| DEBRA A. VALENTINE General Counsel MICHAEL J. BLOOM (MB 7732) Federal Trade Commission DENNIS C. VACCO SHIRLEY F. SARNA (SS 9885) UNITED STATES DISTRICT COURT FEDERAL TRADE COMMISSION and PEOPLE OF THE STATE OF NEW YORK, Plaintiffs, v. TRANS-ASIAN COMMUNICATIONS, INC., RAJ TELEKOM, INC., TRANS AMERICAN SYSTEMS, INC., and RAJESH KALRA, Defendants. 97 Civ. 5764 (MBM) STIPULATED FINAL Plaintiffs, the Federal Trade Commission ("Commission" or "FTC") and the People of the State of New York (the "NYAG"), have filed their complaint pursuant to Section 13(b) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. § 53(b), charging defendants, Trans- Asian Communications, Inc. ("Trans-Asian"), Raj Telekom, Inc. ("Raj Telekom"), Trans American Systems, Inc. ("Trans American"), and Rajesh Kalra ("Kalra") in this action with violations of Section 5 of the FTC Act, 15 U.S.C. § 45, and New York: Executive Law Section 63(12) and General Business Law ("GBL") Article 22-A. Plaintiffs, the Commission and the NYAG, and defendants, Trans-Asian, Raj Telekom, Trans American, and Kalra, by and through their counsel, have agreed to the entry of this Stipulated Final Judgment and Order for Permanent Injunction ("Order") by this Court in order to resolve all matters of dispute between them in this action. Plaintiffs, the Commission and the NYAG, and defendants, Trans-Asian, Raj Telekom, Trans American, and Kalra, by and through their counsel, have consented to the entry of this Order without trial or adjudication of any issue of law or fact herein. NOW, THEREFORE, plaintiffs, the Commission and the NYAG, and defendants, Trans- Asian, Raj Telekom, Trans American, and Kalra, having requested the Court to enter this Order, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED, as follows: FINDINGS
DEFINITIONS For purposes of this Order, the following definitions shall apply: A. "Prepaid Phone Cards" means cards that embody a right to exchange the card’s monetary value for telephone calling time, often at specified rates. B. "Related Products or Services" means any product or service sold as a method of placing prepaid telephone, cellular, or facsimile calls between or among two or more parties. C. "Defendants" means Trans-Asian, Raj Telekom, Trans American, and Kalra, and each of them, and their successors, assigns, subsidiaries, affiliates, officers, agents, servants, employees, and attorneys. D. "Receiver" means Jay I. Borow of Kahn Consulting, Inc. I. PROHIBITION AGAINST MISREPRESENTATIONS IT IS THEREFORE ORDERED that in connection with the advertising, marketing, offering for sale, or sale of any Prepaid Phone Cards or Related Products or Services, Defendants and all other persons or entities in active concert or participation with them who receive notice of this Order by personal service or otherwise, are hereby permanently restrained and enjoined from violating Section 5 of the FTC Act and New York: Executive Law Section 63(12) and GBL Article 22-A, including but not limited to: A. Falsely representing, directly or by implication, that consumers or distributors of their Prepaid Phone Cards will, promptly after Defendants’ receipt of payment, receive cards or personal identification numbers ("PINs") and toll free access numbers enabling consumers to make prepaid calls from the United States; B. Falsely representing, directly or by implication, that Defendants’ Prepaid Phone Cards or PINs will be reduced in value for minutes of calling time only commencing after the party called answers the phone and until either party to the call hangs up or is disconnected; C. Falsely representing, directly or by implication, that Defendants’ Prepaid Phone Cards or PINs will be reduced in value only at the advertised per minute rates; D. Falsely representing, directly or by implication, that Defendants will, within a reasonable time after request, provide dissatisfied consumers or distributors with refunds or with viable replacement Prepaid Phone Cards in exchange for nonfunctioning Prepaid Phone Cards; and E. Providing substantial assistance or support to any seller of Prepaid Phone Cards when any Defendant knows or consciously avoids knowing that the seller is engaged in any act or practice that violates Section 5 of the FTC Act or New York: Executive Law Section 63(12) and GBL Article 22-A. II. PERFORMANCE BOND IT IS FURTHER ORDERED that Defendant Kalra is hereby permanently restrained and enjoined from engaging or participating, whether directly or indirectly, in concert with others, or through any business entity or other device, in the advertising, marketing, offering for sale, or sale of Prepaid Phone Cards or Related Products or Services, unless and until Defendant Kalra first obtains a performance bond for each such business entity or activity in the principal sum of one million dollars ($1,000,000). A. Each performance bond shall be an insurance agreement pledging surety for financial loss issued by a surety company that holds a Federal Certificate of Authority As Acceptable Surety On Federal Bond and Reinsuring. The surety company issuing the performance bond must be admitted to do business in each state where the entity to be insured does business and must be issued by a surety or bonding company licensed by and in good standing with the New York State Department of Insurance. The performance bond shall cite this Stipulated Final Judgment and Order for Permanent Injunction as the subject matter of the bond and shall provide surety thereunder against financial loss resulting from whole or partial failure of performance due to, in whole or in part, any conduct violating this Order, Section 5 of the FTC Act, 15 U.S.C. § 45, or New York: Executive Law Section 63(12) or GBL Article 22-A. Such performance bond shall be executed in favor of (1) the Federal Trade Commission and the People of the State of New York for the benefit of any person injured as a result of any false or misleading representation of material fact made by any such business or its employees, and (2) any consumer so injured; B. The bond shall be deemed continuous and remain in full force and effect at all times during which Defendant Kalra holds any ownership interest, share, or stock in, or serves as an officer, director, or trustee of such business, and for at least three (3) years after Defendant Kalra has ceased to engage or participate in any manner in said business; C. The bond required by this paragraph is in addition to, and not in lieu of, any other bond required by federal, state, or local law; D. Defendant Kalra shall provide copies of the bond required by this paragraph to the Regional Director of the New York Regional Office of the FTC and the NYAG, at the addresses set forth in subparagraph VI.C below, at least ten (10) days before commencing any advertising, marketing, offering for sale, or sale of Prepaid Phone Cards or Related Products or Services; E. The Commission and the NYAG may execute against the performance bond if they demonstrate to this Court by a preponderance of the evidence that, after the effective date of this Order, any business in which Defendant Kalra holds an ownership interest, shares, or stock, or in which he serves as an officer, director, or trustee, made any false or misleading representation of material fact, directly or by implication, in connection with the advertising, marketing, offering for sale, or sale of Prepaid Phone Cards or Related Products or Services; and F. Proceedings instituted under this paragraph are in addition to, and not in lieu of, any other civil or criminal remedies as may be provided by law, including any other proceedings the Commission or the NYAG may initiate to enforce this Order. III. MONETARY RELIEF IT IS FURTHER ORDERED that: A. Judgment is hereby entered against Defendants Trans-Asian, Raj Telekom, Trans American, and Kalra in the amount of one million dollars ($1,000,000). Based upon Defendants’ sworn representations in their financial statements and subject to the conditions provided for in paragraph V of this Order, the Commission and the NYAG suspend payment of all but forty thousand dollars ($40,000) for equitable monetary relief, including but not limited to, consumer redress, and for paying any attendant expenses of administering any redress fund. In order to satisfy the judgment, Defendants have paid the sum of forty thousand dollars ($40,000) into an escrow account administered by the Commission. Pursuant to the parties’ agreement, the freeze of Defendants’ future assets pursuant to the Preliminary Injunction was lifted and any remaining asset freeze is hereby dissolved; B. If the Commission and the NYAG, in their sole discretion, determine that redress is wholly or partially impractical, any funds not used as redress shall be deposited in the United States Treasury and with New York State. The Commission and the NYAG, in their sole discretion, may use a designated agent to administer consumer redress. Defendants acknowledge and agree that this judgment for equitable monetary relief, as with all other relief provided in this Order, is solely remedial in nature and is not a fine, penalty, punitive assessment, or forfeiture; and C. Each party to this Order hereby agrees to bear its own costs and attorney fees incurred in connection with this action; provided, however, in the event the Commission and/or the NYAG initiates proceedings to enforce this Order and provided further, if the Court determines that Defendants have violated any term or provision of this Order, Defendants shall pay the costs and attorney fees incurred by the Commission and the NYAG or their agents in connection with proceedings to enforce this Order. Defendants further agree that the facts as alleged in the complaint shall be taken as true in any subsequent litigation filed by the Commission or the NYAG pursuant to this Order, including but not limited to, a non-dischargeability complaint in any subsequent bankruptcy proceeding. IV. REAFFIRMATION OF FINANCIAL STATEMENTS IT IS FURTHER ORDERED that, within three (3) business days from the date of entry of this Order, Defendant Kalra shall submit to the Commission a truthful sworn statement that shall reaffirm and attest to the truth, accuracy, and completeness of Defendants’ Trans-Asian, Raj Telekom, Trans American, and Kalra’s financial statements, executed on August 28, 1997 and September 7, 1997, and previously submitted to the Commission, and thereafter updated and reaffirmed on December 2, 1997. V. RIGHT TO REOPEN IT IS FURTHER ORDERED that the Commission’s and the NYAG’s agreement to this Order is expressly premised upon the truthfulness, accuracy, and completeness of the Defendants’ financial conditions as represented in their respective financial statements, which contain material information relied upon by the Commission and the NYAG in negotiating and agreeing to the terms of this Order. If, upon motion by the Commission or the NYAG, this Court finds that any Defendant failed to disclose any material asset, materially misrepresented the value of any asset, or made any other material misrepresentation or omission on any Defendant’s financial statement, the Commission or the NYAG may request that the Final Judgment be reopened for the sole purpose of allowing the Commission or the NYAG to modify Defendants’ monetary liability. A finding of material misrepresentation or omission as to the financial statement of any Defendant will render immediately due and payable the entire suspended judgment against Defendants of one million dollars ($1,000,000), less the forty thousand dollars ($40,000) previously paid; provided, however, that in all other respects this Order shall remain in full force and effect unless otherwise ordered by the Court and that Defendants have no right to contest any of the allegations in the complaint in this matter in any proceedings brought pursuant to this paragraph; and, provided further, that proceedings instituted under this provision would be in addition to and not in lieu of any other civil or criminal remedies as may be provided by law, including any other proceedings the Commission or the NYAG may initiate to enforce this Order. VI. INDIVIDUAL MONITORING IT IS FURTHER ORDERED that Defendant Kalra shall: A. Notify the Commission and the NYAG in writing, within ten (10) days of the date of entry of this Order, of his current residence address, business and home telephone numbers, and employment status, including the names, telephone numbers, and business addresses of any current employers; B. For a period of five (5) years from the date of entry of this Order, Defendant Kalra shall:
C. For the purposes of this Order, all written notifications to the Commission shall be mailed to:
and all written notifications to the People of the State of New York shall be mailed to:
D. For the purposes of paragraph VI, "employment" includes the performance of services as an employee, consultant, or independent contractor; and "employers" include any individual or entity for whom Defendant Kalra performs services as an employee, consultant, or independent contractor. VII. CORPORATE MONITORING IT IS FURTHER ORDERED that, Defendants Trans-Asian, Raj Telekom, and Trans American, and their successors and assigns, shall notify the Commission and the NYAG at the addresses listed in subparagraph VI.C above at least thirty (30) days prior to any change in any of said Defendants’ businesses including, but not limited to, merger, incorporation, dissolution, assignment, sale which results in the emergence of a successor corporation, the creation or dissolution of a subsidiary or parent, or any other change which may affect Defendants’ obligations under this Judgment. VIII. RECORD KEEPING AND DOCUMENT RETENTION IT IS FURTHER ORDERED that, for a period of five (5) years from the date of entry of this Order, Defendants Trans-Asian, Raj Telekom, Trans American, and Kalra, in connection with any business where Defendant Kalra is the majority owner of the business or otherwise directly or indirectly manages or controls the business, and where the business engages in, or assists others in the advertising, marketing, offering for sale, or sale, by any means, of Prepaid Phone Cards or Related Products or Services, are hereby restrained and enjoined from failing to create and maintain: A. Records containing the name, address, telephone number, and Social Security number of each person employed in the business in any capacity, including as an independent contractor, that person’s job title or position, the date upon which the employee commenced work, and the date and reason for the employee’s termination, if applicable; B. Books, records, and accounts that, in reasonable detail, accurately and fairly reflect the cost of products or services sold by the business, the income and expenses incurred in the sale of any products or services, revenues generated, and the disbursement of such revenues; C. Records containing the names, addresses, phone numbers, dollar amounts paid, quantity of items purchased, and description of items purchased, for each person to whom any of the above-referenced businesses has sold, invoiced, or shipped any products or services, or from whom any of the above-referenced businesses accepted money or other items of value; D. Copies of all sales scripts, training packets, advertisements, or other marketing materials utilized; E. Records that reflect, for every written or oral customer complaint or refund request, whether received directly, indirectly, or through any third party:
IX. ACCESS IT IS FURTHER ORDERED that, for a period of five (5) years from the date of entry of this Order, for the purpose of further determining compliance with this Order, Defendant Kalra shall permit representatives of the Commission or the NYAG, within five (5) business days of receipt of written notice from the Commission or the NYAG: A. Access during normal business hours to any office, or facility storing documents, of any business where:
In providing such access, Defendant Kalra shall permit representatives of the Commission and the NYAG to inspect and copy all documents relevant to any matter contained in this Order; and B. To interview or depose the officers, directors, and employees, including all personnel involved in responding to consumer complaints or inquiries, and all sales personnel, whether designated as employees, consultants, independent contractors, or otherwise, of any business to which subpararaph A applies, concerning matters relating to compliance with the terms of this Order. The person interviewed or deposed may have counsel present. Provided further, that the Commission and the NYAG may otherwise monitor Defendant Kalra’s compliance with this Order by all lawful means available, including the use of compulsory process seeking production of documents and the use of investigators posing as consumers or suppliers. X. RECEIVERSHIP PROVISIONS IT IS FURTHER ORDERED that A. Jay I. Borow, the Court-appointed Receiver of Trans-Asian, Raj Telekom, and Trans American (the "Receivership Companies"), together with the attorneys and accountants retained by the Receiver, are hereby deemed to have withdrawn from their respective appointments and representations pursuant to Section III of the Stipulation and Order for Preliminary Injunction entered into by the parties and So Ordered by the Court in this action on or about September 25, 1997; and B. The Receiver, together with the attorneys and accountants retained by him, are immediately released and discharged from any further liabilities, duties, responsibilities, or obligations that they otherwise might have in connection with the Receivership Companies. XI. ORDER DISTRIBUTION IT IS FURTHER ORDERED that, for a period of five (5) years from the date of entry of this Order, Defendants shall: A. Provide a copy of this Order to, and obtain a signed and dated acknowledgment of receipt of same from, each officer or director, each individual serving in a management capacity, all personnel involved in responding to consumer complaints or inquiries, and all sales personnel, whether designated as employees, consultants, independent contractors or otherwise, immediately upon employing or retaining any such persons, for any business where:
B. Maintain for a period of three (3) years after creation, and upon reasonable notice make available to representatives of the Commission and the NYAG, the original signed and dated acknowledgments of the receipt of copies of this Order, as required in subparagraph A above. XII. RETENTION OF JURISDICTION IT IS FURTHER ORDERED that this Court shall retain jurisdiction of this matter for purposes of construction, modification, and enforcement of this Order or the punishment of violations thereof. The parties listed below hereby stipulate and agree to entry of the foregoing Order, which shall constitute the final judgment in this action as to the undersigned. This Order may be executed on separate pages. STIPULATED AND AGREED TO: FOR THE FEDERAL TRADE COMMISSION: Michael Joel Bloom FOR THE ATTORNEY GENERAL DENNIS C. VACCO SHIRLEY F. SARNA ___________________________ FOR THE DEFENDANTS: _________________________ __________________________ FOR THE RECEIVER: __________________________ SO ORDERED, this _____ day of __________________, 1998, at _______.m. __________________________________ |