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~ase 8: 11-cv-00299-AG -JEM Document 1 Filed 02/22/11 Page 1 of 20 Page 10 #: 

WILLARD TOM 

General Counsel 

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ROBERT G. SCHOSHINSKI, DC # 429736 rschoshinski(a),ftc~ov 

CHRISTINE"M. TODARO, OH # 0084976 

ctodaro(a),ftc.gov 

Federal 'Trade Commission 

600 Pennsylvania Avenue, N.W. 

Washington DC 20580 

202~ 3Z6-3219J.SchoshinSki) 202 326-3711 Todaro) 

202 326-3395 acsimile 

Local Counsel 

RAYMOND MCKOWN 

nnckown@ftc.gov 

CA Bar NO. 150975 

Federal Trade Commission 

10877 Wilshire Boulevard, Suite 700 

Los Angeles, CA 90024 

310-824-4325 . 310-824-4380 facsimile 

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13 AttomeY§ for Plaintiff 

Federal Trade Commission 

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UNITED STATES DISTRICT COURT 

CENTRAL DISTRICT OF CALIFORNIA 

FEDERAL TRADE COMMISSION, 

Plaintiff, 

v. 

Phillip A. Flora, 

a.k.a. "Phil P .," 

Defendant. 

COMPLMNTFORPERMANENT 

INJUNCTION AND OTHER 

EQUITABLE RELIEF 

Plaintiff, the Federal Trade Commission ("FTC"), for its Complaint alleges: 

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1 1. The FTC brings this action under Sections 13(b) and 19 of the Federal 

2 Trade Commission Act ("FTC Act"), 15 U.S.c. §§ 53(b) and 57b, and Section 7(a) 

3 of the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 

4 2003 ("CAN-SPAM AcC), 15 U.S.C. § 7706(a), to obtain preliminary and 

5 permanent injunctive relief, restitution, disgorgement of ill-gotten monies, and 

6 other equitable relief for Defendant's acts or practices in violation of Section 5( a) 

7 of the FTC Act, 15 U.S.C. § 45(a), and in violation of the CAN-SPAM Act, 

8 15 U.S.C. §§ 7701-7713. 

9 

10 JURISDICTION AND VENUE 

11 2. This Court has subject matter jurisdiction pursuant to 28 U.S.C. 

12 §§ 1331, 1337(a), and 1345, and 15 U.S.C. §§ 45(a), 53(b), and 770l. 

13 3. Venue is proper in this district under 28 U.S.C. § 1391(b) and 

14 15 U.S.C. § 53(b). 

15 

16 PLAINTIFF 

17 4. The FTC is an independent agency of the United States Government 

18 created by statute. 15 U.S.C. §§ 41-58. The FTC enforces Section 5(a) of the FTC 

19 Act, 15 U.S.C. § 45(a), which prohibits unfair or deceptive acts or practices in or 

20 affecting commerce. The FTC also enforces the CAN-SPAM Act as if statutory 

21 violations of the CAN-SPAM Act "were an unfair or deceptive act or practice 

22 proscribed under Section 18(a)(l)(B) of the [FTC Act] (15 U.S.C. 57a (a)(l)(B))." 

23 15 U.S.C. § 7706(a). 

24 5. The FTC is authorized to initiate federal district court proceedings, by 

25 its own attorneys, to enjoin violations of the FTC Act and the CAN-SP AM Act and 

26 to secure such equitable relief as may be appropriate in each case, including 

27 restitution, consumer redress, and the disgorgement of ill-gotten monies. 

28 15 U.S.C. §§ 53(b), 56(a)(2)(B), 57b, & 7706(a). 

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ase 1 1 1 3 10 

DEFENDANT 

1 

2 

3 6. Defendant Phillip A. Flora, also known as "Phil P ," ("Flora"), resides 

4 in Huntington Beach, California and, in connection with the matters alleged herein, 

5 transacts or has transacted business in this district and throughout the United 

6 States. 

7 

8 7. 

COMMERCE 

At all times material to this Complaint, Defendant Flora has 

9 maintained a substantial course of trade in or affecting commerce, as "commerce" 

10 is defined in Section 4 of the FTC Act, 15 U.S.C. § 44. 

11 

12 DEFINITIONS 

13 8. "Electronic mail message" (or "email") means a message sent to a 

14 unique electronic mail address. 15 U.S.C. § 7702(6). 

15 9, "Electronic mail addr'ess" means a destination, commonly expressed 

16 as a string of characters, consisting of a unique user name or mailbox (commonly 

17 referred to as the "local part") and a reference to an Internet domain (commonly 

18 referred to as the "domain part"), whether or not displayed, to which an electronic 

19 mail message can be sent or delivered. 15 U.S.C. § 7702(5). 

20 10. "Commercial electronic mail message" means any electronic mail 

21 message the primary purpose of which is the commercial·advertisement or 

22 promotion of a commercial product or service (including the content on an Internet 

23 website operated for commercial purposes). 15 U.S.C. § 7702(2). 

24 11. "Initiate," when used with respect to a commercial email message, 

25 means to originate or transmit such message or to procure the origination or 

26 transmission of such message. 15 U.S.C. § 7702(9). 

27 12. "Procure," when used with respect to the initiation of a commercial 

28 email message, means intentionally to payor provide other consideration to, or 

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ase 8:11-cv-00299-AG -JEM Document 1 Filed 02/22/11 Page 4 of 20 Page 10 #: 

1 induce, another person to initiate such a message on one's behalf. 15 U.S.C. 

2 § 7702(12). 

3 13. "Protected Computer" means a computer which is used in interstate 

4 or foreign commerce or communication, including a computer located outside the 

5 United States that is used in a manner that affects interstate or foreign commerce or 

6 communication of the United States. 15 U.S.C. § 7702(13). 

7 14. "Sender" means a person who initiates a commercial email message 

8 and whose product, service, or Internet Web site is advertised or promoted by the 

9 message. 15 U.S.C. § 7702(16). 

10 

11 DEFENDANT'S BUSINESS ACTIVITIES 

12 15. Defendant Flora engages in and has engaged it;l the sending of 

13 unauthorized and unsolicited commercial electronic text messages (''text message 

14 spam") to the mobile telephones and other wireless devices of consumers 

15 throughout the United States. Defendant Flora also engages in and has engaged in 

16 the sending of unsolicited commercial email ( .. email spam") to the computers of 

17 U.S. consumers. In his email spam, Defendant Flora has advertised his service of 

18 sending text message spam on behalf of third parties. 

19 Background 

20 16. Many mobile telephone and wireless device service providers 

21 operating in the United States (hereinafter "wireless service providers") provide 

22 their subscribers with text messaging services. Text messaging services permit the 

23 transmission of text messages to wireless handsets from other wireless handsets, 

24 electronic mail accounts, and various Internet applications. 

25 17. To transmit a text message to wireless handsets, a sender transmits the 

26 message electronically, either directly or indirectly, through a wireless service 

27 provider's text message router, which then transmits the message to the recipient 

28 through the wireless service provider's interstate wireless network. 

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ase 8:11-cv-00299-AG -JEM Document 1 Filed 02/22/11 Page 5 of 20 Page 10 #: 

1 18. Text messaging is used by consumers to stay in touch with business 

2 colleagues and associates, customers, family members, and friends. Text 

3 messaging is also used by numerous employers, schools, police departments, fire 

4 departments, and emergency medical services across the country. 

5 Defendant Flora's Text Message Spam 

6 19. Beginning on or about August 22,2009 and continuing thereafter, 

7 Defendant Flora transmitted or arranged for the transmission of at least 5 million 

8 unsolicited commercial electronic text messages to the wireless handsets of U.S. 

9 consumers for the primary purpose of promoting products and services, including, 

10 but not limited to, loan modification programs and debt relief services. 

11 20. Many of the unsolicited loan modification text messages that 

12 Defendant Flora has sent to U.S. consumers offer to help consumers obtain 

13 mortgage loan modifications and state: 

14 Homeowners, we can lower your mortgage payment 

15 by doing a Loan Modification. Late on payments OK. 

16 No equity OK. May we please give you a call? 

17 loanmod-gov.net. 

18 21. Consumers who read this message and then visited the web address 

19 "loanmod-gov.net" arrived at a website that touted itself as "Official Home Loan 

20 Modification and Audit Assistance Information" beneath a graphic of the U.S. flag. 

21 'The site requested that consumers provide information about their mortgages 

22 through an electronic form on the site, and indicated that the operators of the site 

23 would use the information to perform a "Forensic Loan Audit" and that an advisor 

24 would then contact the submitting consumer. 

25 22. The term "gov," when used in the suffix, or "top-level" domain part, 

26 of a website address, indicates that the website is operated by a federal, state, or 

27 local governmental entity or agency or a private organization with a formal 

28 association with the U.S. federal government. See 41 C.F.R~ §§ 102-173.5 to 

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ase 8:11-cv-00299-AG -JEM· Document 1 Filed 02/22/11 Page 6 of 20 Page ID #: 

1 102-173.95 (March 28, 2003). For example, the Federal Trade Commission's web 

2 address is "FTC.gov," the web address for the U.S. Federal Courts is 

3 "USCourts.gov," and the web address for the state of California is "Ca.gov." 

4 23. Although the loanmod-gov.net website's domain name included the 

5 term "gov" in its address, and the text of the site stated it provided "Official Home 

6 Loan Modification and Audit Assistance Information" and included a graphiC of 

7 the U.S. flag, it was not operated by or affiliated with any governmental entity. 

8 24. Many of the unsolicited debt relief services text messages that 

9 Defendant Flora has sent to U.S. consumers state: 

10 

11 

12 

If you are struggling to keep up with credit card 

payments and have more than 10k in debt, we can 

help. May we give you a call regarding this? 

13 25. Other unsolicited loan modification text messages that Defendant 

14 Flora has sent to U.S. consumers state: 

15 

16 

17 

18 

Is your mortgage payment too expensive? Our Loan 

Modification program can lower your paY.ments 

immediately. May we please give you a call? 

19 The Recipients of Defendant Flora's Text Message Spam 

20 26. Many, if not all, of the consumers who received the text message 

21 spam sent by Defendant Flora never agreed to be contacted by Defendant Flora. 

22 27. Many of the recipients of Defendant Flora's text message spam have 

23 wireless service plans that require them to pay a fixed fee for each text message 

24 received by their wireless handsets. Accordingly, many such recipients were 

25 required to pay a fee for the receipt of Defendant Flora's text message spam. 

26 28. Other recipients of Defendant Flora's text message spam have 

27 wireless service plans that allow them a fixed, limited number of text messages per 

28 month without charge beyond their monthly service charge, with text messages that 

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1 . exceed the monthly allowance billed on a per-message basis. Accordingly, many 

2 such recipients had their monthly allowance of text messages reduced upon receipt 

3 of each of Defendant Flora's text message spam. 

4 29. Many recipients of Defendant Flora's text message spam have 

5 experienced annoyance, frustration, and a sense of harassment from receiving the 

6 spam. 

7 30. Many recipients' wireless handsets audibly notify the recipient when a 

8 text message is received. 

9 31. Many recipients of Defendant Flora's text message spam received that 

10 spam in the late-~ight or early-morning hours or while at work or school. 

11 32. Many recipients of Defendant Flora's text message spam had the 

12 telephone numbers assigned to their wireless handsets registered on the National 

13 Do Not Call Registry maintained by the FTC, and thus had explicitly indicated that 

14 they did not wish to receive unsolicited marketing calls on those handsets. 

15 Defendant Flora Sells the Personal Wireless Telephone Numbers of 

16 Consumers Who Respond to His Text Message Spam 

17 33. Typically, wireless service providers allow their subscribers who 

18 receive a text message to send a reply text message to the number which sent the 

19 initial text message. 

20 34. Defendant Flora collects and has collected the telephone numbers of 

21 the personal wireless devices of many consumers who respond to his unsolicited 

22 ~ext messages, including many of those consumers who respond negatively to his 

23 text message spam and many of those consumers who request that he stop sending 

24 them text message spam. He then has sold these personal wireless telephone 

25 numbers to third parties. 

26 35. Defendant Flora has sold the personal wireless telephone numbers of 

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1 these consumers through online advertisements that tout the consumers' 

2 information as "debt settlement leads" that are "[p]roduced via SMS (text message) 

3 campaign." 

4 Defendant Flora's Acts and Practices Have Caused 

5 Substantial Injury That Cannot Be Reasonably Avoided and Is Not 

6 Outweighed by Countervailing Benefits to Consumers or to Competition 

7 36. As detailed in Paragraphs 19 through 35, above, consumers have 

8 suffered and continue to suffer substantial injury from Defendant Flora's text 

9 message spam. 

10 37, The consumer injury caused by Defendant Flora cannot be reasonably 

11 avoided by consumers. Defendant Flora's text message spam is routinely foisted 

12 upon consumers without their advance knowledge or permission. Many consumers 

13 who have requested that Flora stop sending them text message spam continued to 

14 receive text message spam after making the request 

15 . 38. Defendant Flora's text message spam does not create countervailing 

16 benefits to consumers or to competition that.outweigh the harm caused by his 

17 unlawful activity. 

18 Defendant Flora's Email Spam Campaign 

19 39. Beginning on or about June 1,2010 and continuing thereafter, 

20 Defendant Flora has sent or caused others to send commercial email messages to 

21 consumers' protected computers in order to market and sen his products and 

22 servIces. 

23 40. Defendant Flora "initiates" a commercial email message when he has 

24 either originated or transmitted a message himself or has procured the origination 

25 or transmission of a message through payments or other consideration or 

26 inducements. 

27 41. Defendant Flora is a "sender" with respect to a commercial email 

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ase 8:11-cv-00299-AG -JEM Document 1 Filed 02/22/1.1 Page 9 of 20 Page 10 # 9 

1 message when he has initiated a message and it is his products or services that are 

2 being advertised or promoted by such message. 

3 42 .. Using commercial email messages, Defendant Flora has advertised 

4 and promoted his text message services, offering to transmit large numbers of 

5 commercial text messages to consumers on behalf of third parties in exchange for a 

6 fee. Many of the commercial email messages that Defendant Flora sent had a 

7 "Subject" line that stated: "SMS marketing generates more leads and sales ... ", 

8 and text that stated: 

9 

10 

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Currently able to send out 200k text messages a day; I 

designed, own and operate the marketing system. 

All companies on the internet charge about a penny a 

message, I charge a tiny fraction of that and I do not 

charge for cell phone data because I maintain a 

database of 100 million cell phone opt-in uses. 

My campaigns produce AT LEAST 1 lead per 1000 

messages sent (1/1000), I have seen some campaigns 

that get 1 lead per 300 messages sent (1/300). 

Prices: 

50k messages: $200 

lOOk messages: $300 

Please call me for more information, 

Phil Flora 

714-308-[REDACTED] 

Philfloral@[REDACTED]. 

26 43. Using commercial email messages, Defendant Flora has advertised 

27 and promoted databases of debt leads, loan modification leads, data about 

28 homeowners and their mortgages, and other marketing data. 

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C se 8:11-cv-00299-AG -JEM Document 1 Filed 02/22/11 Page 10 of 20 Page ID #: 0 

1 44. Many of Defendant Flora's commercial email messages fail to include 

2 any notification to recipients of their ability to decline receiving future email 

3 messages from Defendant Flora. 

4 45. Defendant Flora has initiated commercial email messages that failed 

5 to include a valid physical postal address of the sender. 

6 

7 VIOLATIONS OF THE FTC ACT 

8 46. Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), prohibits "unfair or 

9 deceptive acts or practices in or affecting commerce." 

10 47. Acts or practices are unfair under Section 5 of the FTC Act if they 

11 cause substantial injury to consumers that consumers cannot reasonably avoid 

12 themselves and that is not outweighed by countervailing benefits to consumers or 

13 competition. 15 U.S.C. § 45(n). 

14 48. Misrepresentations or deceptive omissions of material fact constitute 

15 deceptive acts or practices prohibited by Section 5(a) of the FTC Act. 

16 Count I 

17 Unfair Transmission of Text Message Spam 

18 49. In numerous instances, Defendant Flora's practice of initiating or 

. 19 procuring the transmission of unauthorized or unsolici~ed commercial electronic 

20 text messages to the mobile telephones and other wireless devices of consumers in 

21 the United States as described in Paragraphs 19-38 has caused or is likely to cause 

22 substantial injury to consumers that consumers cannot reasonably avoid themselves 

23 and that is not outweighed by countervailing benefits to consumers or competition. 

24 50. Therefore, Defendant's acts or practices as described in Paragraph 49 

25 are unfair and violate Section 5 of the FTC Act, 15 U.S.C. §§ 45(a) and 45(n). 

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Count II 

Deceptive Representations 

3 51. In numerous instances, as described in Paragraphs 19-23, Defendant 

4 Flora has represented, directly or indirectly, expressly or by implication that the 

5 website located at the web address "loanmod-gov.net" is a website operated by or 

6 affiliated with a federal, state, or local governmental entity or agency. Such 

7 representations are material to consumers seeking mortgage loan modification 

8 servIces. 

9 52. In truth and in fact the website located at the web address "loanmod10 gov.net" is not a website operated by or affiliated with a federal, state, or local 

11 governmental entity or agency. 

12 53. Therefore, Defendant Flora's representations as set forth in 

13 Paragraph 51 are false and misleading and constitute deceptive acts or practices in 

14 violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a). 

15 

16 VIOLATIONS OF THE CAN-SPAM ACT 

17 54: The CAN-SPAM Act became effective on January 1,2004, and has 

18 since remained in full force and effect. 

19 55. Section 5(a)(3) of the CAN-SPAM Act, 15 U.S.C. § 7704(a)(3) states: 

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It is unlawful for any person to initiate the transmission 

to a protected computer of a commercial electronic mail 

message that does not contain a functioning return 

electronic mail address or other Internet-based 

mechanism, clearly and conspicuously displayed, that-

(i) a recipient may use to submit, in a manner specified in 

the message, a reply electronic mail message or other 

form of Internet-based communication requesting not to 

receive future commercial electronic mail messages from 

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56. 

states: 

that sender at the electronic mail address where the 

message was received; and 

(ii) remains capable of receiving such messages or 

communications for. no less than 30 days after the 

transmission of the original message. 

Section 5(a)(5)(A) of the CAN-SPAM Act, 15 U.S.C. § 7704(a)(5)(A) 

It is unlawful for any person to initiate the transmission 

of any commercial electronic mail message to a protected 

computer unless the message provides: 

(i) clear and conspicuous identification that the message 

is an advertisement or solicitation; 

(ii) clear and conspicuous notice of the opportunity 

under [section 5(a)(3)] to decline to receive further 

commercial electronic mail messages from the sender; 

and 

(iii) a valid physical postal address of the sender. 

19 57. Section 7(a) of the CAN-SPAM Act, 15 U.S.C. § 7706(a), states: 

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[T]his Act shall be enforced by the [FTC] as if the 

violation of this Act were an unfair or deceptive act or 

practice proscribed under section 18(a)(1)(B) of the [FTC 

Act] (15 U.S.C. 57(a)(1)(B». 

Countll 

Failure to Provide Notice of Opt-Out 

26 58. In numerous instances, as described in Paragraphs 39-44, Defendant 

27 Flora has initiated the transmission, to protected computers, of commercial email 

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1 messages that advertise or promote Defendant Flora's products or services, and do 

2 not include a clear and conspicuous notice of the recipient's opportunity to decline 

3 to receive further commercial electronic mail messages from Defendant Flora at 

4 the recipient's electronic mail address. 

5 59. Defendant Flora's acts or practices, as described in Paragraph 58, 

6 violate 15 U.S.c. § 7704(a)(5)(A)(ii), or 15 U.S.C. § 7704(a)(3), or both of those 

7 provIsIons. 

8 

9 

Count IV 

Failure to Include Valid Physical Postal Address 

10 60. In numerous instances, as described in Paragraphs 39-45, Defendant 

11 Flora has initiated the transmission, to protected computers, of commercial email 

12 messages that advertise or promote Defendant Flora's products or services and do 

13 not include the sender's valid physical postal address. 

14 61. Defendant Flora's acts or practices, as described in Paragraph 60, 

15 violate 15 U.S.C. § 7704(a)(5)(A)(iii). 

16 

17 CONSUMER INJURY 

18 62. Consumers have suffered and will continue to suffer substantial injury 

19 as a result of Defendant's violations of the FTC Act and the CAN-Sf AM Act. In 

20 addition, Defendant Flora has been unjustly enriched as a result of his unlawful 

21 acts or practices. Absent injunctive reliefby this Court, Defendant Flora is likely 

22 to continue to injure consumers, reap unjust enrichment, and harm the public 

23 interest. 

24 THIS COURT'S POWER TO GRANT RELIEF 

25 63. Sections 13(b) of the FTC Act, 15 U.S.C. § 53(b), empowers this 

26 Court to grant injunctive and such other relief as the Court may deem appropriate 

27 to halt and redress violations of any provision of law enforced by the FTC. The 

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se 8:11-cv-00299-AG -JEM Document 1 Filed 02/22/11 Page 14 of 20 Page 10 #:14 

1 Court, in the exercise of its equitable jurisdiction, may award ancillary relief, 

2 including restitution, the refund of monies paid, and the disgorgement of ill-gotten 

3 monies, to prevent and remedy any violation of any provision of law enforced by 

4 the FTC. 

5 64. Section 19 of the FTC Act, 15 U.S.C. § 57b, and the CAN-SPAM Act, 

6 15 U.S.C. § 7706 authorize this Court to grant such relief as the Court finds 

7 necessary to redress injury to consumers resulting from Defendant's violations of 

8 the CAN -SP AM Act, including the refund of money. 

9 PRAYER FOR RELIEF 

10 Wherefore, Plaintiff FTC, pursuant to Sections 13(b) and 19 of the FTC Act, 

11 15 U.S.C. §§ 53(b) and 57b, and Section 7(a) of the CAN-SPAM Act, 15 U.S.C. 

12 § 7706 and the Court's own equitable powers, requests that the Court: 

13 A. Award Plaintiff such preliminary injunctive and ancillary relief as 

14 may be necessary to avert the likelihood of consumer injury during the pendency 

15 of this action and to preserve the possibility of effective final relief, including but 

16 not limited to, temporary and preliminary injunctions, including an order freezing 

17 '.lssets; 

18 B. Enter a permanent injunction to prevent future violations of the FTC 

19 Act and the CAN-SP AM Act by Defendant Flora; 

20 C. Award such relief as the Court finds necessary to redress injury to 

21 consumers resulting from Defendant's violations of the FTC Act and the 

22 CAN-SPAM Act, including but not limited to, restitution, the refund of monies 

23 paid, and the disgorgement of ill-gotten monies; and 

24 D. Award Plaintiff the costs of bringing this action, as well as such other 

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

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Respectfully submitted, 

WILLARD TOM 

General Counsel 

Ii1JjkA~ 

Robert G. Schoshinski, DC # 429736 

rschoshinski(a),ftc.gov 

Christine M.lodaro, OH # 0084976 

ctodaro(a),ftc.gov 

Federal'trade Commission 

600 Pennsylvania Avenue, N.W. 

Washington DC 20580 202l326-3219 fSchoShinSki) 202 326-3711 Todaro) 202 326-3395 acsimile 

Local Counsel Ra~ond McKown 

rmckown@,ftc.gov 

CA BarNo. 150975 

Federal Trade Commission 

10877 Wilshire Boulevard, Suite 700 

Los Angeles, CA 90024 

310-824-4325 

310-824-4380 facsimile 

Attorneys for Plaintiff 

FEDERAL TRADE COMMISSION 

15 

10 5