Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: Precious Metal Investment Marketers Reach Settlement with FTC over Alleged Investment Abuses, (Dec 12, 2012)

By Tobias J. Gillett, J.D., LLM.

Precious metal investment company American Precious Metals and its principals have agreed to settle the Federal Trade Commission’s charges that they deceived consumers into making risky investments without clearly disclosing the costs and risks associated with the investments. The settlement orders permanently bar the company and its principals from offering investment opportunities, prohibit them from misrepresenting or failing to disclose material information concerning any goods or services offered in the future, prohibit them from using customers’ personal information they had obtained for their benefit and from failing to dispose of the information within thirty days of the orders, and require them to pay a judgment of over $24.3 million.

In May 2011, the FTC had filed a complaint in federal district court in Miami charging the company and two of its principals, Harry R. Tanner, Jr. and Andrea Tanner, with violating the Federal Trade Commission Act, the Telemarketing and Consumer Fraud and Abuse Prevention Act (TCFAPA), and the FTC’s Telemarketing Sales Rule (TSR). In November 2011, the FTC named Sam J. Goldman as an additional co-defendant.

The complaint asserted that the defendant’s business involved telemarketing of investment opportunities involving precious metals. The complaint alleged that employees of the company would cold-call consumers, offering quick profits that could be obtained from investing in precious metals, with purportedly low risk.

The complaint alleged that the calls claimed that the investments were “poised to skyrocket,” despite the fact that the markets for precious metals were volatile. The calls allegedly provided examples of the profits that could be obtained from precious metal investments, without disclosing commissions, fees, and interest that could dissipate those profits.

The complaint also alleged that the calls, and written materials sent to prospective investors, claimed that the investments would present a low risk. The materials also allegedly claimed that the company “deal[t] only with the tangible, physical assets,” and that it would provide “secured storage or delivery” of the metals to consumers, even though the company did not possess the metals. Instead, the FTC alleged that the company would, without properly informing the consumers, use the money to purchase precious metal derivatives, issuing loans to the consumers to cover up to 80 percent of the cost.

According to the complaint, the company would also not disclose that more than 40 percent of the money would go to pay commissions, while the consumers’ accounts would be subject to equity calls, requiring more investment to prevent liquidation of the accounts. The fees, commissions, and equity calls allegedly prevented consumers from profiting from their investments.

The FTC asserted that these practices violated the FTC Act, the TCFAPA, and the TSR. A previous order of the federal district court in Miami had issued a temporary injunction freezing the defendants’ assets, appointing a receiver for the corporation, and halting the corporation’s allegedly deceptive business activities. The district court entered the present settlement orders on November 19, 2012.

News: ConsumerProtection FederalTradeCommissionNews