FOR IMMEDIATE RELEASE: December 13, 1988 FTC CHARGES NATIONWIDE TELEMARKETER OF MAGAZINES, BUDGET MARKETING INC., WITH MAKING MISREPRESENTATIONS IN SELLING ITS MAGAZINES The Federal Trade Commission has charged a nationwide tele- marketer of magazines, Budget Marketing Inc., with violating a Commission order by misrepresenting to consumers the true purpose of its calls. The complaint, filed in court yesterday, also charged the company with illegally deducting subscription charges electronically from consumers' bank accounts without signed authorizations. The FTC asked the court to order the defendants to pay civil penalties and to prohibit them from violating the FTC order and the FTC Act. Budget sells magazine subscriptions and renewals to the public over the telephone. In 1972, the FTC accepted a consent order with Budget's predecessor corporation, Cowles Communications, settling charges that the company used deceptive and misleading sales and debt- collection practices. The consent order prohibited the challenged practices. In 1980 the FTC accepted a consent decree with Budget, settling charges the company violated the 1972 order by misrepresenting the purpose of phone calls to consumers. The 1980 decree required the company to pay a $125,000 civil penalty and to alter its telephone solicitation practices. According to the complaint, examples of false claims the company's representatives made to consumers include: -- "You have won free magazines for 6 years, you only have to pay postage." -- "The magazines are paid for by the advertisers, you only pay for the handling charges." (More) -"The only thing we ask help from you with is our processing costs. That's what it costs us to wrap, stencil on the mailing labels, and get the magazines out to you." -- "The magazine offer is on a trial basis and can be cancelled at any time." -- "No authorization or withdrawal of money will occur until you sign the papers that will be coming through the mail." According to the complaint, the company has continued to violate the 1972 order by routinely failing to reveal that the purpose of the calls it makes to consumers is to sell magazines, by failing to cancel subscriptions upon request, and by making false claims. In addition, the complaint charged, Budget violated the Electronic Fund Transfer (EFT) Act by failing to get signed authorizations from consumers to have their bank accounts debited for the monthly subscription payments. According to the complaint, oral authorizations by consumers or authorizations signed by the telephone solicitors on consumers' behalf do not meet the requirements of the act. The complaint also charged that Budget violated the 1972 order by misrepresenting payment terms to purchasers and failing to tell consumers the total cost of their purchase. In addition, according to the complaint, Budget harassed or intimidated customers to get them to pay their accounts, threatened legal action the company did not intend to take and falsely claimed that the customer's credit rating would be adversely affected by nonpayment. The complaint also names the following Budget officers: Dennis H. Gougion, Chairman of the Board and Chief Executive Officer; J. JoAnn Butler, President;, Phyllis J. Parr, Secretary and Assistant Treasurer; Thomas Lynch, Vice President, Data Processing; Joseph A. Pirillo, Controller; Mavis B. Miller, Treasurer. All reside in Des Moines, Iowa. In addition, the complaint names Tram Management Ltd. and its officers: Charles A. Eagle, President; John D. Krohn, Vice President and Treasurer; Donna Joyce Eagle, Vice President; Richard Rick, Secretary; and Joanne E. Isles, Assistant Secretary. The company and officers are all of Des Moines, Iowa. (More) thers the complaint names are: Dale T. Lenard of Denver Colo., doing business as Mega Magazine Service, Colorado Dawn, and Key Concept; John R. Daly of Redondo Beach, Calif., doing business as Western Marketing Inc.; Charles P. Donly of Waukee, Iowa, doing business as Budget Renewal Service; Roy Golden of Urbandale, Iowa, doing business as American Marketing Services; Tom McCoy of Windsor Heights, Iowa, doing business as International Service Association; Dave Keowan of Arvada, Colo., doing business as Publishers Marketing. The complaint also names: Richard Prochnow of Atlanta, Ga., doing business as Direct Sales International; Sebastian Runza of Des Moines, Iowa, doing business as Direct Marketing Service; John Harrison of Lake Quivira, Ka., doing business as Keystone Publishers Service Inc.; William Stemple of Virginia Beach, Va., doing busines as Budget Marketing of Virginia; Dale Branson of Tampa, Fla., doing business as Leisure Day Marketing; and Steven Johnson of Johnston, Iowa, doing business as Johnson Marketing Service. The Department of Justice also began a proceeding yesterday to bring civil contempt charges against the company and a number of the individuals in the case, because they violated the court's 1980 consent decree prohibiting the company and individuals from using deceptive marketing practices in selling magazines. Budget Marketing Inc. is based in Des Moines, Iowa. The complaint was filed in the U.S. District Court for the Southern District of Iowa, Central Division at Des Moines by the Department of Justice at the request of the FTC. Copies of the complaint will be available shortly from the FTC's Public Reference Branch, Room 130, 6th St. and Pennsylvania Ave. N.W., Washington, D.C. 20580; 202-326-2222; TTY 202-326- 2502. # # # MEDIA CONTACT: Dee Ellison, Office of Public Affairs, 202-326-2177 STAFF CONTACT: Joseph J. Koman, Bureau of Consumer Protection, 202-326-3014 Ronald D. Lewis, Bureau of Consumer Protection, 202-326-2985 FTC Docket No. 8831 Civil Action No. 88-1698 E [BUDGET2] ee end DOJ today/yesterday??? ***************************** WHEN ISSUED, MAIL A COPY OF THE RELEASE TO DAVID LEVITT, DOJ, 666 - 11th Street, N.W., P.O. Box 386, Suite 900B, D.C. 20001; 724-6154