[Federal Register Volume 63, Number 57 (Wednesday, March 25, 1998)]
[Notices]
[Pages 14466-14468]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-7700]


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FEDERAL TRADE COMMISSION

[File No. 972-3025]


Civic Development Group, Inc., et al.; Analysis To Aid Public 
Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the draft 
complaint that accompanies the consent agreement and the terms of the 
consent order--embodied in the consent agreement--that would settle 
these allegations.

DATES: Comments must be received on or before May 26, 1998.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary, 
Room 159, 6th St. and Pa. Ave., N.W., Washington, D.C. 20580.

FOR FURTHER INFORMATION CONTACT:
Eileen Harrington or Hugh Stevenson, FTC/H-238, Washington, D.C. 20580. 
(202) 326-3127 or 326-3511.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Section 2.34 of 
the Commission's Rules of Practice (16 CFR 2.34), notice is hereby 
given that the above-captioned consent agreement containing a consent 
order to cease and desist, having been filed with and accepted, subject 
to final approval, by the Commission, has been placed on the public 
record for a period of sixty (60) days. The following Analysis to Aid 
Public Comment describes the terms of the consent agreement, and the 
allegations in the complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC Home Page 
(for March 18, 1998), on the World Wide Web, at ``http://www.ftc.gov/
os/actions97.htm.'' A paper copy can be obtained from the FTC Public 
Reference Room, Room H-130, Sixth Street and Pennsylvania Avenue, N.W., 
Washington, D.C. 20580, either in person or by calling (202) 326-3627. 
Public comment is invited. Such comments or views will be considered by 
the Commission and will be available for inspection and copying at its 
principal office in accordance with Section 4.9(b)(6)(ii) of the 
Commission's Rules of Practice (16 CFR 4.9(b)(6)(ii)).

Analysis of Proposed Consent Order To Aid Public Comment

    The Federal Trade Commission (``Commission'') has accepted an 
agreement to a proposed consent order from Civic Development Group, 
Inc., and Community Network, Inc., corporations, and Scott Pasch and 
David Keezer, individually and as officers of Civic Development Group, 
Inc., and Richard McDonnell, individually and as an officer of 
Community Network, Inc. (``Respondents'').
    The proposed consent order has been placed on the public record for 
sixty (60) days for reception of comments by interested persons. 
Comments received during this period will become part of the public 
record. After sixty (60) days, the Commission will again review the 
agreement and the comments received and will decide whether it should 
withdraw from the agreement or make final the agreement's proposed 
order.
    This matter concerns representations made by Respondents when they 
solicit consumers by telephone to contribute money to the non-profit 
organization, the American Deputy Sheriffs' Association (``ADSA'').
    The Commission's complaint in this matter charges Respondents with 
engaging in unfair or deceptive acts or practices in connection with 
soliciting consumers by telephone to contribute to the ADSA. According 
to the complaint, in the course of making such solicitations, 
Respondents misrepresent to consumers that: money contributed by 
consumers to the ADSA had in the past benefitted law enforcement 
offices in the town, city, county, or state in which the consumers 
reside; money contributed to the ADSA by consumers had been used in the 
past to purchase bullet-proof vests for law enforcement offices in the 
town, city, county, or state in which the consumers reside, and money 
contributed to the ADSA by consumers had been used in the past to pay 
death benefits to the survivors of deceased law enforcement officers 
who resided or worked in the town, city, county, or state in which the 
consumers reside.
    The complaint also alleges that Respondents misrepresented that: 
Money contributed to the ADSA by consumers would be used to benefit law 
enforcement offices in the town, city, county, or state in which the 
consumers reside; money contributed to the ADSA by consumers would be 
used to purchase bullet-proof vests for law enforcement offices in the 
town, city, county, or state in which the consumers reside; and money 
contributed to the ADSA by consumers would be used to pay death 
benefits to the survivors of deceased law enforcement officers who 
reside or work in the town, city, county, or state in which the 
consumers reside.
    The consent order contains provisions designed to remedy the 
violations charged and to prevent Respondents from engaging in similar 
deceptive or unfair acts or practices in the future.
    Paragraph I of the order prohibits Respondents, in connection with 
a telephone solicitation, from misrepresenting the purpose for which

[[Page 14467]]

charitable contribution has been or will be used.
    Paragraph II of the order prohibits Respondents, in connection with 
a telephone solicitation, from misrepresenting the geographic location 
of the charity, organization or program that has benefitted or will 
benefit from the charitable contribution.
    Paragraph III of the order prohibits Respondents, in connection 
with a telephone solicitation, from misrepresenting any fact material 
to the decision of any person to make a charitable contribution.
    Paragraph IV of the order requires that Respondents, in connection 
with telephone solicitations, adopt an education and monitoring program 
designed to ensure compliance with Paragraph I through III of the 
order. As part of this education and monitoring program, Respondents 
must tape-record and review 1,000 solicitation telephone calls every 
thirty days.
    Paragraph V of the order provides that in any action brought by the 
Commission to enforce the order, unless Respondents know or reasonably 
should have known of the violation, there shall be a rebuttable 
presumption that Respondents exercised good faith in complying with 
Parts I through III of the order, if Respondents show by a 
preponderance of the evidence that they have established and maintained 
the education and monitoring program mandated in Paragraph IV of the 
order.
    Paragraph VI of the order requires Respondents, for a period of 
five (5) years, to maintain and permit representatives of the 
Commission access to Respondents' business premises to inspect and copy 
all documents relating in any way to any conduct that is the subject of 
this order.
    Paragraph VII of the order requires that Respondents, for a period 
of five (5) years, permit representatives of the Commission to 
interview and depose, under oath, at the Respondents' business 
premises, the officers, directors, or employees of any such business 
with regard to compliance with the terms of this order.
    Paragraph VIII of the order prohibits Respondents from providing 
the means and instrumentalities to, or otherwise assisting and 
facilitating any person who Respondents know or should know makes false 
or misleading representations about the purpose for which charitable 
contributions have been or will be used, the geographic location of the 
charity, organization or program that has benefitted or will benefit 
from charitable contributions or any fact material to any person to 
make any charitable contribution.
    Paragraph IX of the order requires that Respondents, for a period 
of five (5) years from the date of entry of the order, deliver a copy 
of the order to all current and future principals, officers, directors, 
and managers of Respondents' companies or of any affiliated companies 
having responsibilities with respect to the subject matter of the 
order, and shall secure from each such person a signed and dated 
statement acknowledging receipt of the order.
    Paragraph X of the order requires that Respondents Civic 
Development Group, Inc. and Community Network, Inc. notify the 
Commission at least thirty (30) days prior to any change in the 
corporation(s) that may affect compliance obligations arising under 
this order. Provided, however, that, with respect to any proposed 
change in the corporation about which Respondents learn less than 
thirty (30) days prior to the date such action is to take place, 
Respondents shall notify the Commission as soon as is practicable after 
obtaining such knowledge.
    Paragraph XI of the order requires that Respondents Community 
Network, Inc., Civic Development Group, Inc., and their successors and 
assigns and Respondents Scott Pasch, David Keezer, and Richard 
McDonnell, within sixth (60) days after the date of service of the 
order, and again 180 days following entry of the order, and again at 
such other times as the Federal Trade Commission may require, file with 
the Commission a report, in writing, setting forth in detail the manner 
and form in which they have complied with this order.
    Paragraph XII of the order requires that Respondents Scott Pasch, 
David Keezer, and Richard McDonnell, for a period of ten (10) years 
after the date of issuance of the order, notify the Commission of the 
discontinuance of their current business or employment, or of their 
affiliation with any new business or employment.
    Paragraph XIII of the order provides for a twenty (20) year sunset 
provision.
    The purpose of this analysis is to facilitate public comment on the 
proposed order, and it is not intended to constitute an official 
interpretation of the agreement and proposed order, or to modify any of 
their terms.

    By direction of the Commission, Commissioner Azcuenaga and 
Commissioner Swindle not participating.
Donald S. Clark,
Secretary.

Statement of Chairman Robert Pitofsky and Commissioner Sheila F. 
Anthony

    Today, we issue the attached administrative settlement for public 
comment. The proposed agreement would resolve serious allegations about 
misrepresentations made by respondents in connection with their 
telephone fundraising efforts on behalf of a non-profit organization. 
We present our views on one particular provision in the proposed Order 
to ensure that it is not misconstrued to suggest to some that the 
Commission is steering in a new direction.
    Part V of the Order provides respondents with a limited rebuttable 
presumption that they have exercised good faith in complying with key 
injunctive provisions of the Order, if respondents show, by a 
preponderance of the evidence, that they have established and 
maintained the education and compliance program mandated in Part IV. In 
this case, including this provision is acceptable.
    Part IV of the Order establishes numerous and significant 
monitoring and education requirements designed to ensure that 
respondents make no deceptive representations in connection with any 
charitable solicitations by telephone. These requirements include, but 
are not limited to: disseminating a brochure that discusses the 
obligations of a professional fundraiser to current and future 
employees and agents (Part IV.A); monitoring a random and 
representative sample of employees and agents in each location from 
which solicitations are made to ensure compliance with the injunctive 
provisions (Part IV.C); and taping a random and representative sample 
of telephone solicitations in each location in which solicitations are 
made and reviewing a random sample of at least 1000 such calls every 30 
days to ensure compliance with the injunctive provisions (Part IV.D). 
Part IV.E further requires that respondents terminate any employee or 
agent who makes more than one material representation that violates the 
injunctive provisions in any consecutive twelve-month period.
    Given the circumstances of this case as well as the strength and 
scope of the monitoring and education requirements in Part IV, we are 
of the view that the limited rebuttable presumption delineated in Part 
V is acceptable. (Under current law, good faith is among those factors 
relevant to determining an appropriate civil penalty amount where an 
order has been violated. See United States v. Danube Carpet Mills, Inc. 
737 F.2d 998, 993-94 (11th Cir. 1984); United States v. Reader's Digest 
Ass'n, 662 F.2d 955, 967-68 (3d Cir. 1981), cert, denied, 455 U.S. 908 
(1982)). This provision does not establish a defense to any subsequent 
enforcement actions. Similarly, it in no way precludes the

[[Page 14468]]

Commission from taking action should it determine that respondents are 
not in full compliance with any final order. Furthermore, the 
Commission continues to adhere to its Policy Statement Concerning 
Errors and Omissions Clauses in Consent Decrees, 59 F.R. 34440 (July 5, 
1994). We consider it highly unlikely that other facts would present 
themselves--in the administrative or federal court context--that would 
warrant application of the same or a similar rebuttable presumption.

Statement of Commissioner Mozelle W. Thompson

    I am writing to express my concurrence with the Statement of 
Chairman Robert Pitofsky and Commissioner Sheila F. Anthony on the 
proposed consent agreement that the Commission accepted today for 
public comment in Civic Development Group, Inc. I have voted to support 
this proposed agreement in recognition of the allegation of serious 
harm caused by respondents through their fraudulent telemarketing 
fundraising and the need to place such respondents under order. 
However, one provision of the order raises issues addressed by my two 
aforementioned colleagues and that I wish also to address through this 
Statement.
    Part V of the Order in Civic Development Group states that in any 
Commission action to enforce the order, ``there shall be a rebuttable 
presumption that the respondents have exercised good faith in complying 
with [substantive provisions of the order] if the respondents show, by 
a preponderance of the evidence, that they have established and 
maintained the education and compliance program mandated in Paragraph 
IV of the order * * *.''
    I question the propriety of accepting a consent agreement that 
results in shifting the burden of proof to benefit a party that the 
Commission is claiming engaged in unlawful conduct. There are serious 
risks in permitting any party or adjudicative body to interfere with 
the Commission's well-supported prosecutorial discretion, and it could 
be argued that the limited rebuttable presumption in Part V allows 
respondent's compliance with the procedural requirements to detract 
from the Commission's ability to pursue substantive violations.
    For purposes of this case only, I accept the order's burden-
shifting provision and concur with the Chairman, Commissioner Anthony, 
and staff that this order is acceptable based on the unique and 
specialized aspects of this case. Accordingly, in my view, the order 
presented here should not be regarded as having precedential value.
    I trust that staff will continue to work closely with the company 
to monitor its compliance with the stringent requirements of Part IV as 
well as all other requirements of the order.

[FR Doc. 98-7700 Filed 3-24-98; 8:45 am]
BILLING CODE 6750-01-M