Last year, Alan Masarek made news as he left Google to become Vonage’s new CEO.
Orange County, CA, March 13, 1996 (DLD DIGEST) -- A federal district court has ordered a temporary halt to the allegedly deceptive "toner phoner" scheme run by seven corporations and eight individuals, doing business under the names of District Supply Center, Central Supply Center, and National Supply Center ("Supply Center"). The order follows Federal Trade Commission charges that the defendants obtained orders by falsely representing to businesses nationwide that Supply Center was their regular supplier of photocopier toner and that there was an increase in the price of the toner. In some cases, the defendants shipped and billed the businesses for unordered products and tacked on substantial freight and handling charges. At the FTC's request, the court also has frozen the defendants' assets to preserve funds for possible redress, and appointed a receiver to manage the defendants' business operations.
This is another in a series of FTC cases involving "toner phoner" telemarketers -- telemarketers that victimize small businesses by shipping and charging them exorbitant prices for unordered photocopier toner and other office supplies. As a word of caution to small businesses, Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection advises that if "companies receive merchandise that they did not order, they should first check their records to be sure that the merchandise was not ordered by the company, then treat the unordered merchandise as a free gift."
The FTC's complaint detailing the allegations in this case names as defendants MTK Marketing, Inc.; Nationwide Transport, Inc.; Copy Resource Center, Inc.; Intel Marketing of California, Inc.; Telco Marketing, Inc.; Paragon Shipping, Inc.; and Acacia Properties, Inc. The individual defendants are Dennis Connelly; Sam June; Erick Graziano, also known as Eric Knight; Donald Ryan; Donna Green; Colleen McCullough; Jeanine Dora; and James Rem. All seven of the companies are based in Orange County, California.
According to the Commission's complaint, the defendants used telemarketers to sell photocopier toner to businesses nationwide. In the course of soliciting sales, the defendants' representative typically represented that they were the customer's regular supplier. In fact, the FTC charged, the defendants had no affiliation with the customer's regular supplier nor with their original equipment manufacturer. According to the complaint, the sales representative would tell the customer that there had been a price increase in the product or that an increase was about to occur, and would urge the customer to place one last order at the "old" price. The price of the defendants' toner typically was several times higher than prices of comparable products, the complaint alleges.
In addition, the complaint alleges that after one order was placed, the defendants told customers that their order consisted of multiple shipments and that the customer was obligated to accept and pay for the additional shipments which was not true. The defendants also shipped unordered products to the businesses and invoiced them as though the businesses had ordered the products, the FTC alleged. Finally, the complaint alleges that the defendants quoted a price to customers but failed to disclose that a substantial charge would be added to the invoices for freight and handling.
The FTC's complaint asks the court to order a permanent halt to the alleged deceptive practices and to order that redress be paid for injured customers.
The Commission vote to file the complaint was 5-0. The complaint was filed in the U.S. District Court for the Central District of California, in Santa Ana, on March 7, 1996 under seal. The seal was lifted on today. A hearing on the FTC's request for a preliminary injunction continuing the conduct prohibitions and asset freeze is scheduled for March 18. The FTC's Los Angeles Regional Office handled the investigation with assistance from the Orange County
District Attorney’s Office, the Newport Beach Police Department, the Mendocino County District Attorney, the Ukiah Police Department, Sonoma County District Attorney, the Santa Rosa Police Department, and the Better Business Bureau.
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 defendants have actually violated the law. The case will be decided by the court.
Copies of the FTC's complaint are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 202-326-2502. To find out the latest FTC news as it is announced, call the FTC's NewsPhone recording at 202-326-2710.
(FTC File No. 962 3054)
(Civil Action No. 96-230 LHM (EEX)
(C) 1996 VANTEK COMMUNICATIONS