Federal Trade Commission v. Grant Connect, LLC et al

Filing 165

PRELIMINARY INJUNCTION. Signed by Judge Philip M. Pro on 6/17/10. (Copies have been distributed pursuant to the NEF - ASB)

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1 2 3 UNITED STATES DISTRICT COURT 4 D IS T R IC T OF NEVADA 5 6 F E D E R A L TRADE COMMISSION, 7 P la in tif f , 8 v. 9 G R A N T CONNECT, LLC, et al., 10 Defendants. 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 *** ) ) ) ) ) ) ) ) ) ) ) 2 :0 9 -C V -0 1 3 4 9 -P M P -R J J P R E L IM IN A R Y INJUNCTION ORDER A S TO DEFENDANTS MICHAEL L. H E N R IK S E N JR., TASHA JN PAUL, K Y L E KIMOTO, AND JOHNNIE S M IT H Presently before the Court is Plaintiff Federal Trade Commission's ("FTC") E m e rg e n c y Motion for a Temporary Restraining Order and Preliminary Injunction as to A d d itio n a l Individual Defendants (Doc. #143) with supporting exhibits (Doc. #144, #145), f ile d on May 14, 2010. Defendant Johnnie Smith ("Smith") filed an Opposition (Doc. # 1 5 2 ) on May 27, 2010. Defendant Michael L. Henriksen ("M. Henriksen") filed an O p p o s itio n (Doc. #154) on May 27, 2010. Defendant Kyle Kimoto ("K. Kimoto") did not f ile a response to the motion, instead filing his own motion for summary judgment and/or to d is m is s (Doc. #155). Defendant Tasha Jn Paul ("Jn Paul") did not file a response, but she s e n t a letter to the FTC (Doc. #158, Decl. of Roberto Anguizola, Ex. 1), which the parties h a v e treated as her response. Plaintiff FTC filed a Reply (Doc. #158) on June 7, 2010. The C o u rt held a hearing on this matter on June 15, 2010. (Mins. of Proceedings (Doc. #164).) F I N D I N G S OF FACT T h e FTC filed this action on July 27, 2009, alleging Defendants Grant Connect, L L C ; Global Gold, Inc.; Horizon Holdings, LLC; O'Connell Gray, LLC; Pink LP; Vantex G ro u p , LLC; Vertek Group, LLC; Rachael A. Cook; James J. Gray; Steven R. Henriksen; 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 J u lie tte M. Kimoto; and Randy D. O'Connell (collectively "Original Defendants") d e c e p tiv e ly marketed grant and credit line offers, failed to adequately disclose negative u p s e lls and related monthly charges, and debited consumers' bank accounts on a recurring b a s is without obtaining written authorization. (Compl. (Doc. #1).) The FTC alleged the O rig in a l Defendants engaged in a common enterprise while engaging in these acts, and thus a re jointly and severally liable. The FTC brings claims against Defendants for m isre p re s e n ta tio n (count one); failure to disclose (count two); and unauthorized debiting of c o n s u m e rs ' bank accounts (count three). The FTC seeks injunctive relief, including a p p o in tm e n t of a receiver and asset freezes, and equitable relief to redress consumer injury, in c lu d in g restitution and disgorgement. O n July 28, 2009, the Court granted a Temporary Restraining Order ("TRO") (D o c . #18) against the Original Defendants. The TRO included prohibitions on certain c o n d u c t, froze Original Defendants' assets, and appointed Robb Evans as temporary re c e iv e r. On August 14, 2009, the FTC and Defendants Grant Connect, LLC; Horizon H o ld in g s , LLC; O'Connell Gray, LLC; James J. Gray; and Randy D. O'Connell stipulated to the entry of a preliminary injunction (Doc. #44), which the Court granted on August 18, 2 0 0 9 (Doc. #48). On September 22, 2009, the Court converted the TRO to a preliminary in ju n c tio n (Doc. #83) as to Defendants Global Gold, Inc.; Pink LP; Vantex Group, LLC; V e rte k Group, LLC, Rachael A. Cook; Steven R. Henriksen; and Juliette M. Kimoto. This O rd e r hereby incorporates the findings of fact and conclusions of law set forth in the prior p re lim in a ry injunction order. In April 2010, the FTC amended the Complaint to add factual allegations re g a rd in g other allegedly fraudulent internet website offers, including offers related to work f ro m home and the acai berry. The Amended Complaint (Doc. #112) added four new in d iv id u a l Defendants: M. Henriksen, Jn Paul, K. Kimoto, and Smith (collectively " A d d itio n a l Individual Defendants"). The Amended Complaint also added fifteen new 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 c o rp o ra te Defendants: Acai, Inc.; AllClear Communications, Inc.; Consolidated Merchant S o lu tio n s , LLC; Dragon Group, Inc.; Elite Benefits, Inc.; Global Fulfillment Inc.; Global G o ld Limited; Healthy Allure, Inc.; Juliette M. Kimoto Asset Protection Trust; MSC O n lin e , Inc.; OS Marketing Group, LLC; Paid to Process, Inc.; Premier Plus Member, Inc.; T o ta l Health, Inc.; and Vcomm, Inc. It appears to the satisfaction of the Court, having considered the evidence p re s e n te d by the parties, including the Amended Complaint, the Motions for Preliminary In ju n c tio n filed by Plaintiff, the declarations, exhibits, and memoranda of points and a u th o ritie s filed in support thereof and in response thereto, that: 1 . This Court has jurisdiction over the subject matter of this case, and there is g o o d cause to believe it will have jurisdiction over all parties hereto and that v e n u e in this district is proper; 2 . There is good cause to believe that Additional Individual Defendants have e n g a g e d in and are likely to engage in acts and practices that violate Section 5(a) o f the Federal Trade Commission Act, 15 U.S.C. 45(a), Section 907(a) of the E le c tro n ic Funds Transfer Act, 15 U.S.C. 1693e(a) ("EFTA"); and Section 2 0 5 .1 0 (b ) of Regulation E, 12 C.F.R. 205.10(b) ("Regulation E"), and the C o m m is sio n is therefore likely to prevail on the merits of this action. A practice is deceptive under the Federal Trade Commission Act "if it is likely to mislead c o n s u m e rs acting reasonably under the circumstances . . . in a way that is m a te ria l." F.T.C. v. Cyberspace.Com LLC, 453 F.3d 1196, 1199 (9th Cir. 2006). "A solicitation may be likely to mislead by virtue of the net impression it creates e v e n though the solicitation also contains truthful disclosures." Id. at 1200. While proof that consumers actually were deceived is not required, such evidence is "highly probative to show that a practice is likely to mislead consumers acting re a so n a b ly under the circumstances." Id. at 1201. 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 a . As set forth in the Court's prior preliminary injunction order (Doc. # 8 3 ), the FTC is likely to prevail in showing the various offers were false o r misleading. b . The FTC is likely to prevail in demonstrating the Additional Individual D e f e n d a n ts are liable under the Act. An individual may be liable for in ju n c tiv e relief under the Act for a corporation's deceptive practices "if th e FTC can prove (1) that the corporation committed misrepresentations o r omissions of a kind usually relied on by a reasonably prudent person, re s u ltin g in consumer injury, and (2) that [the individual] participated d ire c tly in the acts or practices or had authority to control them." F.T.C. v. P u b l'g Clearing House, Inc., 104 F.3d 1168, 1170-71 (9th Cir. 1997). An in d iv id u a l is personally liable for a corporation's violations of the Act if (1 ) "he participated directly in the acts or practices or had authority to c o n tro l them," and (2) "had actual knowledge of material m is re p re s e n ta tio n s, was recklessly indifferent to the truth or falsity of a m is re p re s e n ta tio n , or had an awareness of a high probability of fraud a lo n g with an intentional avoidance of the truth." Cyberspace.Com LLC, 4 5 3 F.3d at 1202. i. The FTC is likely to prevail in demonstrating Defendant Smith p a rtic ip a te d directly in the acts and practices of Vantex. Vantex o rg a n iz a tio n charts put Smith at the top of the chart and list him as E x e c u tiv e Director. (Pl.'s Exs. 430, 517-19.) This is confirmed by th e declaration of Vantex owner Juliette Kimoto that while her h u s b a n d , K. Kimoto, was preparing for trial, Smith "was placed in c h a rg e of the day-to-day business operations of Vantex." (Pl.'s R e p ly (Doc. #158), Ex. 601.) J. Kimoto's statement is supported by 4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 th e testimony of Vantex employee Matthew Dacko ("Dacko"), who in d ic a te d that Smith represented that Smith was in charge at V a n te x , and by Vantex employee Rachel McKinnon (" M c K in n o n " ), who testified that Smith was ranked higher than D e f e n d a n t Jn Paul, who is Vantex's Operations Manager. (Pl.'s E x . 586 at 56, Ex. 587 at 170-71.) Moreover, Smith's consulting a g re e m e n t suggests he was more than a consultant. (Smith Opp'n (D o c . #152), Ex. 2.) The agreement gave Smith authority to p e rf o rm a broad range of activities, provided for approximately $ 2 0 0 ,0 0 0 in compensation, and provided for Smith eventually to g a in an ownership interest in Vantex. (Id.) Smith also agreed to a tw o -ye a r covenant not to compete. (Id.) In addition to his title and place within Vantex's hierarchy, F T C has presented evidence that Smith was involved in Vantex's b u s in e s s practices. Smith did not live in Las Vegas, and visited the L a s Vegas office only sporadically. (Pl.'s Ex. 586 at 57, Ex. 587 at 2 3 -2 4 .) However, Smith was in daily contact with Jn Paul and re c e iv e d by email summaries of various corporate activities. (Pl.'s E x s . 417, 422, 587 at 170-71.) Testimony and email evidence d e m o n s tra te s Smith was involved in such business affairs as d e c id in g whether a new vendor would receive a new "skin," or o f f e r; approving designs for new offers; recommending changes to th e terms and conditions of the Global Gold offer; attempting to re s o lv e a dispute between Jn Paul and an outside party regarding th e amount of the "bounty" the third party would receive; directing V a n te x employees as to the priority of certain offers; directing a 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 V a n te x employee to develop a plan of action in conformity with his d ire c tio n s ; and implementing a new pay increase policy. (Pl.'s Exs. 4 3 6 , 495, 587 at 165-66, Ex. 591, Ex. 600, Ex. 608.) The FTC also is likely to prevail in showing Smith had a c tu a l knowledge of the misrepresentations, or at least was re c k le s s ly indifferent. Vantex employee McKinnon testified that s h e advised another Vantex employee that she found a Vantex page th a t was not in compliance with regulatory requirements because it d e p ic te d President Obama and indicated the public could obtain f re e stimulus money. (Pl.'s Ex. 587 at 74-76.) That employee a d v is e d Jn Paul and Smith about the offending web page, but the p a g e was not taken down immediately. (Id.) Smith was aware of a c tu a l complaints relating to the websites, as he was the recipient of a n email indicating a publisher had submitted a Global Gold offer to his lawyer for review, and the lawyer indicated the offer lacked p ro p e r disclosures. (Pl.'s Ex. 457.) Smith also was copied on an e m a il which indicated Global Gold had received a complaint from th e Iowa Attorney General. (Pl.'s Ex. 539.) Additionally, Smith re c e iv e d an email detailing recent FTC cases, including cases in w h ic h the FTC pursued companies who failed "to disclose monthly re c u rrin g charges prior to purchase including negative option c h a rg e s . This cannot be done by clicking on a link to view the te rm s and conditions." (Pl.'s Mot., Ex. 542.) F u rth e r, Smith was included in email discussions regarding th e fact that for four months Global Gold was incurring a high rate o f customer chargebacks to their credit cards. (Pl.'s Exs. 536-37.) 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 S m ith was involved in another email string in which M. Henriksen q u e s tio n e d whether the refunds Vantex issued per cycle increased d u e to customers "watching their bills" or was based on Vantex's n e w partial refund policy which was initiated to "solve the c h a rg e b a c k issue." (Pl.'s Ex. 592.) After the TRO was entered in th is case, Smith threw away a laptop because it contained in f o rm a tio n he did not "want anyone trying to come here to use a g a in s t" him. (Smith Dep. (Doc. #162) at 99-100.) F in a lly, Smith was a defendant in FTC v. Capital Choice C o n s u m e r Credit, Inc. in relation to a shoppers club credit card s im ila r to the ones offered by Defendants in this case. (Pl.'s Ex. 5 9 8 ). The court in that case found Smith personally liable for the te le m a rk e tin g frauds committed in that case by various companies. (Id. at 47-53.) Judgment was entered in that case in 2004. (Id.) Moreover, Smith knew before he started working with Vantex that K . Kimoto was under indictment for similar activity. (Smith Dep. a t 44-45.) Consequently, Smith should have been alert to the p o s s ib ility that similar claims in the Vantex/Global Gold offers w e re misleading. Smith's alleged reliance on an attorney's opinion le tte r on a single Global Gold offer does not insulate him from in d iv id u a l liability. Cyberspace.Com LLC, 453 F.3d at 1202 (" [ R ]e lia n c e on advice of counsel [is] not a valid defense on the q u e s tio n of knowledge required for individual liability."). ii. The FTC is likely to prevail in demonstrating Defendant M. H e n rik s e n participated directly in the acts and practices of Vertek a n d Vantex, and/or that he had the authority to control the acts and 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 p ra c tic e s of Vertek and Vantex employees. A Vantex organization c h a rt shows Henriksen as head of Vantex's accounting department. (Pl.'s Ex. 517.) Juliette Kimoto avers that M. Henriksen was " re sp o n s ib le for the financial operations of Vantex and Vertek." (Pl.'s Ex. 601.) Although listed as head of accounting, Dacko re f e rre d to M. Henriksen as the "boss," "pretty much the top guy," a n d "in charge." (Pl.'s Ex. 586 at 53-54, 56.) Other testimony in d ic a te s M. Henriksen had significant control over non-accounting is s u e s . Specifically, Smith identified M. Henriksen as one of only a f e w individuals who could terminate his employment with Vantex a n d as one of the top individuals at the company. (Smith Dep. at 8 7 , 137-38.) Dacko also testified that M. Henriksen resolved a p e rs o n n e l issue within Vantex. (Pl.'s Ex. 586 at 79-83.) According to Smith, M. Henriksen demoted Jn Paul. (Smith Dep. at 167-68.) M. Henriksen also was involved in the decision to spin off Vantex f ro m Vertek, and was the person who announced the name change to the employees. (Smith Dep. at 154-56; Pl.'s Ex. 586 at 68.) In a May 2009 email, M. Henriksen lists "stuff [he] is w a tc h in g over," and directs Steve Henriksen, Smith, Rachael Cook, a n d Josh Henriksen to "please read and pay attention to everything w ith your name on it." (Pl.'s Ex. 558.) Henriksen proceeded to g iv e instructions regarding a variety of offers, including the grants a n d acai berry. (Id.) M. Henriksen contends that each of these m a tte rs related only to accounting, and thus the email does not s h o w he had authority over the content of the offers. Many of the a re a s covered by the email involve accounting, but other topical 8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 a re a s include deciding whether to do a bonus sale for acai, getting a rtic le s of incorporation completed for two companies, drafting agreements that "look like a legal document" for servicing c u s to m e rs , and looking into the possibility of opening accounts in P a n a m a to avoid chargebacks. (Id.) The FTC also is likely to prevail in showing M. Henriksen h a d actual knowledge of the misrepresentations, or at least was re c k le s s ly indifferent. M. Henriksen was aware of actual c o m p la in ts relating to the websites, as he was the recipient of an e m a il indicating a publisher had submitted a Global Gold offer to h is lawyer for review, and the lawyer indicated the offer lacked p ro p e r disclosures. (Pl.'s Ex. 457.) M. Henriksen also was copied o n an email which indicated Global Gold had received a complaint f ro m the Iowa Attorney General. (Pl.'s Ex. 539.) Additionally, M. H e n rik s e n was a recipient of an email detailing recent FTC cases, in c lu d in g cases where the FTC pursued companies who failed "to d is c lo s e monthly recurring charges prior to purchase including n e g a tiv e option charges. This cannot be done by clicking on a link to view the terms and conditions." (Pl.'s Ex. 542.) Finally, M. H e n rik e n received an email by Steve Henriksen in which Steve H e n rik s e n stated, "This is pretty funny . . . ." (Pl.'s Ex. 529.) Attached to the email is an internet website, wiki.answers.com, w h ic h refers to First National Gold, a Global Gold credit line offer, a s fraudulent. (Pl.'s Exs. 529, 530.) F u rth e r, M. Henriksen was included in email discussions re g a rd in g the fact that for four months Global Gold was incurring a 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 h ig h rate of customer chargebacks to their credit cards. (Pl.'s Exs. 5 3 6 -3 7 .) M. Henriksen questioned whether the refunds Vantex is s u e d per cycle increased due to customers "watching their bills" o r was based on Vantex's new partial refund policy which was in itia te d to "solve the chargeback issue." (Pl.'s Ex. 592.) Henriksen was aware of the hefty fines imposed by the Merchant C h a rg e b a c k Monitoring Program due to the large amount of c u s to m e r chargebacks. (Pl.'s Exs. 554-56.) Finally, Henriksen is under a stipulated injunction with the F T C in the Assail case restraining him from engaging in any te le m a rk e tin g , and further prohibiting him from making certain re p re s e n ta tio n s related to credit card offers in connection with the o f f e r of goods or services "by any means whatsoever." (Pl.'s Ex. 5 9 7 .) M. Henriksen thus should have been alert to the issue of p o te n tia l fraud in the various offers. iii. The FTC is likely to prevail in demonstrating Defendant K. K im o to participated directly in the acts and practices of Vertek and V a n te x , and/or had the authority to control the acts and practices of V e rte k and Vantex employees. The evidence presented shows K. K im o to set up Vertek prior to his incarceration in relation to the A ss a il matter. (Pl.'s Ex. 586 at 29-32.) Defendants O'Connell and G ra y aver that in late 2006 or early 2007, K. Kimoto contacted th e m to assist Global Gold with the logistics of accepting tra n s a c tio n s over the internet. (Pl.'s Exs. 56-66.) O'Connell and G ra y began providing services to Global Gold thereafter. (Id.) Afterwards, Kimoto "introduced" O'Connell and Gray to the grant 10 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 o p p o rtu n ity. (Id.) After further discussions with K. Kimoto, O 'C o n n e ll and Gray agreed to work on the grant project which b e c a m e Grant Connect. (Id.) In an email to a third party, Gray d e s c rib e d K. Kimoto as heading up product development and p u b lis h e r relations. (Pl.'s Ex. 572.) Smith testified at his deposition that K. Kimoto recruited h im for employment at Vantex and negotiated the terms of Smith's agreement with Vantex. (Smith Dep. at 37, 70-71, 74, 79-80, 1363 7 .) Smith also identified K. Kimoto as someone who had a u th o rity at Vantex to terminate his employment. (Id. at 87.) K. K im o to also had authority to grant or deny Jn Paul's requests for tim e off. (Smith Dep. at 141-42.) K. Kimoto participated in V a n te x business affairs, such as a discussion regarding setting up m e rc h a n t accounts and the decision to split up Vertek and Vantex. (Pl.'s Ex. 576; Smith Dep. at 154-56.) Vertek paid for thousands of d o lla rs worth of jury and trial consultation for K. Kimoto. (Pl.'s E x s . 269-70, 272.) The FTC also is likely to prevail in showing K. Kimoto had a c tu a l knowledge of the misrepresentations, or at least was re c k le s s ly indifferent. K. Kimoto was the originator of Grant C o n n e c t, which no one has attempted to defend as a legitimate p ro d u c t. Around the time K. Kimoto was setting up Vantex and re c ru itin g Smith to take over Vantex operations, K. Kimoto was f a c in g criminal charges in relation to the Assail matter. K. Kimoto th e re f o re should have been alert to the possibility that similar offers m a d e over the internet were false and/or misleading. 11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 iv . The FTC is likely to prevail in demonstrating Defendant Jn Paul p a rtic ip a te d directly in the acts and practices of Vertek and Vantex, a n d /o r had the authority to control the acts and practices of Vertek a n d Vantex employees. Jn Paul worked at Vantex as operations m a n a g e r. (Pl.'s Ex. 586 at 34, 76, Ex. 587 at 23-24.) Dacko d e s c rib e d her as a "boss," the one "running the show," and his " s u p e rv is o r." (Pl.'s Ex. 586 at 54, 59.) K. Kimoto described Jn P a u l to Smith as his "right hand man," and stated she "knows the o p e ra tio n inside out." (Smith Dep. at 48.) According to M c K in n o n , Jn Paul had authority to decide whether a new vendor w o u ld receive a new "skin," or offer. (Pl.'s Ex. 587 at 165-66.) Jn P a u l also was involved in regular meetings regarding the business o p e ra tio n s of the various offers. (Pl.'s Exs. 422, 433-34, 461, 4 8 6 -8 7 , 507-08.) T h e FTC also is likely to prevail in showing Jn Paul had a c tu a l knowledge of the misrepresentations, or at least was re c k le s s ly indifferent. McKinnon testified that she advised another V a n te x employee that she had found a Vantex page that was not in c o m p lia n c e because it showed President Obama and indicated the p u b lic could obtain free stimulus money. (Pl.'s Ex. 587 at 74-76.) That employee advised Jn Paul and Smith, but the page was not ta k e n down immediately. (Id.) McKinnon also related that she a d v is e d Jn Paul some pages regarding the line of credit offers were n o t compliant, but Jn Paul told her not to change those pages. (Pl.'s E x . 587 at 100-02.) Jn Paul was included on the above-referenced e m a il strings regarding M. Henriksen's question as to wehther 12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 /// re f u n d s issued per cycle increased due to people "watching their b ills" or was based on giving partial refund policy to "solve the c h a rg e b a c k issue." (Pl.'s Ex. 536, 537.) In her letter to the FTC, Jn P a u l does not dispute she knew the offers were false or misleading. She argues only that she tried to be "as compliant as possible," and s h e was just "following orders." (Pl.'s Reply, Decl. of Roberto A n g u iz o la , Ex. 1.) 3. There is good cause to believe that immediate and irreparable harm will result f ro m Additional Individual Defendants' ongoing violations of the FTC Act, the E F T A , and Regulation E unless Additional Individual Defendants are restrained a n d enjoined by Order of this Court. See United States v. Nutri-cology, Inc., 982 F .2 d 394, 398 (9th Cir. 1992); 4 . There is good cause to believe that immediate and irreparable damage to this C o u rt's ability to grant effective final relief for consumers, including monetary re s titu tio n , rescission or refunds, will occur from the sale, transfer, or other d is p o s itio n or concealment by Additional Individual Defendants of their assets or re c o rd s without an injunction; 5 . Good cause exists for (a) the freezing of the Additional Individual D e f e n d a n ts' assets and (b) ancillary relief; 6 . Weighing the equities and considering Plaintiff's likelihood of ultimate s u c c e ss on the merits, a preliminary injunction with an asset freeze and other e q u ita b le relief is in the public interest; 7 . Plaintiff FTC is an independent agency of the United States of America and n o security is required of any agency of the United States for the issuance of a p re lim in a ry injunction. Fed. R. Civ. P. 65(c). 13 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 ORDER D E F IN IT IO N S F o r the purpose of this Preliminary Injunction ("Order"), the following d e f in itio n s shall apply: 1 . "Additional Defendants" means Consolidated Merchant Solutions, LLC; OS M a rk e tin g Group, LLC; Acai, Inc.; Allclear Communications, Inc.; Dragon G ro u p , Inc.; Elite Benefits, Inc.; Global Fulfillment, Inc.; Global Gold Limited; H e a lth y Allure, Inc.; MSC Online, Inc.; Paid To Process, Inc.; Premier Plus M e m b e r, Inc.; Total Health, Inc.; Vcomm, Inc.; Juliette M. Kimoto Asset P ro te c tio n Trust; Michael L. Henriksen, Jr.; Tasha Jn Paul; Kyle R. Kimoto; and J o h n n ie Smith; 2. "Additional Individual Defendants" means Michael Henriksen; Tasha Jn Paul; K yle Kimoto; and Johnnie Smith. 3 . "Asset" means any legal or equitable interest in, right to, or claim to, any real, p e rs o n a l, or intellectual property including, but not limited to, chattel, goods, in s tru m e n ts , equipment, fixtures, general intangibles, effects, leaseholds, c o n tra c ts , mail or other deliveries, shares or stock, securities, inventory, checks, n o te s , accounts, credits, receivables (as those terms are defined in the Uniform C o m m e rc ia l Code), cash, trusts, including but not limited to asset protection tru s ts , and reserve funds or other accounts associated with any payments p ro c e sse d on behalf of any Defendant, including, but not limited to, such reserve f u n d s held by a payment processor, credit card processor, or bank. 4 . "Assisting others" includes knowingly providing any of the following goods o r services to another entity: (1) performing customer service functions, in c lu d in g , but not limited to, charging consumers for products or services, or re c e iv in g or responding to consumer complaints; (2) formulating or providing, or 14 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 a rra n g in g for the formulation or provision of, any promotional material; (3) p ro v id in g names of, or assisting in the generation of, potential customers; or (4) p e rf o rm in g promotional or marketing services of any kind, including but not lim ite d to, creating, hosting, or maintaining websites, or recruiting affiliates; or (5 ) processing credit and debit card payments. 5 . "Charge" means any amount charged or debited to a consumer's credit card, d e b it card, checking, savings, share or similar financial account, or collected f ro m a consumer by any other method. 6 . "Clearly and Conspicuously" a . with regard to print advertisements, solicitations, or other promotional m a te ria l, the disclosure shall be in a type size and location sufficiently n o tic e a b le for an ordinary consumer to read and comprehend it, in print th a t contrasts with the background against which it appears; and in m u lti-p a g e promotional materials, the disclosure shall appear on the cover o r first page; b . with regard to Internet advertisements, solicitations, or other p ro m o tio n a l material, the disclosure shall be made next to any advertised p ric e or cost (including free), and where consumers' financial account in f o rm a tio n is required, without the use of pop-up windows or hyperlinks to other electronic pages to display Material information. 7 . "Continuity Program" means any plan, arrangement, or system under which a c o n s u m e r is periodically charged for products or services, including but not lim ite d to access to a "member only" website, without prior notification by the s e lle r before each charge, regardless of any trial or approval period allowing the c o n s u m e r to cancel the program. 8 . "Corporate Defendants" means Grant Connect, LLC; Global Gold, Inc.; 15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 H o riz o n Holdings, LLC; O'Connell Gray, LLC; Pink LP; Vantex Group, LLC; V e rte k Group, LLC; Consolidated Merchant Solutions, LLC; OS Marketing G ro u p , LLC; Acai, Inc.; AllClear Communications, Inc.; Dragon Group, Inc.; E lite Benefits, Inc.; Global Fulfillment, Inc.; Global Gold Limited; Healthy A llu re , Inc.; MSC Online, Inc.; Paid To Process, Inc.; Premier Plus Member, In c .; Total Health, Inc.; VComm, Inc.; Juliette M. Kimoto Asset Protection Trust; a n d their successors, assigns, affiliates or subsidiaries. 9 . "Defendants" means Grant Connect, LLC; Global Gold, Inc.; Horizon H o ld in g s , LLC; O'Connell Gray, LLC; Pink LP; Vantex Group, LLC; Vertek G ro u p , LLC; Rachael A. Cook; James J. Gray; Steven R. Henriksen; Juliette M. K im o to ; Randy D. O'Connell; Michael Henriksen; Tasha Jn Paul; Kyle Kimoto; J o h n n ie Smith; Acai, Inc.; AllClear Communications, Inc.; Consolidated M e rc h a n t Solutions, LLC; Dragon Group, Inc.; Elite Benefits, Inc.; Global F u lf illm e n t Inc.; Global Gold Limited; Healthy Allure, Inc.; Juliette M. Kimoto A ss e t Protection Trust; MSC Online, Inc.; OS Marketing Group, LLC; Paid to P ro c e s s , Inc.; Premier Plus Member, Inc.; Total Health, Inc.; and Vcomm, Inc. 1 0 . "Document" is synonymous in meaning and equal in scope to the usage of th e term in the Federal Rules of Civil Procedure 34(a), and includes writing, d ra w in g s , graphs, charts, Internet sites, Web pages, Web sites, electronic c o rre s p o n d e n c e , including e-mail and instant messages, photographs, audio and v id e o recordings, contracts, accounting data, advertisements (including, but not lim ite d to, advertisements placed on the World Wide Web), FTP Logs, Server A c c e s s Logs, USENET Newsgroup postings, World Wide Web pages, books, w ritte n or printed records, handwritten notes, telephone logs, telephone scripts, re c e ip t books, ledgers, personal and business canceled checks and check re g is te rs , bank statements, appointment books, computer records, and other data 16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 c o m p ila tio n s from which information can be obtained and translated, if n e c e s sa ry, through detection devices into reasonably usable form. A draft or n o n -id e n tic a l copy is a separate document within the meaning of the term. 11. "Individual Defendants" means Rachael A. Cook; James J. Gray; Steven R. H e n rik s e n ; Juliette M. Kimoto; Randy D. O'Connell; Michael L. Henriksen, Jr.; T a s h a Jn Paul; Kyle R. Kimoto; and Johnnie Smith. 12. "Las Vegas Preliminary Injunction" means the preliminary injunction entered b y the Court against Defendants Global Gold, Inc.; Pink LP; Vantex Group, L L C ; Verterk Group, LLC; Rachael A. Cook; Steven R. Henriksen; and Juliette M . Kimoto on September 22, 2009 (Doc. #83). 1 3 . "Material" means likely to affect a person's choice of, or conduct regarding, g o o d s or services; 1 4 . "Negative Option feature" means, in an offer or agreement to sell or provide a n y goods or services, a provision under which the customer's silence or failure to take an affirmative action to reject goods or services or to cancel the agreement is interpreted by the seller as acceptance of the offer; 1 5 . "Original Corporate Defendants" means Grant Connect, LLC; Global Gold, In c .; Horizon Holdings, LLC; O'Connell Gray, LLC; Pink LP; Vantex Group, L L C ; Vertek Group, LLC; and their successors, assigns, affiliates or subsidiaries. 1 6 . "Original Defendants" means Grant Connect, LLC; Horizon Holdings, LLC; O 'C o n n e ll Gray, LLC; Global Gold, Inc.; Vantex Group, LLC; Vertek Group, L L C ; Pink LP; Rachael A. Cook; James J. Gray; Steven R. Henriksen; Juliette M. K im o to ; and Randy D. O'Connell. 1 7 . "Person" means a natural person, organization, or other legal entity, in c lu d in g a corporation, partnership, proprietorship, association, cooperative, g o v e rn m e n t or governmental subdivision or agency, or any other group or 17 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 c o m b in a tio n acting as an entity; 1 8 . "Plaintiff" or "Commission" or "FTC" means the Federal Trade C o m m is sio n ; 1 9 . "Preauthorized Electronic Fund Transfer," as defined by the Electronic Fund T ra n s f e r Act, 15 U.S.C. 1693a(9), means an electronic fund transfer authorized in advance to recur at substantially regular intervals. 2 0 . "Receiver" means the receiver appointed in Section XI of this Order and any d e p u ty receivers that shall be named by the temporary receiver. 2 1 . "Receivership Defendants" means Grant Connect, LLC; Global Gold, Inc.; Horizon Holdings, LLC; O'Connell Gray, LLC; Pink LP; Vantex Group, LLC; Vertek Group, LLC; and their successors, assigns, affiliates or subsidiaries. 2 2 . "Reno Preliminary Injunction" means the stipulated preliminary injunction e n te re d by the Court as to Defendants Grant Connect, LLC; Horizon Holdings, L L C ; O'Connell Gray, LLC; James J. Gray; and Randy D. O'Connell on August 1 8 , 2009 (Doc. #48). 2 3 . "Representatives" means Defendants' officers, agents, servants, employees, a n d attorneys, and any other person or entity in active concert or participation w ith them who receives actual notice of this Order by personal service or o th e rw is e . I. P R O H I B I T E D BUSINESS ACTIVITIES I T IS THEREFORE ORDERED that, in connection with the advertising, m a rk e tin g , promotion, offering for sale, or sale of any product or service, the Additional In d iv id u a l Defendants and their Representatives, whether acting directly or through any e n tity, corporation, subsidiary, division, director, manager, member, affiliate, independent c o n tra c to r, accountant, financial advisor, or other device, are hereby preliminarily 18 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 r e s tr a in e d and enjoined from: A . Misrepresenting, directly or indirectly, expressly or by implication, or from a s sis tin g others who are misrepresenting, any consumer's eligibility to receive, or th e likelihood of receiving, a grant or other financial assistance from the g o v e rn m e n t or any other source; B . Making any representation, expressly or by implication, concerning D e f e n d a n ts' success rate in securing grants or any person's likelihood of re c e iv in g a grant, unless Additional Individual Defendants possess and rely upon re lia b le evidence that substantiates the representation at the time the re p re s e n ta tio n is made; C . Failing to disclose, Clearly and Conspicuously, all applicable material terms re g a rd in g any and all products and services sold, marketed, promoted, or d is trib u te d by Defendants, including but not limited to: 1 . all products and services that are part of the sales offer, including but n o t limited to, all goods and services provided by third parties and/or a f f ilia te s ; 2 . all Continuity Programs associated with the sales offer; 3 . in conjunction with any Continuity Program: a . that consumers are signing up for a Continuity Program; b . the length of any trial period; c . that consumers who do not take affirmative action to cancel the C o n tin u ity Program within the trial period will incur a Charge by D e f e n d a n ts ; d . the Charge(s) that Defendants impose on consumers who do not c a n c e l within the trial period, and the date(s) the Charge(s) will be s u b m itte d for payment; and 19 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 e . the specific steps consumers must follow to cancel enrollment in a ll Continuity Programs to avoid incurring any Charge; 4 . any other Negative Option feature of any product or service that is part o f the sales offer; 5 . the amount of all Charges for all products and services that are part of th e sales offer, including but not limited to, any Continuity Program, and g o o d s and services provided by third parties; and 6 . Defendants' refund policy. D . Continuing to charge the credit card of any consumer for the purchase of D e f e n d a n ts' grant-related publications, products, goods, services, or programs; E . Charging the credit or debit card, or debiting the bank account, of any c o n s u m e r who was enrolled in any Continuity Program without receiving clear a n d conspicuous disclosures, as described in this Section, of the material terms of s u c h program; and F . Misrepresenting, directly or indirectly, expressly or by implication, or from k n o w in g ly assisting others who are misrepresenting, any other fact material to a c o n s u m e r's decision to purchase Defendants' products or services. II. A C T I V I T I E S PROHIBITED PURSUANT TO T H E ELECTRONIC FUNDS TRANSFER ACT ("EFTA") I T IS FURTHER ORDERED that Additional Individual Defendants and their R e p re s e n ta tiv e s , whether acting directly or through any entity, corporation, subsidiary, d iv is io n , director, manager, member, affiliate, independent contractor, accountant, financial a d v is o r, or other device, are hereby preliminarily restrained and enjoined from: A . Failing to obtain written authorization for preauthorized Electronic Fund T ra n s f e rs from a consumer's account before initiating any Preauthorized Electronic Fund 20 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 T ra n s f e r, as required by Section 907(a) of EFTA, 15 U.S.C. 1693e(a) and Section 2 0 5 .1 0 (b ) of Regulation E, 12 C.F.R. 205.10(b) as more fully set out in Section 205.10 of th e Federal Reserve Board's Official Staff Commentary to Regulation E, 12 C.F.R. 205, S u p p . I; and B . Failing to provide a copy of a valid written authorization to the consumer for p re a u th o riz e d Electronic Fund Transfers from a consumer's account, as required by Section 9 0 7 (a ) of EFTA, 15 U.S.C. 1693e(a) and Section 205.10(b) of Regulation E, 12 C.F.R. 205.10(b), as more fully set out in Section 205.10 of the Federal Reserve Board's Official S ta f f Commentary to Regulation E, 12 C.F.R. 205, Supp. I. III. A S S E T FREEZE I T IS FURTHER ORDERED that Additional Individual Defendants and their R e p re s e n ta tiv e s , whether acting directly or through any entity, corporation, subsidiary, d iv is io n , director, manager, member, affiliate, independent contractor, accountant, financial a d v is o r, or other device, are hereby preliminarily restrained and enjoined from: A . Transferring, liquidating, converting, encumbering, pledging, loaning, selling, c o n c e a lin g , dissipating, disbursing, assigning, relinquishing, spending, withdrawing, g ra n tin g a lien or security interest in, or otherwise disposing of any funds, real or personal p ro p e rty, accounts, contracts, shares of stock, lists of consumer names, or other assets, w h e re v e r located, including outside the United States, that are: 1 . owned or controlled, in whole or in part by any Defendant; 2 . held for the benefit of, directly or indirectly, any Defendant, in whole o r in part; 3 . in the actual or constructive possession of any Defendant; 4 . held by an agent of any Defendant as a retainer for the agent's p ro v isio n of services to Defendants; or 21 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 5 . owned or controlled by, or in the actual or constructive possession of or o th e rw is e held for the benefit of, any corporation, partnership, asset p ro te c tio n trust, or other entity that is directly or indirectly owned, m a n a g e d , controlled by any of the Defendants, or of which any Defendant is an Officer, Director, Member, or Manager. This includes, but is not lim ite d to, any assets held by, for, or subject to access by, any of the D e f e n d a n ts at any bank or savings and loan institution, or with any b ro k e r-d e a le r, escrow agent, title company, commodity trading company, p re c io u s metal dealer, or other financial institution or depository of any k in d ; or 6 . held in any account for which any Defendant is an authorized signor. 7 . This Order shall not preclude any Additional Individual Defendant f ro m spending a maximum of $100 per day for living expenses from their p e rs o n a l funds. 8. Additional Individual Defendants may seek relief from the asset freeze in relation to specified assets for good cause shown. B . Opening or causing to be opened, unless accompanied by Counsel for the C o m m is s io n , any safe deposit boxes titled in the name of any Defendant, either individually o r jointly, or subject to access by any Defendant; C . Obtaining a personal or secured loan encumbering the assets of any D e f e n d a n t, or subject to access by any Defendant; D . Incurring liens or other encumbrances on real property, personal property, or o th e r assets in the name, singly or jointly, of any Defendant or of any corporation, p a rtn e rs h ip , or other entity directly or indirectly owned, managed, or controlled by any D e f e n d a n t; or E . Incurring charges or cash advances on any credit or bank card issued in the 22 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 n a m e , individually or jointly, of any Corporate Defendant or any corporation, partnership, o r other entity directly or indirectly owned, managed, or controlled by any Defendant or of w h ic h any Defendant is an Officer, Director, Member, or Manager. This includes, but is n o t limited to, any corporate bank or credit card account for which any Additional In d iv id u a l Defendant is an authorized signor. I T IS FURTHER ORDERED that the assets affected by this Section shall in c lu d e assets (a) existing as of the date this Order is entered, or (b) acquired by any D e f e n d a n t following entry of this Order, if such assets are derived from any activity that is th e subject of or is prohibited by this Order. IV . D U T I E S OF ASSET HOLDERS I T IS FURTHER ORDERED that any financial or brokerage institution, credit c a rd processing company, payment processor, merchant bank, acquiring bank, business e n tity, or person served with a copy of this Order that (a) holds, controls, or maintains c u s to d y of any account or asset of any Additional Individual Defendant, (b) holds, controls, o r maintains custody of any asset associated with credit or debit card charges made on b e h a lf of Additional Individual Defendants, including but not limited to, reserve funds held b y payment processors, or (c) that has held, controlled, or maintained custody of any such a c c o u n t or asset at any time since the date of entry of this Order shall: A . Hold and retain within its control and prohibit the withdrawal, removal, a s s ig n m e n t, transfer, pledge, encumbrance, disbursement, dissipation, relinquishing, c o n v e rs io n , sale, or other disposal of any such asset except by further order of this Court; B . Deny any person, except the Receiver acting pursuant to Section XII of this O rd e r, access to any safe deposit box that is: 1 . titled in the name of any Additional Individual Defendant, either in d iv id u a lly or jointly; or 23 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 2 . otherwise subject to access by any Additional Individual Defendant; C . Unless already provided, provide the FTC's counsel, within ten (10) business d a ys of receiving a copy of this Order, a sworn statement setting forth: 1 . the identification number of each account or asset: a ) titled in the name, individually or jointly, of any of the A d d itio n a l Individual Defendants; b ) held on behalf of, or for the benefit of, any of Additional In d iv id u a l; or c ) associated with credit or debit card charges made on behalf of A d d itio n a l Individual Defendants; 2 . the balance of each such account, or a description of the nature and v a lu e of each such asset as of the close of business on the day on which th is Order is served, and, if the account or other asset has been closed or re m o v e d , the date closed or removed, the total funds removed in order to c lo se the account, and the name of the person or entity to whom such a c c o u n t or other asset was remitted; and 3 . the identification of any safe deposit box that is either titled in the n a m e , individually or jointly, of any of the Additional Individual D e f e n d a n ts, or is otherwise subject to access by any of the Additional In d iv id u a l Defendants; and D . Upon the request of the FTC, promptly provide the FTC with copies of all re c o rd s or other documentation pertaining to such account or asset, including, but not lim ite d to, originals or copies of account applications, account statements, signature cards, c h e c k s , drafts, deposit tickets, transfers to and from the accounts, including wire transfers a n d wire transfer instructions, all other debit and credit instruments or slips, currency tra n s a c tio n reports, 1099 forms, and safe deposit box logs. 24 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 V. F I N A N C IA L STATEMENTS I T IS FURTHER ORDERED that each Additional Individual Defendant, u n le s s already provided, shall upon of entry of this Order prepare and deliver to Counsel for th e Commission and to the Receiver completed financial statements on the forms attached to this Order as Attachment A (Financial Statement of Individual Defendant) for themselves in d iv id u a lly, and Attachment B (Financial Statement of Corporate Defendant) for each b u s in e s s entity under which they conduct business or of which they are an officer, and for e a c h trust for which any Defendant is a trustee. The financial statements shall be accurate as o f the date of entry of this Order. Each Additional Individual Defendant shall include in the f in a n c ia l statements a full accounting of all funds and assets, whether located inside or o u ts id e of the United States, that are: (a) titled in the name of such Additional Individual D e f e n d a n t, jointly, severally, or individually; (b) held by any person or entity for the benefit o f such Additional Individual Defendant; or (c) under the direct or indirect control of such A d d itio n a l Individual Defendant. V I. R E P A T R I A T I O N OF ASSETS AND DOCUMENTS I T IS FURTHER ORDERED that upon entry of this Order, each Additional In d iv id u a l Defendant shall: A . Provide the Commission and the Receiver with a full accounting of all funds, d o c u m e n ts , and assets outside of the United States which are: (1) titled in the name, in d iv id u a lly or jointly, of any Defendant; or (2) held by any person or entity for the benefit o f any Defendant; or (3) under the direct or indirect control, whether jointly or singly, of a n y Defendant; B . Transfer to the territory of the United States and deliver to the Receiver all f u n d s , documents, and assets located in foreign countries which are: (1) titled in the name 25 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 in d iv id u a lly or jointly of any Additional Individual Defendant; or (2) held by any person or e n tity, for the benefit of any Additional Individual Defendant; or (3) under the direct or in d ire c t control of any Additional Individual Defendant, whether jointly or singly; C . Provide the Commission access to all records of accounts or assets of any A d d itio n a l Individual Defendant held by financial institutions located outside the territorial U n ite d States by signing the Consent to Release of Financial Records appended to this O rd e r as Attachment C. V II. N O N I N T E R F E R E N C E WITH REPATRIATION I T IS FURTHER ORDERED that Additional Individual Defendants and their R e p re s e n ta tiv e s , whether acting directly or through any entity, corporation, subsidiary, d iv is io n , director, manager, member, affiliate, independent contractor, accountant, financial a d v is o r, or other device, are hereby preliminarily restrained and enjoined from taking any a c tio n , directly or indirectly, which may result in the encumbrance or dissipation of foreign a s s e ts , or in the hindrance of the repatriation required by Section VI of this Order, in c lu d in g , but not limited to: A . Sending any statement, letter, fax, email or wire transmission, or telephoning o r engaging in any other act, directly or indirectly, that results in a determination by a f o re ig n trustee or other entity that a "duress" event has occurred under the terms of a f o re ig n trust agreement until such time that all assets have been fully repatriated pursuant to S e c tio n VI of this Order; or B . Notifying any trustee, protector or other agent of any foreign trust or other re la te d entities of either the existence of this Order, or of the fact that repatriation is re q u ire d pursuant to a court order, until such time that all assets have been fully repatriated p u rs u a n t to Section VI of this Order. /// 26 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 V III. C O N S U M E R CREDIT REPORTS I T IS FURTHER ORDERED that pursuant to Section 604(1) of the Fair Credit R e p o rtin g Act, 15 U.S.C. 1681b(1), any consumer reporting agency served with this O rd e r shall promptly furnish consumer reports as requested concerning any Additional In d iv id u a l Defendant to the counsel for the Commission. IX . P R E S E R V A T I O N OF RECORDS I T IS FURTHER ORDERED that Additional Individual Defendants and their R e p re s e n ta tiv e s , whether acting directly or through any entity, corporation, subsidiary, d iv is io n , director, manager, member, affiliate, independent contractor, accountant, financial a d v is o r, or other device, are hereby preliminarily restrained and enjoined from: A . destroying, erasing, mutilating, concealing, altering, transferring, or otherwise d is p o s in g of, in any manner, directly or indirectly, documents that relate to the business, b u s in e s s practices, assets, or business or personal finances of any Defendant; and B . Failing to create and maintain documents that, in reasonable detail, a c c u ra te ly, fairly, and completely reflect Additional Individual Defendants' incomes, d is b u rse m e n ts , transactions, and use of money. X. P R O H IB I T I O N ON RELEASE OF CUSTOMER INFORMATION O R CUSTOMER LISTS I T IS FURTHER ORDERED that the Additional Individual Defendants and th e ir Representatives, whether acting directly or through any entity, corporation, subsidiary, d iv is io n , director, manager, member, affiliate, independent contractor, accountant, financial a d v is o r, or other device, are hereby preliminarily restrained and enjoined from selling, re n tin g , leasing, transferring, or otherwise disclosing the name, address, telephone number, 27 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 c re d it card number, bank account number, email address, or other identifying information of a n y person who paid money to any Defendant for grant-related services, programs, or p ro d u c ts or who were contacted or are on a list to be contacted by any of the Defendants; p ro v id e d that the Additional Individual Defendants may disclose such identifying in f o rm a tio n to a law enforcement agency or as required by any law, regulation, or court o rd e r. X I. T R A N S F E R OF RECEIVERSHIP PROPERTY TO RECEIVER I T IS FURTHER ORDERED that the Additional Individual Defendants, their R e p re s e n ta tiv e s , and any other person, with possession, custody or control of property of, or re c o rd s relating to, the Receivership Defendants shall upon notice of this Order by personal s e rv ic e or otherwise immediately notify the Receiver of, and, upon receiving a request from th e Receiver, immediately transfer or deliver to the Receiver possession, custody, and c o n tro l of, the following: A . All assets of the Receivership Defendants; B. All documents of the Receivership Defendants, including, but not limited to, b o o k s and records of accounts, all financial and accounting records, balance sheets, income s ta te m e n ts , bank records (including monthly statements, canceled checks, records of wire tra n s f e rs , and check registers), client lists, title documents and other papers; C . All computers and data in whatever form used to conduct the business of the R e c e iv e rs h ip Defendants; D . All assets belonging to other persons or entities whose interests are now u n d e r the direction, possession, custody, or control of, the Receivership Defendants; and E. All keys, codes, and passwords necessary to gain or to secure access to any a s s e ts or documents of the Receivership Defendants, including, but not limited to, access to th e ir business premises, means of communication, accounts, computer systems, 28 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 o r other property. In the event that any person or entity fails to deliver or transfer any asset o r otherwise fails to comply with any provision of this Section, the Receiver may file ex p a rte an Affidavit of Non-Compliance regarding the failure. Upon filing of the affidavit, th e Court may authorize, without additional process or demand, Writs of Possession or S e q u e stra tio n or other equitable writs requested by the Receiver. The writs shall authorize a n d direct the United States Marshal or any sheriff or deputy sheriff of any county, or any o th e r federal or state law enforcement officer, to seize the asset, document, or other item c o v e re d by this Section and to deliver it to the Receiver. X II. P R O V I S IO N OF INFORMATION TO RECEIVER I T IS FURTHER ORDERED that Additional Individual Defendants shall p ro v id e to the Receiver, immediately upon request, the following: A . A list of all assets and property, including accounts, of the Receivership D e f e n d a n ts that are held in any name other than the name of a Receivership Defendant, or b y any person or entity other than a Receivership Defendant; and B . A list of all agents, employees, officers, servants or those persons in active c o n c e rt and participation with the Additional Individual Defendants and Receivership D e f e n d a n ts, who have been associated or done business with the Receivership Defendants. X III. C O O P E R A T I O N WITH THE RECEIVER I T IS FURTHER ORDERED that Additional Individual Defendants, their R e p re s e n ta tiv e s , and any other person served with a copy of this Order shall fully cooperate w ith and assist the Receiver in taking and maintaining possession, custody, or control of the a s s e ts of the Receivership Defendants. This cooperation and assistance shall include, but n o t be limited to: providing information to the Receiver that the Receiver deems necessary in order to exercise the authority and discharge the responsibilities of the Receiver under 29 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 th is Order; providing any password required to access any computer, electronic file, or te le p h o n ic data in any medium; advising all persons who owe money to the Receivership D e f e n d a n ts that all debts should be paid directly to the Receiver; and transferring funds at th e Receiver's direction and producing records related to the assets and sales of the R e c e iv e rs h ip Defendants. The entities obligated to cooperate with the Receiver under this p ro v is io n include, but are not limited to, banks, broker-dealers, savings and loans, escrow a g e n ts , title companies, commodity trading companies, precious metals dealers and other f in a n c ia l institutions and depositories of any kind, and all common carriers, third-party b illin g agents, including but not limited to, payment processors, and other te le c o m m u n ic a tio n s companies, that have transacted business with the Receivership D e f e n d a n ts . X IV . I N T E R F E R E N C E WITH THE RECEIVER I T IS FURTHER ORDERED that Additional Individual Defendants and their R e p re s e n ta tiv e s , corporations, subsidiaries, divisions, or affiliates, are hereby restrained and e n jo in e d from directly or indirectly: A . Interfering with the Receiver managing, or taking custody, control, or p o s s e s s io n of, the assets or documents subject to this Receivership; B . Transacting any of the business of the Receivership Defendants; C . Transferring, receiving, altering, selling, encumbering, pledging, assigning, liq u id a tin g , or otherwise disposing of any assets owned, controlled, or in the possession or c u s to d y of, or in which an interest is held or claimed by, the Receivership Defendants, or th e Receiver; and D . Refusing to cooperate with the Receiver or the Receiver's duly authorized a g e n ts in the exercise of their duties or authority under any order of this Court. /// 30 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 XV . S T A Y OF ACTIONS AGAINST LAS VEGAS RECEIVERSHIP DEFENDANTS I T IS FURTHER ORDERED that, except by leave of this Court, during p e n d e n c y of the Receivership ordered herein, the Additional Individual Defendants, their R e p re s e n ta tiv e s , corporations, subsidiaries, divisions, or affiliates, and all investors, c re d ito rs , stockholders, lessors, customers and other persons seeking to establish or enforce a n y claim, right, or interest against or on behalf of the Additional Individual Defendants, a n d all others acting for or on behalf of such persons, are hereby enjoined from taking a c tio n that would interfere with the exclusive jurisdiction of this Court over the assets or d o c u m e n ts of the Receivership Defendants, including, but not limited to: A . Commencing, prosecuting, or continuing a judicial, administrative, or other a c tio n or proceeding against the Receivership Defendants, including the issuance or e m p lo ym e n t of process against the Receivership Defendants, except that such actions may b e commenced if necessary to toll any applicable statute of limitations; B . Filing or enforcing any lien on any asset of the Receivership Defendants, ta k in g or attempting to take possession, custody, or control of any asset of the Receivership D e f e n d a n ts; or attempting to foreclose, forfeit, alter, or terminate any interest in any asset of th e Receivership Defendants, whether such acts are part of a judicial proceeding, are acts of s e lf -h e lp , or otherwise; C . Initiating any other process or proceeding that would interfere with the R e c e iv e r managing or taking custody, control, or possession of, the assets or documents s u b je c t to this receivership. P ro v id e d that, this Order does not stay: (i) the commencement or continuation of a criminal a c tio n or proceeding; (ii) the commencement or continuation of an action or proceeding by a governmental unit to enforce such governmental unit's police or regulatory power; or (iii) th e enforcement of a judgment, other than a money judgment, obtained in an action or 31 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 p ro c e e d in g by a governmental unit to enforce such governmental unit's police or regulatory p o w e r. X V I. D I S T R I B U T I O N OF ORDER BY DEFENDANTS I T IS FURTHER ORDERED that Additional Individual Defendants shall im m e d ia te ly provide a copy of this Order to each affiliate, sales entity, successor, assign, m e m b e r, officer, director, employee, agent, independent contractor, client company, s e rv a n t, attorney, spouse, subsidiary, division, and representative of any Additional In d iv id u a l Defendant, and shall, within ten (10) days from the date of entry of this Order, provide the FTC with a sworn statement that Additional Individual Defendants have c o m p lie d with this provision of the Order, which statement shall include the names and a d d re s s e s of each such person or entity who received a copy of this Order. Furthermore, A d d itio n a l Individual Defendants shall not take any action that would encourage officers, a g e n ts , members, directors, employees, salespersons, independent contractors, attorneys, s u b s id ia rie s , affiliates, successors, assigns or other persons or entities in active concert or p a rtic ip a tio n with them to disregard this Order or believe that they are not bound by its p r o v is io n s . X V II. S E R V I C E ON FINANCIAL INSTITUTIONS, E N T I T I E S OR PERSONS I T IS FURTHER ORDERED that copies of this Order may be served by any m e a n s , including facsimile transmission, email, and overnight delivery service, upon any f in a n c ia l institution or other entity or person that may have possession, custody, or control o f any documents or assets of any Additional Individual Defendant, or that may otherwise b e subject to any provision of this Order. Service upon any branch or office of any f in a n c ia l institution shall effect service upon the entire financial institution. 32 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 X V III. G E N E R A L SERVICE OF ORDER IT IS FURTHER ORDERED that pursuant to Fed. R. Civ. P. 4(c)(2), this Order a n d the papers filed in this matter may be served on the Additional Individual Defendants, u p o n the business premises of Additional Individual Defendants, and upon any financial in s titu tio n or other entity or person that may have possession, custody or control of any d o c u m e n ts or assets of any Additional Individual Defendant, or that may be subject to any p ro v is io n of this Order, by employees of the FTC, by employees of any other law e n f o rc e m e n t agency, by any agent of Plaintiff or by any agent of any process service re ta in e d by Plaintiff. X X IX . C O R R ESPO N D EN C E I T IS FURTHER ORDERED that, for the purpose of this Order, all c o rre sp o n d e n c e and service of pleadings on Plaintiff shall be addressed to: R o b e rto Anguizola and Tracey Thomas F e d e ra l Trade Commission 6 0 0 Pennsylvania Avenue NW, #286 W a s h in g to n , DC 20580 F A X : 202-326-3395 E m a il: ranguizola@ftc.gov, tthomas@ftc.gov XX. D U R A T IO N OF THE PRELIMINARY INJUNCTION I T IS FURTHER ORDERED that this Order shall remain in full force and e f f e c t pending trial on the merits unless sooner modified or dissolved. /// /// /// /// 33 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 D A T E D : June 17, 2010 X X I. R E T E N T I O N OF JURISDICTION I T IS FURTHER ORDERED that this Court shall retain jurisdiction of this m a tte r for all purposes. I T IS SO ORDERED. _______________________________ PHILIP M. PRO United States District Judge 34

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