Case 2:97-cv-00750-PMP-VCF Document 131 Filed 01/28/13 Page 1 of 50 l 

I SARAH WALDROP 

REENAH L. KIM 

2 Federal Trade Commission 

600 Pennsylvania Ave. N .W. 

3 Mailstop M-8102B 

Washington, DC 20580 

4 Tekphone: (202) 326-3444, -2272 

Facsimile: (202) 326-2558 

5 Email: swaldrop@ftc.gov, rkiml@ftc.gov 

6 BLAINE T. WELSH 

Assistant United States Attorney 

7 Nevada Bar No. 4790 

333 Las Vegas Boulevard South, Suite 5000 

8 Las Vegas, Nevada 89101 

Telephone: (702) 388-6336 

9 Facsimile: (702) 388-6787 

Email: Blaine.Welsh@usdoj.gov 

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Attorneys for Plaintiff 

UNITED STATES DISTRICT COURT 

DISTRICT OF NEVADA 

/ 

15 FEDERAL TRADE COMMISSION, Case No. 2:97-CV-00750-PMP (LRL) 

Plaintiff, 

v. 

DAYTON FAMILY PRODUCTIONS, INC., 

etaL 

Defendants. 

FILED UNDER SEAL 

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FEDERAL TRADE COMMISSION'S EX PARTE MOTION TO HOLD 

GLEN BURKE AND AMERICAN HEALTH ASSOCIATES. LLC. IN CONTEMPT 
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--

Pursuant to Federal Rule of Civil Procedure 65 and LR 7-5, Plaintiff Federal Trade 

Commission respectfully moves ex parte to hold Glen Burke and American Health Associates, 

LLC in contempt of this Court's October I, 1998, Stipulated Final Order for Permanent 

Injunction. The grounds for this motion, and for submitting it ex parte, are set forth in the 

accompanying memorandum in support, exhibits, and Rule 6S(b) certification. 

Dated: January 28,2013 

I 

Respectfully submitted, 

SARAH WALDR P 

swaldrop@ftc.gov, (202) 326-3444 

REENAH L. KIM 

Reenah L. Kim 

rkiml@ftc.gov, (202) 326-2272 

600 Pennsylvania Avenue NW, M-8102B 

Washington, DC 20580 

Attorneys for Plaintiff 

FEDERAL TRADE COMMISSION 
Case 2:97-cv-00750-PMP-VCF Document 131 Filed 01/28/13 Page 3 of 50 ' 

I SARAH WALDROP 

REENAH L. KIM 

2 Federal Trade Commission 

600 Pennsylvania Ave. N.W. 

3 Mailstop M-8102B 

Washington, DC 20580 

4 Tele_phone: (202) 326-3444, -2272 

Facs1mile: (202) 326-2558 

5 Email: swaldrop@ftc.gov, rkim1@ftc.gov 

6 BLAINE T. WELSH 

Assistant United States Attorney 

7 Nevada Bar No. 4 790 

333 Las Vegas Boulevard South, Suite 5000 

8 Las Vegas, Nevada 89101 

Tele_phone: (702) 388-6336 

9 Facs1mile: (702) 388-6787 

Email: Blaine.Welsh@usdoj.gov 

Attorneys for Plaintiff 

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UNITED STATES DISTRICT COURT 

DISTRICT OF NEVADA 

FEDERAL TRADE COMMISSION, 

Plaintiff, 

v. 

DAYTON FAMILY PRODUCTIONS, INC., et 

at. 

Defendants. 

Case No. 2:97-CV-00750-PMP 

(LRL) 

FILED UNDER SEAL 

FEDERAL TRADE COMMISSION'S MEMORANDUM IN SUPPORT OF ITS 

EX PARTE MOTION TO HOLD GLEN BURKE AND 

AMERICAN HEALTH ASSOCIATES, LLC, IN CONTEMPT 
Case 2:97-cv-00750-PMP-VCF Document 131 Filed 01/28/13 Page 4 of 50

I TABLE OF CONTENTS 

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INTRODUCTION ........................................................................................................................ ! 

STATEMENT OF FACTS ........................................................................................................... 2 

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6 II. 

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III. 

The Original Action .......................................................................................................... 2 

Contempt Defendants ....................................................................................................... .3 

A. Glen Burke ........................................................................................................... .3 

B. American Health Associates, LLC ...................................................................... .5 

Contempt Defendants' Violative Business Practices ........................................................ ? 

A. 

B. 

C. 

D. 

Contempt Defendants Use a Deceptive Telemarketing Pitch to Convince 

Consumers to Pay ................................................................................................. 7 

Contempt Defendants Fail to Deliver Prizes of the Promised Value .................. I 0 

Contempt Defendants Often Fail to Issue Refunds ............................................. II 

Contempt Defendants Caused Approximately $2 Million in Consumer Harm .. 12 

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ARGUMENT .............................................................................................................................. 12 

I. The Permanent Injunction Binds Each of the Contempt Defendants ............................. 13 

II. The Contempt Defendants Violate the Permanent Injunction ........................................ 14 

A. Contempt Defendants Telemarket in Violation of the Permanent Injunction .... 14 

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22 B. Contempt Defendants Misrepresent That Consumers Were Specially Selected to 

23 Receive Valuable Prizes ..................................................................................... 15 

24 III. Contempt Defendants' Violations Have Caused $2 Million in Consumer Harm .......... .!? 

25 CONCLUSION ........................................................................................................................... 18 

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INTRODUCTION 

Glen Burke ("Burke"), a recidivist fraudulent telemarketer, is using his company, 

American Health Associates, LLC ("AHA"), to deceptively telemarket a purported prize 

promotion, in violation of this Court's order1 banning Burke from telemarketing and from 

making misrepresentations. AHA telemarketers call consumers with exciting news - they have 

been specially selected to receive a valuable prize. The telemarketers claim the consumer has · 

"already won" a new car, boat, jewelry, vacation, or thousands of dollars in cash. The only catch 

is that, to claim the prize, the consumer must purchase vitamins from the company for $300 to 

$500. When consumers hesitate to pay so much for a product they do not even want, the 

telemarketers assure them the value of their "guaranteed" prize far outweighs the purchase price 

of the vitamins. AHA later presses consumers who bought into the initial pitch to pay thousands 

more as part of a "next level" or "second round," which purportedly offers even more valuable 

prizes. Once consumers pay, however, AHA either ignores their calls and sends them nothing 

(other than the vitamins), or sends cheap costume jewelry worth far less than what the consumers 

paid. 

Burke, who has been the subject of numerous law enforcement proceedings, conceals his 

involvement in this and other schemes. In addition to using fictitious firm names, shell 

companies, rented mailboxes, and hired fronts, Burke orchestrates a morass of fund transfers 

among bank accounts, including overseas accounts, to reap the profits of his schemes while 

evading detection. 

Accordingly, the FTC seeks civil contempt sanctions against Burke and AHA 

(collectively, "Contempt Defendants"), including compensatory relief for consumers victimized 

by Contempt Defendants' fraudulent scheme. In addition, pursuant to Federal Rule of Civil 

Procedure 65(b ), the FTC has concurrently filed an Ex Parte Motion for a Temporary 

Restraining Order and Preliminary Injunction to preserve the Court's ability to grant effective 

Stipulated Final Order for Permanent Injunction, entered October 1, 1998 ("Permanent 

Injunction"). 

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final relief pending resolution of this matter, including an asset freeze, appointment of a receiver, 

and expedited discovery. 2 

As discussed in its Motion for a Temporary Restraining Order, the FTC has conducted its 

investigation to this point without contacting Contempt Defendants because of the risk that 

Contempt Defendants would otherwise dissipate assets and destroy evidence. The FTC therefore 

respectfully requests that this Court permit a short period of discovery before holding any 

hearing on this Motion, to allow the FTC to present the Court with a full picture of Contempt 

Defendants' violations of the Permanent Injunction and the harm they caused to consumers. The 

FTC further requests that, following that brief period of discovery, the Court find the Contempt 

Defendants in contempt and enter sanctions in the full amount necessary to compensate 

consumers for their losses? 

STATEMENT OF FACTS4 

I. The Original Action 

In the underlying action, Burke stipulated to the Permanent Injunction with the FTC to 

resolve charges that he telemarketed investments in a film company by making wildly inflated 

earnings representations. Complaint for Injunction and Other Equitable Relief, ~~21-24 

2 The FTC is also concurrently filing an Ex Parte Motion for an Order Temporarily Sealin 

Entire File and Docket. Grounds for the ex parte filing are explained more fully in the 

accompanying Certification of Counsel filed pursuant to Federal Rule of Civil Procedure 65(b) 

and Local Rule 7-5(b). 

3 Pursuant to the Federal Rules of Civil Procedure, contempt proceedings may be initiated, 

as here, through a motion for contempt that states the grounds for the motion, describes the relief 

sought, and gives defendants an opportunity to be heard. SEC v. Hyatt, 621 F.3d 687, 695 (7th 

Cir. 2010); see also Fed. R. Civ. P. 6(c), 7(b); cf Thomas, Head and Greisen Employees Trust v. 

Buster, 95 F.3d 1449, 1458-59 (9th Cir. 1996) (recognizing district court's power to manage 

contempt procedures). It is therefore no longer necessary to initiate contempt proceedings 

through a motion for an order to show cause. Hyatt, 621 F .3d at 695 (FRCP render orders to 

show cause antiquated, "unnecessary formalities which take up the time of judges and add 

nothing of value."). 

4 The Statement of Facts is the same as that included in the FTC's concurrently filed Ex 

Parte Motion for a Temporary Restraining Order. Both motions refer to the same combined 

exhibits. 

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(attached hereto as Appendix A); Permanent Injunction (attached hereto as Appendix B). This 

Court entered the Permanent Injunction against Burke and others on September 30, 1998. App'x 

B, Permanent Injunction, p. 16. Among other things, the Permanent Injunction (I) bans Burke 

from telemarketing and (2) prohibits him from misrepresenting any fact material to a consumer's 

decision to buy a good or service. App'x B, Permanent Injunction, ~~II.B, III. 

II. Contempt Defendants 

A. Glen Burke 

Burke has been the subject of numerous law enforcement proceedings by the FTC and 

other agencies concerning his fraudulent telemarketing, including the underlying action. In 

1991, the U.S. Postal Inspection Service ("USPIS") investigated a telemarketing operation Burke 

ran in Las Vegas, Nevada, which shut down within a year after the USPIS executed search 

warrants. (PX3 ~3.) 5 The FTC obtained its first order against Burke in 1996, when he failed to 

answer a complaint alleging violations ofthe FTC Act and the Franchise Rule arising from a 

business opportunity scam. (PXl ~30, Att. T.) The following year, the Securities and Exchange 

Commission ("SEC") obtained an order against Burke after charging that he failed to disclose to 

investors that at least five states had commenced law enforcement proceedings against his 

publicly traded telemarketing operation. (PXI ~31, Att. U.) Finally, in 1998, Burke stipulated 

to, and this Court entered, the Permanent Injunction underlying this action. App'x B, Permanent 

Injunction. 

Even after this Court entered the Permanent Injunction against him, Burke continued to 

run deceptive marketing operations, though he has taken greater steps to conceal his 

5 Citations to "PX_" refer to the combined exhibits the FTC is submitting in support of its 

ex parte filings. These exhibits are contained in the concurrently filed volumes titled "Federal 

Trade Commission's Exhibits to Memoranda in Support of Federal Trade Commission's Ex 

Parte Motion For a Temporary Restraining Order And Preliminary Injunction and Ex Parte 

Motion to Hold Glen Burke And American Health Associates, LLC in Contempt." 

Exhibits filed in support of the FTC's motions have been redacted pursuant to Federal 

Rule of Civil Procedure 5.2(a) and District of Nevada Special Order No. 108, and to protect 

individuals' privacy. 

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involvement. Along with his former employee Katrinka Willard, Burke registered dozens of 

fictitious firm names ("DBAs") with Clark County, Nevada, often through limited liability 

companies. (PXI ~~5-9, 10-12, Att. A-B, Att. I-L.) Since 2007, consumers have registered mor 

than 300 complaints about these DBAs, most concerning prize or sweepstakes ventures operatin 

out ofNevada. (PX1 ~16.) Furthermore, the USPIS and the Department of Homeland Security 

("DHS") have been investigating a series of mailed sweepstakes operations run through shell 

companies, rented mailboxes, and hired fronts. According to USPIS and DHS officials, the 

operations' solicitations typically state that the recipients have won thousands of dollars and 

need only mail a small fee to claim it. (PXI ~32, Att. V pp. 1-5, 9-16; PX3 ~4.) After 

consumers mail the fee, however, they receive nothing in return. (PX I Att. V, p.5; PX3 ~4.) 

Two of Burke's former employees, including Willard, state that Burke is behind these prize and 

sweepstakes operations.6 (PXI ~7; PX2 ~~2-4, 6-8, 12, 15-16.) Furthermore, the USPIS and the 

DHS have linked Burke to locations, mailboxes, and mass mailings used to run these operations. 

The USPIS traced the scheme to Willard, who was operating from one of Burke's longtime 

addresses, and confirmed that Burke and Willard knew one another. (PX3 ~~4-17, Att. A-B.) 

Then, in early 2012, U.S. Immigration and Customs Enforcement ("ICE") intercepted packages 

routed through Mexico to Burke's office at 2451 S. Buffalo Street in Las Vegas that contained 

checks and money orders U.S. consumers sent in response to the sweepstakes solicitations. (PXI 

Att. V pp. 1-5, 9-16.) The investigating agent confirmed that Burke's company leased the office 

and learned from individuals who worked there that Burke was the "owner." (PX1 Att. V pp. 4, 

6-8, 17-38.) The FTC's contempt action currently focuses on one of Burke's sweepstakes scams 

- a telemarketing company called American Health Associates. 

6 Katrinka Willard spoke with FTC Investigator Ronald D. Lewis about Burke's activities 

in May 2012. Following this conversation, however, the FTC's repeated attempts to reach or 

locate Willard were unsuccessful. Lewis recounts the information Willard provided about 

Burke's operations in his sworn declaration. (PX1 ~3-9). A sworn declaration from another 

former employee in Burke's operation, Tina Craig, is attached at PX2. 

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B. American Health Associates, LLC 

American Health Associates, LLC is a limited liability company organized in Nevada 

with a business address at 2550 Duneville Street, Suite A, Las Vegas, Nevada 89146. (PX1 Att. 

C.) Vincent P. Calise is the sole officer identified in AHA's corporate filings with the state of 

Nevada, and he is also the sole signatory on AHA's current bank account. (PX1 Att. C, Att. N 

pp. 2-3.) Burke, however, is AHA's de facto principal, as demonstrated by his financial ties to 

the company, oversight of its operations, and connection to the company's location. 

Burke has provided financial backing for AHA, used the company's funds to support his 

other businesses, and received AHA's profits. Specifically, initial deposits into AHA's bank 

account included thousands of dollars from accounts for which Burke is the sole signatory. (PX1 

Att. M pp. 78-84, 108-109; Att. 0 pp. 2-3.) Burke also controls the American Express merchant 

account that funnels consumers' credit card payments into AHA's bank account. (PX1 Att. N, 

pp. 2-3; Att. Q pp. 3, 5-6.) Moreover, checks drawn on AHA's bank accounts have been issued 

to: the U.S. Treasury, with "Burke 2003" in the memo line; a commercial mail receiving agency, 

with "GlenburkeD8" in the memo line; and several individuals, with "SEO" or "Your First SEO" 

(a company Burke founded) in the memo line. (PX1 Att. A; Att. F; Att. M pp. 95-98; Att. N pp. 

113-116.) In addition, since AHA commenced operations in early 2011, more than $130,000 in 

checks from AHA's accounts have been deposited directly into accounts for which Burke is the 

sole signatory. (PXI Att. M pp. 85-93, 108-109, 115-116, 122-123; Att. N pp. 98-112; Att. 0 

pp. 2-3.) 

Furthermore, according to former employees, Burke is "running the show" and "in 

charge" of an enterprise that includes AHA. (PX1 '1['1[5-7; PX2 '1[3.) Burke hired Katrinka 

Willard to manage customer service functions and handle additional duties for AHA and other 

sweepstakes ventures. (PX1 '1['1[5-7; PX2 '1['1[12-15.) During her employment, Willard reported 

directly to Burke and acted at his direction, communicating with him regularly regarding the 

receipt of revenues relating to his various operations. (PX1 '1['1[5-6; PX2 '1['1[3, 6, 8-10.) Willard in 

turn hired an assistant, Tina Craig, who answered telephone calls from AHA consumers and 

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performed data entry for the many ventures with which Willard and Burke were involved. (PX2 

'1!'1\2, 4-5, 8-10, 13-14.) When Craig's employment was terminated, she was told it was because 

Burke "wanted to downsize." (PX2 '1\3.) Similarly, an accountant who worked out of the same 

office space as Willard and Craig kept the books for Burke's operations and reported directly to 

Burke, calling him with questions and using a laminated copy of Burke's driver's license to 

assist in managing his affairs. (PX2 '1!11; PX1 Att. M pp. 99-105; Att. N pp. 117-139.) 

AHA operates from two locations in Las Vegas that Burke has used for many years: 2550 

Duneville Street and 2451 S. Buffalo Street. In its interactions with consumers and filings with 

the state of Nevada, AHA lists its address as 2550 Duneville Street, Suite A, Las Vegas, Nevada. 

(PX1 Att. C; PX7 Att. E; PX8 Att. I; PXIO Att. C, Att. F; PXII Att. B; PX12 Att. D; PX13 Att. 

C, Att. E; PX19 Att. D.) The USPIS executed search warrants at that location against one of 

Burke's former telemarketing operations in 1991. (PX3 'lj3.) In the ensuing years, Burke has 

continued to use the address in filings with the Clark County (Nevada) Fictitious Firm Name 

registry and Nevada Secretary of State, most recently in 2011. (PX1 'lj12(a), Att. E-F, Att. H-I.) 

Moreover, bank accounts for which Burke is the sole signatory list the Duneville Street address 

on checks and account-opening documents. (PX1 Att. M pp. 108-109, 114-116, 121.) 

AHA has also conducted business through Burke's office at 2541 S. Buffalo, Suites 

100B/102 and 112. In August 2012, AHA issued a check to "2451 Buffalo Drive LLC, c/o 

Gatski Comm'l Real Estate" to pay the rent for suites 102 and 112. (PXI Att. N p. !58; see also 

PXI Att. M p. 107 (check issued to UPS by AHA at the 2451 S. Buffalo address).) A subpoena 

that Immigrations and Customs Enforcement served on Gatski Commercial Real Estate, and the 

ICE investigator's visit to the site, revealed that Burke leases suite I OOB (also referred to as suite 

102 in the lease documents) and suite 112 at the 2451 S. Buffalo address. (PX1 Att. V pp. 4, 6-8 

17-38.) Underscoring Burke's ties to both locations, USPIS investigators interviewed Burke at 

2451 S. Buffalo in February 2010, and he told them they could find Katrinka Willard at the 2550 

Duneville location. (PX3 '1!'1!11-15.) 

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I III. Contempt Defendants' Violative Business Practices 

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As described below, Burke has violated the Permanent Injunction by carrying out a 

deceptive telemarketing sweepstakes operation through AHA. Telemarketers for AHA employ a 

misleading pitch, claiming consumers have "already won" a purportedly valuable prize they will 

receive upon paying for a shipment of vitamins. Once consumers pay, however, AHA either 

fails to deliver any prize or sends items worth far less than promised. Contempt Defendants have 

caused approximately $2 million in consumer injury through this scheme. 

A. Contempt Defendants Use a Deceptive Telemarketing Pitch to Convince 

Consumers to Pay. 

10 Contempt Defendants first contact consumers by placing outbound telemarketing calls. 

11 (PX6 '1[2; PX7 '1[2; PX8 '1['1[2-3; PX9 '1['1[2-3; PXIO '1[2; PXll '1[2; PX12 '1[2; PX13 '1[2; PX14 '1[4; 

12 PX15 '1[2; PX16 '1[2-3; PX18 '1[2-3; PX19 '1[3; PX20 '1['1[2-31; PX21 '1[3.) AHA telemarketers tell 

13 consumers they have won one of five valuable prizes and give various explanations about how 

14 the consumers won a contest without entering. Id For example, AHA telemarketers told Janice 

15 Austin, Silvia Cruz, and Melissa Follin the company entered them in a sweepstakes "as a 

16 courtesy" after calling them previously, even though the consumers did not purchase anything on 

17 the initial call. (PX6 '1[2; PX8 '1['1[2-3; PX9 '1[2-3.) Another AHA telemarketer told Shalenna 

18 Stoker she was entered in the sweepstakes when she purchased an exercise DVD. (PX16 '1[2.) 

19 AHA telemarketers repeatedly assure consumers they are not offering a chance to enter a 

20 contest, but, rather, are calling because the consumer has "already won" a "guaranteed" prize. 

21 (PX6 '1[2; PX9 '1[6; PXIO '1[2; PX11 '1[3; PX15 '1[4; PX16 '1[3; PX18 '1[2; PX20 '1[3; PX21 '1[3.) 

22 According to the telemarketer, the only remaining question is which of the five valuable prizes 

23 the consumer will receive: a current-model-year car; a Boston Whaler boat; a piece of jewelry 

24 (e.g., a sapphire-and-diamond bracelet); thousands of dollars in cash; or a cruise or vacation 

25 (which may be exchanged for cash if the consumer is unable to travel). (PX6 '1[2; PX7 '1[2; PX8 

26 '1[3; PX9 '1[3; PX10 '1[2; PXll '1[3; PX12 '1[2; PX13 '1[2; PX14 '1[4; PX15 '1[2; PX16 '1[3; PX18 '1[2; 

27 PX20 '1[3; PX21 '1[3.) Some consumers later receive a letter reiterating this list of five possible 

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prizes, consistent with the descriptions provided during the initial telemarketing pitch. (PX7 Att. 

B; PX8 Att. D; PXlO Att. A; PX11 Att. A; PX12 Att. B-2.) 

After describing these items in detail, AHA telemarketers tell consumers that to receive 

their prize, all they have to do is purchase vitamins from the company. (PX6 ~3; PX7 ~2; PX8 

~5; PX9 ~4; PX10 ~4; PX11 ~4; PX12 ~2; PX13 ~3; PX14 ~4; PX15 ~3; PX16 ~4; PX18 ~3; 

PX20 ~~3-4; PX21 ~3.) In the initial pitch, telemarketers typically quote a price between $299 

and $499 (ostensibly for a supply lasting several months) and claim consumers must buy 

vitamins to claim the prizes because the sweepstakes is part of a promotion. !d. Indeed, 

telemarketers often bolster this claim by asking consumers to send in pictures of themselves with 

their prizes, so the company can use the photos for promotional purposes. (PX9 ~4; PXI 0 ~4; 

PX11 ~2; PX15 ~3.) For instance, AHA telemarketers told Melissa Follin and Clifton Gordon 

that, if they won cars, dealerships near their homes would set up an appointment to take a picture 

with their cars. (PX9 ~6; PX1 0 ~1 0.) 

If a consumer hesitates, telemarketers reiterate the high value of the prizes and emphasize 

the consumer will come out ahead even after paying for the vitamins. (PX8 ~6; PX11 ~4; PX13 

~~3-4; PX18 ~3.) The list of prizes- which includes obviously valuable items like new cars, 

boats, vacations, and thousands of dollars in cash - creates an impression that all prizes are wort 

more than the cost of the vitamins. In some instances, the telemarketer claims all the prizes are 

worth more than a specified amount, ranging from $1,000 to $2,300. (PX10 ~3; PX11 ~3-4; 

PX12 ~2; PX13 ~2; PXJ6 ~3; PX20 ~3.) Numerous consumers reported agreeing to pay solely 

because of Contempt Defendants' representations about the value of the prizes, not because they 

want AHA's high-priced vitamins. (PX7 ~2; PX8 ~7; PX11 ~4; PX13 ~4; PX14 ~4; PX16 ~4; 

PX20~4.) 

After convincing consumers to pay, the telemarketer obtains payment information and 

claims the company will notify the consumer within a few weeks which prize the consumer will 

receive. (PX7 ~2; PX8 ~7; PXIO ~~5-6; PXIJ ~4; PX12 ~~2-3; PX13 ~4; PX14 ~4; PX15 ~5-6; 

PX16 ~4; PX18 ~6.) Some consumers later received a "confirmation code" that supposedly 

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corresponded to one of the five prizes. (PX7 Att. B; PX8 Att. D; PXl 0 Att. A; PXll Att. A; 

PX12 Att. B-2.) Bob Pierce reported that when he hesitated to give AHA his financial 

information, the telemarketer told him his "prize code" on the spot, thus assuring him this 

promotion was "for real;" Pierce sent his payment to AHA shortly afterward. (PX15 n5-6.) 

The Contempt Defendants then seek to bilk consumers who paid in response to the initial 

pitch for an even more expensive "next level" or "second round" prize. In these instances, an 

AHA telemarketer calls the consumer with the "good news" that he or she will receive the 

jewelry prize described in the first call (either a set of diamond watches or a diamond-andsapphire bracelet). (PX7 ~5; PX8 ~10; PX13 ~7; PX15 ~7; PX18 ~II.) Capitalizing on the 

excitement this promise generates, an AHA telemarketer then claims the consumer has won an 

additional- and even more valuable- prize as part of a "VIP" promotion. (PX7 ~7; PX8 ~I 0; 

PXII n7-8; PX12 ~5; PX13 ~8; PX15 ~9; PX18 ~II; PX20 ~8.) The telemarketer lists five new 

big-ticket items and assures the consumer he or she is "guaranteed" to receive one of them. 

(PX8 ~10; PXIO ~~8-10; PXII ~~7-8; PX12 ~5; PX13 ~8; PX15 ~9; PX18 ~11; PX20 ~8.) These 

items include: a current-model-year car; a home theater; a larger amount of cash than in the first 

round; a vacation cruise (which the consumer may elect to exchange for thousands in cash 

instead); gold bars; a set of diamond watches; or a lithograph by a purportedly well-known artist. 

ld. As before, some consumers later receive a letter listing the same prizes the telemarketer 

described over the phone. (PX7 Att. D; PX8 Att. H; PXI 0 Att. E; PXII Att. D.) 

As with the first round, telemarketers tell consumers they must purchase more vitamins 

from the company to claim their prizes. (PX7 ~7; PX8 ~10; PXII ~8; PX12 ~5; PX13 ~8; PX18 

~12; PX20 ~9.) This time, the vitamins cost more- usually between $1,200 and $1,500. (PX8 

nro, 12; PXIO ~14; PXII ~8; PX12 ~5; PX13 ~8; PX14 ~6; PX18 ~12; PX20 ~9; PX21 ~~6-7.) 

As before, the telemarketer again assures skeptical consumers that their prize is worth far more 

than the cost of the vitamins. (PX8 ~11; PXIO ~10; PXll ~8; PX12 ~5; PX13 ~8; PX18 ~12.) 

Once consumers agree to pay, AHA representatives take consumers' payments and promise 

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further contact that will reveal which prize the consumer won? (PX7 '1''118-9, Att. D; PX8 '1['1[13-

14, Att. D; PXIO '1['1[11, 17, Att. E; PXll '1['1[9, 12, Att. D; PX13 '1[10; PX18 '1['1[16-17.) 

B. Contempt Defendants Fail to Deliver Prizes of the Promised Value. 

After charging consumers hundreds or even thousands of dollars - which consumers 

agree to pay because of AHA's assurances they are "guaranteed" to receive prizes worth far 

more than the payment- Contempt Defendants fail to deliver. 

AHA sends consumers their supply of vitamins and an "affidavit and release" form the 

consumer must sign and send back to the company to claim the prize. (PX7 '1['1[4-5, 9-10, Att. E; 

PX8 '11'1[9, 14, 17, 19, Att. D, Att. I; PXIO '1['1[7, 12, Att. C; PXll '11'1[5-6, 12, Att. B; PX12 '1['1[3, 10, 

Att. D; PX13 '1['1[6, 9, 13-14, Att. C, Att. E; PX16 '1[6; PX18 '1['1[7-8, 18; PX20 '1['1[5, 11.) AHA 

refuses to send prizes to consumers without signed releases. (PX7 '1[6; PX8 '1[22; PXIO '1[13; 

PX13 '1[7; PX18 '1[20.) These forms include a vague statement, in the midst of dense text, that 

AHA made no "representations or warranties with respect to the Award," as well as several 

provisions by which the consumer supposedly releases AHA and a long list of affiliated parties 

from all claims and liability relating to the prize. (PX7 Att. E; PX8 Att. D, Att. I; PXI 0 Att. C; 

PXII Att. B; PX12 Att. D; PX13 Att. C, Att. E.) 

No consumer receives the promised valuable prizes. Some consumers never receive any 

prizes, even after paying hundreds of dollars and calling AHA repeatedly to try to sort out the 

matter. (PX7 '1['1[9-10; PXIO '1['1[19-21; PXII '1[13; PX12 '1['1[4, 8, 9; PX15 '1[8; PX16 '1['1[9-11; PX18 

'1['1[20-23.) Former employee Craig fielded numerous calls from consumers complaining they had 

paid the money requested, but did not receive a prize. (PX2 '1['1[13-14.) Some consumers 

complained to Craig that they had not even received the vitamins, much less any of the prizes 

AHA promised. (PX2 '1[14.) 

7 Some consumers report AHA telemarketers tried to induce a third purchase with 

promises of a third round of prizes. (PX15 '1['1[13-14; PX13 '1[13; PX20 '1['1[15-16.) By then, 

however, consumers are generally too skeptical to agree to pay any more money. !d. One 

consumer, however, paid for several rounds and received a "lithograph"- a framed print the 

consumer's wife describes as "nothing special"- as the third-round prize. (PX21 '1['1[5, 8.) 

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Consumers who do receive "prizes" fare no better. Consumers are invariably told they 

will receive a piece of jewelry- never the car, boat, cash, gold bars, home theater system, 

vacation or cruise AHA's telemarketers describe. 8 (PX7 ~5; PX8 n10, 18; PXIO ~12; PXII ~6; 

PX12 ~10; PX13 ~~7, 13; PX14 ~7; PX15 ~7; PX16 ~7; PX18 ~~II, 19; PX20 ~~II, 9; PX21 

~~5, 8.) Consumers who ultimately receive the jewelry are disappointed almost immediately; it 

arrives in flimsy cardboard or plastic packaging, and the item itself has visible flaws and looks 

"cheap." (PX8 ~~15; PX13 ~~12, 16; PX14 ~8; PX20 ~~12, 18.) Dorothy Lambing and Yundi 

Zhang brought their jewelry to appraisers who turned them away because the items were not 

even worth the cost ofthe appraisal. (PX13 ~15; PX20n14, 19.) Furthermore, Dorothy 

Lambing searched for her purported "diamond watches" online and found an eBay listing for an 

identical item, with the same design and brand name, for $39.99. (PX13 ~17, Att. G.) Indeed, 

AHA's own bank records include a check for $2,830 with the notation "100 bracelets" in the 

memo line- indicating that AHA paid only $28.30 per bracelet. (PXI Att. N p. 141.) 

A highly credentialed, expert appraiser, Martin Fuller, evaluated the jewelry "prizes" 

consumers received from AHA. (PXI ~39; PX4 ~~2, 4-6.) His appraisal confirms the purported 

"diamond and sapphire" bracelets are made of "poorly cut" and "chipped or broken" stones of 

very low quality, including only miniscule diamond chips. (PX4 ~5.) He estimated the fair 

market value of the bracelets to range from $35 to $60. (PX4 ~10.) Furthermore, he found that 

the purported "gold" and "diamond" watches are in fact made of base metal and stainless steel, 

with a few "broken pieces of diamond glued in place" on the face. (PX4 ~4.) Fuller estimated 

the fair market value of the men's watch model to be $39.99, and the women's watch model to 

be $59.99. (PX4 n8-9.) 

c. Contempt Defendants Often Fail to Issue Refunds. 

Once consumers realize Contempt Defendants have not delivered as promised, some seek 

to return the vitamins. They face a chaotic return process rigged to discourage them from 

obtaining a refund. In numerous instances, AHA simply refuses to accept returned vitamins, 

8 Furthermore, AHA's bank records do not indicate payment for such prizes. (PXI ~24.) 

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often claiming various laws prohibit the return of"consumable products." (PX7 ~12; PXIO ~19; 

PXll ~11, 15; PX12 ~8; PX13 ~18; PX14 ~9; PX18 ~21; PX20 ~20.) In other cases, AHA 

shunts consumers seeking refunds from representative to representative until the consumers 

become frustrated. (PX2 ~~13-14; PX8 ~~18, 20, 23; PX16 ~~8-11; PX19 ~6; PX21 ~~10-11.) 

In at least three instances, AHA cautioned consumers not to go to their credit card companies 

and stated that all refunds are issued by check. (PXIO ~18, Att. F; PX19 ~15, Att. D, Att. G; 

PX21 ~12.) 

When frustrated consumers eventually turn to the BBB or their credit card companies to 

seek refunds, Contempt Defendants change their tune, contending that consumers did not comply 

with a mandatory 30-day return policy. (PX8 ~20; PXll ~14; PX14 ~12.) AHA's tactic 

sometimes succeeds even though the company itself was responsible for consumers' purported 

failure to return the vitamins promptly (e.g., by stringing consumers along beyond the 30-day 

period with unreturned calls and unfulfilled assurances of a prompt resolution, or by refusing to 

accept the consumer's return package). (PX8 ~21; PX14 ~12.) Notwithstanding Contempt 

Defendants' attempts to avoid charge backs, known AHA merchant accounts with Visa and 

MasterCard show charge back rates of 4% to 6%. (PXl ~29, Att. R, Att. S.) Those rates greatly 

exceed the industry's 1% threshold. (PXS ~10.) 

D. Contempt Defendants Caused Approximately $2 Million in Consumer Harm. 

AHA's known bank accounts show a total of$2,217,280.91 in deposits from January 

2011, when it commenced operations, through the fall of 2012, when its banks produced 

documents to the FTC. (PX1 ~23, Att. M pp. 2-77, Att. N pp. 4-96.) This figure reflects, or is at 

least a reasonable estimate of, the amount consumers paid AHA in response to Contempt 

Defendants' deceptive telemarketing. 

ARGUMENT 

Civil contempt is warranted where there is clear and convincing evidence the contemnors 

violated a specific and definite order of the court. FTC v. Affordable Media, LLC, 179 F.3d 

1228, 1239 (9th Cir. 1999). Here, there is clear and convincing evidence the Permanent 

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Injunction binds each of the Contempt Defendants, and that Contempt Defendants violated two 

specific and definite provisions of the Permanent Injunction and should be held in contempt. 

Furthermore, Contempt Defendants should be ordered to pay compensatory sanctions, following 

a brief period of discovery to establish the extent of their violative conduct and confirm the 

amount of financial harm their actions caused consumers.9 

I. The Permanent Injunction Binds Each of the Contempt Defendants. 

Injunctions bind parties with notice of an order, as well as any person or entity with 

notice of the order that acts in "active concert or participation" with a party to violate the order. 

Fed. R. Civ. P. 65(d)(2)(A). As Burke is a party to the Permanent Injunction and stipulated to its 

entry, he is bound by its prohibitions. See Permanent Injunction, App'x B, p. 16. 

Furthermore, AHA is also bound by the Permanent Injunction because (I) it has notice of 

the order through Burke, its de facto principal; and (2) it acted under Burke's control to aid him 

in violating the Permanent Injunction. 

First, Burke's knowledge of the Permanent Injunction may be imputed to AHA because 

he is its de facto principal. When an individual finances a company, controls its financial 

resources, exercises hiring and firing authority, and makes operational decisions, his knowledge 

of an injunction is imputed to the company even if the individual is not formally an officer or 

principal. FTC v. Data Med. Capital, Inc., No. SA CV 99-1266 AHS (EEx), 2010 WL 1049977, 

at *20 (C. D. Cal. Jan. 15, 2010); FTC v. Vocational Guides, Inc., No. 3:01-0170,2009 WL 

943486, at *15 (M.D. Tenn. April6, 2009). Although Burke is not named in AHA's corporate 

papers, financial records show Burke provided early financial backing for AHA from an account 

on which he is the sole signatory. He also controls AHA's accounts, paying both his personal 

expenses (including his taxes and payments for his PostNet account) and expenses relating to his 

other businesses (including Your First SEO) with AHA funds. Furthermore, Burke controls the 

American Express merchant account that processes consumers' payments into AHA's bank 

9 Should the Court grant the FTC's concurrent motion seeking appointment of a receiver, 

coercive remedies may not be necessary to halt the violative conduct. 

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account. Former employee Craig reports Burke is "in charge," has hiring and firing authority 

over staff, and oversees key personnel - such as the accountant who keeps the books for AHAwho act at his direction. Former employee Willard confirms that this matches Burke's usual 

method of controlling his operations from the background while using others as fronts. 

Moreover, Burke ultimately receives the proceeds of AHA's deceptive telemarketing scheme. 

Accordingly, Burke's knowledge of the Permanent Injunction may be imputed to AHA. 

Second, AHA acts in "active concert" with Burke to violate the Permanent Injunction 

because it is "subject to [his] control" and abets him in violating the order. Regal Knitwear Co. 

v. NLRB, 324 U.S. 9, 13-14 (1945) (entities "subject to [a party's] control" are bound by 

injunctions entered against the party); Peterson v. Highland Music, Inc., 140 F.3d 1313, 1324 

(9th Cir. 1998) (non-party that has notice of an order and abets defendant in violating it is in 

contempt). As discussed above, Burke controls AHA. He has authority over its merchant 

account, exercises hiring and firing authority, oversees key personnel, receives the proceeds of 

its activities, and uses those proceeds for his own ends. Furthermore, AHA abets him in 

violating the order by acting as the vehicle through which Burke conducts his deceptive 

telemarketing. Therefore, because AHA is under Burke's control and abets him in violating the 

Permanent Injunction, it is also bound by the Permanent Injunction's prohibitions. 

II. The Contempt Defendants Violate the Permanent Injunction. 

Burke and AHA violate two specific and definite provisions of the Permanent Injunction: 

(1) Section III's permanent telemarketing ban; and (2) Section II.B's prohibition against material 

misrepresentations. 

A. Contempt Defendants Telemarket in Violation of the Permanent Injunction. 

Section III of the Permanent Injunction permanently bans Burke from "engaging in 

telemarketing" or "assisting others in telemarketing." The Permanent Injunction defines 

"telemarketing" as "a plan, program, or campaign which is conducted to induce the purchase of 

goods or services by use of one or more telephones and which involves more than one interstate 

telephone call." Permanent Injunction, App'x B, p. 3. As described above, consumers in many 

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states report receiving unsolicited phone calls from Contempt Defendants' telemarketers seeking 

to sell vitamins through a purported prize promotion. In these calls, the telemarketers make 

nearly identical promises to each consumer and follow a similar pattern of escalating offers- and 

fees- after a consumer agrees to pay. Contempt Defendants' representatives explicitly state that 

their calls are part of a promotional campaign designed to induce the purchase of their vitamins. 

As Burke uses AHA to conduct this "program or campaign" to "induce the purchase" of 

vitamins, both Burke and AHA violate the Permanent Injunction's clear and definite 

telemarketing ban. 

B. Contempt Defendants Misrepresent That Consumers Were Specially 

Selected to Receive Valuable Prizes. 

II Section II.B of the Permanent Injunction prohibits "[m]isrepresenting, in any manner, 

12 directly or by implication, or failing to disclose any fact material to a consumer's decision to 

13 purchase any item, product, good, service, or investment." 

14 Here, Contempt Defendants make several related material representations to consumers. 

15 First, AHA telemarketers expressly claim consumers were specially selected to win one of five 

16 prizes in a promotional contest and need only buy vitamins to claim the prize. This 

17 representation is material because it convinces consumers that the "prize" is worth more than 

18 they must pay to claim it. Second, Contempt Defendants reinforce the initial representation by 

19 claiming, both expressly and implicitly, that the prizes consumers will receive are valuable. For 

20 example, the telemarketers describe several prizes with verifiable values, such as $3,000 cash or 

21 specifically named current-model-year cars. This representation convinces consumers that the 

22 other prizes on the list are comparably valuable. Some telemarketers claim the prizes are listed 

23 in descending order of value, with the least valuable worth $1,500 or more. Other telemarketers 

24 claim all prizes are worth much more than the buy-in price of $300 to $500 for the first round, or 

25 $1 ,200 to $1 ,500 for the second. These representations are also material because numerous 

26 consumers report that they paid for vitamins only because they wanted the valuable prizes the 

27 Contempt Defendants offered. 

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In reality, the supposed "contest" is nothing but a ruse. Instead of awarding "prizes" only 

to a select few consumers, Contempt Defendants will take money from any consumer who will 

pay. Despite telemarketers' representations that prize availability is strictly limited, the 

company's bank records reflect the bulk purchase of costume jewelry- in one instance, 100 

pieces at a time- to send as "prizes." Some consumers receive no prizes whatsoever, and those 

who receive prizes get nothing but mass-produced items worth much less than Contempt 

Defendants claim. In fact, one consumer found her "valuable prize," a watch, listed on eBay for 

$39.99; others were turned away by appraisers who told them the items were not even worth the 

cost of an appraisal. AHA's own records show that it paid $23.80 per item for one shipment of 

bracelets. An expert appraiser who examined several pieces of jewelry AHA sent consumers 

confirmed that none of the items had a fair market value above $60. Finally, AHA's accounts do 

not show purchases of any of the other "valuable" prizes they supposedly awarded (e.g., cars, 

boats, cruises). 

These misrepresentations deceive consumers into paying for Contempt Defendants' 

ridiculously overpriced vitamins, as shown by consumers' testimony and Contempt Defendants' 

excessive charge back rates. See FTC v. Grant Connect, LLC, 827 F. Supp. 2d 1199, 1221 (D. 

Nev. 2011) (excessive chargeback rates "suggest that in fact consumers were deceived."). Thus, 

because AHA abets Burke and acts under his control in misrepresenting to consumers that they 

won a contest and will receive a valuable prize, both Contempt Defendants violate Section II.B 

of the Permanent Injunction. 10 

10 The purported releases consumers must sign to claim their prizes do not, in fact, release 

the Contempt Defendants from liability. The Contempt Defendants fraudulently induced 

consumers to sign the "affidavits" with false promises about the valuable prizes they would 

supposedly receive, rendering any purported waivers invalid. J.A. Jones Canst. Co. v. Lehrer 

McGovern Bovis, Inc., 120 Nev. 277, 290-91 (2004); Friendly Irishman, Inc. v. Rannow, 74 Nev. 

316, 318-19 (1958) (knowingly false representations intended to induce a contract render the 

contract voidable). 

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2 

Contempt Defendants' Violations Have Caused $2 Million in Consumer Harm. 

After appropriate contempt proceedings, Contempt Defendants should be found in 

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contempt and ordered to compensate consumers victimized by their actions. The Court has 

broad authority to impose sanctions for violations of its orders, including requiring compensation 

for losses sustained as a result of the failure to comply with the order. United States v. United 

Mine Workers of Am., 330 U.S. 258, 303-04 (1947); Koninklijke Philips Elec. NV v. KXD Tech., 

Inc., 539 F.3d 1039, 1042 (9th Cir. 2008) (purpose of civil contempt is coercive or 

compensatory). In an FTC contempt action, consumer loss is an appropriate measure of the 

compensatory remedy. FTC v. EDebitPay, LLC, 695 F.3d 938, 945 (9th Cir. 2012). In this case, 

consumer loss is the amount all consumers paid AHA, as Contempt Defendants induced all of 

their "customers" to pay with false representations. Furthermore, no offset is warranted for the 

value of the vitamins or the cheap prizes some consumers received, as consumers paid based on 

false promises about valuable prizes. See FTC v. Figgie, 994 F.2d 595,606 (9th Cir. 1993) 

(consumers enticed by false promises are entitled to full refunds regardless of the value of 

merchandise received because they are injured by "the fraud in the selling"); see also FTC v. 

Trudeau, 579 F.3d 754, 773 n. 16 (7th Cir. 2009); FTC v. Kuykendall, 371 F.3d 745, 766 (lOth 

Cir. 2004); McGregor v. Chierico, 206 F.3d 1378, 1388-89 (II th Cir. 2000) (all applying Figgie 

in measuring contempt sanctions). 

At this time, the FTC estimates that Contempt Defendants' conduct defrauded consumers 

of approximately $2 million, as deposits into AHA's known bank accounts total $2,217,280.91. 

However, this figure is an estimation based on evidence gathered through an undercover 

investigation and may be further refined based on evidence gathered during discovery. 

Following such discovery, the FTC will present any further evidence in support of its request for 

an order holding Contempt Defendants in civil contempt and ordering them to pay a 

compensatory sanction in the full amount consumers paid them. 

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CONCLUSION 

For the foregoing reasons, the FTC requests that, following a brief period of discovery 

and appropriate contempt proceedings, the Court find the Contempt Defendants in contempt of 

the Permanent Injunction and order compensatory sanctions measured by the full amount 

consumers paid. 

Dated: January 28,2013 

18 

Respectfully submitted, 

SARAH WALDRO 

swaldrop@ftc.gov, (202) 326-3444 

REENAH L. KIM 

Reenah L. Kim 

rkiml@ftc.gov, (202) 326-2272 

600 Pennsylvania Avenue NW, M-81028 

Washington, DC 20580 

Attorneys for Plaintiff 

FEDERAL TRADE COMMISSION 
Case 2:97-cv-00750-PMP-VCF Document 131 Filed 01/28/13 Page 23 of 50

APPENDIX A 
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)4 

GREGG SHAPIRO 

JAMES GARLAND 

Federal Trade Commission 

600 Pennsylvania Ave., N.W., Rm. 200 

Washington, D.C. 20580 

(202) 326-3549, -2068 (voice) 

(202) 326-3392 (facsimile) 

JEROME M. STEINER, JR. 

Federal Trade Commission 

90 I Market St., Ste. 570 

San Francisco, CA 94103 

(415) 356-5270 

BLAINE T. WELSH 

Assistant United States Attorney 

70 I E. Bridger Ave., Ste. 800 

Las Vegas, NV 89101 

(702) 388-6336 

Attorneys for Plaintiff 

..-... zw- :........, ,- ~'- t·~ r~ ··~ _· .... ~ ' - ; .... ~ 

1\17 JUN 20 All 9: 36 

CLE~dC \ 1.: •• ~;::';.it,iCT COURT 

Dl$iJ-:iS";' OF ~tEVADA 

GY--···-·--DEPUTY 

UNITED STATES DISTRICT COURT 

DISTRICT OF NEVADA 

) 

15 FEDERAL TRADE COMMISSION, ) CV-S16 Plaintiff, 

) . 

) COMPLAINT FOR INJUNCTION AND 

) OTHER EQUITABLE RELIEF 

:: DAYTON F ~L Y PRODUCTIONS, INC.; ~ J. J. DAYTON ASSOCIATES, INC.; IDGH ) 

19 VOLTAGE PICTURES, INC. aka Hi~ Voltage ) 

Entertainment; JOHN RUBBICO, indtvidually and ) 

20 doing business as J J Family Film Productions; ) 

GLEN E. BURKE, KEVIN ROY; IGNACIO ) 

21 llMENEZ; JOHN lA VARONE; and FRED ) 

22 

23 

24 

25 

DAVIDSON, ) 

Defendants. ~ 

Plaintiff, the Federal Trade Commission ("Commission"), by its undersigned attorneys, 

alleges as follows: 

I 
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I. The Commission brings this action under Sections 13 (b) and 19 of the 

2 Federal Trade Commission Act ("FTC Act"), 15 U.S.C. §§ 53 (b) and 57b, and the 

3 Telemarketing and Consumer Fraud and Abuse Prevention Act ("Telemarketing Act"), 15 

4 U.S.C. §§ 6101-6108, to secure a permanent injunction and other equitable relief, including 

5 rescission, restimtion, and disgorgement, against defendants for their violations of Section 5(a) 

6 of the FTC Act, 15 U.S.C. § 45(a), and the Commission's Telemarketing Sales Rule, 16 C.F .R. 

7 Part 310 (1996, p. 274). 

8 JURJSDICIION AND VENUE 

9 2. This Court has subject matter jurisdiction over this matter pursuant to 28 U.S.C. 

10 §§ 1331, 1337(a), and 1345, and 15 U.S.C. §§ 45(a), 53(b), 57b, 6102(c), and 6105(b). 

II 3. Venue in this district is proper under 28 U.S. C. § 139l(b) and (c), and 15 U.S.C. 

12 § 53(b). 

1.3 THE PARTIES 

.4 4. The Commission is an independent agency of the United States government 

15 created by the FTC Act, 15 U.S.C. §§ 41-58. The Commission enforces the FTC Act, which 

16 prohibits deceptive acts or practices in conunerce, and the Telemarketing Sales Rule, which 

17 specifically prohibits deceptive or abusive telemarketing acts or practices. The Conunission 

18 may initiate federal district court proceedings to el\ioin violations of the FTC Act and the 

19 Telemarketing Sales Rule, and to secure such equitable relief as is appropriate in each case, 

20 including restimtion and disgorgement. 15 U.S.C. §§ 53(b), 57b, and 6105(b). 

21 5. Defendant J. J. Dayton Associates, Inc. ("J. J. Dayton") is a Nevada corporation 

22 with its principal place of business at 4480 W. Spring Mountain Road in Las Vegas, Nevada. 

23 Through its telemarketing sales force, J. J. Dayton solicits consumers to invest in general 

24 partnerships that purportedly will own the rights to films produced by Lyman Dayton. J. J. 

25 Dayton transacts business in the District ofNevada. 

16 6. Defendant Dayton Family Productions, Inc. ("DFP") is a Nevada corporation with 

! 

2 
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. 

its principal place of business at 4480 W. Spring Mountain Road in Las Vegas, Nevada. DFP is 

2 the initial managing partner of Family Movie Partners, an entity that purportedly owns the rights 

3 to a Lyman Dayton film called The Last Resort, and of Wolf Creek Partners, an entity that 

4 purportedly owns or will own the rights to a Lyman Dayton film to be called WolfCreek a/k/a 

5 Wind River a/k/a Cry of the Spirit (hereinafter "WolfCreek"). DFP also solicits consumers to 

6 invest in Wolf Creek Partners. -DFP transacts business in the District of Nevada. 

7 7. Defendant High Voltage Pictures, Inc. ("High Voltage") is a Nevada corporation 

8 with its principal place of business at 4480 W. Spring Mountain Road in Las Vegas, Nevada. 

9 High Voltage is also known as High Voltage Entertainment. High Voltage is the executive 

10 producer of WolfCreek. High Voltage also solicits consumers to invest in general partnerships 

11 that purportedly will own the rights to films produced by Lyman Dayton. High Voltage transacts 

12 business in the District ofNevada. 

8. The foregoing defendant corporations- J. 1. Dayton, DFP, and High Voltage-

! 

14 operate together as part of a common enterprise (hereinafter "the Dayton Enterprise'') to raise 

15 funds for films, including The Last Resort and WolfCreek. 

16 9. Defendant John Rubbico is the sole proprietor of a telemarketing business called 

17 1 1 Family Film Productions, which solicits consumers to invest in the Wolf Creek Partners 

18 general partnership. Individually, or in concert with others, defendant Rubbico directs, controls, 

19 _formulates, or participates in the acts and practices of the Dayton Enterprise. He transacts 

20 business in the District ofNevada. 

21 10. Defendant Glen Burke is a consultant to the Dayton Enterprise. Individually, or 

22 in concert with others, defendant Burke directs, controls, formulates, or participates in the acts 

23 and practices of the Dayton Enterprise. He resides and transacts business in the District of 

24 Nevada. 

25 11. Defendant Kevin Roy is the president, secretary, treasurer, and sole <;lirector of 

·-26 defendant J. J. Dayton. Individually, or in concert with others, defendant Roy directs, controls, ! 

' 

3 
Case 2:97-cv-00750-PMP-VCF Document 131 Filed 01/28/13 Page 27 of 50

formulates, or participates in the acts and practices of the Dayton Enterprise. He transacts 

2 business in the District of Nevada. 

3 12. Defendant Ignacio Jimenez is a consultant to the Dayton Enterprise and a past 

4 director of defendant J. J. Dayton. Individually, or in concert with others, defendant Jimenez 

5 directs, controls, formulates, or participates in the acts and practices of the Dayton Enterprise. 

6 He resides and transacts business in the District ofNevada. 

7 13. Defendant John Iavarone is the president, secretary, and treasurer of defendant 

8 High Voltage. He is also the former president and director of defendant J. J. Dayton. 

9 Individually, or in concert with others, defendant Iavarone directs, controls, formulates, or 

I 0 participates in the acts and practices of the Dayton Enterprise. He resides and transacts business 

II in the District ofNevada. 

12 14. Defendant Fred Davidson is the president of defendant DFP. Individually, or in 

13 concert with others, defendant Davidson directs, controls, formulates, or participates in the acts 

,

1

4 and practices Qfthe Dayton Enterprise. He transacts business in the District ofNevada. 

15 

16 15. 

DEFENDANTS' COURSE OF CONDUCT 

Since at least July 1995, and continuing thereafter, defendants have maintained a 

17 substantial course of trade in the offering and sale of general partnership investments involving 

18 films produced and/or directed by Lyman Dayton. Defendants offer and sell their investment 

I 9. opportunities to consumers across the country using telephone sales presentations and written 

20 promotional materials. 

21 16. Defendants represent to prospective investors that Lyman Dayton's past films 

22 have generated, on average, profits for investors of roughly five dollars for every dollar invested 

23 in the films. 

24 17. Defendants represent to prospective investors that Lyman Dayton and/or his films 

25 have won several prestigious film industry awards, thus demonstrating the quality of his past 

]6 films and the likely commercial viability of The Last Resort and WolfCreek. 

4 
Case 2:97-cv-00750-PMP-VCF Document 131 Filed 01/28/13 Page 28 of 50

18. In the course of their business, during 1995 and early 1996, defendants 

2 represented to prospective investors that they would raise a $2.625 million from the sale of units 

3 in a general partnership, Family Movie Partners, to produce and market a film called The Last 

4 Resort. In fact, defendants have raised over $4.1 million from the sale of units in Family Movie 

5 Partners. Since mid-1996, defendants have represented to prospective investors that they will 

6 raise $3.5 million through the sale of units in a second general partnership, Wolf Creek Partners, 

7 to produce and market a film called WolfCreek. In fact, defendants have raised over $4.5 

8 million from the sale of units in WolfCreek Partners. This overselling has diluted substantially 

9 each investor's stake in the partnerships that defendants promote. The overselling also has raised 

10 substantially the "break-even" points for the partnerships that defendants promote, thus reducing 

1.1 the likelihood of a positive return on the investments. 

12 19. Defendants, individually or in concert with others, have used the above 

•13 representations, or others similar to those described above, to induce consumers to purchase 

14 investments in their Family Movie Partners and WolfCreek Partners offerings. 

15 20. Defendants' course of trade is in or affecting commerce, within the meaning of 

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

17 

18 

19 

21. 

COUNT ONE: DEFENDANT'S VIOLATIONS OF Tiffi 

FEDERAL IRADE COMMISSION ACT 

Defendants represent, expressly or by implication, that Lyman Dayton's past 

·films have generated, on average, profits for investors of roughly five dollars for every dollar 

20 

21 

invested in the films. In truth and in fact, Lyman Dayton's past films have not generated, on 

average, profits for investors of roughly five dollars for every dollar invested in the films. 

22 

Instead, the films have generated, on average, substantially fewer profits, or no profits at all, for 

23 

24 

25 

the investors who invested in the films. 

22. . Defendants represent, expressly or by implication, that Lyman Dayton and/or his 

films have won the following awards: a National Association of Theater Owners 1985 award for 

5 
Case 2:97-cv-00750-PMP-VCF Document 131 Filed 01/28/13 Page 29 of 50

I, 

I "Producer of the Year" for Lyman Dayton, a Motion Picture Association of America "Best 

2 Family Picture of the Year Award" for Lyman Dayton's film Baker's Hawk, and a Cannes Film 

3 Festival Award for Lyman Dayton's film Dream Machine, In truth and in fact, Lyman Dayton 

4 and/or his ftlms have not won the following awards: . a National Association of Theater Owners 

5 1985 award for "Producer of the Year" for Lyman Dayton, a Motion Picture Association of 

6 America "Best Family Picture of the Year Award" for Lyman Dayton's film Baker's Hawk, and 

7 a Cannes Film Festival Award for Lyman Dayton's film Dream Machine. 

8 23. Defendants represent, expressly or by implication, that they will raise no more 

9 than specified amounts for each of the partnerships they promote. In truth and in fact, defendants 

10 raise substantially more than the specified amounts for each of the partnerships they promote. 

II 24. Therefore, defendants' representations as set forth in Paragraphs 21-23, above, are 

12 false and misleading, and constitute deceptive acts or practices in violation of the FTC Act, 15 

·13 U.S.C. § 45(a). 

)4 THE TELEMARKETING SALES RULE 

15 25. Defendants are "sellers" or "telemarketers" engaged in "telemarketing" of 

16 "investment opportunities," as those terms are defined in the. Telemarketing Sales Rule, 16 C.F.R. 

17 §§ 310.2(r), (t), (u), and G). 

18 26. The Telemarketing Sales Rule prohibits: "Misrepresenting, directly or by 

19 implication ... any material aspect of an investment opportunity." 16 C.F.R. 

20 § 310.3(a)(2)(vi). 

21 27. Pursuant to Section 3(c) of the Telemarketing Act, 15 U.S.C. § 6!02(c), and 

22 Section !8(d)(3) of the FTC Act, 15 U.S.C. § 57a(d)(3), violations of the Telemarketing Sales 

23 Rule constitute unfair or deceptive acts or practices in or affecting commerce, in violation of 

24 Section 5(a) of the FTC Act, IS U.S.C. § 45(a). 

25 

6 
Case 2:97-cv-00750-PMP-VCF Document 131 Filed 01/28/13 Page 30 of 50

l COUNT TWO: DEfENDANTS' VIOLATIQNS OF THE TELEMARKETING SALES RULE 

2 28. In the course of telemarketing, in numerous instances since December 31, 1995, 

3 defendants have niisrepresented, directly or by implication, material aspects of their investment 

4 opportunities. These misrepresentations include statements: 

5 (a) that Lyman Dayton's past films have generated, on average, profits for 

6 investors of roughly five dollars for every dollar invested in the films; 

7 (b) that Lyman Dayton and/or his films have won the following awards: a 

8 National Association of Theater Owners 1985 award for "Producer of the Year" for 

9 Lyman Dayton, a Motion Picture Association of America "Best Faniily Picrure of the 

10 Year Award" for Lyman Dayton's film Baker's Hawk, and a Cannes Film Festival 

II Award for Lyman Dayton's film The Dream Machine; and 

(c) that defendants will raise no more than specified amounts for each of the 

partnerships they promote. 

29. In truth and in fact: 

(a) Lyman Dayton's past films have generated, on average, profits for 

16 investors of substantially less than five dollars for every dollar invested in the films; 

17 (b) Lyman Dayton and/or his films have not won the following awards: a 

18 National Association of Theater Owners 1985 award for "Producer of the Year" for 

19 Lyman Dayton, a Motion Picture Association of America "Best Faniily Picrure of the 

20 Year Award" for Lyman Dayton's film Baker's Hawk, and a Cannes Film Festival 

21 Award for Lyman Dayton's film Dream Machine; and 

22 (c) defendants raise substantially more than the specified amounts for each of 

23 the partnerships they promote. 

24 30. Therefore, defendants' representations as set forth in Paragraph 29, above, violate 

25 Section 310.3(a)(2)(vi) of the Telemarketing Sales Rule, 16 C.P.R. § 310.3(a)(2)(yi). 

~6 

) 

7 
Case 2:97-cv-00750-PMP-VCF Document 131 Filed 01/28/13 Page 31 of 50

CONSUMER INnJRy 

2 31. Defendants' violations of Section S(a) of the FTC Act and Section 31 0.3(a)(2)(vi) 

3 of the Telemarketing Sales Rule have injured and will continue to injure consumers. Because of 

4 defendants' misrepresentations about their general partnership offerings, consumers have made 

5 and will continue to make investments that are likely to cause substantial financial injury, absent 

6 injunctive relief. 

7 

8 32. 

THIS COURT'S POWER TO GRANT RELIEF 

Section 13(b) of the FTC Act empowers this Court to issue injunctive and other 

9 relief against violations of the FTC Act and, in the exercise of its equitable jurisdiction, to award 

I 0 redress to remedy the injury to consumers, to order disgorgement of monies resulting from 

II defendants' unlawful acts or practices, and to order other ancillary equitable relief. 

12 33. Section 19 of the FTC Act, 15 U.S.C. § 57b, and Section 6(b) of the 

ol3 Telemarketing Act, 15 U.S.C. § 6105(b), authorize this Court to grant such relief as the Court 

.~ finds necessary to redress injury to consumers or other persons resulting from defendants' 

15 violations of the Telemarketing Sales Rule, including the rescission and reformation of contracts, 

16 and the refund of money. 

17 PRAYER FOR RELIEF 

18 WHEREFORE, plaintiff requests that this Court: 

19 ( 1) Award the Commission all temporary and preliminary injunctive and ancillary relief 

20 that may be necessary to avert the likelihood of consumer injury during the pendency of this 

21 action, and to preserve the possibility of effective final relief, including, but not limited to, 

22 temporary and preliminary injunctions, appointment of a receiver, and an order freezing each 

23 defendant's assets; 

24 (2) Enjoin defendants permanently from violating Section 5(a) of the FTC Act and the 

25 Telemarketing Sales Rule, including committing such violations in connection with !he 

16 advertising, offering for sale, or other promotion of investments in films; l 

8 
Case 2:97-cv-00750-PMP-VCF Document 131 Filed 01/28/13 Page 32 of 50 ' 

I (3) Award such relief as the Court finds necessary to redress injury to investors resulting 

2 from defendants' violations of Section S(a) of the FTC Act and the Telemarketing Sales Rule, 

3 including, but not limited to, the rescission of contracts or refund of money, and the 

4 disgorgement of unlawfully obtained monies; and 

5 ( 4) Award plaintiff the cost of bringing this action as well as such additional equitable 

6 relief as the Court may determine to be just and proper. 

7 

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Respectfully submitted, 

GREGGSPIRO 

JAMES GARLAND 

JEROME M. STEINER, JR. 

Federal Trade Commission 

BLAINE T. WELSH 

Assistant United States Attorney 

Attorneys for Plaintiff 
Case 2:97-cv-00750-PMP-VCF Document 131 Filed 01/28/13 Page 33 of 50

APPENDIXB 
Case 2:97-cv-00750-PMP-VCF Document 131 Filed 01/28/13 Page 34 of 50

• 

ftt!u / . ', 

~ ...... r _, ·-·- =- ... ' \I ,_,,.. =- --· ~ 

,.ORIGINAL 

' 

I 

_I 

1.-. ·~co r~!) "9 A" I"" 33 :J ~:..; L 11 u· 

1 GREGG SHAPIRO t ~?~. •c.s c:s-,;-:<:r cC:1f:T 

Federal Trade Commission c:c1 "'C ~;· i;;:y ADA 

2 600 Pennsylvania Ave., N.W., Rm. 200 

Washington, D.C. 20580 '" OEPUTV 

3 (202) 326-3549 (voice) • ----- (202) 326-3392 (facsimile) 

4 

JEROME M. STEINER, JR. 

5 Federal Trade Commission 

90 l Market St., Ste. 5 70 

6 San Francisco;CA 94103 

(415) 356-5270 

7 

BLAINE T. WELSH 

8 Assistant United States Attorney 

701 E. Bridger Ave., Ste. 800 

9 Las Vegas, NV 89101 

(702) 388-6336 

10 

Attorneys for Plaintiff 

ENTERED·· 

SERVE:.;. 

OCT -I 1998 

CLERK, US. P:STRICT -~OUPT 

['IS<:UCT vF NEVA:JA 

11 BV DEPUTY 

12 

13 

14 

15 

16 

17 

UNITED STATES DISTRICT COURT 

DISTRICT OF NEVADA 

FEDERAL TRADE COMMISSION, 

Plaintiff, 

v. 

DAYTON FAMILY PRODUCTIONS, INC., 

18 ~ 

19 Defendants. 

20 

21 

22 

~ CV-S-97-750,..PMP (LRL) 

~ STIPULATED FlNAL ORDER 

) FOR PERMANENT INJUNCTION 

) AND SETILEMENT OF CLAIMS 

) FORMONETARYRELIEF AGAINST 

) DEFENDANTS GLEN BURKE, JOHN 

) IAVARONE, IGNACIO JIMENEZ, 

) KEVIN ROY, J.J. DAYTON 

) ASSOCIATES, INC., HIGH VOLTAGE 

) PICTURES, INC., HIGH VOLTAGE 

) ENTERTAINMENT, INC., and AZTEC 

) ESCROW, INC., 

23 Plaintiff, the Federal Trade Commission ("Commission"), commenced this action by 

24 filing its complaint against defendants Dayton Family Productions, Inc., J. J. Dayton Associates, 

25 Inc., High Voltage Pictures, Inc., John Rubbico, individually and doing business as J J Family 

26 Film Productions, John Iavarone, Glen Burke, Ignacio Jimenez, Kevin Roy, and Fred Davidson. 

Stipulated Order Page 1 ofl6 
Case 2:97-cv-00750-PMP-VCF Document 131 Filed 01/28/13 Page 35 of 50

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The Commission later amended its cOmplaint to name American Family Productions, Inc., 

American Family Consultants, Inc., High Voltage Entertainment, Inc., Reunion Management, 

Inc., Icon Management Services, Inc., Aztec Escrow, Inc., Raymond Filosi, and Richard S. Hart 

as additional defendants. The amended complaint alleges that the defendants engaged in unfair 

or deceptive acts or practices in violation of Section 5 of the Federal Trade Commission Act 

("FTC Act"), 15 U.S.C. § 45, and of the Telemarketing Sales Rule ("TSR"), 16 C.F.R. Part 310, 

and seeks a permanent injunction and monetary relief pursuant to Section 13(b) of the FTC Act 

and the TSR. The Commission and these defendants, as hereinafter defined, hereby stipulate to 

the entry of this Final Order for Permanent Injunction and Settlement of Claims for Monetary 

Relief ("Order"). Being advised of the premises, the Court finds: 

A. This is an action by the Commission instituted under Sections 5 and 13(b) of the 

Federal Trade Commission Act, 15 U.S.C. §§ 45 and 53(b), and the TSR, 16 C.F.R. Part 

310. The amended complaint seeks both permanent injunctive relief and consumer 

redress for alleged .unfair or deceptive acts or practices by these defendants in connection 

with the promotion of investments in films. 

B. The Commission has the authority under Section 13(b) of the FTC Act and the 

TSR to seek the relief it has requested. 

C. This Court has jurisdiction over the gubject matter of this case and has jurisdiction 

over each of these defendants. Venue in the District of Nevada is proper, and the 

complaint states a.claim upon which relief may be granted against these defendants under 

Sections 5 and 13(b) of the FTC Act and under the TSR. 

D. The activities of these defendants are in or affecting commerce, as defined in 15 

u.s.c. §44, 

E. Each of these defendants neither admits nor denies the allegations set forth in the 

amended complaint. 

F. Each of these defendants waives all. rights to seek judicial review or otherwise 

Stipulated Order Page 2 of16 
Case 2:97-cv-00750-PMP-VCF Document 131 Filed 01/28/13 Page 36 of 50

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I. 

challenge or contest the validity of this Order. Each of these defendants also waives any 

claim that he or it may have held under the Equal Access to Justice Act, 28 U.S.C. 

§ 2412, concerning the prosecution of this action to the date of this Order. Each of these 

defendants shall bear his or its own costs and attorneys fees incurred in connection with 

this action. 

G. The Commission and the defendants have agreed that the entry of this Order 

resolves all matters of dispute between them arising from the complaint in this action, up 

to the date of entry of this Oider. 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. 

H. Consistent with the principles set forth in United States y Halper, 490 U.S. 435 

(1989), each of these defendants, j:ly si~g and stipulating to this Order, acknowledges 

and agrees that this civil action has not placed him or it in jeopardy and that this Order 

does not preclude subsequent criminal action against him or it. 

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

IT IS THEREFORE ORDERED, ADJUDGED AND DECREED AS FOLLOWS: 

DEFINITIONS 

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

A. "Telemarketing" means a plan, program, or campaign which is conducted to 

induce the purchaSe of goods or services by use of one or more telephones and which 

involves more than one interstate telephone call. The term does not include the 

solicitation of sales through the mailing of a catalog which: contains a written description 

or illustration of the goods or services offered for sale; includes the· business address of 

the seller; includes multiple pages of written material or illustrations; and has been issued 

not less frequently than once a year, when the person making the solicitation does not 

solicit customers by telephone but only receives calls initiated by customers in response 

Stipulated Order Page3 of16 
Case 2:97-cv-00750-PMP-VCF Document 131 Filed 01/28/13 Page 37 of 50

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to the catalog and ·during those calls takes orders only without further solicitation. For 

purposes of the previous sentence, the term "further solicitation" does not include 

providing the customer with information about, or attempting to sell, any other item 

included in the same catalog which prompted the customer's call or in a substantially 

similar catalog. The term "telemarketing" does not include telephone calls initiated by a 

consumer in response to an advertisement through any media, other than direct mail or email solicitations; provided, however, that this exception does not apply to calls initiated 

by a consumer in response to an advertisement relating to investments. 

B. "Assisting others" means knowingly providing any of the following goods or 

services to any person or entity (I) performing customer service functions for an entity 

including, but not limited to, receiving or responding to consumer complaints; (2) 

formulating or providing, or arranging for the formulation or provision of, any telephone 

sales script or any other marketing material for an entity; (3) providing names of; or · 

assisting in the generation of, potentilil customers for an entity; or (4) performing. 

marketing services of any kind for an entity. 

C. Unless otherwise indicated, the term "these defendants" or "defendants" refers to 

and includes the following individnals: John Iavarone, Glen Burke, Ignacio Jimenez, and 

Kevin Roy (the "individual defendants"); and refers to the following corporations or 

business entities: J. J. Dayton Associates, Inc., High Voltage Pictures, Inc., High Voltage 

Entertainment, Inc., and Aztec Escrow, Inc. (the "corporate defendants"). 

PROillBITED BUSINESS PRACTICES 

TIIEREFORE, IT IS HEREBY ORDERED that defendants and their agents, employees, 

23 officers, and servants, and all other persons or entities in active concert or participation with 

22 11. 

24 them who receive actual notice of this order by personal service or otherwise, in connection with 

25 the advertising, promotion, offer for sale, or sale of any item, product, good, service, or 

26 investment interest of any kind, including but not limited to investments in films, are hereby 

Stipulated Order Page 4 ofl6 
Case 2:97-cv-00750-PMP-VCF Document 131 Filed 01/28/13 Page 38 of 50

'! 

1 restrained and enjoined from: 

2 

3 

4 

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7 

8 

9 

10 

11 

12 

l3 

A Misrepresenting, directly or by implication: 

1. 

2. 

the returns, revenues, or profits that any film has generated for investors; 

the performance (including gross revenues generated and box office 

receipts) of any film; 

3. the awards received by any film or by any person who has worked on or 

been associated with a film; 

4. the likely profits to be made through any investment involving films or 

any other investment; 

5. the amount of money or other capital that will be raised for any investment 

involving films or any other investment; 

6. the purposes for which funds raised from consumers will be used; 

! 14 

7; ' ' the costs associated with the advertising, promotion, offer for sale, or sale ' 

of any item, product, good, service, or investment, including but not limited to 

any investment involving films; 

) 

15 

16 

17 

18 

19 B. 

8. the risk, liquidity, market value, resale value, or expected income or profit 

associated with any item, product, good, service, or investment, including but not 

limited to any investment involving films; 

Misrepresenting, in any manner, directly or by implication, or failing to disclose 

20 any filet material to a consumer's decision to purchase any item, product, good, service, or 

21 investment, including but not limited to any investment involving films; 

22 C. Assisting others in violating any provision in Subsections A and B of this 

23 Paragraph; 

24 

25 

26 

D. Violating or assisting others to violate any provision of the Telemarketing Sales 

Rule, 16 C.F.R Part 310, including but not limited to: misrepresenting, directly or by 

implication " [a ]ny material aspect of an investment opportunity including, but not liruited 

Stipulated Order Page 5 ofl6 
Case 2:97-cv-00750-PMP-VCF Document 131 Filed 01/28/13 Page 39 of 50

) 

I 

2 

3 m. 

to, risk, liquidity, earnings potential, or profitability." 16 C.F.R. § 310.3(a)(2)(vi). 

BAN ON TELEMARKETING 

IT IS FURTHER ORDERED that defendants John Iavarone, Glen Burke, Ignacio 

4 Jimenez, Kevin Roy, J. J. Dayton Associates, Inc., High Voltage Pictures, Inc., High Voltage 

5 Entertainment, and Aztec Escrow, Inc. are hereby permanently restrained and enjoined from 

6 either (I) engaging in telemarketing; or (2) assisting others in telemarketing. 

7 USTS 

8 IV. IT IS FURTHER ORDERED that defendants and their officers, agents, servants, and 

9 employees, and all other persons or entities in active concert or participation 

I 0 with them who receive actual notice of this Order by personal service or otherwise, are 

11 permanently restmined and enjoined from selling, renting, leasing, transferring, or otherwise 

12 disclosing the name, address, telephone number, credit card number, bank account number, 

13 e-mail address, or other identifying information of any person who paid any money to any . 

14 defendant, at imy time prior to entry of this Order, in connection with investments involving 

15 films. Provided that defendants may disclose such identifying info~on with the express. 

16 written consent of the person whose information is disclosed, to a law enforcement agency, or as 

17 required by any law, regulation, or court order. 

18 MONETARYREUEF 

19 v. 

20 

21 

22 

23 

24 

25 

26 

IT IS FURTHER ORDERED: 

A. That judgment is hereby entered against each of the defendants, jointly and 

severally, in the amount ofTEN THOUSAND DOLLARS ($10,000) for equitable 

monetary relief, including but not limited to consumer redress, and for paying any 

attendant expenses of administering any redress fund. This $10,000 judgment shall be 

separate and in addition to any assets turned over to the Commission pursuant to · 

Paragraph VI of this Order. 

B. That any funds paid by defendants pursuant to Paragraphs V and Vl of this Order 

Stipulated Order Page 6 of16 
Case 2:97-cv-00750-PMP-VCF Document 131 Filed 01/28/13 Page 40 of 50

1 shall be paid into a redress fund administered by the Commission. If the Commission, in 

2 its sole discretion, determines that redress is wholly or partially impractical, any funds not 

3 so used shall be deposited into the United States Treasury as an equitable disgorgement 

4 remedy~ Defendants shall have no right to contest the manner of distribution chosen by 

5 the Commission or its designated agent 

6 TURNOVER OF FROZEN ASSETS 

7 VI. IT IS FUR TilER ORDERED THAT all funds in the following previously frozen 

8 accounts shall be transferred to the Commission: 

9 Nevada Federal Credit Union account number 182580234, to which defendant 

10 

11 

12 

13 

Iavarone is a signatory (approximate balance = $1,811 ); 

First Bank of Beverly Hills account number 0150600716, to which defendant 

Burke is a signatory (approximate balance= $545); 

! 14. 

. California Federal Bank account number 8944023962, to which defendant 

Ignacio rnnenez is a signatory (approximate balance= $375); 

) 

15 

16 

17 

18 

19 

20 

California Federal Bank account number 894-4007189, to which defendant 

Ignacio Jimenez is a signatory (approximate balance= $2,200); 

American Express accotmt number 3783-497460-62004, to which defendant 

Iavarone is a signatory (approximate balance = $785); and 

American Bank of Commerce account number 4{)4{)17796, to which defendant 

Burke is a signatory (approximate balance= $3,816). 

21 For each of the foregoing transfers, the Commission shall be responsible for any withdrawal 

22 penalties and fees to the extent that such penalties and fees do not exceed the value of the 

23 transfer. 

24 ORDER DISTRIBUTION 

25 VII. IT IS FUR TilER ORDERED that, for a period of three years from the date of entry of 

26 this Order, each individual defendant shall: 

Stipulated Order Page 7 of16 
Case 2:97-cv-00750-PMP-VCF Document 131 Filed 01/28/13 Page 41 of 50

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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, innnediately upon employing or retaining any such persons, for 

any business where (I) that individual defendant is the majority owner of the business or 

otherwise directly or indirectly manages or controls the business, and where (2) the 

business engages in, or assists others engaged in, telemarketing or the sale of 

investments; and 

B. Maintain for a period of three (3) years after creation, and ~n reasonable notice, 

make available to representatives of the Commission, the original signed and dated 

acknowledgments of the receipt of copies of this Order, as required in Subpart A of this 

Paragraph. 

RECORD KEEPING PROVISIONS 

IT IS FURTHER ORDERED that, for a period of three years from the date of entry of 

17 this Order, each individual defendant and his officers, agents, servants, and employees, and all 

18 other persons or entities in active concert or participation with him who receive actual notice of 

19 this Order by personal service or otherwise, in connection with any business where (1) said 

16 VIII. 

20 individual defendant is the majority owner of the business or directly or indirectly manages or 

21 controls the business, and where (2) the business engages in, or assists others engaged in, 

22 telemarketing or the sale of investments, is hereby restrained and enjoined from: 

23 A. Failing to create, and from failing to retain for a period of three (3) years 

24 following the date of such creation, unless otherwise specified: 

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I. Books, records, and accounts that, in reasonable detail, accurately and 

fairly reflect the cost of goods or services sold, revenues generated, and the 

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Case 2:97-cv-00750-PMP-VCF Document 131 Filed 01/28/13 Page 42 of 50

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disbursement of such revenues; 

2. Records accurately reflecting: the name, address, and telephone number of 

each person employed in any capacity by such business, including as an 

independent contractor; that person's job title or position; the date upon which the 

person commenced work; and the date and reason for the person's termination, if 

applicable. The business subject to this paragraph shall retain such records for 

any terminated employee for a period of two (2) years following the date of 

termination; 

3. Records containing the names, addresses, phone numbers, dollar amounts 

paid, quantity of items, services or investments purchased, and description of 

items, services, or investments purchased for all consumers to whom such 

business has sold, invoiced or shipped any good, service, or investment; 

4. · Records that reflect, for every eousuiner complaint.or refund request, 

whether received directly or indirectly or through any third party; 

5. 

Stipulated Order 

a. the. consumer's name, address, telephone number and the dollar 

amount paid by the consumer; 

· b. the written complaint or refund request, if any, and the date of the 

complain~ or refund request; 

c. the basis of the complaint, including the name of any salesperson 

complained against, and the nature and result of any investigation 

conducted concerning any complaint; 

d. each response and the date of the response; 

e. any final resolution and the date of the resolution; and 

f. in the event of a denial of a refund request, the reason for the 

denial; and 

Copies of all sales scripts, training materialS, advertisements, or other 

Page 9of16 
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· marketing materials utilized; provided that copies of all sales scripts, training 

materials, advertisements, or other marketing materials utilized shall be retained 

for three (3) years after the last date of dissemination of any such materials. 

B. Destroying, throwing away, mutilating, changing, concealing, altering, 

transferring, or otherwise disposing of, in any manner, directly or indirectly, any books, 

records, tapes, discs, accounting data, checks (fronts and backs), correspondence, forms, 

advertisements, brochures, manuals, electronically stored data, banking records, 

consumer lists, files, invoices, telephone records, ledgers, payroll records, or other 

business or financial documents of any kind, including information stored in computermaintained form, in the possession, custody, or control of defendant or any other person 

or entity in active concert or participation with defendant. 

COMPLIANCE REPORTING BY DEFENDANTS 

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

14 Order. may be monitored: 

l3 IX .. 

15 A. For a period of three years from the date of entry of this Order, each individual 

I 6 defendant shall notify the Commission in writing within 30 days of the following: 

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I. Any changes in the defendant's residence, mailing addresses, and 

telephone numbers within I 0 days of such change; 

2. Any changes in the defendant's employment status (including selfemployment) within 10 days of such change. Such notice shall include the name 

and address of each business that the defendant is affiliated with or employed by, 

a statement of the nature of the business, and a statement of the defendant's duties 

and responsibilities in connection with the business or employment; and 

3. Any proposed change in the structure of any business entity owned or 

controlled by the defendant, such as creation, incorporation, dissolution, 

assignment, sale, merger, creation, dissolution of subsidiaries, proposed filing of 

Stipulated Order Page 10 of16 
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bankruptcy petition, or change in the corporate name or address, or any change 

that may affect compliance obligations arising out of this Order, thirty (30) days 

prior to the effective date of any proposed change; pruvided, however, that, with 

respect to any proposed change in the corporation about which the defendant 

learns less than thirty (30) days prior to the date such action is to take place, the 

defendant shall notify the Commission as soon as is practicable after learning of 

such proposed change; 

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

defendant shall provide a written report to the Commission, sworn to under penalty of 

petjury, setting forth in detail the manner and form in which the defendant has complied 

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

L The defendant's then current residence (if an individual defendant) or 

business address (if a corporate defendant) and telephone number; 

2. · For individual defendants, the defendant's then current employment, 

business addresses and telephone numbers, a description of the business activities . . 

of each such employer, and the defendant's title and responsibilities for each 

employer; 

3. A copy of each acknowledgment of receipt of this Order obtained by each 

defendant pursuant to Paragraph VII of this Order; 

4. A statement describing the manner in which the defendant has complied 

and is complying with Paragraphs II through VIII of this Order; and 

C. Upon written request by a representative of the Commission, defendants shall 

submit additional written reports (under oath, if requested) and produce documents on 

fifteen (15) days' notice with respect to any conduct subject to this Order; 

D. For the purposes of this Order, defendants shall, unless otherwise direCted by the 

Commission's authorized representatives, mail all written notifications to: 

Stipulated Order Page 11 ofl6 
Case 2:97-cv-00750-PMP-VCF Document 131 Filed 01/28/13 Page 45 of 50

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Re: 

E. 

Associate Director for Service Industry Practices 

RoomH-200 

Federal Trade Commission 

Washington, D.C. 20580 

FTC y. Payton Family Productions 

For the purposes of this Paragraph, "employment" includes the performance of 

5 services as an employee, consultant, or independent contractor; and "employers" include 

6 any individual or entity for whom any defendant performs services as an employee, 

7 consultant, or independent contractor. 

8 COMMISSION'S AUTHORITY TO MONITOR COMPLIANCJ!; 

9 X. IT IS FURTHER ORDERED that the Commission is authorized to monitor defendants' 

10 compliance with this Order by all lawful means, including but not limited to the following 

11 means: 

12 A. The Commission is authorized, without further leave of court, to obtain discovery 

13 from any person in the manner provided by Chapter V of the Federal Rules of Civil 

14 Procedure, Fed. R Civ. P. 26-37, including the use of compulsory process pursuant to 

15 Fed. R. Civ. P. 45, for the purpose ofmoiritoring and investigating defendants' 

16 compliance with any provision of this Order; 

17 B. The Commission is authorized to use representatives posing as consumers and 

18 suppliers to defendants, defendants' employees, or any other entity managed or controlled 

19 in whole or in part by defendants, without the necessity of identification or prior notice; 

20 c. Nothing in this Order shall limit the Commission's lawful use of compulsory 

21 process, pursuant to Sections 9 and 20 of the FTC Act, 15 U.S.C. §§ 49, 57b-l, to 

22 investigate whether any defendant has violated any provision of this Order or Section 5 of 

23 the FTC Act, 15 U.S.C. § 45. 

24 ACCESS TO BUSINESS PREMISES 

25 XI. IT IS FURTHER ORDERED that, for a period of three years from the date of entry of 

26 this Order, for the purpose of further determining compliance with this Order, each defendant 

Stipulated Order Page 12 ofl6 
Case 2:97-cv-00750-PMP-VCF Document 131 Filed 01/28/13 Page 46 of 50

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I shall permit representatives of the Commission, within three (3) business days of receipt of 

2 written notice from the Commission: 

3 A. Access during normal business hours to any office, or facility storing documents, 

4 of any business where the named defendant is the majority owner of the business or 

5 directly or indirectly manages or controls the business, and where the business is engaged 

6 in telemarketing or the sale of investments, or assisting others engaged in said activities. 

7 In providing such access, defendaots shall permit representatives of the Commission to 

8 inspect and copy all documents relevant to any matter contained in this Order; and shall 

9 permit Commission representatives to remove documents relevant to any matter 

10 contained in this Order for a period not to exceed five (5) business days so that the 

II documents may be inspected, inventoried, and copied; and 

12 B. To interview the officers, directors,. and employees, including all personnel 

13 involved in responding to consumer complaints or inquiries, and all sales personnel, 

' 14 whether designated as emp!oyees, consultants, independent contractors or otherwise, of 

15 any business to which Subsection A of this. Paragraph applies, concerning matters relating 

16 to compliance with the terms of this Order. The person interviewed may have counsel 

17 presenL 

18 Provided that, upon application of the Commission and for good cause shown, the Court may 

19 enter an ex parte order granting immediate access to defendants' business premises for the 

20 purposes of inspecting and copying all documents relevant to any matter contained in this Order. 

21 SUBSEQUENT PROCEEDINGS 

22 XII. · Notwithstanding any other provision of this Order, defendants agree that the facts as 

23 alleged in the complaint shall be taken as true in any subsequent litigation filed by the 

24 Commission to enforce this Order, including but not limited to a non-dischargeability complaint 

25 in any subsequent bankruptcy proceeding. 

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Stipulated Order Page 13of16 
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1 · REAFFIRMATION OF FINANCIAL STATEMENT AND ACKNOWLEDGMENT OF 

RECEIPT OF FINAL ORDER 

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XIII. IT IS FURTIIER ORDERED that, within five business days from the date of entry of this 

Order, each defendant shall submit to the Commission a truthful sworn statement in a form 

substantially similar in language to Attachment A that shall acknowledge receipt of this Order 

and reaffirm and attest to the truth, accuracy and completeness of that defendant's financial 

statements previously submitted to the Commission. 

RIGHT TO REOPEN 

XIV. IT IS FUR TilER ORDERED that the Commission's agreement to this Order is expressly 

premised upon the truthfulness, accuracy, and completeness of defendants' financial condition as 

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represented in each of the defendants' financial statements previously submitted to the 

Commission, which contain material information relied upon by the Commission in negotiating 

·and agreeing to the terms of this Order. If the Commission has reason to believe that any of the. · 

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above-referenced finanCial statements failed to disclo~ any material asset, materially· 

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misrepresented the value of any asset, or made any other material misrepresentation or omiSsion, 

the Commission may request thai this Order be reopened for the sole purpose of allowing the 

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Commission to modifY the monetary liability of the defendant who submitted the fuiancial 

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statement. If the Court finds that such defendant failed to disclose any material asset, materially 

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misrepresented the value of any asset, or made any other material misrep1esentation or omission 

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in the above-referenced financial statement, the Court shall enter judgment against that 

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defendant, in favor of the Commission, in the amount of one million dollars ($1,000,000), less 

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the amount the defendants have already paid to the Commission under Paragraph V of this 

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Order; provided, however, that in all other respects this Order shall remain in full force and effect 

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unless otherwise ordered by the Court and that such defendant has no right to contest any of the 

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allegations in the Commission's complaint in this matter in any proceedings brought pursuant to 

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Stipulated Order Page 14 of16 
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2 RETENTION OF JURISDICTION 

3 XV. IT IS FURTHER ORDERED that this Court shall retain jurisdiction of this matter for all 

4 purposes. 

5 ENTRY OF TillS JUDGMENT 

6 XVI. IT IS FURTHER ORDERED that there is no just reason for delay of entry of this 

7 judgment, and that, purswint to Fed. R. Civ. P. 54(b), the Clerk shall enter this Order 

8 immediately. 

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Stipulated Order Page 15 of16 
Case 2:97-cv-00750-PMP-VCF Document 131 Filed 01/28/13 Page 49 of 50

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I STIPULATED AND AGREED TO: 

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~ 114.5'~);~ ~ pll'O , 3 

4 Jerome M. Steiner, Jr. 

Federal Trade Commission 

5 Blaine T. Welsh 

Assistant United States Attorney 

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Attorneys for Plaintiff 

7 Federal Trade Commission 

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22 IT IS SO ORDERED. 

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Dated6-fi£-= J D 

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) Stipulated Order 

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'1998 

~L~M President of Defendant High Voltage 

Pictures, Inc., and Defendant High 

Voltage Entertainment, Inc. 

Cantor 

Graziade· & Cantor 

Attorney or fendants Glen Burke, 

I o J en and Kevin Roy 

Page 16 of16 
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ATTACHMENT A 

1. My name is----------·· I am a citizen of the United States and am 

over the age of 18. I reside in ----------·· I have knowledge of the matters 

discussed in this declaration. 

2. I am a defendant in FTC v. Dayton Family Productions Inc. eta! .. CV-S-97-750-PMP 

(RLH) (U.S. District Court, District of Nevada). 

3. I have received a copy of the Stipulated Final Order for Pennanent Injunction and 

Settlement of Claims for Monetary Relief entered against me in FTC v. Dayton Faroily 

Productions. Inc .. et a!. 

4. The information contained in the Financial Statement executed by me on 

---~------,---' and previously provided to the Federal Trade Commission, was true, 

accurate, and complete on--~--'---------

I hereby declare under penalty of perjury that the foregoing is true and correct. 

Stipulated Order 

I herebyaHest ar.~ certify on h~ 1 I 99 f 

that the foregoing document is a lull, true and ooirect 

copy of the original on file in my office. and in my · 

legal custody. 

CLERK, U.S. DISTRICT COURT 

&!STRICT OF NEV_.bDA ~ _ 

By '~ hJ ~t7?--Deputy