F.T.C. v. Pacific First Benefit, LLC
| Decision Date | 11 January 2007 |
| Docket Number | No. 02 C 8678.,02 C 8678. |
| Citation | 472 F.Supp.2d 974 |
| Parties | FEDERAL TRADE COMMISSION, Plaintiff, v. PACIFIC FIRST BENEFIT, LLC Key Nation Benefit, LLC First Federal Benefit, LLC, Federal Credit Services, Limited, and Alex Orphanou, Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
Karen D. Dodge, John Campbell Hallerud, Federal Trade Commission, Assistant Regional Director, Chicago, IL; for Plaintiff.
Sally H. Saltzberg, Michael S Fiorentino, P. Michael Loftus, Loftus & Saltzberg, P.C., Chicago, IL, for Defendants.
Before the court are Plaintiff's Motion for Summary Judgment against Defendant Alex Orphanou and Plaintiffs Motion for Entry of Monetary Judgment against the Corporate Defendants. For the following reasons, the Motions are granted.
Plaintiff Federal Trade Commission ("FTC" or "the Commission") brings this action against Defendants Pacific First Benefit, LLC, Key Nation Benefit, LLC, First Federal Benefit, LLC, Federal Credit Services, Limited, ("the Companies"), and Alex Orphanou ("Orphanou"). Plaintiff FTC is an independent agency of the United States Government, created by federal statute. The FTC, inter alia, enforces Section 5(a) of the FTC Act, which provides in part that "[u]nfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are hereby declared unlawful." 15 U.S.C. § 45(a)(1). The FTC also enforces the Telemarketing Sales Rule ("TSR"), which prohibits deceptive or abusive telemarketing practices. 16 C.F.R. §§ 310.3-4. The Commission is authorized by statute to bring actions in the federal district court which seek to enjoin violations of the FTC Act and the TSR, and to obtain restitution or other relief for injured consumers. 15 U.S.C. §§ 53(b), 57b, 6102(c), and 6105(b). Defendant Companies are all owned and controlled by individual Defendant Orphanou, and are all corporations registered in the state of Delaware, with their offices located at 164 Eglinton Avenue East, Suite 200, Toronto, Canada.
In support of its Motion for Summary Judgment, the FTC has submitted uncontroverted deposition testimony, uncontroverted declarations, answers to various interrogatories, documentation in the form of, inter alia, letters from consumers to the Companies complaining of Defendants' actions, consumer complaints directed to the Better Business Bureau complaining of Defendants' actions, correspondence from various state Attorneys General Offices and Consumer Affairs Departments directed to Defendants, scripts used by Defendants' telemarketers, and sample pages from the "benefits package" sent to consumers. This uncontroverted evidence establishes the following. Since at least February 1999, and continuing until sometime in 2002, employees of the Companies made unsolicited telephone calls to American consumers (no Canadian consumers were targeted), including consumers in the Northern District of Illinois. These consumers were targeted by the Defendants because of their low or bad credit ratings. During the telephone calls, Defendants' employees would offer to provide consumers with pre-approved, low interest Mastercard or Visa credit cards, with guaranteed credit lines of up to $5,000, if the consumer would agree to permit Defendants to debit their bank accounts for a fee ranging from $175 to $199. Defendants' employees would ask the consumers for bank account numbers and routing information, then debit the accounts later. However, no consumer ever received a pre-approved credit card from Defendants. In fact, Defendants were not even authorized by Mastercard or Visa to issue credit cards.
Instead, the consumers who fell victim to this scam received an essentially worthless packet of materials (the "benefits package") which included information about credit and finances and how to obtain credit and repair bad credit, various offers of discount shopping and vacations, and advice concerning how to avoid financial and credit card fraud (Defendants' maleficent sense of irony is not lost on the court). These packets also included forms that appeared to be credit card applications. These "applications" asked consumers to provide personal information such as social security numbers and employment history. Consumers were to return these "applications" to Defendants, who promised to forward these "applications" to financial institutions that would issue credit cards to the consumers. Consumers who returned these "applications" never received credit cards. The FTC estimates that over 40,000 United States consumers, including some in the Northern District of Illinois, were defrauded of $8,463,728.00. The Commission brings this action to, inter alia, obtain an injunction permanently halting Defendants from continuing this scam, and to obtain restitution for consumers defrauded by the Defendants.
This civil action, however, is far from the worst of Orphanou's problems. In December 2001, the United States Attorney for the Middle District of Pennsylvania and the Royal Canadian Mounted Police, along with the United States Postal Service and the FTC, began an investigation into whether the Defendants' actions had violated criminal laws. Since then, Orphanou has been the subject of an ongoing criminal investigation into whether he has violated the criminal laws of the United States, specifically 18 U.S.C. § 1341 (mail fraud), § 1343 (wire fraud), and § 371 ().
The FTC filed its Complaint against the Defendants on December 2, 2002, alleging violations of the FTC Act and the TSR. On December 16, 2002, the court entered a Stipulated Order which, inter alia, required Defendants to cease and desist all fraudulent conduct, and froze Defendants' assets. On October 8, 2003, the FTC filed its Motion to Compel Production of Documents and Answers to Interrogatories. In this Motion, the FTC asked the court to compel Orphanou to produce certain documents and other evidence. The court initially denied this Motion, but eventually ordered that Orphanou produce the requested evidence. See FTC v. Pacific First Benefit, LLC, 361 F.Supp.2d 751 (N.D.Ill.2005). Counsel for Defendants, however, refused to produce this evidence, citing Orphanou's Fifth Amendment privilege against self-incrimination. On May 5, 2005, the court granted the FTC's motion to preclude Orphanou from using these documents and other evidence in the instant litigation. On that same date, the court entered an Order for Permanent Injunction and Judgment as to Liability against the corporate Defendants.
On January 4, 2006, the FTC moved for Summary Judgment against Orphanou, and for a Monetary Judgment against the corporate Defendants. The FTC's Motion was appropriately accompanied by a Memorandum of Law in Support of the Motion, a Local Rule ("LR") 56.1 Statement of Material Facts, and various exhibits. On February 10, 2006, Orphanou, through counsel, submitted his Response to the FTC's Motion for Summary Judgment. This Response, in its entirety, reads: The Commission's Motion for Summary Judgment is fully briefed and before the court.
Summary judgment is permissible when "there is no genuine issue as to any material fact and ... the moving party is entitled to judgment as a matter of law." FED. R. CIV. P. 56(c). The nonmoving party cannot rest on the pleadings alone, but must identify specific facts, see Cornfield v. Consolidated High Sch. Dist. No. 230, 991 F.2d 1316, 1320 (7th Cir.1993), that raise more than a mere scintilla of evidence to show a genuine triable issue of material fact. See Murphy v. ITT Educational Services, Inc., 176 F.3d 934, 936 (7th Cir.1999).
In deciding a motion for summary judgment, the court can only consider evidence that would be admissible at trial under the Federal Rules of Evidence. See Bombard v. Fort Wayne Newspapers, Inc., 92 F.3d 560, 562 (7th Cir.1996). The court views the record and all reasonable inferences drawn therefrom in the light most favorable to the nonmoving party. FED. R. CIV. P. 56(c); see also Perdomo v. Browner, 67 F.3d 140, 144 (7th Cir.1995). "In the light most favorable" simply means that summary judgment is not appropriate if the court must make "a choice of inferences." See United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962); see also First Nat'l Bank of Ariz. v. Cities Service Co., 391 U.S. 253, 280, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968); Wolf v. Buss (America) Inc., 77 F.3d 914, 922 (7th Cir.1996). The choice between reasonable inferences from facts is a jury function. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
When a party moves for summary judgment, the court must view the record and all inferences in a light most favorable to the nonmoving party. Ameritech Benefit Plan Comm. v. Communication Workers of Am., 220 F.3d 814, 821 (7th Cir.2000). However, the inferences construed in the nonmoving party's favor must be drawn from specific facts identified in the record that support that party's position. Waldridge v. Am. Hoechst Corp., 24 F.3d 918, 922-23 (7th Cir.1994). Under this standard, "[c]onclusory allegations alone cannot defeat a motion for summary judgment." Thomas v. Christ Hospital and Medical Center, 328 F.3d, 890, 892-93 (7th Cir.2003)(citing Lujan v. Nat'l Wildlife Federation, 497 U.S. 871, 888-89, 110 S.Ct. 3177, 111 L.Ed.2d 695 (1990)).
As the court has noted, Defendants have failed to file any substantive Response to ...
To continue reading
Request your trial
-
Fed. Trade Comm'n v. Day Pacer LLC
...raise a number of legal challenges to the TSR itself, which the Court will address before turning to the substance of the FTC's claims. First, Defendants challenge the FTC's authority to bring action to enforce the TSR on the basis that the FTC does “not maintain the requisite person specif......
-
Fed. Trade Comm'n v. NHS Sys., Inc.
...Sept. 28, 1992) (quoting CFTC v. Co Petro Mktg. Grp., Inc., 502 F.Supp. 806, 818 (C.D.Cal.1980)); see also FTC v. Pac. First Benefit, LLC, 472 F.Supp.2d 974, 981 (N.D.Ill.2007) (finding a case where defendants “used deceptive acts and practices to defraud consumers of millions of dollars,” ......