FTC, DOJ crack down on money-making schemes

A yearlong sweep targeting bogus employment and money-making schemes has resulted in more than 90 law enforcement and civil actions, including a restraining order against a company that made US$40 million by promising customers it would help them build Web-based businesses, U.S. agencies announced Wednesday.

The Operation Empty Promises enforcement effort has led to three new cases and developments in seven other cases at the U.S. Federal Trade Commission, 48 criminal enforcement actions at the U.S. Department of Justice, seven civil actions at the U.S. Postal Inspection Service and 28 actions by state law enforcement agencies, the agencies announced.

"The victims of these frauds are our neighbors -- people who are trying to make an honest living," David Vladeck, director of the FTC's Bureau of Consumer Protection, said during a press conference. "Under pressure to make ends meet, they risked their limited financial resources in response to the promise of a job, an income, a chance at a profitable home-based business. But these turned out to be empty promises."

Among the companies targeted was Ivy Capital, which promised customers assistance in setting up Web-based businesses in exchange for fees of up to $20,000, the FTC said. Ivy Capital's business coaching services offered "worthless babble," and customers encountered "endless technical difficulties" with software the company sold, Vladeck said.

Ivy Capital, which promised customers earnings of $3,000 to $10,000 a month, pledged that customers would receive help from business lawyers and accountants, but they were "no shows," Vladeck added.

The FTC filed a complaint against Ivy Capital and 29 other defendants in U.S. District Court for the District of Nevada on Feb. 22. The court has frozen the company's assets and issued a temporary restraining order against its business practices.

IDG News Service was unable to reach Ivy Capital for comment. An unrelated venture capital firm operates at IvyCapital.com.

Ivy Capital's telemarketers called people who responded to e-mail and advertising about work-at-home or Internet business opportunities from fictional companies created to generate sales leads, the FTC said. During telephone calls that could last for longer than an hour, Ivy Capital's telemarketers used high-pressure sales and promised large profits for as little as five to 10 hours of work a week, the FTC said.

Shortly after signing up for the program, consumers received sales calls from companies affiliated with Ivy Capital offering additional business services, including access to credit, expert tax advice, and other services that could cost thousands of dollars in addition to the original fee.

Tom Bernard, who was laid off from his job in 2009, said he responded to an e-mail from Ivy Capital in June 2009. After paying more than $6,800 for the company's services, Ivy persuaded him to pay an additional $5,600 for business credit services, he said at the press conference. "I felt this was a way to tide me over," said Bernard, now living in California.

Ivy told him he could get a business loan for the startup funding, but Ivy put all the fees on his credit card, Bernard said. When he tried to cancel the services, Ivy resisted, eventually offering him $400 for full refund, he said.

The FTC also announced that it has filed a complaint in U.S. District Court for the Northern District of Illinois, Eastern Division against National Sales Group, I Life Marketing and two other defendants, who allegedly advertised nonexistent sales jobs with good pay and benefits on CareerBuilder.com and other online job boards.

The companies' telemarketers falsely told consumers the company recruited for Fortune 1000 employers, the FTC said.

The defendants charged fees they said covered background checks and other services, but often overcharged by billing $97 to customers who had agreed to pay $29 or $38, the agency said. The defendants also charged some customers recurring fees of $13.71 or more per month without their consent.

The operation has generated more than 17,000 complaints to law enforcement agencies, online forums and job boards, and took $8 million from consumers, the FTC said. CareerBuilder.com dropped the company from its website due to complaints.

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is grant_gross@idg.com.

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