FTC settles with 'boiler room' marketers

IDG News Service - The Results Group LLC, a telemarketing firm that sold Web site services, has been banned from further phone sales and will return $435,000 to customers under a settlement with the Federal Trade Commission.

The company, based in Phoenix, and its owners will also give up the proceeds from the sale of luxury cars and a Las Vegas real estate deal in the settlement, which the FTC announced Tuesday. The U.S. District Court for the District of Arizona approved the settlement Monday.

The operation, which the FTC called a "boiler room," charged customers between $99 and $599 to build and host Web sites supposedly affiliated with the Web sites of large online retailers such as Amazon.com Inc. and Overstock.com Inc. Supposedly, customers would make money when those retailers paid commissions for sales made through the consumers' Web sites, the FTC said in its complaint.

The defendants claimed that tens of thousands of Web users would be driven by advertisements to click on the Web sites, the FTC said.

After customers purchased the business system, company employees, calling themselves "business coaches," would call and pressure them to spend more money on advertising. The Results Group coaches said the advertising was necessary to make the business successful, the FTC said.

For many customers, the contact from the business coaches was the first time they heard that the business was not a "turn-key" operation, as promised, the FTC said.

The defendants misrepresented that consumers who purchased their business system were likely to earn a substantial income with little risk, the FTC said. The company claimed that some of their customers were making more than $50,000 per month in commissions, but most customers never earned any income, the agency said.

The settlement with The Results Group, Edward R. Longoria and Amber R. Halverson bans all three defendants from telemarketing. The order contains a $19.5 million judgment that will be suspended based on their sworn financial statements. If the FTC finds that the defendants misrepresented their financial status, or if they fail to make the payments to customers agreed to in the order, then the full amount will be due.