Antitrust Law Daily Wrap Up, CONSUMER PROTECTION—D. Nev.: No reconsideration of $130 million judgment in FTC action against telemarketing operation, (Jun 28, 2013)

By Tobias J. Gillett, J.D., LL.M.

In an FTC action against marketers of a business coaching program and useless goods and services, the federal district court in Las Vegas has denied reconsideration of its order holding Benjamin E. Hoskins liable for over $130 million in restitution and permanently banning him and his company, Dream Financial, from business coaching and telemarketing (FTC v. Ivy Capital, Inc., June 26, 2013, Mahan, J.). The court also denied reconsideration of its finding that Leanne Hoskins must disgorge $1.1 million and rejected several objections to the FTC’s proposed order, although it did alter a blanket ban on telemarketing to only prohibit abusive telemarketing practices.

The Ivy Capital enterprise consisted of an interconnected web of 22 companies, including Dream Financial, in Nevada, California, and Utah. These companies were run primarily by Benjamin Hoskins and seven other owners. Proceeds from the scam were distributed among these owners either directly or through limited liability companies. The majority of the individual, corporate, and relief defendants in this case settled with the FTC, but Benjamin Hoskins and Dream Financial chose to litigate the FTC’s claims.

In its previous decision, the court determined that Benjamin Hoskins and Dream Financial violated the FTC Act and the Telemarketing Sales Rule by representing that consumers were likely to earn thousands of dollars per month after purchasing the business coaching program; by making misleading and deceptive representations about the products and services offered; by misrepresenting and failing to disclose material aspects of their refund policy; and by initiating telephone calls to numbers on the do-not-call registry.

The court held Benjamin Hoskins liable for full restitution in the amount of $130, 375,057.52, plus prejudgment interest, and permanently banned Benjamin Hoskins and Dream Financial from business coaching and telemarketing. The court also held Leanne Hoskins liable for $1.1 million she received from Oxford Financial, LLC, an entity the court considered to be an alter ego of her and Benjamin Hoskins.

Motion for reconsideration. In their motion for reconsideration, Benjamin and Leanne Hoskins contended that the court’s decision was manifestly unjust. The court disagreed, observing “that the mountain of evidence offered by the FTC demonstrated that there was no genuine issue of material fact that Benjamin Hoskins, along with certain other defendants who entered into a settlement with the FTC, bilked consumers out of $130,375,057.52.” Therefore, he was properly found jointly and severally liable for the full sum, in the court’s view. The court noted that Benjamin Hoskins had appealed the grant of summary judgment, and could therefore raise his arguments on appeal.

The court also rejected Leanne Hoskins’ argument that she should not have to disgorge $1.1 million, because the funds she received from Oxford Financial were “just as likely” to have come from legitimate sources as from Ivy Capital. The court observed that the FTC had provided evidence that Ivy Capital passed $1.1 million to Oxford Financial, and “[t]he only evidence to the contrary was Leanne Hoskins’ self-serving affidavit.”

Objections to FTC’s proposed order. The defendants raised five objections to the proposed order the FTC submitted in response to the court’s summary judgment decision. The court denied an objection to the order’s lifetime ban on engaging in, or assisting others in, telemarketing, finding a permanent injunction to be “appropriate.” The court noted that the case was “more egregious than a routine fraud case” and one of the mechanisms the defendants used to defraud their consumers was telemarketing.

However, the court upheld an objection to the scope of the ban. The order broadly prohibited Benjamin Hoskins and Dream Financial from being involved in business coaching programs and any telemarketing. The court found that this provision could prevent Benjamin Hoskins from engaging in many types of business from which he could make money to “repay his victims.” The court therefore held that the proposed order would instead “have language that restricts Benjamin Hoskins from engaging in abusive telemarketing activities.”

The court rejected a challenge to the definition of “assisting others” in the order, noting that the definition was identical to that employed in settlement agreements that the court had already approved. The court overruled an objection to a twenty-year reporting requirement, even though settling defendants only had to agree to a ten-year reporting requirement, because the settling defendants received concessions in return for settling, while Benjamin Hoskins had chosen to litigate the claims “even though a mountain of evidence existed against him.” Finally, the court denied an objection to a provision that would permit the FTC to contact Benjamin or Leanne Hoskins directly even if they were represented by counsel, noting that the provision would allow the defendants to have their counsel present if they wanted an attorney present.

Therefore, the court ordered the FTC to submit a proposed judgment that would reflect the change to the scope of the telemarketing ban.

The case is No. 2:11-CV-283 JCM (GWF).

Attorneys: Daniel O. Hanks for Federal Trade Commission. Casey G. Perkins (Snell & Wilmer, LLP) for Ivy Capital, Inc. Gary Owen Caris (McKenna Long & Aldridge LLP) for Oxford Financial, LLC.

Companies: Ivy Capital, Inc.; Dream Financial; Oxford Financial, LLC

Cases: ConsumerProtection FederalTradeCommissionNews NevadaNews