611-3022 between 8 a.m. and 4:30 p.m. ET Monday through Friday.
Wednesday, October 26, 2005
FDA Warns Doctors and Diabetics About Blood Glucose Meters
The U.S. Food and Drug Administration (FDA) is notifying health care providers and patients of a problem with blood glucose meters made by Abbott Diabetes Care, Alameda, Calif. The meters can unintentionally be switched from one unit of measurement to another, resulting in an inaccurate blood glucose interpretation by the user. Users in the United States should make sure that their meter reading is displayed as mg/dL because an inaccurate reading can lead to taking the wrong dose of insulin or dietary changes, resulting in higher levels of sugar in the blood or hyperglycemia. Hyperglycemia can be a serious and even life-threatening condition and several cases of hyperglycemia have been reported to FDA.
The meters are designed to report blood glucose levels in two different measurements - the U.S. standard, milligrams per deciliter or mg/dL, and the foreign standard, millimoles per liter or mmol/L-and can be accidentally switched from one measurement to the other. The switch may occur when a user is setting the time and date for the meter. There also have been reports of the measurement being switched after a meter was dropped or after replacement of the battery. Abbott has not confirmed these additional causes of failure.
Abbott is not instructing users to return their blood glucose meters. The firm issued a press release on October 14, 2005, and has undertaken a worldwide correction and notification to all healthcare professionals and users, when known, about the measurement switching problem. All Abbott glucose meters currently being shipped for distribution are locked with the correct unit of measurement.
For information on how to change the meter reading back to mg/dl, users should refer to their Owner’s Manual or contact Abbott Diabetes Care at 1-800-553-4105 (open 24 hrs. per day). Consumers who think they may have been using the wrong read-out on their meters for a long period of time and are now worried about their health should contact their doctors.
The affected glucose meters made by Abbott that are sold in the United States are:
FreeStyle, FreeStyle Flash, FreeStyle Tracker, Precision Xtra, MediSense, Sof-Tact, Precision Sof-Tact, MediSense, Optium, and private label brands ReliOn Ultima, Rite Aid, and Kroger blood glucose meters. Precision Sof-Tact meters, which were inadvertently omitted from Abbott’s press release, also are subject to this action. These products are distributed primarily through retail and mail order pharmacies and physicians' offices.
Affected glucose meters sold outside of the United States are: Xceed, Liberty, Boots, Xtra Classic, Easy, and SofTrac.
Physicians and consumers who have experienced a problem with any of the affected glucose meters should report to FDA’s MedWatch program at 1-800-FDA-1088 (1-800-332-1088)and to Abbott Diabetes Care.
The U.S. Food and Drug Administration (FDA) is notifying health care providers and patients of a problem with blood glucose meters made by Abbott Diabetes Care, Alameda, Calif. The meters can unintentionally be switched from one unit of measurement to another, resulting in an inaccurate blood glucose interpretation by the user. Users in the United States should make sure that their meter reading is displayed as mg/dL because an inaccurate reading can lead to taking the wrong dose of insulin or dietary changes, resulting in higher levels of sugar in the blood or hyperglycemia. Hyperglycemia can be a serious and even life-threatening condition and several cases of hyperglycemia have been reported to FDA.
The meters are designed to report blood glucose levels in two different measurements - the U.S. standard, milligrams per deciliter or mg/dL, and the foreign standard, millimoles per liter or mmol/L-and can be accidentally switched from one measurement to the other. The switch may occur when a user is setting the time and date for the meter. There also have been reports of the measurement being switched after a meter was dropped or after replacement of the battery. Abbott has not confirmed these additional causes of failure.
Abbott is not instructing users to return their blood glucose meters. The firm issued a press release on October 14, 2005, and has undertaken a worldwide correction and notification to all healthcare professionals and users, when known, about the measurement switching problem. All Abbott glucose meters currently being shipped for distribution are locked with the correct unit of measurement.
For information on how to change the meter reading back to mg/dl, users should refer to their Owner’s Manual or contact Abbott Diabetes Care at 1-800-553-4105 (open 24 hrs. per day). Consumers who think they may have been using the wrong read-out on their meters for a long period of time and are now worried about their health should contact their doctors.
The affected glucose meters made by Abbott that are sold in the United States are:
FreeStyle, FreeStyle Flash, FreeStyle Tracker, Precision Xtra, MediSense, Sof-Tact, Precision Sof-Tact, MediSense, Optium, and private label brands ReliOn Ultima, Rite Aid, and Kroger blood glucose meters. Precision Sof-Tact meters, which were inadvertently omitted from Abbott’s press release, also are subject to this action. These products are distributed primarily through retail and mail order pharmacies and physicians' offices.
Affected glucose meters sold outside of the United States are: Xceed, Liberty, Boots, Xtra Classic, Easy, and SofTrac.
Physicians and consumers who have experienced a problem with any of the affected glucose meters should report to FDA’s MedWatch program at 1-800-FDA-1088 (1-800-332-1088)and to Abbott Diabetes Care.
Tuesday, October 25, 2005
FDIC Opens Hurrincane Wilma Hotline, Asks Banks To Work With Victims
In the wake of the damage caused by Hurricane Wilma throughout South Florida, the Federal Deposit Insurance Corporation (FDIC) today asked the banks it regulates to work constructively with borrowers affected by the storm.
"Unfortunately, this scenario has become all too familiar," said FDIC Chairman Don Powell. "But we've learned from the last few hurricanes that bankers will do all they can to help consumers get back on their feet. We're encouraging banks to help borrowers who are experiencing difficulties beyond their control due to this devastating hurricane."
The FDIC's 24-hour toll-free consumer hotline, established in the aftermath of Hurricane Katrina, is still operational. Consumers – and bankers – with banking-related questions should call the FDIC's hotline at 1-877-ASK-FDIC (1-877-275-3342) or visit the FDIC's Web site at www.fdic.gov.
In a letter to banks today, the FDIC outlined a series of steps to help the rebuilding process in damaged areas. Extending repayment terms, restructuring existing loans or easing terms for new loans, if done in a manner that is consistent with safe and sound banking practices, can contribute to the health of the community and serve the long-term interests of the lending institution, the FDIC's letter stated.
The FDIC is also considering regulatory relief for banks from certain filing and publishing requirements.
In the wake of the damage caused by Hurricane Wilma throughout South Florida, the Federal Deposit Insurance Corporation (FDIC) today asked the banks it regulates to work constructively with borrowers affected by the storm.
"Unfortunately, this scenario has become all too familiar," said FDIC Chairman Don Powell. "But we've learned from the last few hurricanes that bankers will do all they can to help consumers get back on their feet. We're encouraging banks to help borrowers who are experiencing difficulties beyond their control due to this devastating hurricane."
The FDIC's 24-hour toll-free consumer hotline, established in the aftermath of Hurricane Katrina, is still operational. Consumers – and bankers – with banking-related questions should call the FDIC's hotline at 1-877-ASK-FDIC (1-877-275-3342) or visit the FDIC's Web site at www.fdic.gov.
In a letter to banks today, the FDIC outlined a series of steps to help the rebuilding process in damaged areas. Extending repayment terms, restructuring existing loans or easing terms for new loans, if done in a manner that is consistent with safe and sound banking practices, can contribute to the health of the community and serve the long-term interests of the lending institution, the FDIC's letter stated.
The FDIC is also considering regulatory relief for banks from certain filing and publishing requirements.
Friday, October 21, 2005
Target, CPSC Recall Children's Pencils
Target Stores and the U.S. Consumer Product Safety Commission are recalling more than 150,000 children's pencil and sharpener kits because the sharpeners can become exposed and cause injury.
The kits were sold in Target stores during July and August of this year for an approximate price of $1. Consumers are urged to take the kits to their nearest Target store for a gift card of $1 plus tax. Consumers can also call Target at (800) 440-0680 between 7 a.m. and 6 p.m. CT Monday through Friday.
Target Stores and the U.S. Consumer Product Safety Commission are recalling more than 150,000 children's pencil and sharpener kits because the sharpeners can become exposed and cause injury.
The kits were sold in Target stores during July and August of this year for an approximate price of $1. Consumers are urged to take the kits to their nearest Target store for a gift card of $1 plus tax. Consumers can also call Target at (800) 440-0680 between 7 a.m. and 6 p.m. CT Monday through Friday.
Thursday, October 20, 2005
NY's Spitzer Shuts Cancer Scam Site; Multiple Sites Named, Consumer Instructed To File Complaints
New York Attorney General Eliot Spitzer today announced that his office obtained a restraining order against a Long Island man who operated several Internet scams that bilked consumers out of thousands of dollars.
Jeffrey A. Augugliaro of Malverne in Nassau County, was served with a lawsuit alleging that he and his associates set up an Internet-based business known as "People Helping People" which solicited donations for a phony charitable organization Augugliaro created called "American Cancer Aid Foundation." Donors were told that contributions to the organization would be used for cancer prevention research and that contributors would receive two free airline tickets, worth up to $1,600, that could be used to fly anywhere in the world.
The lawsuit charges that none of the money solicited was ever used for cancer research, but instead was pocketed by Augugliaro and his associates. Furthermore, there were no free airline tickets, and consumers received nothing for their donations.
Similar offers of free airline tickets were promoted on other websites operated by Augugliaro, www.massmarketingprogram.com and www.jamvo.com, both of which allegedly marketed the tickets to business owners as a way to attract new customers. The lawsuit claims that thousands of consumers were defrauded by these scams, including a cancer patient who hoped to use the free airline tickets to fly to a hospital for her cancer treatments.
In addition to the charity scam, Augugliaro created Brixdale, an Internet-based company, www.brixdale.com., that promoted a so-called "inverse mortgage" program. Consumers were promised that by allowing Brixdale to take control of the electronic transfers of their monthly mortgage payments, consumers could not only pay off an entire 30-year mortgage in full, but could also easily make a quarter of a million dollars, all in a matter of months. The lawsuit alleges that Brixdale is simply an illegal pyramid scheme, which survives by participants recruiting more and more participants, and that the promised economic benefits are never realized.
Pending a hearing on the lawsuit, the court barred Augugliaro and the other defendants from operating their businesses, ordered them to shut down their websites and froze approximately one million dollars in bank accounts held by the defendants. Through the lawsuit, Spitzer seeks to permanently shut down the businesses and websites, and require respondents to pay restitution to consumers, as well as penalties and costs.
Spitzer cautions consumers against signing up for offers on the Internet that seem too good to be true, or getting involved in schemes promising that the consumer can "get rich quick" in exchange for recruiting others to join the scheme.
Individuals seeking to file a complaint against any of Augugliaro’s companies are encouraged to contact the Attorney General’s consumer help line at (800) 771-7755 or visit his web site at www.oag.state.ny.us.
New York Attorney General Eliot Spitzer today announced that his office obtained a restraining order against a Long Island man who operated several Internet scams that bilked consumers out of thousands of dollars.
Jeffrey A. Augugliaro of Malverne in Nassau County, was served with a lawsuit alleging that he and his associates set up an Internet-based business known as "People Helping People" which solicited donations for a phony charitable organization Augugliaro created called "American Cancer Aid Foundation." Donors were told that contributions to the organization would be used for cancer prevention research and that contributors would receive two free airline tickets, worth up to $1,600, that could be used to fly anywhere in the world.
The lawsuit charges that none of the money solicited was ever used for cancer research, but instead was pocketed by Augugliaro and his associates. Furthermore, there were no free airline tickets, and consumers received nothing for their donations.
Similar offers of free airline tickets were promoted on other websites operated by Augugliaro, www.massmarketingprogram.com and www.jamvo.com, both of which allegedly marketed the tickets to business owners as a way to attract new customers. The lawsuit claims that thousands of consumers were defrauded by these scams, including a cancer patient who hoped to use the free airline tickets to fly to a hospital for her cancer treatments.
In addition to the charity scam, Augugliaro created Brixdale, an Internet-based company, www.brixdale.com., that promoted a so-called "inverse mortgage" program. Consumers were promised that by allowing Brixdale to take control of the electronic transfers of their monthly mortgage payments, consumers could not only pay off an entire 30-year mortgage in full, but could also easily make a quarter of a million dollars, all in a matter of months. The lawsuit alleges that Brixdale is simply an illegal pyramid scheme, which survives by participants recruiting more and more participants, and that the promised economic benefits are never realized.
Pending a hearing on the lawsuit, the court barred Augugliaro and the other defendants from operating their businesses, ordered them to shut down their websites and froze approximately one million dollars in bank accounts held by the defendants. Through the lawsuit, Spitzer seeks to permanently shut down the businesses and websites, and require respondents to pay restitution to consumers, as well as penalties and costs.
Spitzer cautions consumers against signing up for offers on the Internet that seem too good to be true, or getting involved in schemes promising that the consumer can "get rich quick" in exchange for recruiting others to join the scheme.
Individuals seeking to file a complaint against any of Augugliaro’s companies are encouraged to contact the Attorney General’s consumer help line at (800) 771-7755 or visit his web site at www.oag.state.ny.us.
Wednesday, October 19, 2005
EPA, Airlines Agree On Drinking Water
The Environmental Protection Agency has reached settlements with 11 major domestic airlines and 13 smaller airlines to ensure the safety of the drinking water used by their passengers and crew. The settling airlines have agreed to routinely monitor the quality of water on their airplanes. The action came after an EPA investigation of 327 U.S. and foreign planes at 19 airports in 2004 found total coliform contamination in the drinking water in 15 percent of aircraft.
Total coliform is an indicator that other disease-causing organisms (pathogens) could be in the water and could potentially affect people's health. The settlements require the airlines to regularly monitor aircraft water systems; notify EPA and the public when tests reveal contamination; and regularly disinfect aircraft water systems and water transfer equipment. The orders also require each airline to study possible sources of contamination from outside of the aircraft.
The information released today will help the traveling public make informed decisions. Passengers with compromised immune systems or others concerned may want to request canned or bottled beverages. EPA will update its information and advice to the traveling public as soon as new information is available at: http://www.epa.gov/airlinewater
"EPA and these airlines worked together to establish new practices for protecting the health of the flying public," said Grant Nakayama, EPA's assistant administrator for enforcement and compliance assurance. "We will continue to monitor the safety of water on airlines that use U.S. airports while the agency develops regulations specifically for airline drinking water."
Ben Grumbles, EPA's assistant administrator for the Office of Water, insisted: "The water passengers drink on a plane should be as safe as the water they drink at home. The settlements announced today show that it's time to fine-tune and upgrade EPA's water regulations to specifically address airplanes."
The settlements announced today were reached with: AirTran Airways, Alaska Airlines, Aloha Airlines, American Airlines, America West, ATA Airlines, Champion Air, Continental Airlines, Continental Micronesia, Falcon Air Express, Frontier Airlines, Hawaiian Airlines, Miami Air International, Midwest Airlines, North American Airlines, Northwest Airlines, Pace Airlines, Ryan International Airlines, Spirit Airlines, Sun Country Airlines, United Airlines, US Airways, USA 3000 Airlines, and World Airways. The 11 major domestic airlines who have settled are members of the Air Transport Association, whose 14 members account for 90 percent of U.S. air travel.
EPA is negotiating agreements with Omni Air International and the three remaining members of the Air Transport Association: Delta Airlines, JetBlue Airways, and Southwest Airlines. EPA will continue to work with smaller, regional and charter airlines to ensure drinking water quality with agreements similar to those reached with airlines that belong to the Air Transport Association and the National Air Carrier Association, and Air Carrier Association of America.
Meanwhile, EPA is developing regulations for water that is served onboard aircraft. EPA held a public meeting in June as part the development process for the airline drinking water rule.
The Environmental Protection Agency has reached settlements with 11 major domestic airlines and 13 smaller airlines to ensure the safety of the drinking water used by their passengers and crew. The settling airlines have agreed to routinely monitor the quality of water on their airplanes. The action came after an EPA investigation of 327 U.S. and foreign planes at 19 airports in 2004 found total coliform contamination in the drinking water in 15 percent of aircraft.
Total coliform is an indicator that other disease-causing organisms (pathogens) could be in the water and could potentially affect people's health. The settlements require the airlines to regularly monitor aircraft water systems; notify EPA and the public when tests reveal contamination; and regularly disinfect aircraft water systems and water transfer equipment. The orders also require each airline to study possible sources of contamination from outside of the aircraft.
The information released today will help the traveling public make informed decisions. Passengers with compromised immune systems or others concerned may want to request canned or bottled beverages. EPA will update its information and advice to the traveling public as soon as new information is available at: http://www.epa.gov/airlinewater
"EPA and these airlines worked together to establish new practices for protecting the health of the flying public," said Grant Nakayama, EPA's assistant administrator for enforcement and compliance assurance. "We will continue to monitor the safety of water on airlines that use U.S. airports while the agency develops regulations specifically for airline drinking water."
Ben Grumbles, EPA's assistant administrator for the Office of Water, insisted: "The water passengers drink on a plane should be as safe as the water they drink at home. The settlements announced today show that it's time to fine-tune and upgrade EPA's water regulations to specifically address airplanes."
The settlements announced today were reached with: AirTran Airways, Alaska Airlines, Aloha Airlines, American Airlines, America West, ATA Airlines, Champion Air, Continental Airlines, Continental Micronesia, Falcon Air Express, Frontier Airlines, Hawaiian Airlines, Miami Air International, Midwest Airlines, North American Airlines, Northwest Airlines, Pace Airlines, Ryan International Airlines, Spirit Airlines, Sun Country Airlines, United Airlines, US Airways, USA 3000 Airlines, and World Airways. The 11 major domestic airlines who have settled are members of the Air Transport Association, whose 14 members account for 90 percent of U.S. air travel.
EPA is negotiating agreements with Omni Air International and the three remaining members of the Air Transport Association: Delta Airlines, JetBlue Airways, and Southwest Airlines. EPA will continue to work with smaller, regional and charter airlines to ensure drinking water quality with agreements similar to those reached with airlines that belong to the Air Transport Association and the National Air Carrier Association, and Air Carrier Association of America.
Meanwhile, EPA is developing regulations for water that is served onboard aircraft. EPA held a public meeting in June as part the development process for the airline drinking water rule.
Tuesday, October 18, 2005
Commercial Alert Asks FTC to Investigate Buzz Marketers for Deception
Commercial Alert sent a letter today to the Federal Trade Commission (FTC) requesting it to investigate whether buzz marketers are violating federal law prohibiting deceptive advertising. The letter asks the FTC to review evidence that “companies are perpetrating large-scale deception upon consumers by deploying buzz marketers who fail to disclose that they have been enlisted to promote products. This failure to disclose is fundamentally fraudulent and misleading.”
Commercial Alert’s letter urges the FTC to thoroughly investigate Proctor & Gamble’s Tremor, which has enlisted about 250,000 teenagers in its buzz marketing sales force. “The Commission should carefully examine the targeting of minors by buzz marketing, because children and teenagers tend to be more impressionable and easy to deceive. The Commission should do this, at a minimum, by issuing subpoenas to executives at Proctor & Gamble’s Tremor and other buzz marketers that target children and teenagers, to determine whether their endorsers are disclosing that they are paid marketers.”
The letter states “Buzz marketing also is known as ‘guerrilla,’ or ‘stealth’ marketing. The terms are significant because they suggest the subterfuge that corporations are working on the buying public. They often are not promoting products and services openly, the way conventional advertising does. Rather they are enlisting people to promote products under the guise of doing something else….The Federal Trade Commission should require any and all persons who are paid to engage in such practices to disclose their relationship to the corporation whose products they are pitching, including their compensation. Failure to provide such disclosure should be considered ‘unfair or deceptive acts and practices in or affecting commerce’ within the meaning of the Federal Trade Commission Act.”
The full text of Commercial Alert’s letter to the FTC is available at: http://www.commercialalert.org/buzzmarketing.pdf.
Commercial Alert sent a letter today to the Federal Trade Commission (FTC) requesting it to investigate whether buzz marketers are violating federal law prohibiting deceptive advertising. The letter asks the FTC to review evidence that “companies are perpetrating large-scale deception upon consumers by deploying buzz marketers who fail to disclose that they have been enlisted to promote products. This failure to disclose is fundamentally fraudulent and misleading.”
Commercial Alert’s letter urges the FTC to thoroughly investigate Proctor & Gamble’s Tremor, which has enlisted about 250,000 teenagers in its buzz marketing sales force. “The Commission should carefully examine the targeting of minors by buzz marketing, because children and teenagers tend to be more impressionable and easy to deceive. The Commission should do this, at a minimum, by issuing subpoenas to executives at Proctor & Gamble’s Tremor and other buzz marketers that target children and teenagers, to determine whether their endorsers are disclosing that they are paid marketers.”
The letter states “Buzz marketing also is known as ‘guerrilla,’ or ‘stealth’ marketing. The terms are significant because they suggest the subterfuge that corporations are working on the buying public. They often are not promoting products and services openly, the way conventional advertising does. Rather they are enlisting people to promote products under the guise of doing something else….The Federal Trade Commission should require any and all persons who are paid to engage in such practices to disclose their relationship to the corporation whose products they are pitching, including their compensation. Failure to provide such disclosure should be considered ‘unfair or deceptive acts and practices in or affecting commerce’ within the meaning of the Federal Trade Commission Act.”
The full text of Commercial Alert’s letter to the FTC is available at: http://www.commercialalert.org/buzzmarketing.pdf.
Monday, October 17, 2005
Multiple States, DOJ Settle With AIDS Drug Maker
California Attorney General Bill Lockyer today announced that the maker of a drug approved to treat an AIDS-related syndrome will pay more than $704 million to the federal and state governments to resolve criminal charges and civil allegations in connection with illegal schemes to promote, market and sell its drug, Serostim.
The maker of Serostim is Serono Inc., a Massachusetts-based company that entered into the settlement agreements with the U.S. Department of Justice and the Attorneys General of 43 states, including California. The result of Serono’s scheme was that California’s Medi-Cal program paid too much in reimbursement for prescriptions of the drug during a period from 1997 to 2004.
Pursuant to the criminal component of the settlement, Serono entered a guilty plea in federal district court in Boston to criminal charges that the corporation conspired to violate federal Food and Drug Administration restrictions and conspired to pay kickbacks to physicians and pharmacies. Under the plea bargain, Serono will pay $136.9 million as a criminal fine to the federal government.
The settlement is the product of a false claims lawsuit initially filed by a whistle-blower in federal court. Soon afterward in September 2001, Lockyer began working closely with federal prosecutors in reviewing voluminous medical records submitted by Serono to obtain authorization for the drug, interviewing witnesses and issuing subpoenas. California’s share of the settlement totals $215.7 million, of which $108.5 million will be used to reimburse the federal government for its share of the state’s Medicaid funding.
“Instead of promoting the health needs of those diagnosed with AIDS, Serono allowed greed to drive a business agenda that fraudulently ripped off millions from California’s Medi-Cal program,” Lockyer said. “This settlement tells pharmaceutical companies that there is a serious price to pay when they get caught putting the bottomline ahead of quality healthcare.”
Serostim is approved by the FDA to treat AIDS wasting syndrome, which is marked by the involuntary loss of significant body weight and chronic weakness; and other forms of cachexia, a wasting away of body fat and muscle caused by disease. Serostim prescriptions are quite expensive, with a Medicaid reimbursement price of approximately $6,000 per month. The suggested course of treatment is three months, but many recipients use Serostim for much longer.
In his lawsuit, Lockyer alleged that Serono illegally marketed Serostim by:
• Promoting Serostim for uses not approved by the FDA, including for lipodystrophy and body cell mass wasting.
• Using unapproved software as part of tests to determine if patients were appropriate candidates to use Serostim. The states alleged the software resulted in more patients being prescribed the drug than what was appropriate.
• Engaging in illegal kickbacks to pharmacists and physicians in an effort to increase prescriptions. The kickbacks included payments and trips, including to Cannes, France.
The civil settlements with Serono require the company to enter into a Corporate Integrity Agreement with the Office of the Inspector General in the U.S. Department of Health and Human Services to ensure future compliance with the law. Serono is also required to cooperate with California and other states in any related investigations that may ensue.
Serono, Inc. and Serono Laboratories are U.S. affiliates of the Swiss corporation Serono S.A.; both have their principal place of business in Massachusetts. In addition to California, the states of Florida, Maryland, Massachusetts, Missouri and New York led the negotiations with Serono that resulted in the civil settlement.
As Attorney General, Lockyer has made the prosecution of Medi-Cal fraud a top priority. Under his leadership, criminal filings and restitution have increased by 134 percent and 258 percent, respectively. Lockyer’s Medi-Cal enforcement efforts have resulted in more that $330 million in civil and criminal court-ordered restitution and penalties.
California Attorney General Bill Lockyer today announced that the maker of a drug approved to treat an AIDS-related syndrome will pay more than $704 million to the federal and state governments to resolve criminal charges and civil allegations in connection with illegal schemes to promote, market and sell its drug, Serostim.
The maker of Serostim is Serono Inc., a Massachusetts-based company that entered into the settlement agreements with the U.S. Department of Justice and the Attorneys General of 43 states, including California. The result of Serono’s scheme was that California’s Medi-Cal program paid too much in reimbursement for prescriptions of the drug during a period from 1997 to 2004.
Pursuant to the criminal component of the settlement, Serono entered a guilty plea in federal district court in Boston to criminal charges that the corporation conspired to violate federal Food and Drug Administration restrictions and conspired to pay kickbacks to physicians and pharmacies. Under the plea bargain, Serono will pay $136.9 million as a criminal fine to the federal government.
The settlement is the product of a false claims lawsuit initially filed by a whistle-blower in federal court. Soon afterward in September 2001, Lockyer began working closely with federal prosecutors in reviewing voluminous medical records submitted by Serono to obtain authorization for the drug, interviewing witnesses and issuing subpoenas. California’s share of the settlement totals $215.7 million, of which $108.5 million will be used to reimburse the federal government for its share of the state’s Medicaid funding.
“Instead of promoting the health needs of those diagnosed with AIDS, Serono allowed greed to drive a business agenda that fraudulently ripped off millions from California’s Medi-Cal program,” Lockyer said. “This settlement tells pharmaceutical companies that there is a serious price to pay when they get caught putting the bottomline ahead of quality healthcare.”
Serostim is approved by the FDA to treat AIDS wasting syndrome, which is marked by the involuntary loss of significant body weight and chronic weakness; and other forms of cachexia, a wasting away of body fat and muscle caused by disease. Serostim prescriptions are quite expensive, with a Medicaid reimbursement price of approximately $6,000 per month. The suggested course of treatment is three months, but many recipients use Serostim for much longer.
In his lawsuit, Lockyer alleged that Serono illegally marketed Serostim by:
• Promoting Serostim for uses not approved by the FDA, including for lipodystrophy and body cell mass wasting.
• Using unapproved software as part of tests to determine if patients were appropriate candidates to use Serostim. The states alleged the software resulted in more patients being prescribed the drug than what was appropriate.
• Engaging in illegal kickbacks to pharmacists and physicians in an effort to increase prescriptions. The kickbacks included payments and trips, including to Cannes, France.
The civil settlements with Serono require the company to enter into a Corporate Integrity Agreement with the Office of the Inspector General in the U.S. Department of Health and Human Services to ensure future compliance with the law. Serono is also required to cooperate with California and other states in any related investigations that may ensue.
Serono, Inc. and Serono Laboratories are U.S. affiliates of the Swiss corporation Serono S.A.; both have their principal place of business in Massachusetts. In addition to California, the states of Florida, Maryland, Massachusetts, Missouri and New York led the negotiations with Serono that resulted in the civil settlement.
As Attorney General, Lockyer has made the prosecution of Medi-Cal fraud a top priority. Under his leadership, criminal filings and restitution have increased by 134 percent and 258 percent, respectively. Lockyer’s Medi-Cal enforcement efforts have resulted in more that $330 million in civil and criminal court-ordered restitution and penalties.
Friday, October 14, 2005
Bose Wins J.D. Power Award For Audio Makers
Bose achieves the highest brand power score among audio manufacturers for a third consecutive year, according to the J.D. Power and Associates 2005 Automotive Component Branding Study released this month.
Brand strength in the market is measured by assessing consumers’ top-of-mind awareness (unaided awareness), brand name/logo recognition (aided awareness) and favorability (impression). High brand power scores indicate positive impressions and strong awareness among consumers.
With a combination of strong consumer awareness and favorability, Bose ranks highest in the study, receiving the highest brand power score. Sony follows Bose in the rankings, receiving both strong top-of-mind and aided awareness among consumers. Pioneer, which receives high ratings in unaided awareness, follows Sony in brand power. Dolby performs well in the area of favorability and Panasonic performs well in aided awareness to rank fourth and fifth, respectively. Although Dolby is not a manufacturer of end-use consumer products, its technology is common in many facets of audio entertainment and is employed by the majority of audio equipment manufacturers.
While superior sound quality is important to consumers, brand name still commands a premium. The study finds brand strength plays an integral part in how much consumers are willing to pay for upgraded or premium audio systems. An upgraded audio system might include a satellite radio-ready AM/FM/in-dash six CD player/changer with eight speakers. A premium audio system might additionally include eight to 14 speakers plus surround sound.
Consumers who would purchase an upgraded system report they would pay $358 on average for a non-branded system, and 87 percent say they would pay more for a brand name system. Additionally, consumers who would purchase a premium audio system report they would pay, on average, $616 for a non-branded system. Ninety-three percent say they would be willing to pay more for a brand name system. Within both upgrade and premium audio options, Bose is cited most often as the brand consumers would be willing to pay an additional amount to own.
"When we asked consumers about the importance of branding, one-third believe it is important to know the brand of the AM/FM CD player/changer in their vehicle," said Larry Wu, senior director of automotive emerging technologies at J.D. Power and Associates. "Consumers associate certain brand names with a specific level of quality."
Other automotive component brands that have achieved high awareness ratings include OnStar, Sirius Satellite Radio and XM Satellite Radio. Consumers associate OnStar with safety, security and reliability/dependability. Sirius and XM are associated with being widely available and innovative.
"These component brand names are becoming more recognizable to consumers with the increase of factory installations into new vehicles and heavy promotion in the media," said Wu.
The 2005 Automotive Component Branding Study is based on a Web-based survey of nearly 7,500 consumers who purchased or leased a new vehicle in the past six years.
Bose achieves the highest brand power score among audio manufacturers for a third consecutive year, according to the J.D. Power and Associates 2005 Automotive Component Branding Study released this month.
Brand strength in the market is measured by assessing consumers’ top-of-mind awareness (unaided awareness), brand name/logo recognition (aided awareness) and favorability (impression). High brand power scores indicate positive impressions and strong awareness among consumers.
With a combination of strong consumer awareness and favorability, Bose ranks highest in the study, receiving the highest brand power score. Sony follows Bose in the rankings, receiving both strong top-of-mind and aided awareness among consumers. Pioneer, which receives high ratings in unaided awareness, follows Sony in brand power. Dolby performs well in the area of favorability and Panasonic performs well in aided awareness to rank fourth and fifth, respectively. Although Dolby is not a manufacturer of end-use consumer products, its technology is common in many facets of audio entertainment and is employed by the majority of audio equipment manufacturers.
While superior sound quality is important to consumers, brand name still commands a premium. The study finds brand strength plays an integral part in how much consumers are willing to pay for upgraded or premium audio systems. An upgraded audio system might include a satellite radio-ready AM/FM/in-dash six CD player/changer with eight speakers. A premium audio system might additionally include eight to 14 speakers plus surround sound.
Consumers who would purchase an upgraded system report they would pay $358 on average for a non-branded system, and 87 percent say they would pay more for a brand name system. Additionally, consumers who would purchase a premium audio system report they would pay, on average, $616 for a non-branded system. Ninety-three percent say they would be willing to pay more for a brand name system. Within both upgrade and premium audio options, Bose is cited most often as the brand consumers would be willing to pay an additional amount to own.
"When we asked consumers about the importance of branding, one-third believe it is important to know the brand of the AM/FM CD player/changer in their vehicle," said Larry Wu, senior director of automotive emerging technologies at J.D. Power and Associates. "Consumers associate certain brand names with a specific level of quality."
Other automotive component brands that have achieved high awareness ratings include OnStar, Sirius Satellite Radio and XM Satellite Radio. Consumers associate OnStar with safety, security and reliability/dependability. Sirius and XM are associated with being widely available and innovative.
"These component brand names are becoming more recognizable to consumers with the increase of factory installations into new vehicles and heavy promotion in the media," said Wu.
The 2005 Automotive Component Branding Study is based on a Web-based survey of nearly 7,500 consumers who purchased or leased a new vehicle in the past six years.
Thursday, October 13, 2005
Volkswagen Extends Warranty For 345,000 Vehicles
In cooperation with EPA and the California Air Resource Board, Volkswagen of America has agreed to extend the emissions warranty on 345,000 of its vehicles. The warranty covers the catalytic converter on 1999 through 2001 vehicles which include the Golf, Jetta, and New Beetle models with 2.0 liter AEG engines.
The emissions warranty will be extended from the current eight years or 80,000 miles to 10 years or 120,000 miles due to defects that can cause the ceramic material in the converter to rattle and erode over time. This could lead to exhaust emission levels above the federal and state emission standards.
Volkswagen is sending notification letters to affected owners and will reimburse anyone who has already paid to replace converters for this defect.
In cooperation with EPA and the California Air Resource Board, Volkswagen of America has agreed to extend the emissions warranty on 345,000 of its vehicles. The warranty covers the catalytic converter on 1999 through 2001 vehicles which include the Golf, Jetta, and New Beetle models with 2.0 liter AEG engines.
The emissions warranty will be extended from the current eight years or 80,000 miles to 10 years or 120,000 miles due to defects that can cause the ceramic material in the converter to rattle and erode over time. This could lead to exhaust emission levels above the federal and state emission standards.
Volkswagen is sending notification letters to affected owners and will reimburse anyone who has already paid to replace converters for this defect.
Wednesday, October 12, 2005
FTC Halts Internet Kiosk Sales
A U.S. district court judge has stopped the allegedly illegal practices of an “Internet kiosk” business opportunity and frozen the assets of the companies and their principals following Federal Trade Commission charges that their income claims were deceptive and their location- assistance offers were false. The FTC will seek an order permanently banning the defendants from selling business opportunities, barring them from violating the FTC Act and the Commission’s Franchise Rule, and providing consumer redress.
The defendants told consumers they could use the kiosks to start their own business, promising them a substantial income and help finding high-traffic, high-volume profitable locations for the machines. According to the FTC, consumers typically lost the money they invested, and the defendants rarely, if ever, delivered the terminals to profitable locations.
The machines sold were public-access Internet terminals, mounted computers that accepted payment in exchange for access to the Internet that could be placed in public areas. The defendants ran television and radio ads selling the terminals, making claims like, “You simply receive a monthly check for all the wireless revenue generated at your location. . . There is unlimited income potential. . . Prime locations are available now.” The ads then provided a toll-free number to call for more information. Over the phone, salespeople made additional false claims, according to the FTC. Salespeople made claims such as, “a 142% return on investment in the first year,” “locations include convention centers, military bases, hotels, malls, hospitals – high-traffic, high-volume locations,” and that $1,000 to $2,000 per month per kiosk could be expected in revenue. In many cases, buyers were told the machines would be delivered to the location within two weeks to 45 days after purchase.
Customers paid from $10,000 to $15,000 for one kiosk, up to $100,000 for multiple kiosks. Their terminals, however, were rarely, if ever, delivered and installed in profitable areas. In many cases, the terminals consumers bought were never delivered at all. And, when terminals were delivered, it was hardly ever within the promised time period. Although the defendants did supply the required disclosure document for franchises, it was missing crucial information, including information on all of the corporate officers (specifically, information on criminal charges against one officer’s), the names and addresses of consumers who had bought into the business venture, and any information about how long it would take to place a terminal. Finally, the FTC claimed that the defendants had no support for the earnings claims they made. Typically, buyers lost their entire investment.
The FTC’s complaint names as defendants Transnet Wireless Corporation and its president Bradley Cartwright; Nationwide Cyber Systems, Inc. and its president Farris Pemberton; and Paul Pemberton, who directed day-to-day operations at the companies, which are based in Florida. The complaint also names Margaret Pemberton as a relief defendant – someone who is not accused of wrongdoing, but has allegedly received ill-gotten gains and does not have a legitimate claim to them.
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.
A U.S. district court judge has stopped the allegedly illegal practices of an “Internet kiosk” business opportunity and frozen the assets of the companies and their principals following Federal Trade Commission charges that their income claims were deceptive and their location- assistance offers were false. The FTC will seek an order permanently banning the defendants from selling business opportunities, barring them from violating the FTC Act and the Commission’s Franchise Rule, and providing consumer redress.
The defendants told consumers they could use the kiosks to start their own business, promising them a substantial income and help finding high-traffic, high-volume profitable locations for the machines. According to the FTC, consumers typically lost the money they invested, and the defendants rarely, if ever, delivered the terminals to profitable locations.
The machines sold were public-access Internet terminals, mounted computers that accepted payment in exchange for access to the Internet that could be placed in public areas. The defendants ran television and radio ads selling the terminals, making claims like, “You simply receive a monthly check for all the wireless revenue generated at your location. . . There is unlimited income potential. . . Prime locations are available now.” The ads then provided a toll-free number to call for more information. Over the phone, salespeople made additional false claims, according to the FTC. Salespeople made claims such as, “a 142% return on investment in the first year,” “locations include convention centers, military bases, hotels, malls, hospitals – high-traffic, high-volume locations,” and that $1,000 to $2,000 per month per kiosk could be expected in revenue. In many cases, buyers were told the machines would be delivered to the location within two weeks to 45 days after purchase.
Customers paid from $10,000 to $15,000 for one kiosk, up to $100,000 for multiple kiosks. Their terminals, however, were rarely, if ever, delivered and installed in profitable areas. In many cases, the terminals consumers bought were never delivered at all. And, when terminals were delivered, it was hardly ever within the promised time period. Although the defendants did supply the required disclosure document for franchises, it was missing crucial information, including information on all of the corporate officers (specifically, information on criminal charges against one officer’s), the names and addresses of consumers who had bought into the business venture, and any information about how long it would take to place a terminal. Finally, the FTC claimed that the defendants had no support for the earnings claims they made. Typically, buyers lost their entire investment.
The FTC’s complaint names as defendants Transnet Wireless Corporation and its president Bradley Cartwright; Nationwide Cyber Systems, Inc. and its president Farris Pemberton; and Paul Pemberton, who directed day-to-day operations at the companies, which are based in Florida. The complaint also names Margaret Pemberton as a relief defendant – someone who is not accused of wrongdoing, but has allegedly received ill-gotten gains and does not have a legitimate claim to them.
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.
Tuesday, October 11, 2005
eBay and NY Block Stun Gun Sales
The Office of New York Attorney General Eliot Spitzer today announced that it has worked with the nation’s leading online marketplace to help prevent shipments of dangerous stun guns and other illegal weapons in New York.
Under the voluntarily action, eBay will take a series of steps to block the sale and shipment of such weapons to New Yorkers.
"State law specifically prohibits possession of stun guns and related weapons," Spitzer said. "We are happy to work closely with eBay to ensure that the internet is not used to facilitate illegal activity."
After receiving tips that illegal weapons were being purchased on eBay, the Attorney General’s office began an investigation earlier this year. The office was able to confirm quickly that the weapons were readily available over the internet. Investigators, posing as ordinary consumers, purchased 16 stun guns from 16 different sellers through the eBay auction website.
Among the items purchased were a 900,000-volt Taser stun gun valued at $57, an "Air Taser" stun gun that shoots a darts delivering a disabling shock for $400, and a stun gun made to look like a cellphone for $50.
With eBay’s assistance, the Attorney General’s office then contacted the 16 sellers who together are believed to have sold more than 1,100 stun guns to New Yorkers between September 2003 and August 2005. All but two of the sellers were located out of state.
eBay cooperated in the investigation and was never a target of the Attorney General’s probe.
The Attorney General’s office reached agreements with sellers to discontinue the sales and pay a fine. Information on sales of stun guns has also been reported to local district attorneys
In addition, as a result of the investigation, eBay has taken the following steps:
– The company implemented a messaging system to deter New Yorkers from participating in stun gun sales. Under the new system, anyone from New York, who bids on an illegal weapon will receive an electronic warning that purchasing a stun gun is illegal in New York; and
– The company is sending letters to sellers of stun guns to warn them that sale and possession of stun guns in New York is illegal;
New York is one of seven states that ban electronic "stunning devices."
The Office of New York Attorney General Eliot Spitzer today announced that it has worked with the nation’s leading online marketplace to help prevent shipments of dangerous stun guns and other illegal weapons in New York.
Under the voluntarily action, eBay will take a series of steps to block the sale and shipment of such weapons to New Yorkers.
"State law specifically prohibits possession of stun guns and related weapons," Spitzer said. "We are happy to work closely with eBay to ensure that the internet is not used to facilitate illegal activity."
After receiving tips that illegal weapons were being purchased on eBay, the Attorney General’s office began an investigation earlier this year. The office was able to confirm quickly that the weapons were readily available over the internet. Investigators, posing as ordinary consumers, purchased 16 stun guns from 16 different sellers through the eBay auction website.
Among the items purchased were a 900,000-volt Taser stun gun valued at $57, an "Air Taser" stun gun that shoots a darts delivering a disabling shock for $400, and a stun gun made to look like a cellphone for $50.
With eBay’s assistance, the Attorney General’s office then contacted the 16 sellers who together are believed to have sold more than 1,100 stun guns to New Yorkers between September 2003 and August 2005. All but two of the sellers were located out of state.
eBay cooperated in the investigation and was never a target of the Attorney General’s probe.
The Attorney General’s office reached agreements with sellers to discontinue the sales and pay a fine. Information on sales of stun guns has also been reported to local district attorneys
In addition, as a result of the investigation, eBay has taken the following steps:
– The company implemented a messaging system to deter New Yorkers from participating in stun gun sales. Under the new system, anyone from New York, who bids on an illegal weapon will receive an electronic warning that purchasing a stun gun is illegal in New York; and
– The company is sending letters to sellers of stun guns to warn them that sale and possession of stun guns in New York is illegal;
New York is one of seven states that ban electronic "stunning devices."
Monday, October 10, 2005
Supreme Greens Herbal Supplement Maker Settles FTC Charges
Three individuals and two companies have settled Federal Trade Commission charges over their roles in the deceptive marketing of Supreme Greens, an herbal supplement. The FTC has alleged that these defendants and others promoted the product for the prevention, treatment, and cure of cancer, heart disease, arthritis, and diabetes. They also touted Supreme Greens’ ability to cause substantial weight loss.
In two separate settlement agreements, Supreme Greens developer Alejandro Guerrero and his company, Health Solutions, Inc. (both of Upland, California), and Michael Howell (Fontana, California), Gregory Geremesz (Upland, California) and their company, Healthy Solutions, LLC (Upland, California), have agreed not to make false or unsubstantiated claims about the health benefits, performance, efficacy, or safety of any food, drug, or dietary supplement. Guerrero will also pay $65,000 or transfer to the Commission title to his 2004 Cadillac Escalade. Howell and Geremesz will pay $5,000 and $10,000, respectively, to the Commission.
In June 2004, the FTC filed a lawsuit in the United States District Court for the District of Massachusetts alleging that Direct Marketing Concepts, Inc., ITV Direct, Inc., and their president, Donald W. Barrett; and Alejandro Guerrero, Michael Howell, Gregory Geremesz, and their companies, Health Solutions, Inc., and Healthy Solutions, LLC, had deceptively marketed Supreme Greens. The Commission also alleged that Direct Marketing Concepts, Inc., ITV Direct, Inc., and Donald W. Barrett; and Allen Stern and his companies, Triad ML Marketing, Inc. and King Media, Inc., had deceptively marketed Coral Calcium Daily. The Commission subsequently amended its complaint to name Robert Maihos as an additional liability defendant, and Lisa Stern, Steven Ritchey, and BP International, Inc. as relief defendants. (The litigation continues against all of the defendants other than Guerrero, Howell, Geremesz, and their companies.)
The original Supreme Greens infomercial ran on cable television (including the Outdoor Channel and the PAX Television network), beginning in August 2003. In that infomercial, Guerrero and host Donald Barrett claimed the product can prevent, treat, and cure cancer, heart disease, arthritis, and diabetes. They also touted Supreme Greens as causing substantial weight loss, and claimed that the product was safe for use by pregnant women, children – including those as young as one year old – and any person taking any type of medication.
The settlements announced today prohibit Guerrero, Health Solutions, Inc., Howell, Geremesz, and Healthy Solutions, LLC from making the types of claims alleged in the FTC’s complaint for Supreme Greens or any substantially similar product. The orders also prohibit them from misrepresenting that any dietary supplement can prevent, treat, or cure any disease, or that Guerrero is a medical doctor, Doctor of Oriental Medicine, or Ph.D. In addition, the orders enjoin them from making false or unsubstantiated health benefit, performance, efficacy, or safety claims for any food, drug, or dietary supplement. Finally, the orders prohibit these five defendants from misrepresenting the existence, contents, validity, results, conclusions, or interpretations of any test or study, in connection with the marketing or sale of any food, drug, or dietary supplement.
The Guerrero/Health Solutions, Inc. order provides for judgment in the amount of $65,000 in favor of the Commission. That judgment can be satisfied either by a payment of that amount to the Commission, or by Guerrero transferring to the Commission free and unencumbered title to his 2004 Cadillac Escalade. The order also contains a $1.47 million avalanche clause, which will become due immediately if the court finds that Guerrero or Health Solutions, Inc. misrepresented their financial condition. The order also requires them to notify current and future dietary supplement distributors, resellers, and sales agents of the settlement, and to stop doing business with them if they use any of the promotional materials prohibited by the order.
The Howell/Geremesz/Healthy Solutions, LLC order provides for judgment against Howell in the amount of $5,000, and against Geremesz in the amount of $10,000. This order also contains a $2.7 million avalanche clause and a distributor notification provision. Finally, both orders contain various record-keeping requirements to assist the FTC in monitoring the defendants’ compliance with the orders.
NOTE: These stipulated final orders are for settlement purposes only and do not constitute an admission by the defendants of a law violation. Stipulated final orders have the force of law when signed by the judge.
Three individuals and two companies have settled Federal Trade Commission charges over their roles in the deceptive marketing of Supreme Greens, an herbal supplement. The FTC has alleged that these defendants and others promoted the product for the prevention, treatment, and cure of cancer, heart disease, arthritis, and diabetes. They also touted Supreme Greens’ ability to cause substantial weight loss.
In two separate settlement agreements, Supreme Greens developer Alejandro Guerrero and his company, Health Solutions, Inc. (both of Upland, California), and Michael Howell (Fontana, California), Gregory Geremesz (Upland, California) and their company, Healthy Solutions, LLC (Upland, California), have agreed not to make false or unsubstantiated claims about the health benefits, performance, efficacy, or safety of any food, drug, or dietary supplement. Guerrero will also pay $65,000 or transfer to the Commission title to his 2004 Cadillac Escalade. Howell and Geremesz will pay $5,000 and $10,000, respectively, to the Commission.
In June 2004, the FTC filed a lawsuit in the United States District Court for the District of Massachusetts alleging that Direct Marketing Concepts, Inc., ITV Direct, Inc., and their president, Donald W. Barrett; and Alejandro Guerrero, Michael Howell, Gregory Geremesz, and their companies, Health Solutions, Inc., and Healthy Solutions, LLC, had deceptively marketed Supreme Greens. The Commission also alleged that Direct Marketing Concepts, Inc., ITV Direct, Inc., and Donald W. Barrett; and Allen Stern and his companies, Triad ML Marketing, Inc. and King Media, Inc., had deceptively marketed Coral Calcium Daily. The Commission subsequently amended its complaint to name Robert Maihos as an additional liability defendant, and Lisa Stern, Steven Ritchey, and BP International, Inc. as relief defendants. (The litigation continues against all of the defendants other than Guerrero, Howell, Geremesz, and their companies.)
The original Supreme Greens infomercial ran on cable television (including the Outdoor Channel and the PAX Television network), beginning in August 2003. In that infomercial, Guerrero and host Donald Barrett claimed the product can prevent, treat, and cure cancer, heart disease, arthritis, and diabetes. They also touted Supreme Greens as causing substantial weight loss, and claimed that the product was safe for use by pregnant women, children – including those as young as one year old – and any person taking any type of medication.
The settlements announced today prohibit Guerrero, Health Solutions, Inc., Howell, Geremesz, and Healthy Solutions, LLC from making the types of claims alleged in the FTC’s complaint for Supreme Greens or any substantially similar product. The orders also prohibit them from misrepresenting that any dietary supplement can prevent, treat, or cure any disease, or that Guerrero is a medical doctor, Doctor of Oriental Medicine, or Ph.D. In addition, the orders enjoin them from making false or unsubstantiated health benefit, performance, efficacy, or safety claims for any food, drug, or dietary supplement. Finally, the orders prohibit these five defendants from misrepresenting the existence, contents, validity, results, conclusions, or interpretations of any test or study, in connection with the marketing or sale of any food, drug, or dietary supplement.
The Guerrero/Health Solutions, Inc. order provides for judgment in the amount of $65,000 in favor of the Commission. That judgment can be satisfied either by a payment of that amount to the Commission, or by Guerrero transferring to the Commission free and unencumbered title to his 2004 Cadillac Escalade. The order also contains a $1.47 million avalanche clause, which will become due immediately if the court finds that Guerrero or Health Solutions, Inc. misrepresented their financial condition. The order also requires them to notify current and future dietary supplement distributors, resellers, and sales agents of the settlement, and to stop doing business with them if they use any of the promotional materials prohibited by the order.
The Howell/Geremesz/Healthy Solutions, LLC order provides for judgment against Howell in the amount of $5,000, and against Geremesz in the amount of $10,000. This order also contains a $2.7 million avalanche clause and a distributor notification provision. Finally, both orders contain various record-keeping requirements to assist the FTC in monitoring the defendants’ compliance with the orders.
NOTE: These stipulated final orders are for settlement purposes only and do not constitute an admission by the defendants of a law violation. Stipulated final orders have the force of law when signed by the judge.
Friday, October 07, 2005
37,000 Pounds of Ham Recalled For Not Disclosing Allergens
Sunny Valley Smoked Meats, Inc., a Manteca, Calif., firm, is voluntarily recalling approximately 37,000 pounds of ham products due to undeclared allergens (soy and wheat proteins), the U.S. Department of Agriculture's Food Safety and Inspection Service announced today.
The package labels do not specifically state that wheat starch and soy flour, potential known allergens, are ingredients.
The following products are subject to recall:
One to two-pound vacuum packed packages of "SUNNYVALLEY BRAND HICKORY SMOKED, HONEY CURED HAM WITH NATURAL JUICES." Each package includes the establishment number, "EST. 17823" inside the USDA seal of inspection and a use by/freeze by date between "11/16/05" and "12/26/05." Each case bears the code "31010."
Eight to 10-pound packages of "SUNNYVALLEY BRAND HICKORY SMOKED, HONEY CURED HAM WITH NATURAL JUICES." Each package includes the establishment number, "EST. 17823" inside the USDA seal of inspection and a use by/freeze by date between "9/30/05" and "12/26/05." Each case bears the code "33000."
Two to five-pound packages of "RALEY'S BEL AIR FINE MEATS BONELESS HONEY HAM, HICKORY SMOKED, FULLY COOKED WITH NATURAL JUICES." Each package includes the establishment number, "EST. 17823" inside the USDA seal of inspection and a use by/freeze by date between "10/7/05" and "12/22/05." Each case bears the code "33001" or "33002."
Nine to 11-pound Cryovac wrapped packages of "HOBBS APPLEWOOD SMOKED MEATS HONEY CURED HAM WITH NATURAL JUICES." Each package includes the establishment number, "EST. 17823" inside the USDA seal of inspection and a use by/freeze by date between "12/15/05" and "12/22/05." Each case bears the code "33003."
Seven to eight-pound vacuum packed packages of "RALEY'S BEL AIR FINE MEATS SPIRAL SLICED HAM, HICKORY SMOKED, HONEY CURED, FULLY COOKED WITH NATURAL JUICES." Each package includes the establishment number, "EST. 17823" inside the USDA seal of inspection and a use by/freeze by date between "11/4/05" and "12/29/05." Each case bears the code "37003."
17 to 19-pound vacuum packed packages of "SUNNYVALLEY BRAND HONEY CURED, SPIRAL CUT HAM WITH NATURAL JUICES, FULLY COOKED READY TO EAT." Each package includes the establishment number, "EST. 17823" inside the USDA seal of inspection and a use by/freeze by date between "10/13/05" and "12/13/05." Each case bears the code "37004."
Seven to eight-pound vacuum packed packaged of "SUNNYVALLEY BRAND HONEY CURED, SPIRAL CUT HAM WITH NATURAL JUICES, FULLY COOKED READY TO EAT." Each package includes the establishment number, "EST. 17823" inside the USDA seal of inspection and a use by/freeze by date between "10/13/05" and "12/13/05." Each case bears the code "37005."
18 to 20-pound vacuum packed packages of "SUNNYVALLEY BRAND HONEY CURED SPIRAL CUT HAM WITH NATURAL JUICES, FULLY COOKED READY TO EAT." Each package includes the establishment number, "EST. 17823" inside the USDA seal of inspection and a use by/freeze by date between 11/4/05 and 12/29/05. Each case bears the code "37006."
The products were sold to retail stores and restaurant suppliers in California, Nevada and Oregon.
FSIS has had no reports of illness due to consumption of these products. Anyone concerned about an allergic reaction should contact a physician.
Consumers with food safety questions can call the toll-free USDA Meat and Poultry Hotline at (888) 674-6854. The hotline is available in English and Spanish and can presently be reached 24 hours a day.
Sunny Valley Smoked Meats, Inc., a Manteca, Calif., firm, is voluntarily recalling approximately 37,000 pounds of ham products due to undeclared allergens (soy and wheat proteins), the U.S. Department of Agriculture's Food Safety and Inspection Service announced today.
The package labels do not specifically state that wheat starch and soy flour, potential known allergens, are ingredients.
The following products are subject to recall:
One to two-pound vacuum packed packages of "SUNNYVALLEY BRAND HICKORY SMOKED, HONEY CURED HAM WITH NATURAL JUICES." Each package includes the establishment number, "EST. 17823" inside the USDA seal of inspection and a use by/freeze by date between "11/16/05" and "12/26/05." Each case bears the code "31010."
Eight to 10-pound packages of "SUNNYVALLEY BRAND HICKORY SMOKED, HONEY CURED HAM WITH NATURAL JUICES." Each package includes the establishment number, "EST. 17823" inside the USDA seal of inspection and a use by/freeze by date between "9/30/05" and "12/26/05." Each case bears the code "33000."
Two to five-pound packages of "RALEY'S BEL AIR FINE MEATS BONELESS HONEY HAM, HICKORY SMOKED, FULLY COOKED WITH NATURAL JUICES." Each package includes the establishment number, "EST. 17823" inside the USDA seal of inspection and a use by/freeze by date between "10/7/05" and "12/22/05." Each case bears the code "33001" or "33002."
Nine to 11-pound Cryovac wrapped packages of "HOBBS APPLEWOOD SMOKED MEATS HONEY CURED HAM WITH NATURAL JUICES." Each package includes the establishment number, "EST. 17823" inside the USDA seal of inspection and a use by/freeze by date between "12/15/05" and "12/22/05." Each case bears the code "33003."
Seven to eight-pound vacuum packed packages of "RALEY'S BEL AIR FINE MEATS SPIRAL SLICED HAM, HICKORY SMOKED, HONEY CURED, FULLY COOKED WITH NATURAL JUICES." Each package includes the establishment number, "EST. 17823" inside the USDA seal of inspection and a use by/freeze by date between "11/4/05" and "12/29/05." Each case bears the code "37003."
17 to 19-pound vacuum packed packages of "SUNNYVALLEY BRAND HONEY CURED, SPIRAL CUT HAM WITH NATURAL JUICES, FULLY COOKED READY TO EAT." Each package includes the establishment number, "EST. 17823" inside the USDA seal of inspection and a use by/freeze by date between "10/13/05" and "12/13/05." Each case bears the code "37004."
Seven to eight-pound vacuum packed packaged of "SUNNYVALLEY BRAND HONEY CURED, SPIRAL CUT HAM WITH NATURAL JUICES, FULLY COOKED READY TO EAT." Each package includes the establishment number, "EST. 17823" inside the USDA seal of inspection and a use by/freeze by date between "10/13/05" and "12/13/05." Each case bears the code "37005."
18 to 20-pound vacuum packed packages of "SUNNYVALLEY BRAND HONEY CURED SPIRAL CUT HAM WITH NATURAL JUICES, FULLY COOKED READY TO EAT." Each package includes the establishment number, "EST. 17823" inside the USDA seal of inspection and a use by/freeze by date between 11/4/05 and 12/29/05. Each case bears the code "37006."
The products were sold to retail stores and restaurant suppliers in California, Nevada and Oregon.
FSIS has had no reports of illness due to consumption of these products. Anyone concerned about an allergic reaction should contact a physician.
Consumers with food safety questions can call the toll-free USDA Meat and Poultry Hotline at (888) 674-6854. The hotline is available in English and Spanish and can presently be reached 24 hours a day.
Thursday, October 06, 2005
Government, Wal-Mart Recall Holiday Candles
Wal-Mart has joined with the U.S. Consumer Product Safety Commission to voluntarily recall nearly 50,000 holiday candles because the decorations on the candle can ignite.
The candles were sold at Wal-Mart locations between September 2004 and January 2005 under the name "Holiday Time" and manufactured by Dan Dee International of New Jersey. According to Wal-Mart, there have been six reported incidents of the candles catching fire, including two that resulted in property damage in the thousands of dollars.
Wal-Mart advised consumers that they should immediately stop using the candles and return them to Wal-Mart for a full refund.
Wal-Mart has joined with the U.S. Consumer Product Safety Commission to voluntarily recall nearly 50,000 holiday candles because the decorations on the candle can ignite.
The candles were sold at Wal-Mart locations between September 2004 and January 2005 under the name "Holiday Time" and manufactured by Dan Dee International of New Jersey. According to Wal-Mart, there have been six reported incidents of the candles catching fire, including two that resulted in property damage in the thousands of dollars.
Wal-Mart advised consumers that they should immediately stop using the candles and return them to Wal-Mart for a full refund.
Wednesday, October 05, 2005
Even Consumer Help Web Not Immune From Scam Attempts
Even Consumer Help Web is not immune to scammers'attempts.
A recent voice mail message requested us to contact a "Mr. Nelson, Charlie Nelson." When the call was returned by CHW management, "Charlie Nelson" was "called from a briefing" to answer the phone. CHW was solicited to help the Fairfax County Police Association's "youth foundation for drug prevention" by donating money to them. In return our company would be mentioned in a "42 page full color police yearbook" which would be distributed to "every business in the county" as well as to "each and every police officer." CHW would also receive car decals so police would be aware of our company's support.
Prices were quoted in a descending order for a "full page ad' down to a "business card size ad." If the smallest size was ordered today, the next largest size would be added free. Prices ranged from $975 to $145. It was very hard sell.
When CHW requested written information be sent to us, "Mr. Nelson" refused, stating that only "the bad guys" or scammers sent written information. "The Fairfax County Police Association spends the money on the youth foundation, not on mailings," he said.
CHW contacted the FCPA's website, which had no information regarding any "yearbook" and no mention of a "Charlie Nelson". CHW further contacted the Fairfax County Police Department at Sully Station, to be told this was indeed a scam. Officer Funston informed us that the FCPA, a legitimate organization, does not request money from the public. She told CHW to avoid scams such as these, call and verify the information with officials prior to donating or paying money. She told us that no decal would prevent an officer from enforcing the law. "If you break the law, you break the law, " she said, "But if you are nice about it to the officer, it may help."
Officer Funston also recommended registering with the nationwide "Do Not Call" registry to help avoid these scam attempts.
Needless to say, Consumer Help Web will be missing from this alleged "yearbook."
Even Consumer Help Web is not immune to scammers'attempts.
A recent voice mail message requested us to contact a "Mr. Nelson, Charlie Nelson." When the call was returned by CHW management, "Charlie Nelson" was "called from a briefing" to answer the phone. CHW was solicited to help the Fairfax County Police Association's "youth foundation for drug prevention" by donating money to them. In return our company would be mentioned in a "42 page full color police yearbook" which would be distributed to "every business in the county" as well as to "each and every police officer." CHW would also receive car decals so police would be aware of our company's support.
Prices were quoted in a descending order for a "full page ad' down to a "business card size ad." If the smallest size was ordered today, the next largest size would be added free. Prices ranged from $975 to $145. It was very hard sell.
When CHW requested written information be sent to us, "Mr. Nelson" refused, stating that only "the bad guys" or scammers sent written information. "The Fairfax County Police Association spends the money on the youth foundation, not on mailings," he said.
CHW contacted the FCPA's website, which had no information regarding any "yearbook" and no mention of a "Charlie Nelson". CHW further contacted the Fairfax County Police Department at Sully Station, to be told this was indeed a scam. Officer Funston informed us that the FCPA, a legitimate organization, does not request money from the public. She told CHW to avoid scams such as these, call and verify the information with officials prior to donating or paying money. She told us that no decal would prevent an officer from enforcing the law. "If you break the law, you break the law, " she said, "But if you are nice about it to the officer, it may help."
Officer Funston also recommended registering with the nationwide "Do Not Call" registry to help avoid these scam attempts.
Needless to say, Consumer Help Web will be missing from this alleged "yearbook."
Tuesday, October 04, 2005
IRS Issues Warning About Fake Katrina Charities
The Internal Revenue Service today issued a consumer alert about possible scams taking place in the wake of Hurricane Katrina and other recent natural disasters.
Such fraudulent schemes may be perpetrated through the telephone, Internet, e-mail or in-person solicitations. The IRS cautions hurricane victims and people wishing to make disaster-related charitable donations to avoid unscrupulous scam artists by following these tips:
The IRS has established a toll-free disaster assistance telephone number,
1-866-562-5227, specifically for hurricane victims. Whenever a matter involves tax relief or tax refunds, the first step a disaster victim should take is to call the IRS.
For others, donate to recognized charities.
Be wary of charities with names that sound like familiar or nationally known organizations. Some phony charities use names or Web sites that sound or look like those of respected, legitimate organizations. The IRS Web site at IRS.gov has a search feature that allows people to find legitimate, qualified charities to which donations may be tax-deductible. Legitimate charities may also be found on the Federal Emergency Management Agency (FEMA) Web site at fema.gov.
Don’t give out personal financial information — such as Social Security numbers or credit card and bank account numbers and passwords — to anyone who solicits a contribution from you. Scam artists use this information to steal your identity and financial resources.
Don’t give or send cash. For security and tax record purposes, contribute by check or credit card. Write the official name of the charity on your check.
“We encourage people to be prudent when they are solicited for disaster donations,” said IRS Commissioner Mark W. Everson. “Don’t be taken in by scam artists more interested in lining their pockets than helping others.”
Scam artists can use a variety of tactics. For example, some scammers operating bogus charities may contact members of the public by telephone to solicit money or financial information. In some cases, they may contact disaster victims and, claiming to be working for or on behalf of the IRS to help the victims file amended tax returns to receive tax refunds, attempt to get personal financial information or Social Security numbers that can be used to steal the victims’ identities or financial resources.
The IRS does not ask for personal identifying or financial information in unsolicited telephone calls or mail or via e-mail. Call the IRS toll-free number if you have any doubts as to whether someone is an IRS employee or to verify any information about taxes.
Additionally, bogus Web sites are currently soliciting funds for disaster victims, according to federal law-enforcement agencies. Such fraudulent sites frequently mimic the sites of, or use names similar to, legitimate charities, or claim to be affiliated with legitimate charities, in order to persuade members of the public to send money or provide personal financial information that can be used to steal identities or financial resources.
Members of the public may also have received e-mails that steer the recipient to bogus Web sites that sound as though they are affiliated with legitimate charitable causes.
Taxpayers suspecting disaster-related frauds can:
Report the fraudulent use of the IRS name to the Treasury Inspector General for Tax Administration (TIGTA) at 1-800-366-4484.
Report other fraudulent contacts either to the Federal Bureau of Investigation (FBI) at 1-800-CALL-FBI (1-800-225-5324) or to the Federal Trade Commission's (FTC) Consumer Response Center at 1-877-FTC-HELP (1-877-382-4357) (TTY/TDD 202-326-2502).
The Internal Revenue Service today issued a consumer alert about possible scams taking place in the wake of Hurricane Katrina and other recent natural disasters.
Such fraudulent schemes may be perpetrated through the telephone, Internet, e-mail or in-person solicitations. The IRS cautions hurricane victims and people wishing to make disaster-related charitable donations to avoid unscrupulous scam artists by following these tips:
The IRS has established a toll-free disaster assistance telephone number,
1-866-562-5227, specifically for hurricane victims. Whenever a matter involves tax relief or tax refunds, the first step a disaster victim should take is to call the IRS.
For others, donate to recognized charities.
Be wary of charities with names that sound like familiar or nationally known organizations. Some phony charities use names or Web sites that sound or look like those of respected, legitimate organizations. The IRS Web site at IRS.gov has a search feature that allows people to find legitimate, qualified charities to which donations may be tax-deductible. Legitimate charities may also be found on the Federal Emergency Management Agency (FEMA) Web site at fema.gov.
Don’t give out personal financial information — such as Social Security numbers or credit card and bank account numbers and passwords — to anyone who solicits a contribution from you. Scam artists use this information to steal your identity and financial resources.
Don’t give or send cash. For security and tax record purposes, contribute by check or credit card. Write the official name of the charity on your check.
“We encourage people to be prudent when they are solicited for disaster donations,” said IRS Commissioner Mark W. Everson. “Don’t be taken in by scam artists more interested in lining their pockets than helping others.”
Scam artists can use a variety of tactics. For example, some scammers operating bogus charities may contact members of the public by telephone to solicit money or financial information. In some cases, they may contact disaster victims and, claiming to be working for or on behalf of the IRS to help the victims file amended tax returns to receive tax refunds, attempt to get personal financial information or Social Security numbers that can be used to steal the victims’ identities or financial resources.
The IRS does not ask for personal identifying or financial information in unsolicited telephone calls or mail or via e-mail. Call the IRS toll-free number if you have any doubts as to whether someone is an IRS employee or to verify any information about taxes.
Additionally, bogus Web sites are currently soliciting funds for disaster victims, according to federal law-enforcement agencies. Such fraudulent sites frequently mimic the sites of, or use names similar to, legitimate charities, or claim to be affiliated with legitimate charities, in order to persuade members of the public to send money or provide personal financial information that can be used to steal identities or financial resources.
Members of the public may also have received e-mails that steer the recipient to bogus Web sites that sound as though they are affiliated with legitimate charitable causes.
Taxpayers suspecting disaster-related frauds can:
Report the fraudulent use of the IRS name to the Treasury Inspector General for Tax Administration (TIGTA) at 1-800-366-4484.
Report other fraudulent contacts either to the Federal Bureau of Investigation (FBI) at 1-800-CALL-FBI (1-800-225-5324) or to the Federal Trade Commission's (FTC) Consumer Response Center at 1-877-FTC-HELP (1-877-382-4357) (TTY/TDD 202-326-2502).
Monday, October 03, 2005
Superior Mortgage Settles FTC Charges
Superior Mortgage Corp., a lender with 40 branch offices in 10 states and multiple Web sites, has agreed to settle Federal Trade Commission charges that it violated federal law by failing to provide reasonable security for sensitive customer data and falsely claiming that it encrypted data submitted online. The settlement bars future deceptive claims and requires the company to establish data security procedures that will be reviewed by independent third-party auditors for 10 years.
The FTC’s Safeguards Rule, enacted under the Gramm-Leach-Bliley Act, requires financial institutions, including lenders like Superior, to implement reasonable policies and procedures to ensure the security and confidentiality of sensitive customer information. Superior maintained customers’ Social Security numbers, credit histories, and credit card numbers, among other sensitive information. The FTC complaint alleges that Superior violated the Safeguards Rule because it:
Failed to assess risks to its customer information until more than a year after the Safeguards Rule took effect;
Failed to implement appropriate password policies to limit access to company systems and documents containing sensitive customer information;
Did not encrypt or otherwise protect sensitive customer information before sending it by e-mail; and
Failed to ensure that its service providers were providing appropriate security for customer information and addressing known security risks in a timely manner.
The FTC also alleged that despite Superior’s claims that sensitive personal information collected at its www.supmort.com Web site was encrypted using secure socket layer technology, the information was only encrypted while it was being transmitted between a visitor’s web browser and the Web site’s server. Once the information was received at the Web site, it was decrypted and e-mailed to Superior’s headquarters and branch offices in clear, readable text. The agency alleged that these claims were deceptive and violated the FTC Act.
The settlement bars Superior from misrepresenting the extent to which it maintains and protects the privacy, confidentiality, or security of any personal information collected from or about consumers, and prohibits violations of the Safeguards Rule. The settlement also requires that Superior hire an independent, third-party auditor to assess its security procedures every two years for the next 10 years, and to certify that these procedures meet or exceed the protections required by the Safeguards Rule. The settlement also contains certain record keeping requirements to allow the FTC to monitor compliance.
Superior Mortgage Corp. is based in Tuckerton, New Jersey. It has offices in New Jersey, Pennsylvania, Florida, Virginia, Maryland, North Carolina, Connecticut, Indiana, and Delaware.
NOTE: Consent agreements are for settlement purposes only and do not constitute an admission by the defendant of a law violation.
Superior Mortgage Corp., a lender with 40 branch offices in 10 states and multiple Web sites, has agreed to settle Federal Trade Commission charges that it violated federal law by failing to provide reasonable security for sensitive customer data and falsely claiming that it encrypted data submitted online. The settlement bars future deceptive claims and requires the company to establish data security procedures that will be reviewed by independent third-party auditors for 10 years.
The FTC’s Safeguards Rule, enacted under the Gramm-Leach-Bliley Act, requires financial institutions, including lenders like Superior, to implement reasonable policies and procedures to ensure the security and confidentiality of sensitive customer information. Superior maintained customers’ Social Security numbers, credit histories, and credit card numbers, among other sensitive information. The FTC complaint alleges that Superior violated the Safeguards Rule because it:
Failed to assess risks to its customer information until more than a year after the Safeguards Rule took effect;
Failed to implement appropriate password policies to limit access to company systems and documents containing sensitive customer information;
Did not encrypt or otherwise protect sensitive customer information before sending it by e-mail; and
Failed to ensure that its service providers were providing appropriate security for customer information and addressing known security risks in a timely manner.
The FTC also alleged that despite Superior’s claims that sensitive personal information collected at its www.supmort.com Web site was encrypted using secure socket layer technology, the information was only encrypted while it was being transmitted between a visitor’s web browser and the Web site’s server. Once the information was received at the Web site, it was decrypted and e-mailed to Superior’s headquarters and branch offices in clear, readable text. The agency alleged that these claims were deceptive and violated the FTC Act.
The settlement bars Superior from misrepresenting the extent to which it maintains and protects the privacy, confidentiality, or security of any personal information collected from or about consumers, and prohibits violations of the Safeguards Rule. The settlement also requires that Superior hire an independent, third-party auditor to assess its security procedures every two years for the next 10 years, and to certify that these procedures meet or exceed the protections required by the Safeguards Rule. The settlement also contains certain record keeping requirements to allow the FTC to monitor compliance.
Superior Mortgage Corp. is based in Tuckerton, New Jersey. It has offices in New Jersey, Pennsylvania, Florida, Virginia, Maryland, North Carolina, Connecticut, Indiana, and Delaware.
NOTE: Consent agreements are for settlement purposes only and do not constitute an admission by the defendant of a law violation.
