Attorney General Lockyer Files Consumer Protection Lawsuit Against Firm for Illegally Selling 'Business Opportunity Plans'

Florida Company Deceptively Marketed Pre-Paid Phone Cards and Display Racks

Tuesday, April 1, 2003
Contact: (415) 703-5837, agpressoffice@doj.ca.gov

(LOS ANGELES) – Attorney General Bill Lockyer today filed a consumer protection lawsuit against Florida-based Tele King Communications for unlawful and deceptive sales of "business opportunity plans" for pre-paid, long-distance phone cards.

"Consumers should be wary when sales people approach them with a can't-miss ‘business opportunity' that will bring them lots of money if they buy a product and resell it to the public, " said Lockyer. "The products often are very difficult to resell, and consumers can lose their life savings in these scams."

The lawsuit, filed in Los Angeles County Superior Court, seeks restitution for bilked consumers and civil penalties of at least $1 million. It also asks the court to bar Tele King and its employees from committing the alleged deceptive advertising and unlawful business practices, and from selling business opportunity plans in the future. Besides the firm, defendants include Tele King President Frank Schreiber, and employees Richard Goodman, Barry Goodman, Joyce Heath and Carol Krugly.

Consumers typically paid Tele King between $12,000 and $30,000 for pre-paid phone cards, display racks, marketing materials. Tele King told consumers there was a large market for the cards, which allow users to make long-distance calls up to a certain value. Tele King also told consumers they could earn a substantial profit – up to $30,000 per year, according to information received by the Attorney General's Office. Additionally, the complaint states, Tele King said it would help consumers place their display racks in high-traffic, high-profile retail locations.

The truth was much different, the complaint alleges. Tele King typically placed the racks in low-traffic locations such as bakeries, furniture stores and garages.

Additionally, after subtracting the money they paid to Tele King and to retail outlets where the display racks are placed, consumers were unlikely to earn any significant income. Based on information received by the Attorney General's Office, consumers would have to sell about 430,000 phone cards to earn the $30,000 profit touted by Tele King. These misrepresentations, the complaint alleges, violate state laws prohibiting false or misleading advertising.

Tele King's contracts with consumers also violate state law, according to the complaint. For example, the contracts do not inform consumers of their right to change their minds and rescind the agreement within three days. Additionally, the contracts do not specify the grounds under which consumers can cancel after the three-day period.

State law also requires sellers of business opportunity plans to register with the Consumer Law Section of the Attorney General's Office. After determining the registration meets all requirements, the Attorney General's Office issues the seller a Notice of Filing. Sellers cannot offer business opportunity plans until they receive the notice. The complaint alleges Tele King sold the pre-paid phone card plans before it received a notice.

Lockyer cautioned consumers considering investing in a business opportunity plan to make sure they have all the information about the program before they sign any contract. Consumers also should ensure they receive the disclosures required by California law, and consult with a friend or advisor before investing, said Lockyer.

Consumers who believe they have been victimized by Tele King, or who have questions or complaints about similar scams, can contact the Public Inquiry Unit of the Attorney General's Office at www.ag.ca.gov/consumers.

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PDF icon 03-040.pdf104.49 KB