United States of America v. Kern et al

Filing 50

DEFAULT JUDGMENT AND ORDER for Permanent Injunction. IT IS HEREBY ORDERED that 46 , 48 the United States' Motion for Entry of Default Judgment and Order for permanent Injunction and Other Equitable Relief is GRANTED. The Clerk of Court is directed to ENTER this Default Judgment and Order for Permanent Injunction and CLOSE THIS CASE. Signed by Judge Jennifer A. Dorsey on 11/7/2018. (Copies have been distributed pursuant to the NEF - ADR)

Case 2:18-cv-00283-JAD-PAL Document 49-1 Filed 09/17/18 Page 1 of 14

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JOSEPH H. HUNT
Assistant Attorney General
JAMES M. BURNHAM
Deputy Assistant Attorney General
GUSTAV W. EYLER
Acting Director, Consumer Protection Branch
JILL P. FURMAN
Deputy Director
JACQUELINE BLAESI-FREED
Trial Attorney
Consumer Protection Branch
U.S. Department of Justice
P.O. Box 386
Washington, DC 20044
Telephone: [phone]
Facsimile: [phone]
Email: [e-mail]
DAYLE ELIESON
United States Attorney

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TROY K. FLAKE
Assistant United States Attorney
501 Las Vegas Blvd. South, Suite 1100
Las Vegas, Nevada 89101

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Attorneys for the United States

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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UNITED STATES OF AMERICA,

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Plaintiff,
v.
PATTI KERN, et al.,
Defendants.

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Civil Case No: 2:18-cv-000283-JAD-PAL
[Proposed] DEFAULT
JUDGMENT AND ORDER FOR
PERMANENT INJUNCTION
ECF Nos. 46, 48

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Plaintiff, the United States of America, brought this civil action on February 15, 2018,

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alleging defendants were engaging in an ongoing mail fraud scheme in violation of 18 U.S.C.

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§§ 1341 and 1349 and seeking injunctive and other equitable relief under 18 U.S.C. § 1345. (See
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Case 2:18-cv-00283-JAD-PAL Document 49-1 Filed 09/17/18 Page 2 of 14

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Dkt. No. 1.) This Court granted the United States’ ex parte application for a temporary

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restraining order on February 20, 2018, finding that (1) the United States likely could succeed in

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proving defendants are violating or are about to violate 18 U.S.C. §§ 1341 and 1349 by

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executing a scheme or artifice to defraud, or for obtaining money or property by means of false

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or fraudulent representations with the intent to defraud using the U.S. Mail; (2) the equities

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weighed in favor of an injunction; and (3) an injunction was in the public’s interest. Nine of the

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original defendants have since stipulated to the entry of final orders, which this Court entered.

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(See Dkt. Nos. 32-35.) The remaining eleven defendants—Advanced Allocation Systems, Inc.;

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Distribution Reporting Center, Inc.; Funding Managers, Inc.; Global Data Funding, Inc.;

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Marketing Image Direct, Inc.; North American Disbursement Agency, Inc.; Pacific Allocation

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Systems, Inc.; Special Money Managers, Inc.; All American Awards, Inc.; Montgomery

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Marketing Inc. LLC; and Sean O’Connor (hereinafter “Default Defendants”)—failed to file an

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answer or otherwise defend this action, and the Clerk entered a default against each of them on

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July 17, 2018. (See Dkt. No. 45.)

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Plaintiff filed a Motion for Entry of Default Judgment and Order for Permanent

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Injunction and Other Equitable Relief against the Default Defendants. Having considered the

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motion and memorandum filed in support, declaration, and entire record in this matter, the

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United States’ motion is hereby GRANTED, AND IT IS HEREBY ADJUDGED,

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ORDERED, AND DECREED as follows:
FINDINGS

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1.

The Complaint alleges that defendants violated, are violating, or are about to

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violate 18 U.S.C. §§ 1341 and 1349 by executing schemes and artifices to defraud or for

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obtaining money or property my means of false or fraudulent representations with the intent to

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defraud, and, in so doing, use the United States Mail. The Complaint seeks injunctive and other

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equitable relief.

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2.

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This Court has subject matter jurisdiction over this matter under U.S.C. § § 1345
to 18 18 USC 1345

and 28 U.S.C. §§ 1331 and 1345.

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3.

Venue is proper in this District pursuant to 28 U.S.C. §§ 1391(b) and 1391(c)

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because Default Defendants reside in this District, transact business in this District, and because

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Default Defendants’ actions giving rise to this case occurred in this District.

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4.

The Complaint states a claim upon which relief may be granted against the

Default Defendants under 18 U.S.C. § 1345.

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5.

Default Defendants have been properly served with notice of the lawsuit.

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6.

Default Defendants have failed to answer or otherwise defend this action. The

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Clerk of the Court properly entered a default against all Default Defendants on July 17, 2018.
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Because Default Defendants failed to file an answer, the allegations in the

Complaint are taken as true.
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As alleged in the Complaint, Default Defendants participated in a long-running

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mail fraud scheme. Default Defendants are responsible for mailing, or facilitating the mailing, of

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thousands of fraudulent solicitations that represent recipients have won a substantial prize, but

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must pay a fee to receive the prize. The solicitations purport to be individualized notices sent by

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legitimate entities, when in fact they are mass-produced letters sent by sham corporations.

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Victims who send the fees receive no prizes. Default Defendants know the solicitations are

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fraudulent, but nevertheless continued their participation. Default Defendants’ participation in

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that scheme constitutes mail fraud in violation of 18 U.S.C. §§ 1341 and 1349.

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9.

The Court finds that absent a permanent injunction, Default Defendants are likely

to resume the activities underlying the Plaintiff’s Complaint.
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Default Defendants’ history of fraudulent activity demonstrates a risk that, absent

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a permanent injunction, they will commit future violations of federal fraud statutes. Accordingly

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a permanent injunction constraining their future activities and ensuring they cannot reuse the

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tools of their fraud scheme is warranted. Specifically it is in the interest of justice and the public

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to (1) permanently ban Default Defendants from engaging in certain categories of mailings and

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activities related to such mailings, (2) require Default Defendants to surrender copies of

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fraudulent solicitations, as well as lists of recipients and potential recipients, and (3) provide

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other ancillary relief.
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Case 2:18-cv-00283-JAD-PAL Document 49-1 Filed 09/17/18 Page 4 of 14

DEFINITIONS

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For the purposes of this Order, the following definitions apply:

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1.

“Caging Services” refers to opening mail; entering or inputting data about such

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mail into a database or forwarding such data; handling, forwarding, or depositing payments

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received in such mail, including currency, bank checks, certified checks, money orders, or credit

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card charge authorizations; or handling or forwarding any such mail;

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2.

“Covered Materials” refers to any materials that contain advertisements,

solicitations, promotions, and/or any other materials:
a. that represent, directly or indirectly, expressly or impliedly that the recipient has

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won, will win, or will receive cash, awards, or prizes;

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b. that represent, directly or indirectly, expressly or impliedly that the recipient will

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receive delivery of cash, awards, or other prizes in return for payment of a fee;

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c. that offer for sale information regarding sweepstakes or lotteries;

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d. that represent, directly or indirectly, expressly or impliedly, that the recipient of

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the solicitation was specifically selected to receive the mailing based on a reason

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other than the fact that the recipient’s name appears on a mailing list;
e. that offer for a fee the following items or services:

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i. Wealth-Building Programs, meaning instructions, reports, or programs

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which provide purportedly guaranteed results or methods for making

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money or an item purportedly guaranteed to provide the user with luck or

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wealth;
ii. Psychics, meaning persons (actual or fictitious) that are presented in

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mailed solicitations or other solicitations to consumers as having psychic,

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clairvoyant, or other such similar special abilities; or
f. that contain any other false or misleading representations.

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3.

“Customer List(s)” refers to any compilation including personal information—

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such as the name, address, telephone number, email address, social security number, other

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identifying information, or data that enables access to a person’s account (including a credit
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card, bank account, or other financial account—that was compiled in whole or in part from

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individuals who have responded to any Covered Materials.

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“Fee” refers to a payment of any kind, including but not limited to: processing

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fees, service fees, expediting fees, purchase fees, nominal fees, symbolic payments, gifts and

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gratuities.

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“Payment Processing Services” refers to handling credit card transactions, debit

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card transactions, Automated Clearing House (ACH) transactions, check transactions, money

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orders, travelers check transactions, or cash transactions.
PROHIBITED ACTIVITIES

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I.

Pursuant to 18 U.S.C. § 1345 and the inherent power of this Court, Default

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Defendants, their agents, officers, employees, and successors and all other persons and entities in

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active concert or participation with them are permanently enjoined from:

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A.

committing mail fraud as defined by 18 U.S.C. §§ 1341 and 1349;

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B.

using the United States mail, or causing others to use the United States mail, to
distribute any Covered Materials;

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C.

through the United States mail;

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printing, or causing others to print, any Covered Materials that will be distributed

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receiving, handling, opening, or forwarding any correspondence transmitted

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through the United States mail that responds, by sending payment or otherwise, to

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any Covered Materials;

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E.

brokering or licensing any Customer Lists;

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disclosing, using, benefitting from, selling, offering for sale, leasing, renting,

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disclosing, using, benefitting from, selling, offering for sale, leasing, renting,

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brokering or licensing any lists compiled from or consisting in whole or in part of

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United States residents where such lists will be used to address any Covered

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Materials;

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compiling Customer Lists;

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Case 2:18-cv-00283-JAD-PAL Document 49-1 Filed 09/17/18 Page 6 of 14

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H.

transmitted through the United States mail in response to any Covered Materials;

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I.

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acting as a consultant (whether paid or unpaid) for any person engaged in any of
the conduct described in Subparagraph I(A)-(I), above; or

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performing, or causing others to perform, Payment Processing Services for
payments received from U.S. residents in response to any Covered Materials; or

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performing, or causing others to perform, Caging Services on correspondence

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destroying, deleting, removing, or transferring any and all business, financial,

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accounting, and other records concerning their operations and the operations of

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any other entity that is owned or controlled in whole or in part by any Default

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Defendant, with the proviso that Default Defendants may destroy, delete, remove,

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or transfer records covered by the subparagraph in order to comply with the law

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or other court orders, and may destroy, delete, remove, or transfer Customer Lists

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and Covered Materials in order to comply with Paragraph II of this Order.
RETENTION OF CUSTOMER LISTS AND COVERED MATERIALS

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II.

Within fourteen (14) days of entry of this Order, the Default Defendants are

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ordered to provide to the United States (1) any Customer Lists and (2) any Covered Materials

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that are currently in their possession, custody or control. Within fourteen (14) days of entry of

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this Order, Default Defendants shall also direct any third parties that are in custody of Default

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Defendants’ Customer Lists and Covered Materials to provide all copies of such materials to the

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United States and not to retain any copies of such materials in the third party’s possession,

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custody or control, provided however that these third parties may also provide a copy of such

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Customer Lists and Covered Materials to their own retained counsel. Within twenty-eight (28)

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days of entry of this Order, Default Defendants shall provide the United States a certification in

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the form attached here as Exhibit A, sworn under penalty of perjury before a local notary,

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detailing what materials, if any, were provided the United States in this matter, and certifying

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that Default Defendants no longer have in their possession any such materials.

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NOTICE TO THIRD PARTIES

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III.

Within fourteen (14) days of entry of this Order, Default Defendants shall provide

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copies of this Order to all direct mailers, graphic designers/artists, list brokers,

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printer/distributors, mailing houses, caging services, and/or payment processors with which they

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reasonably have determined they done business at any time with respect to any Covered

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Materials distributed through the United States mail. Within twenty-eight (28) days of entry of

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this Order, Default Defendants shall provide proof of such notice to the United States, including

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the name and addresses of the entities and/or individuals to whom the notice was sent, how the

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notice was sent, when the notice was sent, and a copy of the notice.
AUTHORIZATION TO OPEN MAIL

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IV.

The United States Postal Inspection Service is authorized to open any and all

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United States Mail that was detained pursuant to any order of this Court and any mail responsive

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to Covered Materials in its possession, custody, or control. The United States Postal Inspection

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Service shall return any currency, bearer instruments (including but not limited to money orders

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and travelers checks), and any personal effects that can be positively identified with its sender

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contained in any mail opened pursuant to this paragraph. This return shall include a letter

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notifying the sender of the disposition of this matter, attached here as Exhibit B. The United

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States Postal Inspection Service is authorized to destroy any and all remaining detained mail

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(including but not limited to envelopes, order forms, correspondence, personal checks, and

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payment card information (PCI)).
ORDER ACKNOWLEDGEMENT

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V.

Within five (5) days after entry of this Order, the Default Defendants are ordered

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to submit to the United States a written acknowledgement of this Order sworn under penalty of

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perjury.
PROCEDURE FOR SUBMISSIONS TO THE UNITED STATES

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VI.

Unless otherwise directed by a representative of the Consumer Protection Branch,

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Civil Division, Department of Justice, in writing, all submissions to the United States must be

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sent via overnight delivery with signatures required upon recipient to the following address:
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Case 2:18-cv-00283-JAD-PAL Document 49-1 Filed 09/17/18 Page 8 of 14

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Director, Consumer Protection Branch, United States Department of Justice, 450 Fifth Street,

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NW, Suite 6400 South, Washington, D.C. 20001. The submission must include a cover letter

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with a subject line of “United States v. Kern, et al., 18-cv-283 (D. Nev.).”
RETENTION OF JURISDICTION

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VII.

This Court retains jurisdiction over this matter for construction, modification, or

enforcement of this Order.
CONCLUSION

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Accordingly, IT IS HEREBY ORDERED that IT IS SO ORDERED
the United States' Motion for Entry of
Default Judgment and Order for permanent Injunction and Other Equitable Relief [ ECF
Nos. 46, 48] is GRANTED. The Clerk of Court is directed to ENTER this Default
Judgment and Order for Permanent Injunction and CLOSE THIS CASE.
UNITED STATES DISTRICT JUDGE
_________________________________
U.S. District Judge Jennifer A. Dorsey
Dated: November 7, 2018
DATED:

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Case 2:18-cv-00283-JAD-PAL Document 49-1 Filed 09/17/18 Page 9 of 14

Exhibit A

Case 2:18-cv-00283-JAD-PAL Document 49-1 Filed 09/17/18 Page 10 of 14

Certification
I, ______________________, hereby declare as follows:
Pursuant to Paragraph II of the
entered on _____________, 2018 (the “
al., 2:18-cv-000283-JAD-PAL (D. Nev.)

”) in United States v. Kern, et

I certify as follows (check all that apply):
_____ No Lists or Covered Materials in Possession or Control. As of the date of the
, I did not have in my possession or control any Covered
Materials, as defined in the
, or any Customer Lists, as defined in
the
.
_____ Lists

Provided to
, I have provided to
and Customer Lists. The materials provided are as follows:
Materials
(describe)

. Pursuant to the
all Covered Materials

Counsel Name, Address,
and Point of Contact

(Attach additional sheets if necessary)
[Continued on next page]

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Date
Provided

Case 2:18-cv-00283-JAD-PAL Document 49-1 Filed 09/17/18 Page 11 of 14

_____ Requests to Third Parties. On the dates and in the manner listed below, I instructed
the individuals identified below to provide to the United States all Covered Materials
and Customer Lists, to the extent such individual has or had any such lists in his or her
possession, and not to retain copies of any such materials or lists. I indicate below whether the
individual, as of the date of this certification, has confirmed that he or she has complied
with this directive and the date of such confirmation.
Name of Third Party
(name of corporate entity, if
applicable, and address)
Name of entity/individual
contacted:
Address:

Communication of Instruction
Date:

Response
Confirmed lists and Covered
Materials destroyed

Manner (e.g., phone, mail,
email):

Name of individual responding:
Date of confirmation:
Manner communicated (e.g.,
phone, mail, email):
or
No response received within
five business days

Name of entity/individual
contacted:

Date:

Confirmed lists and Covered
Materials destroyed

Address:

Manner (e.g., phone, mail,
email):

Name of individual responding:
Date of confirmation:
Manner communicated (e.g.,
phone email):
or
No response received within
five business days

(Attach additional sheets if necessary)

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Case 2:18-cv-00283-JAD-PAL Document 49-1 Filed 09/17/18 Page 12 of 14

I declare under penalty of perjury under the laws of the United States that the foregoing is true
and correct.
Dated _________, and executed at __________.
______________________
Signature
______________________
Typed or Printed Name and Title

State of [STATE]
County of [XXX]

)
) ss.:
)

On the _____ day of _________ in the year 2018, before me, the undersigned notary public,
personally appeared _________________________, personally known to me or proved to me
on the basis of satisfactory evidence to be the individual whose name is subscribed to the
within instrument and acknowledged to me that he/she executed the same in his/her capacity,
and that by his/her signature on the instrument, the individual, or the person upon behalf of
which the individual acted, executed the instrument.

Notary Public/State of [STATE][

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Case 2:18-cv-00283-JAD-PAL Document 49-1 Filed 09/17/18 Page 13 of 14

Exhibit B

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UNITED STATES POSTAL INSPECTION SERVICE

DOJ MAIL FRAUD TEAM

[Date]
First Name, Last Name
Address 1
Address 2
City, State Zip
Re:

United States of America v. Kern, et al.
Civil Case No: 2:18-cv-000283-JAD-PAL

Dear Sir/Madam:
We are writing you because you previously mailed [merge field—money/bearer
instrument/personal item and specific amount of remission] in response to a letter claiming
you were entitled to receive a cash prize. We are returning your [merge field—money/bearer
instrument/personal item and specific amount of remission].
The United States Department of Justice (DOJ) has filed civil charges against Patricia Kern;
Advanced Allocation System, Inc.; Distribution Reporting Center, Inc.; Global Data Funding,
Inc.; Marketing Image Direct, Inc.; Montgomery Marketing, Inc. LLC.; North American
Disbursement Agency, Inc.; Pacific Allocation Systems, Inc.; Special Money Managers, Inc.; All
American Awards, Inc.; Golden Products Service, Inc.; Edgar Del Rio; NSD Products, Inc.; Sean
O’Connor; Epifanio Castro; New Generation Graphics, Inc.; Andrea Burrow; Stephen Fennell;
and Neptune Data Services, Inc. The case, filed in the District of Nevada, alleged that the
defendants conducted a scheme to defraud consumers through the mail. Specifically, DOJ
alleged that the defendants solicited payments from consumers by sending letters representing
that the recipient was entitled to receive a large cash prize or other valuable prize in return for a
payment in the range of $20 to $30. DOJ alleged that these representations were fraudulent
and that consumers who sent in payments did not receive the promised cash or prizes. The
letters were sent in the names of multiple different companies and individuals.
On February 20, 2018, the United States District Court made a determination that DOJ could
likely succeed in proving that defendants were engaging in a fraudulent scheme.
On _______ 2018, the District Court entered a permanent injunction against the defendants,
prohibiting them from mailing advertisements representing that a consumer is entitled to receive
a prize in return for a payment. This injunction also requires the U.S. Postal Inspection Service
to return to consumers any currency or bearer instruments (such as money orders or travelers
checks). Enclosed, please find the [merge field—money/bearer instrument and specific
amount of remission] that was able to be identified as belonging specifically to you.
Should you have any questions about this notice, please contact Sabrina Holmes with the U.S.
Postal Inspection Service at [phone]. For more information, visit [insert URL for press
release website.]

PO Box 7404
Washington, DC 20044-7404