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UNITED STATES DISTRICT COURT

DISTRICT OF ARIZONA – PHOENIX DIVISION

)

UNITED STATES OF AMERICA, )

)

Plaintiff, )

v. ) No. CV 10-0696-PHX-LOA

)

DIRECT MARKETING ASSOCIATES, CORP .,)

and JOHN M. RAINEY, JR. )

)

Defendants. )

)

STIPULATED FINAL JUDGMENT AND ORDER FOR CIVIL PENALTIES,

PERMANENT INJUNCTION, AND OTHER EQUITABLE RELIEF

Plaintiff, the United States of America, acting upon notification and authorization to the

Attorney General by the Federal Trade Commission (“FTC” or “Commission”), is

concurrently filing its Complaint herein, which alleges that Defendants Direct Marketing

Associates, Corp., and John M. Rainey, Jr., have engaged in violations of Section 5(a) of

the Federal Trade Commission Act, 15 U.S.C. § 45(a) (“FTC Act”), and section 604 of

the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681b. Defendants have been

represented by the attorney whose name appears hereafter. The parties have agreed to

entry of this Stipulated Final Judgment and Order for Civil Penalties, Permanent

Injunction, and Other Equitable Relief (“Order”) to resolve all matters in dispute in this

action without trial or adjudication of any issue of law or fact herein and without

Defendants admitting the truth of, or liability for, any of the matters alleged in the

Complaint. Defendants have waived service of the Summons and Complaint.

THEREFORE, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED

as follows:

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FINDINGS

1. This Court has jurisdiction over the subject matter of this action and over

Defendants.

2. Venue in this district is proper under 28 U.S.C. §§ 1391(b)-(c), 28 U.S.C.

§ 1395(a), and 15 U.S.C. § 53(b).

3. The activities of Defendants are in or affecting commerce, as defined in

section 4 of the FTC Act, 15 U.S.C. § 44.

4. The Complaint states a claim upon which relief may be granted against

Defendants under sections 5(a), 13(b), and 16(a) of the FTC Act, 15 U.S.C. §§ 45(a),

53(b), and 56(a), and under section 621(a) of the FCRA, 15 U.S.C. § 1681s(a).

5. Defendants make no admissions to the allegations in the Complaint, other

than the jurisdictional facts.

6. Defendants waive: (a) all rights to seek appellate review or otherwise

challenge or contest the validity of this Order; (b) any claim Defendants may have against

the Commission, its employees, representatives, or agents that relate to the matter stated

herein; (c) all claims under the Equal Access to Justice Act, 28 U.S.C. § 2412, as

amended by Pub. L. 104-121, 110 Stat. 847, 863-64 (1996); and (d) any rights to

attorneys’ fees that may arise under said provision of law.

7. This action and the relief awarded herein are in addition to, and not in lieu

of, other remedies as may be provided by law, including both civil and criminal remedies.

8. Entry of this Order is in the public interest.

DEFINITIONS

For purposes of this Order, the following definitions shall apply:

1. “Consumer report”, “consumer reporting agency”, and “firm offer of credit”

have the same meanings as in sections 603(d), 603(f), and 603(l) of the FCRA, 15 U.S.C.

§§ 1681a(d),1681a(f), and 1681a(l).

2. “Individual Defendant” means John M. Rainey, Jr.

2

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3. “Corporate Defendant” means Direct Marketing Associates, Corp., and its

successors and assigns.

4. “Defendants” means both the Individual Defendant and the Corporate

Defendant individually, collectively, or in any combination.

5. “Commerce” means as defined in Section 4 of the Federal Trade

Commission Act, 15 U.S.C. § 44.

ORDER

I. CIVIL PENALTY

IT IS ORDERED that:

A. Judgment in the amount of One Hundred Fifty-Seven Thousand Dollars

($157,000) is hereby entered against Defendants, jointly and severally, as a civil penalty

for violations of the FCRA pursuant to section 621(a) of the Fair Credit Reporting Act, 15

U.S.C. § 1681s(a). Based on Defendants’ sworn representations in financial statements

and information, full payment for the foregoing civil penalty judgment is suspended,

contingent upon the accuracy and completeness of the financial statements and

information, as set forth in Subparagraph B of this Paragraph.

B. Plaintiff’s agreement to this Order is expressly premised upon the truthfulness,

accuracy and completeness of the Defendants’ sworn financial statements and supporting

documents submitted to the Commission, which include material information upon which

Plaintiff relied in negotiating and agreeing to this Order. If, upon motion by Plaintiff, this

Court finds that any Defendant has failed to disclose any material asset or materially

misstated the value of any asset in the financial statements and information submitted to

the Commission, or has made any other material misstatement or omission in the financial

statements and related documents described above, then this Order shall be reopened and

suspension of the judgment against that particular Defendant shall be lifted for the

purpose of requiring payment of a civil penalty in the full amount of the judgment

($157,000). Provided, however, that in all other respects this Order shall remain in full

force and effect, unless otherwise ordered by the Court.

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C. Defendants relinquish all dominion, control, and title to any funds paid to the

fullest extent permitted by law. Defendants shall make no claim to or demand return of

the funds, directly or indirectly, through counsel or otherwise.

D. This judgment represents a civil penalty owed to the United States

Government, is not compensation for actual pecuniary loss, and, therefore, is not subject

to discharge under the Bankruptcy Code pursuant to 11 U.S.C. § 523(a)(7). Defendants

agree that the facts as alleged in the complaint filed in this action shall be taken as true,

without further proof, in any subsequent civil litigation filed by or on behalf of the

Commission to enforce its rights to any payment or money judgment pursuant to this

Order.

II. PROHIBITION AGAINST VIOLATIONS OF SECTION 5 OF THE FTC ACT

IT IS FURTHER ORDERED that Defendants, and their officers, agents,

servants, employees and all persons or entities in active concert or participation with any

of them, who receive actual notice of this Order by personal service or otherwise, whether

acting directly or through any business entity, corporation, subsidiary, division, affiliate,

or other device, in connection with the advertising, promotion, or offering of any

extension of credit or financing are hereby permanently restrained and enjoined from:

A. Misrepresenting, expressly or by implication, the availability of credit or

financing; or

B. Making any representation, expressly or by implication, that a consumer

has been pre-approved for, or otherwise will or is likely to receive an extension of credit

or financing unless Defendants know or take reasonable steps to know that the entity that

is identified as the source of credit or financing is legally and financially able to provide

the credit or financing to all consumers who reasonably can be expected to respond to the

offer and obtain credit or financing from the entity, and, in the case of firm offers of

credit, who meet the qualifications for the firm offer of credit.

4

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III. PROHIBITION AGAINST VIOLATIONS OF THE FCRA

IT IS FURTHER ORDERED that Defendants and all officers, agents, servants,

employees and all persons or entities in active concert or participation with any of them,

who receive actual notice of this Order by personal service or otherwise, whether acting

directly or through any business entity, corporation, subsidiary, division, affiliate, or other

device, are hereby permanently restrained and enjoined from obtaining any consumer

report from a consumer reporting agency unless the report is obtained for a purpose

authorized by section 604 of the FCRA, 15 U.S.C. § 1681b.

IV. COMPLIANCE MONITORING

IT IS FURTHER ORDERED that, for the purpose of monitoring and

investigating compliance with any provision of this Order:

A. Within ten (10) days of receipt of written notice from a representative of the

Commission, Defendants each shall submit additional written reports, which are true and

accurate and sworn to under penalty of perjury; produce documents for inspection and

copying; appear for deposition; and provide entry during normal business hours to any

business location in each Defendant’s possession or direct or indirect control to inspect

the business operation;

B. In addition, the Commission is authorized to monitor compliance with this

Order by all other lawful means, including but not limited to:

1. obtaining discovery from any person, without further leave of Court,

using the procedures prescribed by Fed. R. Civ. P. 30, 31, 33, 34, 36,

and 45.

2. posing as consumers and suppliers to Defendants, their employees,

or any other entity managed or controlled in whole or in part by any

Defendant, without the necessity of identification or prior notice.

C. Defendants each shall permit representatives of the Commission to

interview any employer, consultant, independent contractor, representative, agent, or

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employee who has agreed to such an interview, relating in any way to any conduct subject

to this Order. The person interviewed may have counsel present.

Provided however, that nothing in this Order shall limit the Commission’s lawful

use of compulsory process, pursuant to sections 9 and 20 of the FTC Act, 15 U.S.C. §§ 49

and 57b-1, to obtain any documentary material, tangible things, testimony, or information

relevant to any unfair or deceptive acts or practices in or affecting commerce (within the

meaning of 15 U.S.C.§ 45(a)(1)) or to any violation of the FCRA.

V. COMPLIANCE REPORTING

IT IS FURTHER ORDERED that, in order that compliance with the provisions

of this Order may be monitored:

A. For a period of five (5) years from the date of entry of this Order,

1. The Individual Defendant shall notify the Commission of the

following:

a. Any changes in his residence, mailing addresses, and

telephone numbers, within ten (10) days of the date of such

change;

b. Any changes in his employment status (including selfemployment), and any change in his ownership in any

business entity, within ten (10) days of the date of such

change. Such notice shall include the name and address of

each business that he is affiliated with, employed by, creates

or forms, or performs services for; a detailed description of

the nature of the business; and a detailed description of his

duties and responsibilities in connection with the business or

employment; and

c. Any changes in his name or use of any aliases or fictitious

names.

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2. Defendants shall notify the Commission of any changes in structure

of Corporate Defendant or any business entity that any Defendant

directly or indirectly controls, or has an ownership interest in, that

may affect compliance obligations arising under this Order,

including but not limited to: incorporation or other organization; a

dissolution, assignment, sale, merger, or other action; the creation or

dissolution of a subsidiary, parent, or affiliate that engages in any

acts or practices subject to this Order; or a change in the business

name or address, at least thirty (30) days prior to such change,

provided that, with respect to any proposed change in the business

entity about which a Defendant learns less than thirty (30) days prior

to the date such action is to take place, such Defendant shall notify

the Commission as soon as is practicable after obtaining such

knowledge.

B. One hundred eighty (180) days after the date of entry of this Order and

annually thereafter for a period of five (5) years, Defendants each shall provide a written

report to the FTC, which is true and accurate and sworn to under penalty of perjury,

setting forth in detail the manner and form in which they have complied and are

complying with this Order. This report shall include, but not be limited to:

1. For the Individual Defendant:

a. his then-current residence address, mailing addresses, and

telephone numbers;

b. his then-current employment status (including selfemployment), including the name, addresses, and telephone

numbers of each business that he is affiliated with, employed

by, or performs services for; a detailed description of the

nature of the business; and a detailed description of his duties

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and responsibilities in connection with the business or

employment; and

c. Any other changes required to be reported under Subsection A

of this Section.

2. For all Defendants:

a. A copy of each acknowledgment of receipt of this Order,

obtained pursuant to the Section titled “Distribution of

Order”; and

b. Any other changes required to be reported under Subsection A

of this Section.

C. Each Defendant shall notify the Commission of the filing of a bankruptcy

petition by such Defendant within fifteen (15) days of filing.

D. For the purposes of this Order, Defendants shall, unless otherwise directed

by the Commission’s authorized representatives, send by overnight courier all reports and

notifications required by this Order to the Commission, to the following address:

Associate Director for Enforcement

Federal Trade Commission

600 Pennsylvania Avenue, N.W., Room NJ-2122

Washington, D.C. 20580

RE: FTC v. Direct Marketing Associates, Corp, and John Rainey

Provided that, in lieu of overnight courier, Defendants may send such reports or

notifications by first-class mail, but only if Defendants contemporaneously send an

electronic version of such report or notification to the Commission at: DEBrief@ftc.gov.

E. For purposes of the compliance reporting and monitoring required by this

Order, the Commission is authorized to communicate directly with each Defendant.

VI. RECORD KEEPING PROVISIONS

IT IS FURTHER ORDERED that, for a period of eight (8) years from the date of

entry of this Order, Corporate Defendant and Individual Defendant (for all entities where

he is the majority owner of the business or otherwise controls the business) and their

agents, employees, officers, corporations, and those persons in active concert or

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participation with them who receive actual notice of this Order by personal service or

otherwise, are hereby restrained and enjoined from failing to retain the following records:

A. Copies of all training materials that relate to Defendants’ activities as

alleged in the Complaint and Defendants’ compliance with the provisions of this Order;

B. Copies of each separate advertisement or piece of promotional material

prepared by the Defendants for which the Defendants access consumer reports to obtain a

list of consumers to receive the offer, and copies of all records and documents necessary

to show the business for which the material was prepared, the lender providing the section

604 permissible purpose for obtaining the information under the FCRA, the consumer

reporting agency that provided the consumer report information, the number of

consumers whose names were provided, the date the names were obtained, and the date or

dates on which the advertisements or promotional materials were distributed; and

C. All other records and documents necessary to demonstrate full compliance

with each provision of this Order, including but not limited to, copies of

acknowledgments of receipt of this Order, required by the Sections titled “Distribution of

Order” and “Acknowledgment of Receipt of Order” and all reports submitted to the FTC

pursuant to the Section titled “Compliance Reporting.”

VII. DISTRIBUTION OF ORDER

IT IS FURTHER ORDERED that, for a period of five (5) years from the date of

entry of this Order, Defendants shall deliver copies of the Order as directed below:

A. Corporate Defendant: The Corporate Defendant must deliver a copy of this

Order to (1) all of its principals, officers, directors, and managers; (2) all of its employees,

agents, and representatives who engage in conduct related to the subject matter of the

Order; and (3) any business entity resulting from any change in structure set forth in

Subsection A.2 of the Section titled “Compliance Reporting.” For current personnel,

delivery shall be within five (5) days of service of this Order upon the Corporate

Defendant. For new personnel, delivery shall occur prior to them assuming their

responsibilities. For any business entity resulting from any change in structure set forth in

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Subsection A.2 of the Section titled “Compliance Reporting,” delivery shall be at least ten

(10) days prior to the change in structure.

B. Individual Defendant as Control Person: For any business that the

Individual Defendant controls, directly or indirectly, or in which he has a majority

ownership interest, he must deliver a copy of this Order to (1) all principals, officers,

directors, and managers of that business; (2) all employees, agents, and representatives of

that business who engage in conduct related to the subject matter of the Order; and

(3) any business entity resulting from any change in structure set forth in Subsection A.2

of the Section titled “Compliance Reporting.” For current personnel, delivery shall be

within five (5) days of service of this Order upon such Defendant. For new personnel,

delivery shall occur prior to them assuming their responsibilities. For any business entity

resulting from any change in structure set forth in Subsection A.2 of the Section titled

“Compliance Reporting,” delivery shall be at least ten (10) days prior to the change in

structure.

C. Individual Defendant as employee or non-control person: For any business

where the Individual Defendant is not a controlling person of a business but otherwise

engages in conduct related to the subject matter of this Order, he must deliver a copy of

this Order to all principals and managers of such business before engaging in such

conduct.

D. Defendants must secure a signed and dated statement acknowledging

receipt of the Order, within thirty (30) days of delivery, from all persons receiving a copy

of the Order pursuant to this Section.

VIII. ACKNOWLEDGMENT OF RECEIPT OF ORDER

IT IS FURTHER ORDERED that each Defendant, within five (5) business days

of receipt of this Order as entered by the Court, must submit to the Commission a truthful

sworn statement acknowledging receipt of this Order.

IX. RETENTION OF JURISDICTION

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IT IS FURTHER ORDERED that this Court shall retain jurisdiction of this

matter for purposes of construction, modification, and enforcement of this Order.

X. COSTS AND ATTORNEYS’ FEES

IT IS FURTHER ORDERED that each party shall bear its own costs and

attorneys’ fees incurred in connection with this action.

IT IS SO ORDERED:

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The parties, by their respective counsel, hereby consent to the terms and conditions

of the Stipulated Order as set forth above and consent to the entry thereof.

FOR THE UNITED STATES OF AMERICA:

TONY WEST

Assistant Attorney General

DENNIS BURKE

United States Attorney

District of Arizona

EUGENE M. THIROLF, Director

KENNETH L. JOST, Deputy Director

Civil Division

Office of Consumer Litigation

DANIEL K. CRANE-HIRSCH

Trial Attorney

United States Department of Justice

Office of Consumer Litigation

PO Box 386

Washington, DC 20044

Facsimile: 202-514-8742

Email: Daniel.Crane-Hirsch@usdoj.gov

Telephone: 202-616-8242

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FOR THE FEDERAL TRADE COMMISSION:

Attorneys

Division of Privacy and Identity Protection

Federal Trade Commission

600 Pennsylvania Ave. NW

Washington, DC 20580

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FOR THE DEFENDANTS:

L. JEAN NOONAN, Esq.

Hudson and Cook

1020 19 St. N.W.

th

7 Floor

th

Washington, D.C. 20036

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