F OR P UBLICATION



### UNIT E D ST AT E S CO URT O F APPE AL S FO R T H E NINT H CIRCUIT

F E D E R A L T R A D E C O M M I S S I O N , Plaintiff-Appellee
,

v

.

G R A N T C O N N E C T , L L C, et al.,

Defendants
,

and

K Y L E R. K I M O T O ,

Defendant-Appellant

. N o. 11-18023

D.C. No. 2:09-cv-01349- PMP-RJ J

OPI NI ON

A ppeal from the United States District Court for the District of Nevada Philip M. Pro, Senior District J udg e, Presiding

Arg ued and Submitted April 7, 2014—Pasadena, California

F iled Aug ust 15, 2014

B efore: Sidney

R. Thomas, Milan D. Smith, J r., and Morg an Christen, Circuit J udg es.

O pinion by

J udg e Milan D. Smith, J r.F TC V

. K I M O T O

2

SUMMARY *

F ederal Trade Com m ission

The panel affirmed in part and vacated in part the district court’s summary judg ment in favor of the F ederal Trade C ommission, and its order permanently enjoining Ky le Kimoto from eng ag ing in a variety of marketing tactics and orderinghim to pay

restitution.

The d istrict court f

ound that Vertek, Kimoto’s wholly controlled c ompany , had c o m m itted multiple violations o f the F ederal Trade C o m mission Act, throug h its misleading advertising and various marketing schemes.

T he panel held that the district court properly h e l d Kimoto personally liable for b oth injunctive relief and the

r equirement to pay restitution with r espect to Vertek’ s L i n e of Credit Scheme, G r a n t Connect Scheme, a nd W ork F rom Home Scheme. The panel also held that Kimoto could not be held liable for either injunctive relie f or r estitution with respect to the Acai T otal B urn Scheme. The panel v a cated that part of the district court’s g r a n t of summary judg ment and permanent injunction based o n Vertek’s violations of the F TC Act in connection with the Acai Total B urn Scheme.

The panel held that individual liability for corporate malfeasance was available f or violat ions of the Electronic Fu n d Transfer Act because such violations are also deeme d
to be violati o ns of the F T C A ct, a nd that Kimoto was liable

* T h is su m m ary co n stitu

tes n o part o f th e o p in io n o f th e co u rt. It h as b een p rep ared b y

co u rt staf

f f o r th e co n v en i en ce o f

th e read er.F TC V

. K I M O T O 3

for Vertek’s violations of the Electr o n i c F und Transfer A ct because o f his personal involvement in concocting a nd
carry ing out the several schemes that violated the Act.

The panel held that the scope of t h e d i s trict court’s permanent injunction was not o v erbroad. The panel remanded so that the district court c o u ld modify the
permanen t injunction a

nd the amount of restitution a s required by this decision.

COUNSEL

Peter B orenstein (a

r g u e d ) and Michael Dirscoll (arg ued), L aw Students, University of L oy ola L a w School, L os Ang eles, California;(arg

ued); Erica L

. Reil ley
, J ones Day
, L os Ang eles, California; Daniel Patrick Sel m i
, L os Ang eles, California, for Defendant-Appellant.

Theodore P. Metz ler (arg

ued), B urke W

. Kappler, and Dotan W e inman, Attorney s; Roberto Ang uiz o la, Assistant Director; J ohn F

. Daly
, Deputy General Counsel for L itig ation; F ederal Trade Comm i ssion, W ashing ton, D.C.; B laine T. W e lsh, Assis t a n t United States Attorney
, L as Veg as, Nevada, for Plaintiffs-Appellees.F TC V

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4

OP INION

M. SMI TH, Circuit J udg e :

Ky l e K imoto (Kimoto) appeals from the district court’s
g rant of summary judg ment to the F ederal Trade Commission (F TC), and its or d e r permanently enjoining Kimoto from
eng ag ing in a v ariety of marketing tactics
, and ordering him
to pay r estitution. The district cou rt found that V e r t e k

— K i m o t o ’ s w h o l l y c o n t r o l l e d c o m p a n y

— h a d

co m m i tted multiple violations o f the F TC Act, 15 U .S.C. §§ 4 1–58, throug h its misleadin g a d vertising
, a nd f urther f o u n d that Kimoto was both p ersonally involved in the practices and k

new that the adver t i s i n g was misleading o r

was r ecklessly indifferent as to that p ossibility

. On this basis the district court permanently e njo i ned Kimoto personally from eng ag ing in a variety of ad v er t i s ing practices a nd ordered him to pay

restitution.

On appeal, Kimoto arg ues that the F TC presented insufficient evidence of h is invo l vement in Vertek’s violations of the F TC Act to personally enjoin him or require him to pay restitution. Sp e c i f i c ally
, Kimoto arg ues that he
cannot be held liable for Vertek’s schemes related to the marketing of what a

r e sty led the L ine of Credit scheme, the Grant Connect scheme, the W ork F rom H o m e scheme, a nd the Acai Total B urn scheme, b ecause the campaig n s were not launched until after Kimoto was imprisoned as a re s u l t o f prior violations of the F TC Act committed throug h a different
company

. Kimoto further arg ues that he cann o t be individually liable for V ertek’s misdeeds under the Electronic F und Transfer Act ( EF TA), codified in part at 15 U.S

. C

. § 1693. F inally
, Kimoto c laims that the district co u rt’s injunction—barring him f rom e ng ag ing in what a

re describedF TC V

. K I M O T O 5

a s n e ga t i v e

- o p t i o n m a r k e t i n g, co n t i n u i t y p r o gr a m s , preaut h o r i z ed electronic fund transfers, the use o f testimonials, and marketing or selling products related to g r a nts, credit, business opportunities, diet supplements, o r nutraceuticals—is overly

broad.

W e affirm the district court’s g rant of summary judg ment to the F TC in part, a

n d vacate the distric t court’s g rant o f
summary judg ment to the F TC solely with respect to the Acai Total B urn scheme.

F ACTUAL AND P ROCEDURAL BACK G ROUND

Kimoto’s fraudulent business practices have drawn F TC scrutiny for over a decade, and have resulted in three d istinct enforcement actions ag a inst him. Kimoto’s various schemes have employ e d several unify ing fe at u res: in each, Kimoto lured consumers with a deceptively adver t i s e d headline product, and then enrolled them in “ups ells,” or n eg ativeoption “free trials” that required cons umers to underg o a burdensome cancellation process in ord e r to avoid inadequately

disclosed recurring

monthly fees.

Two such schem e s provide the r elevant backg round for this appeal. I n 2003, the F TC broug ht an enforcement action
ag ainst Kimoto a

nd one of his co m p anies, Assail, I nc. FTC

v. Assail, I

nc. , 4 1 0 F .3d 256, 259 n.1 ( 5th Cir. 2005). The F TC alleg ed that Kimoto entice d c ustomers with an offer to purchase a preapproved MasterCard throug h Assail, but that when they tried to do so Assail provided them e it h e r with applic at i o ns for cash-secured debit cards, o r with unusable plastic cards bearing an unauthoriz ed reproduction o f t h e MasterCard log o. Id. W h en c u stomers a ccepted the offer for the ostensible credit cards, A ssail a lso enrolled them inF TC V

. K I M O T O

6

additional neg ative-option “free trials” that ceased to be free after an int ro d u ctory p e r iod. I d

. A ssail then charg ed

consume r s r ecurring fees both for the “credit cards” and for the “free trials,” and erected a variety of barriers to effective cancellation. Id. On appeal, the F ifth Circuit h eld that Kimoto, th r oug h Assail, “committed multiple, eg reg ious violations of the [ F TC Act] .” Id. at 2 64. The district court in Assail imposed a permanent injunction b arring Kimoto from
eng ag ing i n t elemarketing and also ordered Kimoto to pay $106 million in restitution. Subsequently
, the F T C initiated criminal charg es ag ainst Kimoto for his role in t h e Assail scheme. United S

tates v. Kimoto
, 588 F .3d 464, 470 (7th Cir. 2009).

Apparently

undeterred by

the injunction, Kimoto moved
to L as Veg as and formed a c o r p o r a t e entity to eng ag e in I nternet marketing schemes, whic h eventually became the Vertek Group, L L C. To a void reg ulat o ry scrutiny
, Kimoto

e n t rusted his then-wife, J uliette Kimoto, w ith leg al ownership of the entity

. A ccording to Kimoto’s ex -wife, t his structure had the added—and intended—benefit of permitting her t o profit from the company in the event that Ki m o t o was incarcerated.

Al t h o u g h Mrs. Kimoto was the titular owner of Vertek, Kimoto org aniz ed and ran the company

. Kimoto h ired many

o f the employ ees who had b een involved in the A s s a i l scheme, including Michael Henriksen and Tasha J n Paul. Kimoto al so arrang e d for Michael H enriksen’s brother’s business, Global Gold, to be the first “ product provider” for the scheme and recr

u i t e d two more Assail veterans, Randy O’Connell and J a mes Gray

— throug h th eir business consulting and staffing company O’Con n e l l Gray
, L L P—to help “with the log istics of accepting transactions on t h eF TC V

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[ I nternet]

. . . .” With his team in place, Kimoto directed a nd participated in the development o f several deceptive marketing campaig ns.

A. The Line of Credit Schem e

One of Vertek’s first schemes involved the marketing of

a “$7,500 Unsecured Credit L ine” with promises such as “No Credit Check! No E mploy ment Verification! No Security Deposit! B ankruptcy ? No problem! Appro v al Guaranteed!” The advertisements f

ailed to m e n t ion that consumers could only u s e t h e “ line of credit” to make p urchases from Global Gold’s online store. 1 Consumers who clicked on the advertisements would be taken to so-called “landing p ag es,” which w ere d eceptive websites where consumers could sig n up for the scheme. Consumers e ntered personal data on two
screens, which contained check b o x e s indicating that the
customers ag reed to certain terms and c onditions, as well a s a privacy policy

.

A section entitled “Offer Details” appeared in small print further down t h e p a g e, below the “Submit” button. The details s t a t ed that customers would be charg ed a $39.95 monthly fee if they d i d n o t c ancel the service, and that they would be automatically sig ned up for additional prog r a ms, each o f which had its own “free t r i a l” period, followed b y recurring monthly charg es.

The terms a

nd conditions sug g ested th a t c o n s u m e r s would receive a t r a d i t ional credit c a rd. H idden deep in the fine print, however, the terms and c onditions noted that the line o f

1 Vertek m ark eted th e sam e sch em e u n d er n u m ero u s b ran d s, in clu d in g Glo b al Go ld , First P lu s P latin u m , an d First Natio n al Go ld

.F TC V

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8

credit could only be u sed “to purchase merchandise

ex c lusively at the G lobal Gold Credit Services Web site.” The terms and conditions also noted, more than twenty parag raphs into the fine print that the consumer “acce p ted enrollment for up to 2 a dditional promotional product offers . . . .”

Consumers w ho sig ned up for the line of credit o f t en believed t hat they would receive a credit card, and also complained that they never ag reed to be charg ed f or the “upsells.” W hen consumers tri e d to cancel, Global Gold’s
customer service operation made it ex ceeding ly difficult, needlessly transferring customers to d ifferent websites o r p h o n e n u mbers, even thoug h all of the calls ended up in t h e

same service center. The scheme r a n from J une 2007 until May 2009, when the F TC shut i t d own. During that time, after considerable effort on their parts, approx imately 94 percent of subscribers cancelled their subscriptions.

B. The G rant Connect Schem e

L ike t h e L ine of Credit scheme, the Grant Connect scheme relied on misleading advertising and hid d e n “upsells.” The Grant Connect landing pag es f eatured pictures of President O bama and Vice President B iden, o r of a scantily clad female model holding cash. The pag es stated that billions of dollars in g overnme n t g rants were available to individuals “to help [ them] w ith [ their] fin a n c i al situation,” including funding home purchases, chi ld care, d ebt consolidation, medical costs, and other personal ex penses. The sites offered an “easy to use prog r am” to “instantly find the Grant that’s rig h t for y ou,” and in c l u d e d p hony testimonials from individuals claiming that they had received hundreds of thousands of dollars in g overnment g rants.F TC V

. K I M O T O 9

The “landing pag es” u sed the same deceptive two-step orderi n g p ro c ess as the L ine of Credit scheme. The inconspicuous of

f e r details included an initial $2.78 processing fee along with a u t omatic recurring monthly charg es o f $39.95, as well as enrollment in two additional offers with their own trial peri o d s and neg ative-option monthly charg es.

Customers who purchased Grant Connect were dir e c t ed
to the Grant C o nnect website, where they discovered that
most g overnment g r a n t s cannot be used for personal
exp e n s es. Despite this fact, Global Gold representatives (who also handled calls related to the Grant Connect scheme) told

users they could find g r a n t s f or thing s like ex panding a business, buy ing a home, and o ther p ersonal e x penses. The Grant Connect scheme beg an in March 2008. B y the time the F TC shut down the site in May 2009, and after considerable effort on their parts, more than 9 1 p ercent of Grant Connect’s customers had cancelled their memberships.

C. The Work F rom Hom e Schem e

The W ork F rom Home scheme o perated along similar lines. Misleading advertisements promised t h at consumers

c o u l d m ake a substantial income quickly a nd easily while working from h ome. One s u ch p rog ram, marketed a s Domain Processing o r O n e Hour W ealth B uilder, claimed that u sers could “immediately be gi n earning hundreds to t h ousands of d ollars a day
, in just a few minutes o f [ the i r ]
spare time,” thr o u gh buy ing and selling ex pired I nternet domain names. I n de e d
, the site claimed that users could make $174,150 a y ear w o rk i n g f o r fewer than f

our hours a day . A different prog

ram, My Search Cash, offered a “free”F TC V

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10

trial kit for an “easy to use sy stem” to make “$50,000 or more a y ear” using eB ay

and Goog le.

Not only were these ea r n ing claims unsubstantiated, the sites also included false testimonials ex tolling the simplicity of making money using the sy stems. The W ork F rom Home sch eme used the same two-step ordering process, and also included two “free” n eg a tive-option trials. The W o r k From Home scheme beg an in March 2008 and continued u n t i l the FT C took over the sites in J u ly 2009. B y the ti m e t h e FT C stepped in, after considerable e ffo r t on their p arts, approx imately 63 percent of c ustomers who sig ned up f or the offers had cancelled.

D. K im oto’s Trial and Incarceration

Kimoto’s criminal trial for his involvement in the Assail scheme beg an in late March 2008. Kimoto
, 588 F

. 3d a t 470. After a ten-day trial, the jury convicted M r

. K i m o to on o ne count o f conspiracy
, o ne count of mail fraud, and twelve
counts o f wire fraud. Id. at 468. During his trial and his subsequent i n c a

rceration, Kimoto ceased to actively participate in Vertek’s daily activities.

E. The Acai Total Burn Schem e

The final version of Vertek’s scheme invol ved the marketing of Acai b erries, a popular nutritional supplement. Consumers w ere told that A cai Total B u rn would help them build muscle, increase their m e t abolism, lose weig ht, g ain
energ y , reduce fatig ue, and retard the ag ing pr ocess. These claims were unsubstantiated.F TC V

. K I M O T O 11

The Acai Total B urn scheme used the same deceptive two pag e or d e ring process, inconspicuous disclosures, a nd automatic enrollment in additional neg ative-option trials a s th e o t h er schemes. Acai Total B u rn w as available to consumers for only two months, from J u ne 5, 2009, throug h J uly 30, 2009. During that time, the prog ram enroll e d 670 customers, 1 59 of whom had already cancelled when the F TC took over the site.

F

. P rior P roceedings

I n J uly 2009, the F TC broug ht suit ag ainst many of t h e p a r t i c ipants in the schemes, including Vertek, Global Gold, Steven He n r iksen, and Mrs. K imoto. The F TC soug ht,
among o t h er relief, a temporary restraining order, which the district court g ranted the following day
, and a pre l i m inary injunction. The F T C amended its complaint to a dd alleg ations reg arding additional iterations of the scheme, as well as to add Kimoto, Michael Henrikse n , Tasha J n Paul, J ohnnie Smith, and others as defendants.

F ollowing d i s covery , the F T C and various defendants moved for summary judg ment. The d istrict court found no g enuine dispute of material fact reg arding w hether the L ine of Credit, Grant Connect, W o rk F rom Home, and A cai Total B urn schemes were deceptively marketed; that the neg ativeoption u psells were inadequately disclosed; tha t the testimonials were false; and that defendants vi olated the EF TA by d ebiting c o n s umers’ accounts without written authoriz a tion. Kimoto does not challeng e these finding s on appeal.

The district court also found that the corporate defendants operated as a c ommon enterprise, because “[ a ] ll the vari o u sF TC V

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12

offers w e r e run by the same individuals using different
company names,” the defendants “ s wapped and shared personnel,” as well as “blurred the lines o f c o rp orate

se p a r ateness in their activities,” and “eng ag ed in c oncerted and coordinated action across campaig ns, and [making ] their profits interdependent.” Kimoto, initially proceeding pro se,

was the only defendant to appeal from the district c o u rt’s judg ment.

JURISDICTION AND STANDARD OF REVIEW

W e have jurisdiction over Kimoto’s appeal from the district court’s g rant of summar y j u d g ment and entry of a permanent injunction under 2 8 U.S.C. § 1291. W e r eview de

novo the district court’s g rant of summary judg ment. FTC v

. Stefanchik , 559 F .3d 924, 927 (9th Cir. 2009). W e view the evidence in the lig h t most f avorable to the non-moving party and decide whether there a re any g enuine issu e s o f material fact and w hether the d istrict c ourt co r r e c t ly applied the substantive law. Id. W here the distr i c t co u rt c hooses to impose an equitable remedy
, we r eview it s d e c i s ion for an abuse of discretion. Id. at 931.

D ISCUSSION

Kimoto contends that there is insufficient e vidence of his personal involvement in man y o f the schemes to hold him personally liable. Kimoto further a rg ues that his liability for Vertek’s actions ended when h e left the company to p repare for his criminal trial, and that he cannot be individually liable for Vertek’s misdeeds under the EF T A

.

Kimoto also contends that the district court’s injunction, which b ars him from eng ag ing in neg ative-option marketing
,F TC V

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continuity prog rams, preauthoriz ed e lectronic fund transfers, the use of testimonials, and marketing or selling products related to g rants , credit, b usiness opportunities, diet supplements, or nu traceuticals, is overly broad. W e address these arg uments in turn.

I. P ersonal Liability

I ndividuals may be held liable for injunctive relief based

on corporate e ntity violations of the F TC Act if (1) the corporation c ommitted misrepresentations of a k i n d usually relied o n b y a r ea s o n a b l y p rudent person and resulted in

consumer injury
, and (2) individual s p a r ticipated d irectly in the violations o r had authority to control the entities. FTC v

. Publ’g Clearing House, Inc.
, 104 F .3d 1168, 1170–71 (9th Cir. 1997). I n o rder to hold an individual liable for restitution as a result of the misconduct of a corporation, the F TC must also show that the individual “had knowledg e t h a t the corporation or one of its a g ents eng ag e d i n d ishonest o r fraudulent conduct, that the misrepresentations were the ty pe upon w hich a reasonable and prudent person would rely
, a nd that consumer injury resulted.” Id. at 1171 (quoting FTC v

. Am. Sta n d

a rd Credit S

ys., Inc.
, 874 F

. Supp. 1080, 1089 (C.D. Cal. 1994)). To satisfy the knowledg e requirement, the F TC must show “that [ a defendant] ‘ h ad actual knowledg e o f material mis representations, [ w as] r ecklessly indifferent to the truth or falsity of a misrepresentation, or had an

aw a r e n ess of a hig h probability of fraud a long with an intentional avoidance of the truth.’” I d. The F TC n eed n ot show that a defendant intended to defraud consumers in order for that individual to be perso n a l l y l iable. Id. And “[ t] he

ex tent of an individual’s involvement in a fraudulent scheme alone is sufficient to e stablish the r e q u isite knowledg e for personal r e s t itutionary liability .” F TC v

. Affordable Media
,F TC V

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14

179 F .3d 1228, 1235 (9th Cir. 1 999). Apply ing this standard,

we conclude that the district court properly h e ld Kimoto personally liable for both injunctive r elief and the requirement to pay restitution with respect to all of the schemes d escribed a

bove, wi t h t h e ex c eption of the Acai Total B urn scheme.

A. Line of

Credit Schem e

Kimoto does not c h a lleng e his individu a l liability for injunctive relief with r esp ec t to the L ine of Credit scheme. F urther, the g o vernment’s evidence establishes that Kimoto possessed the req u i site scienter to be personally liable for restitution because he either knew that Vert e k was eng ag ed in deceptive advertising in c onnection with the L ine of Credit scheme or was r e c k l es s ly indifferent a s to that fact. Publ’g Clearing H

ouse , 104 F

. 3d at 1171. Kimoto arrang ed Vertek’s entire operation. He org a n iz ed the c o m p anies, recruited personnel who had been involved in his prior de c e ptive marketing schemes, and directed Vertek ’ s activities. This alone is enoug h to conclude that he h ad knowledg e sufficient
to support p ersonal liability for r estitution damag e s. Id. (“The ex tent of an individual’ s i nvolvement in a fraudulent scheme alone is sufficient to establish the r equisite knowledg e for personal restitutionary liability .”).

Additionally
, Kimoto declared that he thoug h t i t w a s “important for [ him] to understand and know [ th e l a n g uag e

on the deceptive landing p ag e s]
, because that was [ h is] job to take it o ut to the affiliate marketer. ” I n lig ht o f Kimoto’s prior troub l es with the F TC, which also involved inadequately disclosed “upsells,” his level of participation in the scheme and knowle d ge of deceptive web pag e s shows that he knew about, or was recklessly indifferent as toF TC V

. K I M O T O 15

Vertek’s deceptive p r a c t ices. See Publ’g Clearing House
, 104 F

. 3d at 1171 (holding an individual liable w here she filed

a business license at the direction of someone facing criminal charg es due to deceptive telemarketing
, and had worked at a predecessor company that had b een shut down due to a fraud i n v e stig a tion); FTC v

. Amy Travel
, 875 F .2d, 564, 574–75 (7th Cir. 1 989) (holding individuals liable whe re they wrote deceptive scripts and manag ed the day -to-day activities of the corporation).

Kimoto arg ues tha t the F TC has not established the
requ i s i te scienter because he soug ht the advice of counsel, and was imprisoned at the time Vertek received many of the

c o n s u m e r c o m p laints and charg ebacks related to Global G ol d

. Kimoto is mistaken on both c ounts. I t is well established that “reliance on advice of counsel [ is] not a valid defense on the question of knowledg e” required for individual liability

. FTC

v. Cyberspace.Com
, LLC
, 453 F .3d 1196, 1202 ( 9 t h Cir. 2006) (quoting Amy Travel
, 875 F .2d at 575 )

. Nor is it relevant that many of the consumer complaints a nd charg ebacks—which can constitute eviden c e o f an individual’s knowledg e—were r e ceived after Kimoto was incarce r a ted. As previously discussed, Kimoto was w ell aware of the fraudulent nature of the schemes before he was i m prisoned. The fact that he did n ot receive additional information that would have heig htened his knowledg e o f Vertek’s F TC Act violations does not absolve him.

B. G rant Connect Schem e

Kimoto is personally liable for Vertek’s false advertising of the G rant Connect scheme because he both controlled Vertek at the time the scheme was org aniz ed, and dir e ctly participated in establis hing the scheme. According to hisF TC V

. K I M O T O

16

fellow con a

rtists, Kimoto was “responsible for creating and
org aniz ing Vertek.” He “assembled a team to assist him in conducting the business o f Vertek

. . . , which i n cluded De f e ndants Michael H enriksen and Tasha J n Paul,” a nd “pe rs o n ally p articipated in the operation[ ] of Vertek [ ] until he beg a n full-time p reparation for his criminal trial.” “During the time th a t h e participated in the operation[ ] o f Vertek [ ], [ ] Ki m o t o d irected the a ctivities o f V ertek [ ]

. ” Accordingly
, Kimoto controlled Vertek at least until the beg inning o f his trial in March 2008. I n 2007, more than a y ear before Kimoto’s c r iminal trial, Vertek bega n d r afting deceptive terms and conditions f or the scheme, as well a s deceptive landing page s an d advertisements. Vertek also created the log o for the scheme. Kimoto thus participated in the claimed violations thro u gh his c ontrol of, a nd involvement in, Vertek during the period that Vertek drafted the misleading advertising

.

K i m o to also personally participated in concocting the Grant Connect scheme. Kimoto introduce d his idea for the scheme to O’Connell G ray in 2 006, after which J ames G ray sent K imoto lo gi n c r edentials f or several g rant search products in order to enable Tasha J n Paul to create a “hig hly detailed roadmap of h ow all the sites and offers interrelate.” K i m o t o also neg otiated the roles and responsibilities o f Vertek and O ’Connell Gray with respect to the Grant Connect scheme. F ollowing these d iscussions, O’Connel l Gr ay sent Kimoto a draft letter of intent r eg a rding the “ G o v e rnment Grant Venture” between O’Co nnell Gray and a “Ky le Komoto [ sic] entity to be na m e d

. ” F inally
, in early 2008, Kimoto received the mis l e ading “ prog ram specifics” a nd phony “testimonials” for Grant Connect.F TC V

. K I M O T O 17

Kimoto arg ues that he cannot be held liable because Grant Connect was not marketed to consumers until after his i m p r i sonment. O ur case law makes clear that an individ u al is l i a b l e for corporate violations of the F TC A ct where that individual “participated directly in the violation.” Publ’g Clearing House
, 104 F .3d at 1170. Here, Vertek’s violation consisted of the deceptive marketing that underlay the Grant Connect s c h eme, marketing that Kimoto participated in desig ning a

nd approving

. Kimoto does not alleg e, nor does the record show, that the mar k et i ng materials surrounding Grant C o n nect materially chang ed after he ceased his active participation in the scheme. Accordin gly
, Kimoto is personally liable for Vertek’s violations in connection with the Grant Connect scheme b e c a u se of his personal involvement in tha t violation—drafting the misleading advertisements t h a t constituted the violation. The fact that Kimoto did not c ontinue his participation after his criminal trial beg an does n o t a lter the simple fact that he participated in creating the very material found to be m i s l e a ding by the district court.

Kimoto possessed the r equisite scienter to be personally liable for restitution because he either knew that Vertek was
eng ag ed in deceptive advertising in c onnection w ith the Grant Connect scheme or was recklessly indifferent as to that fact. Publ’g Clearing House
, 1 04 F

. 3d a t 1171. Gray sent Kimoto
prog r am specifics and testi m onials for Grant Connect on F ebruary 1 5
, 2008, many months before the product launched. Clearly the testimonials could not have been leg itimate since the p roduct h ad n o t y et launched. Kimoto thus had knowledg e that the scheme was deceptive.F TC V

. K I M O T O

18

C. Work F rom Hom e Schem e

Kimoto wrote the d e ceptive tex t for the landing pag e s

a ssociated with the D omain Processing scheme, one o f t h e W o rk F rom Home schemes, to r e d e s i gn the website, and to desig n the landing pag es and deceptive advertisements. Kimoto also received the product description for the scheme, which d eceptively p romised that participants could earn inflated incomes.

Kimoto possessed the r equisite scienter to be personally liable for restitution because he either knew that Vertek was eng ag ed in deceptive advertising in connection with the W ork F rom Home scheme or was recklessl y i n different as to that fact, Publ’g Clearing House
, 104 F .3d at 1171, for the same

reasons that h e k n e w , or was recklessly indifferent as to the possibility that the statements associated with t h e L ine o f C r e d i t s c h e m e a n d G r an t C o n n e c t s c h e m e w e r e misleading —namely
, his history of trouble with t h e F TC related to “upsells,” his orchestration of the enterpr i se that broug ht the scheme to f ruition, a nd t h e clearly overstated incomes contained in the draft produ c t description that he received.

D. Acai Total Burn Schem e

Unlike the other schemes previously described, however, the evidence does not show that Kimoto controlled Vertek at the time the Acai Total B u rn scheme was developed, nor does it show that he directly participated in the scheme. K i m oto

was incarcerated on April 18, 2008, whereas wor k on the Acai B erry scheme did not beg in until F ebruary 2009. Accordingly
, Kimoto cannot be held liable f or either injunctive relief or restitution w i t h r e s p ect to the Acai TotalF TC V

. K I M O T O 19

B urn scheme. W e vacate that part of the district court’s g rant of summary judg ment and permanent injunction based on Vertek’s violations of t h e FT C Act in connection with the Acai Total B urn scheme.

II. Liability Under the EF TA

Althoug h K i m o to d oes not c ontest that Vertek v iolated th e E F TA, he arg ues that there is no individual liability for corporate violations of that Ac t

. W e disag r ee. The EF TA provides that “a violation o f any requirement imposed under [ the EF TA] shall b e deemed a vi o l at i o n [ of the F TC A ct]

. ” 15 U.S.C. § 1693o(c). The E F TA further provides that “[ a ] ll of the functions and powers of the F ederal Trade Commission under the F ederal Trade Commission Act are available to the F ederal T rade Commission to enforce compliance by any person subject to the jurisdicti o n o f the F e deral Trade Commission with the requirements imposed under this subchapter.” Id. The E FT A provides no enforcement mechanism of its own, instead rely ing on the enforcement provisions in the authoriz ing statutes o f the ag e ncies tasked with enforcing the F TC Act. See 15 U.S.C. §§ 1693o(b)–(c). As previously discussed, where the F T C seeks a perm anent i njunction for violations of the F TC A ct under 1 5 U.S. C

. § 5 3 (b) it can, under appropriate circumstances, hold an individual p e rsonally liable for corporate violations of the F TC Act. Affordable Media
, 179 F .3d at 1234. I n lig ht of the ab o v e, we hold that individual liability for corporate malfeasance is available for violations of the EF TA because such viol at i o ns are also deemed to be violations of the F TC Act, and that Kimoto is liable f o r Vertek’s violations o f the EF TA because of his personal involvement in concocting a nd
carry ing out the several s ch e m es that violated the EF T A
, which are more fully

discussed above.F TC V

. K I M O T O

20

III. Scope of the Injunction

Kimoto nex t challeng es the scope of the distric t court’s injunction on several g round s

. F irst, he contends that the injunction is not tailored to his specific b ad acts. Second, he
arg ues that the injunction’s ban on certain ty pes o f marketing and advertising
, and o n a ll u se of testimonials, is impermis s ibly b road. F inally
, Kimoto arg ues that the injunction’s ban on all electronic f und transfers is overbroad. None of these arg

uments is availing

.

To dete r m i n e if an injunction is overbroad, w e consider “(1) the seriousness and deliber ateness of the violation; (2) [the ] e ase with which the violative claim may be transferred to other products; and (3) whether the respondent has a h istory of prior v iolations.” FTC v. John Beck Amazing Profits
, LLC
, 888 F

. Supp. 2d 1006, 1 0 12 (C.D. Cal. 2 012) (citing In re S

touffer Foods Corp.
, 1 1 8 F .T.C. 746, 811 (1994)). The Commission “is not limited t o p rohibiting the illeg al practice in the p recise form in wh i c h i t is found to have e x isted in the past.” FTC v. Ruber o i d Co.
, 343 U.S. 470, 473 (1952). And those “caug ht v iolating ” the F TC Act “must ex pect some fen c i n g i n

. ” FTC v. Nat’l Lead Co.
, 352 U.S. 419, 431 (1957). A ccording ly
, inj u n c t i ve relief under the F TC Act may be fr a m ed “broadly enoug h to prevent respondents from eng ag ing in simil a r ly illeg al practices in future a d v ertisements.” FTC v. ColgatePalmolive Co.
, 380 U.S. 374, 395 (1965). The injunction will be upheld so l o ng as it bears a “reasonable relation to the unlawful practices found to ex ist.” Id. at 394–95.

Vertek operated as a c ommon e n t e r prise with other companies involved in the scheme. W here corporate entities

o p e r ate tog ether as a common enterprise, each may be h e l dF TC V

. K I M O T O 21

liable for the deceptive acts and p ractices of the others. FTC

v. Network Servs. Depot, Inc.
, 617 F

. 3 d 1127, 1143 (9th Cir. 2 0 1 0 )

. Kimoto, in turn, is p ersonally liable for V erte k ’s violations of the F TC Act in connection with each o f the schemes previously discussed, ex cept f or the A cai Total B urn scheme, by virtue of his having personally participa ted in each of the decepti ve schemes, and by virtue of his control

over Ve r t ek prior to h is incarceration. Kimoto has also consisten t l y e ng ag ed in variations on the same deceptive marketing scheme, which, in its latest iteration alone, has defrauded consumers of more than $ 2 9 million. As the record reveals, the c ommon e lements employ ed in e ach of the frauds concocted by K imoto is easily transferable both to new product l i n e s and to new modes of communication with

consumers. Accord i n gly
, because the district court’s injunction was based on Vertek’s violation s o f t h e F T C A ct in connection with the L ine of Credi t, Grant Connect, a nd W o rk F rom Home schemes, it is not overbroad but is, instead, reasonably tailored to “prevent respond e nt[ ] from eng a g ing in similarly illeg a l practices in futur e a dvertisements.” Colgate-Palmolive Co. , 380 U.S. at 395.

CONCLUSION

F or the r easons above we A FF I RM the district court’s
g rant o f summary judg ment to the F TC in part, and VACATE the district court’s g r ant of summary judg ment to the F TC with respect to the Acai T otal B u rn scheme. W e REMAND
to the district court so that it may modify the p er manent injunction and the a mount of restitution as required b y this opinion. Each party

shall bear its own costs.

AF F IRMED in part, V ACATED in part, a nd REMANDED f

or f urther proceedings.