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Defendants Penalized for 'Assisting and Facilitating' Telemarketing Violations

25 Jan, 2006 Response This Week

WASHINGTON- The Federal Trade Commission (FTC) announced the first lawsuit filed against a company for indirect violations of telemarketing violations.

According to the Commission, Georgia-based defendants Entrepreneurial Strategies Ltd. and its CEO, Dale Allison, Jr., were charged with “assisting and facilitating” another company with violations of the Telemarketing Sales Rule (TSR).

Unbeknownst to many direct marketers who plead ignorance in cases where partner companies violate certain FTC regulations, there is a provision of the TSR titled “Assisting and Facilitating.” In this case, the assisting was reportedly more direct. The FTC’s complaint alleges that Debt Management Foundation Services (DMFS), its president Dale Buird, Jr. and related parties paid Entrepreneurial Strategies to help DMFS “evade compliance with the Do-Not-Call (DNC) provisions of the TSR by assisting it in organizing and operating as a sham nonprofit corporation.” Under the TSR, non-profit agencies are exempt from DNC restrictions, but DMFS was not considered a non-profit.

In 2003, just one month before the DNC restriction went into effect, the FTC claims that Buird asked Allison for help in avoiding any violations by providing consulting and other services that allowed DMFS to disguise itself as a nonprofit corporation. The complaint also states that Allison assisted Buird in “devising and implementing a plan to siphon profits from the purportedly nonprofit DMFS.” The FTC believes that the defendants provided these services with the knowledge that DMFS was a sham nonprofit and that it was violating the DNC Registry.

Then in 2004, the FTC filed its initial lawsuit against DMFS for violating the DNC Registry by calling thousands of registered participants and pitching “bogus debt management services.” The company also allegedly illegally portrayed itself as a nonprofit entity, but it settled these charges in March 2005 for more than $200,000 and agreed to discontinue any illegal activities.

“This case demonstrates just the type of conduct the TSR’s assisting and facilitating provision was intended to prohibit,” said Lydia Parnes, director of the FTC’s Bureau of Consumer Protection, in a statement. “It is illegal to knowingly help others violate the Commission’s telemarketing laws, including the Do-Not-Call Rule.”

The stipulated order announced this week requires Entrepreneurial Strategies and Allison to pay a civil penalty of $13,454.71. The order also contains provisions that would allow the FTC to reopen the case and attempt to collect a larger penalty if the defendants misrepresented their financial conditions.

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