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Attorney General Lockyer Files Lawsuit Against California Company in Nationwide Sweep for Phony Business Opportunities
(SAN DIEGO) – As part of a nationwide sweep to protect consumers from business opportunity scams, Attorney General Bill Lockyer today announced a $1 million civil complaint against Absolute Technologies, Inc., for fraudulently offering to help clients start businesses in electronic billings for medical claims.
"California is joining 28 states, the Federal Trade Commission and the U.S. Justice Department in a nationwide sweep against promoters of fraudulent business opportunities, many of whom use the classified sections of daily newspapers and now the Internet to lure consumers into bogus schemes with promises of high earnings," Lockyer said.
The California lawsuit against Absolute Technologies Inc., (Absotech) seeks $1 million in civil penalties and a permanent injunction prohibiting the company from making untrue and misleading representations in its marketing scheme. The lawsuit was filed in San Diego County Superior Court, where the company recently filed for bankruptcy protection. The company operated in Cypress, Orange County, and Ramona, San Diego County. Also named in the lawsuit were company president Douglas Beaver and company vice president and treasurer Robert Thompson.
Absotech, a registered seller assisted marketing plan, is accused of failing to deliver on promises to assist hundreds of clients to launch money-making businesses for the electronic processing of medical claims for health care providers. State investigators found Absotech advertised its seller-assisted marketing plan in local newspapers and directly to clients through toll-free telephone presentations.
The company sold medical billing software and training services for $7,995. The training to use the software was offered as an in-home program by telephone or CD-ROM, or as a three-day training seminar in Cypress. For another $1,000, the company offered to help clients acquire one health care provider customer. The company also offered to help clients acquire additional customers for the medical billing business for $2,000 each. The company sold another marketing assistance service for $3,500 to $4,000 in which a trainer/sales person was to spend a day individually helping clients with sales presentations and signing up a minimum of two customers for electronic medical billing services.
Among other things, the lawsuit alleges that Absotech failed to provide clients with promised one-on-one telephone support during normal business hours and one-on-one assistance from a trainer/sales person. The complaint also alleges that the individual attention from a trainer/sales person failed to generate the promised minimum of two customers.
Additionally, the company is charged with unfair business practices for failure to include the three-day cancellation notice in contracts required for seller assisted marketing plans; collecting more than 20 percent of the total purchase price prior to delivery without establishing a required escrow account or notifying the client of the name and address of the escrow account holder.
The California Seller Assisted Marketing Plan Act was established to help inexperienced consumers in making an informed decision before investing in a business opportunity. Under the law, persons selling business opportunities for initial payments of $500 to $50,000 must register with the Attorney General's Office, unless otherwise licensed or regulated. Registration is required before the company begins any advertising or sales. California currently has 103 seller assisted marketers registered.
The law requires at least 80 percent of a customer's payment to be placed into an escrow account if payment is received prior to delivery. Contracts must include three-day cancellation notices immediately above the place where a purchaser signs the contract.
The law also requires the companies to provide specific written disclosures to consumers at least 48 hours before a contract is signed or any money is collected from a prospective client. The required disclosures include advice to consult a lawyer or financial advisor; the name of any parent or affiliated company that will engage in business transactions with the purchaser; the amount of the actual or estimated initial payment to be made by the purchaser; a detailed description of the actual services the seller will undertake under the contract; and the name and address of the escrow account holder for client payments.