*Judge Stops ‘Net Kiosk Operation, Following FTC Charges A U.S. district court judge has stopped the allegedly illegal practices of an Internet kiosk business opportunity and frozen the assets of the companies and their principals, following Federal Trade Commission charges that their income claims were deceptive and their location- assistance offers were false.
The FTC names as defendants Transnet Wireless Corp. and its president Bradley Cartwright; Nationwide Cyber Systems, Inc. and its president Farris Pemberton; and Paul Pemberton, who directed day-to-day operations at the companies, which are based in Florida.
The FTC will seek to permanently ban them from selling business opportunities, barring them from violating the FTC Act and the Commission’s Franchise Rule.
The defendants told consumers they could use the kiosks to start their own business, promising them a substantial income and help finding high-traffic, high-volume profitable locations for the machines, according to the FTC.
According to the FTC, consumers typically lost the money they invested, and the defendants rarely, if ever, delivered the terminals to profitable locations. The machines sold were public access Internet terminals, mounted computers that accepted payment in exchange for access to the Internet that could be placed in public areas. The defendants ran television and radio ads selling the terminals, making claims like, “You simply receive a monthly check for all the wireless revenue generated at your location . . . There is unlimited income potential. . . Prime locations are available now.” The ads then provided a toll-free number to call for more information, according to the FTC.
Over the phone, salespeople made additional false claims, according to the FTC. Salespeople made claims such as, “a 142% return on investment in the first year,” “locations include convention centers, military bases, hotels, malls, hospitals – high-traffic, high-volume locations,” and that $1,000 to $2,000 per month per kiosk could be expected in revenue. In many cases, buyers were told the machines would be delivered to the location within two weeks to 45 days after purchase.
Customers paid from $10,000 to $15,000 for one kiosk, up to $100,000 for multiple kiosks. Their terminals, however, were rarely, if ever, delivered and installed in profitable areas. In many cases, the terminals consumers bought were never delivered at all. And, when terminals were delivered, it was hardly ever within the promised time period, according to the FTC.
Although the defendants did supply the required disclosure document for franchises, it was missing crucial information, including criminal charges against one officer, the names and addresses of consumers who had bought into the business venture, and any information about how long it would take to place a terminal. Finally, the FTC claimed that the defendants had no support for the earnings claims they made. Typically, buyers lost their entire investment.
The complaint also named Margaret Pemberton as a relief defendant – someone who is not accused of wrongdoing, but has allegedly received ill-gotten gains and does not have a legitimate claim to them.
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