New Mexico Custom Designs, Inc

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IN THE MATTER OF NEW MEXICO CUSTOM DESIGNS, INC., ET AL. CONSENT ORDER, ETC., INREGARD TO ALLEGED VIOLATION OF SEC. 5 OF THE FEDERAL TRADE COMMISSION ACT Docket C-3485. Complaint, Mar. 17, 1994--Decision, Mar. 17, 1994 This consent order prohibits, among other things, the New Mexico-based corporation and its officer, who claimed to sell beaded earrings, from making any material misrepresentations regarding earnings or profits of participants in any work opportunity and from making misrepresentations about the marketplace demand for any product or service for which the respondents are offering a work opportunity. In addition, the order sets a redress payment, however, based upon financial statements submitted by the respondents, the redress payments have been suspended.

Appearances For the Commission: Gerald E. Wright and Jeffrey Klurfeld. For the respondents: Garry Harrell, Albuquerque, N.M. COMPLAINT The Federal Trade Commission, having reason to believe that New Mexico Custom Designs, Inc., a corporation, and Anthony L. Ingram, individually and as an officer of said corporation (“respondents”), have violated Section 5 of the Federal Trade Commission Act, and it appearing to the Commission that a proceeding by it would be in the public interest, alleges: . PARAGRAPH 1. Respondent New Mexico Custom Designs, Inc. is a New Mexico corporation, with its principal office or place of business at 8415 Washington Place, N.E., Suite D, Albuquerque, New Mexico.

Respondent Anthony L. Ingram is an officer of the corporate respondent. Individually or in concert with others, he formulates, directs and controls the acts and practices of the corporate respondent, including the acts and practices alleged in this complaint. NEW MEXICO CUSTOM DESIGNS, INC., ET AL. 147 146 Complaint His principal office and place of business is the same as that of the corporate respondent.

PAR. 2. Respondents have disseminated advertising seeking individuals to assemble craft items and other products at home,.and have offered for sale and sold introductory kits and craft materials to individuals who accept their offers to engage in such work. PAR. 3. The acts and practices of respondents alleged in this complaint have been in or affecting commerce, as “commerce” is defined in the Federal Trade Commission Act. PAR. 4. Respondents have disseminated, and have caused to be disseminated advertisements, promotional literature, and agreements relating to their income opportunities, including but not necessarily limited to the attached Exhibit A. These materials contain the following statements:

Urgent! Home assemblers needed! Up to $280 a week! Beaded Earrings!... Learn to make quality beaded earrings and earn up to $280.10 a week at home! PAR. 5. Through the use of the statements contained in the materials referred to in paragraph four, including but not necessarily limited to the materials attached as Exhibit A, respondents have represented, directly or by implication, that: A. The stated dollar amounts constitute the weekly earnings regularly realized over a substantial period of time by an appreciable number of independent assemblers of respondents’ products. B. Respondents are fulfilling a significant marketplace demand for their products.

PAR. 6. In truth and in fact:

A. Independent assemblers of respondents’ products have not regularly realized over a substantial period of time the weekly earnings represented. Only a small percentage of persons who assembled products for respondents have regularly derived earnings from their work, and none has achieved over a substantial period of time the weekly earnings represented.

B. Respondents are not fulfilling a significant marketplace demand for their products.

Complaint Hi7 F.T.C, Therefore, the representations set forth in paragraph five were, and are, false and misleading.

PAR. 7. The acts and practices of respondents as alleged in this complaint, constitute unfair and deceptive acts or practices in or affecting commerce in violation of Section 5(a)(1) of the Federal Trade Commission Act.

NEW MEXICO CUSTOM DESIGNS, INC., ET AL. Complaint EXHIBIT A QUALITY COSTUME JEWLERY WE PAY UP 10 $280.00 FULL-TIME OR $150.0. . ART-TIME FOR YOU TO ASSEMBLE EARRINGS IN YOUR HOME GOOD DAY!. HERE IS HOW OUR COMPANY WORKS! Thank you for inquiring about New Mexico Custom Designs, Inc. ft is no wonder in this day and age with the rising costs of child care, transponation, clothing, meals, etc. that so many people are choosing to work from their We offer part-time and full-time units. Part-time consis: of one unit, and full-time consists of two units. You ma choose at any time which you prefer, Each unit include: material for approximately 25 pair of earrings, ions, photocopy of completed earrings, ear wires homes. Some of the main reasons that our bh give are: It enables parents to eam money and care for their children without incurring expenses for child care, uansponation, or clothing suitable for work outside the home; it provides income opportunities for senior citizens and handicapped persons; it helps to remove single parents from welfare rolls and place them in the work force; and it helps people to ear money and car for sick or elderly family members. But whatever your reasons are, you have come to the right place.

WE NEED YOU! NO EXPERIENCE IS NECESSARY. If you fee] that you can string beads on a needle and thread and then tie a knot, we think this work is for you. We have people from all walks of life who are making an income on a part-time or full-time basis by using basic skills to follow our guidelines and instructions.

WHO ARE WE AND WHAT DO WE DO? New Mexico Custom Designs, Inc. is 2 southwestern based family run company. We produce anc market various products that are sold and distributed throughout the United States. Most of our products are made by homeworkers like yourself.

WHY DO WE USE HOMEWORKERS? Because it benefits al] of us. Since you are an independent contractor, you are your own boss! That means you can work when you want and take off when you want. Nobody tells you when you have to work. That means vacations can be planned around your family and friends -- not at the company's convenience. You can also choose the time of day you wish to work. For instance, if you have a full time job but you are Jooking for extra income to pay off some bills or to save for vacation, school, etc. you can participate on a part-time basis. This allows you to do the work in the evening after the kids have gone to bed or during your spare time. You help us because our overhead is lower and our facilities smaller than that of a factory outlet Jt is a win-win situation! thread, beading needle and beads. If you choose to do one unit we will send you payment of up to $150.00 and up to $280.00 for two units. It's that easy. HOW TO GET STARTED RIGHT AWAY! Some people know immediately that this type of prograr is right for them while others might not be so sure that they can ble these earrings. Therefore, we have pi together an intro kit to give everyone a chance to see wh we have to offer before commining to anything. This intro-kit includes instructions, photocopy of completed products, unit order form, enough materials for five pair of earrings including ear wires, thread, beading needle and beads. This kit is complete and will give you a g0% understanding of how to assemble these earrings. The k must be purchased by every independent contractor and is yours to keep. From that point on you can either purchase materials on your own or from New Mexico Custom Designs, Inc., whichever you choose. Have no Fear! You have 15 days to review the ino kit If you feel that the work is not for you or you would lik: to send back the kit for a refund, simply retum the kit in the same condition that you received it and we will senc you a refund minus a handling charge.

Remember you do not have to wait the 15 days to stan) you want to start right away reftum the unit order form ¢ purchase your own materials at a local crafts store and } started! The intro kit gets you set up in our program as independent contractor as soon as you receive it WE WANT YOU TO HAVE THE CREDIT! NMCD, Inc. takes tremendous pride in the high standar of quality of our earrings. People always ask who mak our earrings, and we believe in giving credit where crec is due. Therefore, as an option, those of you who make the earrings to company specifications can request that send you our display cards for you to autograph so that your initials can be displayed along with your quality work.

PLEASE READ AND FILL OUT THE AGREEMENT (ON REVERSE SIDE) FOR QUICK PROCESSING. Looking forward to working with you... and making you a pan of our family! Sincerely, Complaint 117 F.T.C.

EXHIBIT A er eae TOT ee SO Oa oe OP Ee YES! fam interested in gemng started right sway with the assembly of costume jewelry for New Mexico Custom Designs, Joc. | understand that | am an independent contractor with New Mexico Custom Designs, Loc. and I am not obligated to produce unis unless | want to. | also understand that J can work full-tume or part-ome, whichever I choose. If] want to do one unit part-Uime then will be paid up to $150, 1 will be pasd up to $280 full-ume far two units, provided that | follow company gwdelines and qualiry conmol. The enclosed $29.95 is for my purchase of the InroKit which includes materials for five sets of earrings, ear wires, thread, beading needle, beads, photocopy, insvucnons, and unit order form so that I can purchase umit materials for the jewelry. AJ urul matenals will be paid foc by me up front and reumbursad in the unil price provided the units pass inspection: breakdown as follows: Two Units (50 pair) Full-Time One Unit (25 pair) Part-Time Conmactlabor. oe eee ee ee $130.00 Contract Labor. 6 6. eee ee eee see ee $240.0 Reimbursement for Material Fee. 0... ee bd Reimbursement for Material Fen... eee —40.H Total payment Wyo... ee ee $150.00 Tonal payment 1 YOU... ee ee ee ee «SUB. DETAILS FOR A BETTER UNDERSTANDING. If you purchase your own materials then they musi be exactly like those in your ingo kit We will not accepr different shape beads or colors than those sent to you in the ino Kit Lf you have any questions, please call us before you buy anything.

No invo kit refunds are given once you participate in the program as an independent contractor or if the inero kit has been used or damaged If you retum the ino bit us within 15 days for + refund, a handling charge of $8.95 will be subtracted from the cost of the intro kit for a refund of $21.00.

You have 60 days to return your units. Any units reumned after sixty days from the date of purchase or your last payment wil! nox be accepted This is due to style changes that may occur. Please understand that we ase in the business of selling good quality products on a wholesale and retail level, therefore we must set certain guidelines for qualiry control. Lf the unit does not meet the standards outlined in the instructions, we will not pay for the anit AS a result. we musi reserve the right to refuse work that we feel is inferior to our standards. Our guidelines are not unrealistic, jast pracocal. New Mexico Custom Designs, Inc. does not guarantee or represent that it can sell any or all costume jewelry, (however Dus does not affect your payment). It 1s also understood that I do not have to sell the earrings for New Mexico Custom Designs Inc.! Only produce them! Any tax records of earnings, including income taxes, social security benefits, and unemployment insurance is my own responsibility. Termination of this offer may be effected by either party with s 30-day writen notice. Void where prohibited by Ww, Compare us with the others. Are the weekly that some comp advertise ly high? If so the work is probably difficult and requires a Jot of time. NMCD, Inc. supplies easy to follow instructions and guidelines. Full-time should not require over forty hours a week. Some companies give refunds, however their time limit of 7 days is so short that by the time you receive the information and review it, you have exceeded the limit and therefore you can not get a refund, NMCD, Inc. offers a full 15 day refund policy. Does the company have a customer service number where you can reach someone if you have a question? NMCD, Inc.'s number is $05-821-2245. It is always important lo read and understand the Hiieranure of any company before sending any. jedi 4 money. We are not responsible for fost or MY GOAL IS TO. REASONS TO PARTICIPATE! J. make a good income at my convenience. 1, We pay up to $280 full-time for you ta work at your home 2. not have to se or advertise the product, unless ] chocse to. as an individual conrractor. | 3. review the program for 15 days before deciding to 2 You do noi have to advertise or sell any products if you partic ipaie, or receive $21.00 back by reaming the review kit choose not to (just assemble). oo. 4, get started right sway! 3. Limited 15 day money-back guarantee ~ which gives you time to make a decision.

4. Be your own boss and work when you wanj or vacauon * Does noi include shipping and handling. when you want Date SIGNATURE TO GET STARTED RIGHT AWAY Please return this signed and compleled Agreement Form to: New Mexico Custom Designs. Inc. + intro-Kst » PO Box 27417 » Albuquerque, NM 87125 (SOS) 821-2245 PLEASE PRINT Name. Social Security Number Address City Sune Zip Phone() Check Payment Method: O Money Order for $29.95 Gets you started immediately! ; 2 Personal or Business Check ‘adlow 1S business days for clearing) ‘ © Special) Handling, add an additional $2.00 AMOUNT ENCLOSED Please Fil In Amount Of Payment WARNING Copyenghs 1991, any reproduction of this maton in whole or ip pant without permission from New Mexico Curiam Designs, Ine. is prohibited by law OFFICIAL USE ONLY, PLEASE DO NOT WRITE IN THIS SPACE NEW MEXICO CUSTOM DESIGNS, INC., ET AL. 151 146 Decision and Order DECISION AND ORDER The Federal Trade Commission having initiated an investigation of certain acts and practices of the respondents named in the caption hereof, and the respondents having been furnished thereafter with a copy of a draft of complaint which the San Francisco Regional Office proposed to present to the Commission for its consideration and which, if issued by the Commission would charge respondents with violation of the Federal Trade Commission Act; and The respondents, their attorney, and counsel for the Commission having thereafter executed an agreement containing a consent order, an admission by the respondents of all the jurisdictional facts set forth in the aforesaid draft of complaint, a statement that the signing of said agreement is for settlement purposes only and does not constitute an admission by respondents that the law has been violated as alleged in such complaint, and waivers and other provisions as required by the Commission’s rules; and . The Commission having thereafter considered the matter and having determined that it had reason to believe that the respondents have violated the said Act, and that complaint should issue stating its charges in that respect, and having thereupon accepted the executed consent agreement and placed such agreement on the public record for a period of sixty (60) days, and no comments having been filed thereafter by interested parties pursuant to Section 2.34 of its Rules, now in further conformity with the procedure prescribed in Section 2.34 of its Rules, the Commission hereby makes the following jurisdictional findings and enters the following order: 1. Respondent New Mexico Custom Designs, Inc., is a corporation organized, existing, and doing business under and by virtue of the laws of the State of New Mexico, with its principal office and place of business located at 8415 Washington Place, N.E., Suite D, Albuquerque, New Mexico.

Respondent Anthony L. Ingram is an officer of said corporation. He formulates, directs and controls the policies, acts and practices of said corporation and his address is the same as that of the corporation.

2. The acts and practices of respondents alleged in this complaint have been in or affecting commerce, as “commerce” is defined in the Federal Trade Commission Act.

Decision and Order 117 F.T.C.

3. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondents, and the proceeding is in the public interest.

ORDER For purposes of this order, the following definitions shall apply: “Work Opportunity” means any offer to a person to earn income by producing goods or providing services, where (1) the offeree must pay to the offeror, or a person identified by the offeror, any amount of money, whether in the form of a registration, application or other fee, a payment for initial inventory or supplies, or in any other form, as a condition of participating; and (2) the offeror represents that the offeree will or could be compensated in any manner by the offeror or by a person identified by the offeror.

“Participant” means any person who pays the offeror of a work opportunity, or a person identified by such offeror, any amount of money, whether in the form of a registration, application or other fee, a payment for initial inventory or supplies, or in any other form, as a condition of participating in a work opportunity. “Net Earnings or Profits” means the compensation paid to a participant in a work opportunity, less the costs to a participant of materials, supplies and shipping.

It is ordered, That respondents New Mexico Custom Designs, Inc., a corporation, its successors and assigns, and its officers, and Anthony L. Ingram, individually and as an officer of New Mexico Custom Designs, Inc., a corporation, and respondents, agents, representatives and employees, directly or through any corporation, subsidiary, division or other device, in connection with the marketing, advertising, promotion, offering, or sale of any work opportunity, in or affecting commerce, as “commerce” is defined in the Federal Trade Commission Act, do forthwith cease and desist from:

A. Making any material misrepresentation, including but not limited to:

NEW MEXICO CUSTOM DESIGNS, INC., ET AL. 153 146 Decision and Order 1. Misrepresenting the past, present or potential future earnings or profits of participants in any work opportunity; or 2. Misrepresenting the marketplace demand for any product or service for which respondents are offering a work opportunity. B. Making any earnings-related or profit-related claim which uses the phrase “up to” or words of similar import or which states any dollar amount, unless the stated level of earnings or profits constitutes the net earnings or profits which can be achieved by an appreciable number of participants; and further, in any instances where consumers could not reasonably foresee the major factors or conditions affecting the ability to achieve the stated level of earnings or profits, cease and desist from failing to disclose clearly and prominently the class of consumers who can achieve the stated level. Il.

It is further ordered, That for three (3) years after the last date of dissemination of any representation covered by this order, respondents, or their successors and assigns, shall maintain and upon request make available to the Federal Trade Commission for inspection and copying:

A. Specimen copies of all materials disseminated which contain such representation;

B. All materials that were relied upon as substantiation in disseminating such representation;

C. The names, addresses and telephone numbers of all work opportunity participants who paid any money to respondents within the previous three years; and D. The names, addresses and telephone numbers of all work opportunity participants who earned any income or profits from respondents during the previous three years, and for each such participant: all written agreements between respondents and each participant during the previous three years; and the dates and amounts of all payments paid to each participant for work completed pursuant to the work opportunity during the previous three years. Decision and Order LI7F.T.C, Ill.

It is further ordered:

A. That respondent Anthony L. Ingram shall pay to the FTC as consumer redress the sum of one million two hundred thousand dollars ($1,200,000); provided however, that this liability will be suspended, subject to the provisions of subpart B below. B. That the Commission’s acceptance of this order is expressly premised upon the representations regarding the financial condition of the respective respondents made to the FTC in: a “Financial Statement of Debtor” executed by Anthony L. Ingram on October 20, 1992; a “Financial Statement of Corporate Defendant” relating to New Mexico Custom Designs, Inc. executed by Anthony L. Ingram, as president, on October 20, 1992; the federal income tax returns of New Mexico Custom Designs, Inc., for 1989, 1990 and 1991; the federal income tax returns of Anthony L. Ingram for 1990 and 1991; accounting statements for 1990, 1991 and 1992, referred to in, and enclosed with, a letter from Gary Harrell, Esq., to the Federal Trade Commission, dated 22 March 1993; and a letter from Gary Harrell, Esq., to the Federal Trade Commission, dated 3 May 1993. After service upon respondents of an order to show cause, the FTC may reopen this proceeding to make a determination whether there are any material misrepresentations or omissions in said representations regarding the financial condition of the respective respondents. Respondents shall be given an opportunity to present evidence on this issue. If, upon consideration of respondents’ evidence and other information before it, the FTC determines that there are any material misrepresentations or omissions in the financial statements and related documents, that determination shall cause the entire amount of monetary liability of one million two hundred thousand dollars ($1,200,000) to become immediately due and payable to the Federal Trade Commission, and interest computed at the rate prescribed in 28 U.S.C. 1961, as amended, shall immediately begin to accrue on the unpaid balance. Proceedings initiated under part III are in addition to, and not in lieu of, any other civil or criminal remedies as may be provided by law, including any proceedings the Federal Trade Commission may initiate to enforce this order. NEW MEXICO CUSTOM DESIGNS, INC., ET AL. 155 146 Decision and Order IV.

It is further ordered, That the corporate respondent shall notify the Commission at least thirty (30) days prior to any dissolution, assignment, or sale resulting in the emergence of a successor corporation, the creation or dissolution of subsidiaries, or any other change in the corporation that may affect compliance obligations arising out of the order.

V.

It is further ordered, That the individual respondent shall promptly notify the Commission of the discontinuance of his present business or employment and, for a period of five (5) years after the date of service of this order, shall promptly notify the Commission of each affiliation with a new business or employment. VI.

It is further ordered, That respondents shall, within sixty (60) days after service of this order on them, and on the first through the fifth anniversaries of the effective date of this order, file with the Commission a report in writing, setting forth in detail the manner and form in which it has complied with this order. 156 | FEDERAL TRADE COMMISSION DECISIONS Complaint 117 F.T.C.