Federal Trade Commission v. Health Care One LLC et al

Filing 57

PRELIMINARY INJUNCTION by Judge James V. Selna, WITH ASSET FREEZE, APPOINTMENT OF PERMANENT RECEIVER, AND OTHER EQUITABLE RELIEF AGAINST DEFENDANTS HEALTH CARE ONE LLC, AMERICANS4HEALTHCARE INC., AND MICHAEL ELLMAN: (See document for further details. ) XXII. CORRESPONDENCE: IT IS FURTHER ORDERED that, for the purposes of this Order, all correspondence and service of pleadings on Plaintiff shall be addressed to: Faye Chen Barnouw, Barbara Y.K. Chun, and John D. Jacobs, Federal Trade Commission,108 77 Wilshire Blvd., Suite 700, Los Angeles, CA 90024, Fax: [phone], E-mail: [e-mail], [e-mail], and [e-mail]; XXIII. SERVICE OF THIS ORDER: IT IS FURTHER ORDERED that copies of this Order may be served by any means, including facsimile transmission, upon any financial institution or other entity or person that may have possession, custody, or control of any documents or assets of any Defendant, or that may be subject to any provision of this Order. SO ORDERED: (rla)

-RNB Federal Trade Commission v. Health Care One LLC et al

Doc. 57

1 FAYE CHEN BARNOUW, CA Bar No. 168631 BARBARA CHUN, CA Bar No. 186907 2 JOHN D. JACOBS, CA Bar No. 134154 e-mail: [e-mail]; [e-mail]; 3 and [e-mail] FEDERAL TRADE COMMISSION 4 10877 Wilshire Blvd., Suite 700 s 5 LoleAngeles, CA 90024 Te phone: [phone] Facsimile: [phone] 7 Attorneys for Plaintiff FEDERAL TRADE COMMISSION 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 FEDERAL TRADE COMMISSION, v. Plaintiff, Case no. SACV10-1161-JVS-RNBx UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

PRELIMINARY INJUNCTION WITH ASSET FREEZE, APPOINTMENT OF HEALTH CARE ONE LLC, an Arizona PERMANENT RECEIVER, AND limited liability company, also d/b/a OTHER EQUITABLE RELIEF "HealthcareOne," "Americans4 AGAINST DEFENDANTS Healthcare," "Citizens4Healthcare," HEALTH CARE ONE LLC, "American Eagle Healthcare," AMERICANS4HEALTHCARE INC., "EasyLife Healthcare," "Elite AND MICHAEL ELLMAN Healthcare," "Global Healthcare," and "Republic Healthcare"; AMERICANS4HEALTHCARE INC., a Delaware corporation; MICHAEL JAY ELLMAN, an individual; ELITE BUSINESS SOLUTIONS, INC., a Nevada corporation, also d/b/a "EasyLife Healthcare," "Elite Healthcare" and "Republic Healthcare"; ROBERT DANIEL FREEMAN, an individual; Defendants.

Dockets.Justia.com

1

On August 3, 2010, Plaintiff Federal Trade Commission ("Commission" or

2 "FTC"), pursuant to Sections 13(b) and 19 of the Federal Trade Commission Act 3 ("FTC Act"), 15 U.S.C. §§ 53(b) and 57b, and the Telemarketing and Consumer 4 Fraud and Abuse Protection Act, 15 U.S.C. §§ 6101-6108, filed a Complaint for a 5 permanent injunction and other equitable relief against Health Care One LLC 6 ("Health Care One"), Americans4Healthcare Inc. ("Americans4Healthcare"), Elite 7 Business Solutions, Inc. ("Elite Business Solutions"), Michael Jay Ellman, and 8 Robert Daniel Freeman (also known as Dan Freeman). Plaintiff concurrently applied 9 ex parte for a Temporary Restraining Order ("TRO"), and for an Order to Show 10 Cause ("OSC") why a preliminary injunction should not be granted and why a 11 permanent receiver should not be appointed over the corporate Defendants. 12 On August 3, 2010, the Court entered a TRO, which would expire on, and 13 scheduled a hearing on the OSC for, August 13, 2010. On August 11, 2010, the 14 Court extended the TRO for good cause shown through, and rescheduled the OSC 15 hearing for, August 27, 2010. 16 On August 23, 2010, the Court entered a stipulated preliminary injunction 17 against Defendants Elite Business Solutions, Inc., and Robert Daniel Freeman, and 18 appointed Thomas W. McNamara as permanent receiver over Elite Business 19 Solutions, Inc., and Freeman's affiliated entities, including Mile High Enterprise, 20 Inc., Freeman Consulting, and Lighthouse Business Solutions LLC. 21 On August 27, 2010, after consideration of the briefs and evidence filed in 22 support of and in opposition to the OSC, and upon good cause shown, the Court 23 granted Plaintiff's application for a preliminary injunction against Defendants Health 24 Care One, Americans4Healthcare, and Michael Ellman and appointment of a 25 permanent receiver over Health Care One, Americans4Healthcare, and Ellman's 26 affiliated entities, including Secure Healthplan Corporation, HCO Marketing Inc., 27 The American Mint, Ltd., Red Carpet Skincare Inc., Quad Digital Corporation, 28 AutoPlanOne Inc., and Magnum Financial Management, Inc. The Court ordered that 2

1 the TRO entered on August 3, 2010 be extended to remain in full force and effect 2 until the entry of the preliminary injunction. 3 5 6 7 FINDINGS OF FACT The Court has considered the Complaint, Plaintiff's Ex Parte Application for For good cause shown, the Court hereby enters this Preliminary Injunction 4 With Asset Freeze, Appointment of Permanent Receiver and Other Equitable Relief:

8 TRO, memorandum of points and authorities, supplemental brief, and evidence filed 9 in support thereof, Defendants' memorandum of points and authorities and evidence 10 filed in opposition thereto, and the Reports filed by the Temporary Receiver, and it 11 appears to the satisfaction of the Court that: 12 1. This Court has jurisdiction of the subject matter of this case. There is 13 also good cause to believe it will have jurisdiction over all parties hereto, and that 14 venue in this district is proper. 15 2. There is good cause to believe that Defendants Health Care One LLC, 16 Americans4Healthcare Inc., and Michael Jay Ellman ("Defendants") have engaged in 17 and are likely to engage in acts that violate Section 5(a) of the FTC Act, 15 U.S.C. 18 § 45(a), and the FTC's Telemarketing Sales Rule, 16 C.F.R. Part 310, and that the 19 Commission is likely to prevail on the merits of this action. 20 3. There is good cause to believe that immediate and irreparable harm will 21 result from Defendants' ongoing violations of the FTC Act unless Defendants are 22 restrained and enjoined by Order of this Court. 23 4. Good cause exists for the appointment of a Permanent Receiver over 24 Corporate Defendants Health Care One LLC, Americans4Healthcare Inc., and 25 Defendant Ellman's affiliated entities, including Secure Healthplan Corporation, 26 HCO Marketing Inc., The American Mint, Ltd., Red Carpet Skincare Inc., Quad 27 Digital Corporation, AutoPlanOne Inc., and Magnum Financial Management, Inc. 28 3

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5.

Considering Plaintiff's likelihood of ultimate success and weighing the

2 equities, a Preliminary Injunction ("Order") with an asset freeze, the appointment of 3 a Permanent Receiver, immediate access, and other equitable relief is in the public 4 interest. 5 7 8 9 10 11 12 1. 2. ORDER DEFINITIONS For purposes of this Order, the following definitions shall apply: "Plaintiff" means the Federal Trade Commission. "Defendants" means Defendants Health Care One LLC; 6. No security is required of any agency of the United States for issuance 6 of a restraining order. Fed. R. Civ. P. 65(c).

13 Americans4Healthcare Inc.; and Michael Jay Ellman, and each of them, by whatever 14 names each might be known by, as well as their successors and assigns, whether 15 acting directly or through any corporation, subsidiary, division, or other device, 16 including, but not limited to, fictitious business names. 17 19 20 3. 4. 5. "Corporate Defendants" refers to Defendants Health Care One LLC "Individual Defendant" refers to Defendant Michael Jay Ellman. "Receivership Defendants" refers to Defendants Health Care One 18 and Americans4Healthcare Inc.

21 LLC, Americans4Healthcare Inc., and Defendant Ellman's affiliated entities, 22 including Secure Healthplan Corporation, HCO Marketing Inc., The American Mint, 23 Ltd., Red Carpet Skincare Inc., Quad Digital Corporation, AutoPlanOne Inc., and 24 Magnum Financial Management, Inc., as well as any successors, assigns, affiliates, 25 and subsidiaries that conduct any business related to the Defendants' "national 26 healthcare discount program" and which the Permanent Receiver has reason to 27 believe are owned or controlled in whole or in part by any of the Defendants. 28 4

1 3 4 5 6 7 8 9 10 11

6.

"Assisting others" means knowingly providing any of the following a. b. performing customer service functions, including, but not limited to, receiving or responding to consumer complaints; or formulating or providing, or arranging for the formulation or provision of, any telephone sales script or any other marketing material; or c. d. providing names of, or assisting in the generation of, potential customers; or performing marketing services of any kind.

2 goods or services to another person or entity:

7.

"Assets" means any legal or equitable interest in, right to, or claim to,

12 any real or personal property, including, without limitation, chattels, goods, 13 instruments, equipment, fixtures, general intangibles, leaseholds, mail or other 14 deliveries, inventory, checks, notes, accounts, credits, contracts, receivables, shares 15 of stock, and all cash, wherever located. 16 8. The term "document" is equal in scope and synonymous in meaning to 17 the terms "document" and "electronically stored information," as described and used 18 in Federal Rule of Civil Procedure 34(a), and includes writings, drawings, graphs, 19 charts, photographs, audio and video recordings, computer records, and any other 20 data compilations from which information can be obtained. A draft or non-identical 21 copy is a separate document within the meaning of the term. 22 24 9. 10. "Material fact" means any fact that is likely to affect a person's choice "Person" means a natural person, organization, or other legal entity, 23 of, or conduct regarding, goods or services. 25 including a corporation, partnership, proprietorship, association, cooperative, or any 26 other group or combination acting as an entity. 27 28 5

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I. PROHIBITED REPRESENTATIONS IT IS THEREFORE ORDERED that Defendants and their successors,

4 assigns, officers, agents, servants, employees, and attorneys, and those persons or 5 entities in active concert or participation with any of them who receive actual notice 6 of this Order by personal service or otherwise, whether acting directly or through any 7 corporation, subsidiary, division, or other device, in connection with the advertising, 8 marketing, promotion, offering for sale or sale of any good or service, are hereby 9 restrained and enjoined from falsely representing, or from assisting others who are 10 falsely representing, any of the following: 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 6 F. E. D. C. B. A. The program that Defendants are selling or marketing is health insurance; The program that Defendants are selling or marketing is affiliated with or endorsed or sponsored by the federal government; Enrollment in the program that Defendants are selling or marketing will result in substantial healthcare savings to the consumers; Consumers who enroll in the program that Defendants are selling or marketing will be able to obtain program benefits from the consumers' current healthcare providers and from other healthcare providers in the consumers' local communities; Defendants will provide a full refund, subject to no or only a nominal processing fee to consumers who enroll in the program that Defendants are selling or marketing, if the consumer submits a cancellation request before the thirty-day trial period expires; and Any other fact material to a consumer's decision to purchase any good or service from Defendants.

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II. PROHIBITION AGAINST VIOLATING THE TELEMARKETING SALES RULE IT IS FURTHER ORDERED that Defendants and their successors, assigns,

5 officers, agents, servants, employees, and attorneys, and those persons or entities in 6 active concert or participation with any of them who receive actual notice of this 7 Order by personal service or otherwise, whether acting directly or through any 8 corporation, subsidiary, division, or other device, in connection with the 9 telemarketing of any good or service, are hereby restrained and enjoined from 10 violating any provision of the Telemarketing Sales Rule, 16 C.F.R. Part 310, 11 including, but not limited to: 12 A. Violating Section 310.3(a)(2)(iii) of the TSR, 16 C.F.R. 13 § 310.3(a)(2)(iii), by misrepresenting, directly or by implication, material aspects of 14 the performance, efficacy, nature, or central characteristics of the program, including 1 5 that: 16 17 18 19 20 21 22 23 24 25 26 27 B. 4. 3. 2. 1. The program that Defendants are selling or marketing is health insurance; Enrollment in the program that Defendants are selling or marketing will result in substantial healthcare savings to the consumer; Consumers who enroll in the program that Defendants are selling or marketing will be able to obtain program benefits from the consumers' current healthcare providers and from other healthcare providers in the consumers' local communities; or Any other fact material to a consumer's decision to purchase any good or service from Defendants; and Violating Section 310.3(a)(2)(iv) of the TSR, 16 C.F.R.

28 § 310.3(a)(2)(iv), by misrepresenting, directly or by implication, material aspects of 7

1 the nature or terms of the seller's refund or cancellation policies, including that 2 Defendants will provide a full refund, subject to no or only a nominal processing fee, 3 if the consumer submits a cancellation request before the thirty-day trial period 4 expires. 5 6 7 9 III. ASSET FREEZE IT IS FURTHER ORDERED that each of the Defendants is hereby A. Transferring, encumbering, selling, concealing, pledging,

8 restrained and enjoined, until further order of this Court, from: 10 hypothecating, assigning, spending, withdrawing, disbursing, conveying, gifting, 11 dissipating, or otherwise disposing of any funds, property, coins, lists of consumer 12 names, shares of stock, or other assets, wherever located, that are (1) owned or 13 controlled by any of the Defendants, in whole or in part; (2) in the actual or 14 constructive possession of any of the Defendants; (3) held by an agent of any of the 15 Defendants, as a retainer for the agent's provision of services to a Defendant; or (4) 16 owned, controlled by, or in the actual or constructive possession of, or otherwise 17 held for the benefit of, any corporation, partnership, or other entity directly or 18 indirectly owned or controlled by any of the Defendants. 19 21 B. C. Opening or causing to be opened any safe deposit boxes titled in the Incurring charges or cash advances on any credit or debit card issued in 20 name of any of the Defendants, or subject to access by any of the Defendants; 22 the name, singly or jointly, of any of the Defendants, or any corporation, partnership, 23 or other entity directly or indirectly owned or controlled by any of the Defendants; 2 4 and 25 D. Failing to disclose to Plaintiff, immediately upon service of this Order, 26 information that fully identifies each asset of the Defendants, and each entity holding 27 such asset, including, without limitation, the entity's name, address, and telephone 28 number, the number of the account, and the name under which the account is held. 8

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Provided, that the freeze imposed in this Section shall be construed to not

2 apply to assets that the Individual Defendant acquires following service of this Order 3 if the Individual Defendant can prove that such assets are not derived from activity 4 prohibited by this Order. 5 6 7 9 IV. FINANCIAL REPORTS IT IS FURTHER ORDERED that, if they have not already done so pursuant A. The Individual Defendant shall complete and deliver to Plaintiff the

8 to the TRO, within forty-eight hours after service of this Order: 10 Financial Statement form captioned "Financial Statement of Individual Defendant," a 11 copy of which is attached as Attachment 2 to the "Financial Statement Forms for 12 Section IV (Financial Reports) of the Temporary Restraining Order with Asset 13 Freeze, Appointment of Temporary Receiver, Immediate Access, and Other 14 Equitable Relief, and Order to Show Cause Why a Preliminary Injunction Should 15 Not Issue and a Permanent Receiver Should Not Be Appointed" filed in this action; 16 B. Each Individual Defendant shall prepare and deliver to Plaintiff and the 17 Permanent Receiver, for each of the Corporate Defendants, the Financial Statement 18 captioned "Financial Statement of Business Entity Defendant," a copy of which is 19 attached as Attachment 1 to the "Financial Statement Forms for Section IV 20 (Financial Reports) of the Temporary Restraining Order with Asset Freeze, 21 Appointment of Temporary Receiver, Immediate Access, and Other Equitable Relief, 22 and Order to Show Cause Why a Preliminary Injunction Should Not Issue and a 23 Permanent Receiver Should Not Be Appointed" filed in this action; 24 C. The Individual Defendant shall, on behalf of each business entity 25 (whether a partnership, limited partnership, joint venture, sole proprietorship, limited 26 liability company, corporation, or otherwise) of which he is the majority owner or 27 otherwise controls, other than the Corporate Defendants, complete and deliver to 28 9

1 Plaintiff a separate copy of the "Financial Statement of Business Entity Defendant"; 2 and 3 D. Defendants shall provide access to records and documents pertaining to 4 assets of any of the Defendants that are held by financial institutions outside the 5 territory of the United States by signing a Consent to Release of Financial Records if 6 requested by Plaintiff or the Permanent Receiver. 7 8 9 V. PRESERVATION OF RECORDS IT IS FURTHER ORDERED that Defendants, and their agents, servants,

10 employees, and attorneys, and all persons or entities directly or indirectly under the 11 control of any of them, and all other persons or entities in active concert or 12 participation with any of them who receive actual notice of this Order by personal 13 service or otherwise, and each such person, are hereby restrained and enjoined from 14 destroying, erasing, mutilating, concealing, altering, transferring or otherwise 15 disposing of, in any manner, directly or indirectly, any documents that relate to the 16 business practices or finances of any of the Defendants, including, but not limited to, 17 such documents as any contracts, accounting data, correspondence, advertisements, 18 computer tapes, discs or other computerized records, books, written or printed 19 records, handwritten notes, telephone logs, telephone scripts, receipt books, ledgers, 20 personal and business canceled checks and check registers, bank statements, 21 appointment books, copies of federal, state, or local business or personal income or 22 property tax returns. 23 This Section specifically applies to all documents displayed on or accessible 24 from any and all Internet websites owned or controlled by any Defendant, including 25 but not limited to any of the websites with the following domain names: 26 www.healthcareone.com, www.americans4healthcare.com, www.a4hrx.com, 27 www.citizens4healthcare.com, www.elitehealthcareinc.com, 28 10

1 www.republichealthcare.com, www.easylifehealthcare.com, 2 www.americaneaglehealthcare.com, and www.myglobalhealthonline.com. 3 4 5 VI. RECORD KEEPING IT IS FURTHER ORDERED that the Individual Defendant is hereby

6 restrained and enjoined from failing to make and keep, and to provide to Plaintiff's 7 counsel promptly upon request, an accurate accounting that, in reasonable detail, 8 accurately, fairly, and completely reflects his income (including all income resulting 9 from any services, activity, or efforts rendered by the Individual Defendant), 10 disbursements, transactions, and use of money, beginning immediately upon service 11 or actual notice of this Order, and continuing daily until otherwise ordered by the 1 2 Court. 13 14 15 16 A. VII. NOTIFICATION OF BUSINESS ACTIVITIES IT IS FURTHER ORDERED that: The Individual Defendant is hereby restrained and enjoined from

17 directly or indirectly creating, operating, or exercising any control over any business 18 entity, including any partnership, limited partnership, joint venture, sole 19 proprietorship, limited liability company, or corporation, without first serving on 20 counsel for the Commission a written statement disclosing the following: (1) the 21 name of the business entity; (2) the address and telephone number of the business 22 entity; (3) the names of the business entity's officers, directors, principals, managers 23 and employees; and (4) a detailed description of the business entity's intended 2 4 activities. 25 B. The Individual Defendant shall notify the Commission at least seven (7) 26 days prior to affiliating with, becoming employed by, or performing any work for 27 any business that is not a named Defendant in this action. Each notice shall include 28 the Defendant's new business address and a statement of the nature of the business or 11

1 employment and the nature of his duties and responsibilities in connection with that 2 business or employment. 3 4 5 VIII. FINANCIAL INSTITUTIONS IT IS FURTHER ORDERED that any financial or brokerage institution, any

6 business entity, or any other person having possession, custody, or control of any 7 records of any of the Defendants, or of any account, safe deposit box, or other asset 8 titled in the name of any of the Defendants, either individually or jointly or held for 9 the benefit of any of the Defendants, or which has maintained any such account, safe 10 deposit box, or other asset at any time since March 1, 2006, who is served with a 11 copy of this Order, or who otherwise has actual knowledge of this Order, shall: 12 A. Hold and retain within its control and prohibit the transfer, 13 encumbrance, pledge, assignment, removal, withdrawal, dissipation, sale, or other 14 disposal of any such account or other asset, except for transfers or withdrawals 15 authorized in writing by counsel for Plaintiff, by the Permanent Receiver (with 16 respect to assets of any of the Receivership Defendants), or by further order of this 1 7 Court; 18 20 B. C. Deny access to any safe deposit box titled individually or jointly in the Provide to Plaintiff and to the Permanent Receiver, within three (3) 19 name of, or otherwise subject to access by, any of the Defendants; 21 business days of notice of this Order, if not already provided pursuant to the TRO, a 22 sworn statement setting forth: 23 24 25 26 27 28 1. 2. The identification of each account or asset; The balance of each account or a description of the nature and value of each asset as of the close of business on the day notification of this Order is received, and, if the account or asset has been closed or moved, the balance or value removed and the person or entity to whom it was transferred; and 12

1 2 3 D.

3.

The identification of any safe deposit box titled in the name of or subject to access by any of the Defendants.

Upon request by counsel for Plaintiff (or by the Permanent Receiver,

4 with respect to assets held for any of the Receivership Defendants), promptly provide 5 Plaintiff or the Permanent Receiver with copies of all records or other documentation 6 pertaining to such account or asset, including but not limited to originals or copies of 7 account applications, account statements, signature cards, checks, drafts, deposit 8 tickets, transfers to and from the accounts, all other debit and credit instruments or 9 slips, currency transaction reports, 1099 forms, and safe deposit box logs; and 10 E. At the direction of Plaintiff (or the Permanent Receiver, with respect to 11 assets held for any of the Receivership Defendants), and without further order of this 12 Court, convert any stocks, bonds, options, mutual funds, or other securities to their 13 cash equivalents. 14 15 16 IX. REPATRIATION OF ASSETS IT IS FURTHER ORDERED that within five business days following

17 service of this Order, if not already done pursuant to the TRO, each of the 18 Defendants shall: 19 A. Repatriate to the United States all funds, documents, or assets in foreign 20 countries held either: (1) by them; (2) for their benefit; or (3) under their direct or 21 indirect control, jointly or singly; 22 23 24 25 26 27 C. 2. B. The same business day as any repatriation under paragraph A above, 1. notify Plaintiff and the Permanent Receiver of the name and location of the financial institution or other entity that is the recipient of such funds, documents, or assets; and serve this Order on any such financial institution or other entity; Provide Plaintiff and the Permanent Receiver with a full accounting of

28 all funds, documents, and assets outside of the territory of the United States held 13

1 either: (1) by them; (2) for their benefit; or (3) under their direct or indirect control, 2 jointly or singly; and 3 5 6 7 D. Hold and retain all repatriated funds, documents, and assets and prevent X. APPOINTMENT OF PERMANENT RECEIVER IT IS FURTHER ORDERED that Thomas W. McNamara is appointed 4 any transfer, disposition, or dissipation whatsoever of any such assets or funds.

8 Permanent Receiver for Defendants Health Care One LLC, Americans4Healthcare 9 Inc., and Ellman's affiliated entities, including Secure Healthplan Corporation, HCO 10 Marketing Inc., The American Mint, Ltd., Red Carpet Skincare Inc., Quad Digital 11 Corporation, AutoPlanOne Inc., and Magnum Financial Management, Inc., as well as 12 for any successors, assigns, affiliates, and subsidiaries that conduct any business 13 related to the Defendants' national healthcare discount program and which the 14 Permanent Receiver has reason to believe are owned or controlled in whole or in part 15 by any of the Defendants (the "Receivership Defendants"), with the full power of an 16 equity receiver. The Permanent Receiver shall be the agent of this Court and solely 17 the agent of this Court in acting as Receiver under this Order. The Permanent 18 Receiver shall be accountable directly to this Court. The Permanent Receiver shall 19 comply with all Local Rules of this Court governing receivers. 20 21 22 24 XI. RECEIVERSHIP DUTIES IT IS FURTHER ORDERED that the Permanent Receiver is directed and A. Assume full control of the Receivership Defendants by removing, as the

23 authorized to perform and accomplish the following: 25 Permanent Receiver deems necessary or advisable, any manager, independent 26 contractor, employee, or agent of the Receivership Defendants, including the 27 Individual Defendant, from control of, management of, or participation in, the affairs 28 of the Receivership Defendants; 14

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B.

Take exclusive custody, control and possession of all assets and

2 documents of, or in the possession, custody, or under the control of, the Receivership 3 Defendants, wherever situated. The Permanent Receiver shall have full power to 4 divert mail and to sue for, collect, receive, take in possession, hold, and manage all 5 assets and documents of the Receivership Defendants and other persons or entities 6 whose interests are now held by or under the direction, possession, custody, or 7 control of the Receivership Defendants; 8 C. Take all steps necessary to secure all premises owned, rented, leased, or 9 otherwise controlled by the Receivership Defendants, including but not limited to all 10 such premises located at 3220 S. Fair Lane, Suite 12, Tempe, AZ 85282. Such steps 11 may include, but are not limited to, the following, as the Permanent Receiver deems 12 necessary or advisable: (1) serving and filing this Order; (2) completing a written 13 inventory of all receivership assets; (3) obtaining pertinent information from all 14 employees and other agents of the Receivership Defendants, including, but not 15 limited to, the name, home address, social security number, job description, method 16 of compensation, and all accrued and unpaid commissions and compensation of each 17 such employee or agent; (4) photographing and video taping all portions of the 18 location; (5) securing the location by changing the locks and disconnecting any 19 computer modems or other means of access to the computer or other records 20 maintained at that location; or (6) requiring any persons present on the premises at 21 the time this Order is served to leave the premises, to provide the Permanent 22 Receiver with proof of identification, or to demonstrate to the satisfaction of the 23 Permanent Receiver that such persons are not removing from the premises 24 documents or assets of the Receivership Defendants. Law enforcement officers may 25 assist the Permanent Receiver in implementing these provisions to keep the peace 26 and maintain security; 27 D. Continue to conduct the business, or cease operation of the business, of 28 the Receivership Defendants in such manner, to such extent, and for such duration as 15

1 the Permanent Receiver may in good faith deem to be necessary or appropriate to 2 operate the businesses profitably and lawfully. 3 E. Conserve, hold, and manage all receivership assets, and perform all acts 4 necessary or advisable to preserve the value of those assets, in order to prevent any 5 irreparable loss, damage, or injury to consumers or to creditors of the Receivership 6 Defendants, including, but not limited to, obtaining an accounting of the assets and 7 preventing transfer, withdrawal, or misapplication of assets; 8 9 F. G. Enter into contracts and purchase insurance as advisable or necessary; Prevent the inequitable distribution of assets and to determine, adjust,

10 and protect the interests of consumers and creditors who have transacted business 11 with the Receivership Defendants; 12 H. Manage and administer the business of the Receivership Defendants 13 until further order of this Court by performing all incidental acts that the Permanent 14 Receiver deems to be advisable or necessary, which includes retaining, hiring, or 15 dismissing any employees, independent contractors, or agents; 16 I. Choose, engage, and employ attorneys, accountants, appraisers, and 17 other independent contractors and technical specialists, as the Permanent Receiver 18 deems advisable or necessary in the performance of duties and responsibilities under 19 the authority granted by this Order; 20 J. Make payments and disbursements from the receivership estate that are 21 necessary or advisable for carrying out the directions of, or exercising the authority 22 granted by, this Order. The Permanent Receiver shall apply to the Court for prior 23 approval of any payment of any debt or obligation incurred by the Receivership 24 Defendants prior to the date of entry of this Order, except payments that the 25 Permanent Receiver deems necessary or advisable to secure assets of the 26 Receivership Defendants, such as rental payments; 27 28 16

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K.

Determine and implement the manner in which the Receivership

2 Defendants will comply with, and prevent violations of, this Order and all other 3 applicable laws; 4 L. Institute, compromise, adjust, appear in, intervene in, or become party to 5 such actions or proceedings in state, federal or foreign courts that the Permanent 6 Receiver deems necessary and advisable to preserve or recover the assets of the 7 Receivership Defendants or that the Permanent Receiver deems necessary and 8 advisable to carry out the Permanent Receiver's mandate under this Order; 9 M. Defend, compromise, adjust, or otherwise dispose of any or all actions 10 or proceedings instituted in the past or in the future against the Permanent Receiver 11 in his role as Permanent Receiver, or against the Receivership Defendants that the 12 Permanent Receiver deems necessary and advisable to preserve the assets of the 13 Receivership Defendants or that the Permanent Receiver deems necessary and 14 advisable to carry out the Permanent Receiver's mandate under this Order; 15 17 estate; 18 O. Open one or more bank accounts as designated depositories for funds of 19 the Receivership Defendants. The Permanent Receiver shall deposit all funds of the 20 Receivership Defendants in such a designated account and shall make all payments 21 and disbursements from the receivership estate from such an account; and 22 24 26 27 28 17 P. Q. Maintain accurate records of all receipts and expenditures that s/he Cooperate with reasonable requests for information or assistance from 23 makes as Permanent Receiver. 25 any state or federal law enforcement agency. N. Issue subpoenas to obtain documents and records pertaining to the 16 receivership, and conduct discovery in this action on behalf of the receivership

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XII. COOPERATION WITH THE PERMANENT RECEIVER IT IS FURTHER ORDERED that Defendants and Receivership Defendants,

4 and their agents, servants, employees, and attorneys, and all persons or entities 5 directly or indirectly under the control of any of them, and all other persons or 6 entities in active concert or participation with any of them who receive actual notice 7 of this Order by personal service or otherwise, and each such person, shall fully 8 cooperate with and assist the Permanent Receiver. Such cooperation and assistance 9 shall include, but not be limited to, providing any information to the Permanent 10 Receiver that the Permanent Receiver deems necessary to exercising the authority 11 and discharging the responsibilities of the Permanent Receiver under this Order; 12 providing any password required to access any computer or electronic files in any 13 medium; or advising all persons who owe money to the Receivership Defendants that 14 all debts should be paid directly to the Permanent Receiver. Defendants are hereby 15 restrained and enjoined from directly or indirectly: 16 A. Transacting any of the business of the Receivership Defendants, or 17 transacting business under the name Health Care One, Americans4 Healthcare, 18 Citizens4Healthcare, American Eagle Healthcare, EasyLife Healthcare, Elite 19 Healthcare, Global Healthcare, and Republic Healthcare, or any substantially similar 20 name; 21 B. Destroying, secreting, defacing, transferring, or otherwise altering or 22 disposing of any documents of the Receivership Defendants, including, but not 23 limited to, books, records, accounts, or any other papers of any kind or nature; 24 C. Transferring, receiving, altering, selling, encumbering, pledging, 25 assigning, liquidating, or otherwise disposing of any assets owned, controlled, or in 26 the possession or custody of, or in which an interest is held or claimed by, the 27 Receivership Defendants, or the Permanent Receiver; 28 D. Excusing debts owed to the Receivership Defendants; 18

1

E.

Failing to notify the Permanent Receiver of any asset, including

2 accounts, of any Receivership Defendant held in any name other than the name of 3 any Receivership Defendant, or by any person or entity other than the Receivership 4 Defendants, or failing to provide any assistance or information requested by the 5 Permanent Receiver in connection with obtaining possession, custody, or control of 6 such assets; or 7 F. Doing any act or refraining from any act whatsoever to interfere with 8 the Permanent Receiver's taking custody, control, possession, or managing of the 9 assets or documents subject to this receivership; or to harass or interfere with the 10 Permanent Receiver in any way; or to interfere in any manner with the exclusive 11 jurisdiction of this Court over the assets or documents of the Receivership 12 Defendants; or to refuse to cooperate with the Permanent Receiver or the Permanent 13 Receiver's duly authorized agents in the exercise of their duties or authority under 14 any Order of this Court. 15 16 17 18 A. XIII. DELIVERY OF RECEIVERSHIP PROPERTY IT IS FURTHER ORDERED that: Immediately upon service of this Order upon them, or within a period

19 permitted by the Permanent Receiver, Defendants and all other persons in 20 possession, custody, and control of assets or documents of the Receivership 21 Defendants shall transfer or deliver possession, custody, and control of the following 22 to the Permanent Receiver: 23 24 25 26 27 28 19 1. 2. All assets of the Receivership Defendants; All documents of the Receivership Defendants, including, but not limited to, books and records of accounts, all financial and accounting records, balance sheets, income statements, bank records (including monthly statements, canceled checks, records

1 2 3 4 5 6 7 8 9 B. 4. 3.

of wire transfers, and check registers), client lists, title documents and other papers; All assets belonging to members of the public now held by the Receivership Defendants; and All keys and codes necessary to gain or to secure access to any assets or documents of the Receivership Defendants, including, but not limited to, access to their business premises, means of communication, accounts, computer systems, or other property. In the event any person or entity fails to deliver or transfer any asset or

10 otherwise fails to comply with any provision of this Section, the Permanent Receiver 11 may file, on an ex parte basis, an Affidavit of Non-Compliance regarding the failure. 12 Upon filing of the affidavit, the Court may authorize, without additional process or 13 demand, Writs of Possession or Sequestration or other equitable writs requested by 14 the Permanent Receiver. The writs shall authorize and direct the United States 15 Marshal or any sheriff or deputy sheriff of any county to seize the asset, document, 16 or other thing and to deliver it to the Permanent Receiver. 17 18 19 XIV. BANKRUPTCY PETITIONS IT IS FURTHER ORDERED that, in light of the asset freeze and

20 appointment of the Permanent Receiver, Defendants are hereby prohibited from 21 filing, or causing to be filed, on behalf of any of the Receivership Defendants, a 22 petition for relief under the United States Bankruptcy Code, 11 U.S.C. § 101 et seq., 23 without prior permission from this Court. 24 25 26 XV. TRANSFER OF FUNDS TO THE PERMANENT RECEIVER IT IS FURTHER ORDERED that, upon service of a copy of this Order, all

27 banks, broker-dealers, savings and loans, escrow agents, title companies, commodity 28 trading companies, or other financial institutions shall cooperate with all reasonable 20

1 requests of the Permanent Receiver relating to implementation of this Order, 2 including transferring funds at his or her direction and producing records related to 3 the assets of the Receivership Defendants. 4 5 6 7 A. XVI. STAY OF ACTIONS IT IS FURTHER ORDERED that: Except by leave of this Court, during pendency of the receivership

8 ordered herein, Defendants, Receivership Defendants, and all clients, investors, note 9 holders, creditors, claimants, and all others acting on their behalf, and all other 10 persons and entities (except for Plaintiff) are hereby stayed from taking any action to 11 establish or enforce any claim, right, or interest for, against, on behalf of, in, or in the 12 name of: a) any of the Corporate Defendants or Receivership Defendants, or b) any 13 of their assets, or c) the Permanent Receiver or the Permanent Receiver's duly 14 authorized agents acting in their capacities as such, including, but not limited to, the 15 following actions: 16 1. Commencing, prosecuting, continuing, entering, or enforcing any 17 suit or proceeding, except that such actions may be filed to toll any applicable statute 18 of limitations; 19 2. Accelerating the due date of any obligation or claimed obligation; 20 filing or enforcing any lien; taking or attempting to take possession, custody, or 21 control of any asset; attempting to foreclose, forfeit, alter, or terminate any interest in 22 any asset, whether such acts are part of a judicial proceeding, are acts of self-help, or 2 3 otherwise; 24 3. Executing, issuing, serving, or causing the execution, issuance or 25 service of, any legal process, including, but not limited to, attachments, 26 garnishments, subpoenas, writs of replevin, writs of execution, or any other form of 27 process whether specified in this Order or not; or 28 21

1

4.

Doing any act or thing whatsoever to interfere with the Permanent

2 Receiver taking custody, control, possession, or management of the assets or 3 documents subject to this receivership, or to harass or interfere with the Permanent 4 Receiver in any way, or to interfere in any manner with the exclusive jurisdiction of 5 this Court over the assets or documents of the Receivership Defendants. 6 7 8 proceeding; 9 11 or 12 3. The enforcement of a judgment, other than a money judgment, 13 obtained in an action or proceeding by a governmental unit to enforce such 14 governmental unit's police or regulatory power. 15 C. Except as otherwise provided in this Order, all persons and entities in 16 need of documentation from the Permanent Receiver shall in all instances first 17 attempt to secure such information by submitting a formal written request to the 18 Permanent Receiver, and, if such request has not been responded to within thirty (30) 19 days of receipt by the Permanent Receiver, any such person or entity may thereafter 20 seek an Order of this Court with regard to the relief requested. 21 22 23 XVII. COMPENSATION OF PERMANENT RECEIVER IT IS FURTHER ORDERED that the Permanent Receiver and all personnel 2. The commencement or continuation of an action or proceeding by 10 a governmental unit to enforce such governmental unit's police or regulatory power; B. This paragraph does not stay: 1. The commencement or continuation of a criminal action or

24 hired by the Permanent Receiver as herein authorized, including counsel to the 25 Permanent Receiver and accountants, are entitled to reasonable compensation for the 26 performance of duties pursuant to this Order and for the cost of actual out-of-pocket 27 expenses incurred by them, from the assets now held by or in the possession or 28 control of or which may be received by the Receivership Defendants. The 22

1 Permanent Receiver shall file with the Court and serve on the parties periodic 2 requests for the payment of such reasonable compensation, with the first such request 3 filed no more than sixty days after the date of this Order. The Permanent Receiver 4 shall not increase the hourly rates used as the bases for such fee applications without 5 prior approval of the Court. 6 7 8 XVIII. RECEIVER'S BOND IT IS FURTHER ORDERED that the Permanent Receiver shall have on file

9 with the Clerk of this Court a bond in the sum of $50,000, with sureties to be 10 approved by the Court, conditioned that the Permanent Receiver will well and truly 11 perform the duties of the office and abide by and perform all acts the Court directs. 12 13 14 XIX. DISTRIBUTION OF ORDER IT IS FURTHER ORDERED that Defendants shall immediately provide a

15 copy of this Order to each of the Corporate Defendants' affiliates, franchises, 16 subsidiaries, divisions, successors, assigns, directors, officers, managing agents, 17 employees, representatives, and independent contractors and shall, within three (3) 18 business days from the date of service of this Order, serve on Plaintiff affidavits 19 identifying the names, titles, addresses, and telephone numbers of the persons and 20 entities whom they have served pursuant to this provision. The Permanent Receiver 21 has no obligation under this provision. 22 23 24 XX. CREDIT REPORTS IT IS FURTHER ORDERED that Plaintiff may obtain credit reports

25 concerning any of the Defendants pursuant to Section 604(a)(1) of the Fair Credit 26 Reporting Act, 15 U.S.C. § 1681b(a)(1), and that, upon written request, any credit 27 reporting agency from which such reports are requested shall provide them to 2 8 Plaintiff. 23

1 2 3 5 7 8 9 10 11 12 13 14 B. 3. 2.

XXI. LIMITED EXPEDITED DISCOVERY IT IS FURTHER ORDERED that the Commission is granted leave at any A. Take the deposition of any person or entity, without limitation, for the 1. discovering the nature, location, status, and extent of assets of any of the Defendants, including Receivership Defendants, or of their affiliates or of their subsidiaries, discovering the nature, location, status and extent of documents reflecting the business transactions of any of the Defendants; discovering the nature and extent of Defendants' business activities, and Demand the production of documents from any person or entity relating

4 time after service of this Order to: 6 purpose of:

15 to the nature, status, location and extent of any of the Defendants' assets, and the 16 location of any documents reflecting the Defendants' business transactions or the 17 nature and extent of Defendants' business operations. 18 Thirty-six (36) hours notice shall be deemed sufficient for any such deposition 19 and forty-eight (48) hours notice shall be deemed sufficient for the production of any 20 such documents. The limitations and conditions set forth in Fed. R. Civ. P. 30(a)(2) 21 and 31(a)(2) shall not apply to depositions taken pursuant to this Section. Any such 22 depositions taken pursuant to this Section shall not be counted toward the ten 23 deposition limit set forth in Fed. R. Civ. P. 30(a)(2)(A) and 31(a)(2)(A). Service of 24 discovery taken pursuant to this Section shall be sufficient if made by facsimile or by 25 overnight delivery. 26 27 28 24

1 2 3 5 6 7 8 9 10 11 12 13 14 15 17 18 Dated: September 1, 2010 19 20 21 22 23 24 25 26 27 28

XXII. CORRESPONDENCE IT IS FURTHER ORDERED that, for the purposes of this Order, all Faye Chen Barnouw, Barbara Y.K. Chun, and John D. Jacobs Federal Trade Commission 10877 Wilshire Blvd., Suite 700 Los Angeles, CA 90024 Fax: [phone] E-mail: [e-mail], [e-mail], and [e-mail] XXIII. SERVICE OF THIS ORDER IT IS FURTHER ORDERED that copies of this Order may be served by any means, including facsimile transmission, upon any financial institution or other entity or person that may have possession, custody, or control of any documents or assets of any Defendant, or that may be subject to any provision of this Order.

4 correspondence and service of pleadings on Plaintiff shall be addressed to:

16 SO ORDERED: _______________________________ Hon. James V. Selna United States District Judge

25