SALT LAKE CITY (CN) - So-called "business coaches" defrauded consumers of millions of dollars in a telemarketing and Internet scheme, leaving many of them "heavily in debt," the Federal Trade Commission claims in court.
The FTC sued Apply Knowledge, 16 other businesses and nine people who ran or helped run them, in Federal Court.
The FTC claims the 25 defendants, operating as a common enterprise, violated consumer protection laws, the FTC Act and telemarketing rules through misrepresentations, by promising and failing to deliver home-based online businesses.
"Defendants operate, as a common enterprise, a multiphase, multimillion-dollar, Internet and telemarketing scheme that preys on consumers hoping to earn money via a home-based Internet business. Defendants, using a multitude of corporate names and oft-changing dbas, rely on deceptive tactics to induce consumers to pay thousands of dollars - most of it borrowed on their credit cards - for defendants' services and related goods," the 42-page complaint states.
"Consumers make these purchases based on defendants' representations that they will end up with an online business generating substantial revenue. Yet, despite defendants' assurances, most consumers who purchase defendants' services and related goods do not end up with a functional online business, earn little or no money, and end up heavily in debt."
Apply Knowledge, doing business as Apply Knowledge Institute and Coaching Department, was incorporated in 2009 and is based in Provo, according to the FTC.
"At times material to this complaint, acting alone or in concert with others, Apply Knowledge has advertised, marketed, distributed or sold the defendants' business coaching programs throughout the United States through the use of one or more telephones and through more than one interstate telephone call," according to the complaint, filed Feb. 10 and unsealed Friday, Feb. 21.
Defendant LLCs include Dahm International, of Salt Lake City; Dominion of Virgo Investments, of Herriman, Utah; eCommerce Support, of Eagle, Idaho; Essent Media, of Lehi, Utah; eVertex Solutions, of Provo; and EVI, of Orem.
Also named as defendants are Nemrow Consulting, of Pleasant Grove, Utah; Novus North, of Lehi; Purple Buffalo, of St. George; Supplier Source, of Provo; 365DailyFit, of American Fork; Vensure International, of Lehi; and VI Education, of Lehi.
"Defendants' scheme consists of three interconnected phases, with different defendants performing different functions. Each defendant's role is integral to the overall success of the scheme," the complaint states.
"In the first phase, defendants use emails and websites to induce consumers to purchase relatively inexpensive work-at-home kits. In the second phase, defendants use telemarketing to sell consumers a much more expensive program of business coaching services and related goods that defendants say will provide consumers with a profitable online business. In the third phase, defendants purport to provide consumers with the promised 'coaching' services, while they or related telemarketers direct and urge consumers to purchase costly add-on business services, known as 'upsells,' such as business formation, website design, website development, accounting and tax filing services, and drop-shipping services.
"In truth and in fact, consumers rarely, if ever, end up with a profitable online business, and defendants' scheme continues either until consumers realize that they are victims of a scam or until they reach the limits on their credit cards."
Defendants individuals are Ken Sonnenberg and his wife Babata Sonnenberg, of Orem; David Bevan, of Eagle, Idaho; Jessica Bjarnson and Phillip Gannuscia; Chad Huntsman, all of South Jordan; Scott Nemrow, of Lehi; Jeffrey Nicol, of Draper; and Thomas J. Riskas III, of Orem.
"Consumers have suffered and will continue to suffer substantial injury as a result of defendants' violations of the FTC Act and the TSR [Telemarketing and Consumer Fraud and Abuse Prevention Act]. In addition, defendants have been unjustly enriched as a result of their unlawful acts or practices," the complaint states. "Absent injunctive relief by this court, defendants are likely to continue to injure consumers, reap unjust enrichment, and harm the public interest."
The FTC seeks an injunction, disgorgement of ill-gotten gains and costs.
It is represented by Assistant U.S. Attorney David Barlow, of Salt Lake City, and FTC attorney Svetlana Gans of Washington, D.C.