Source: http://chapter11cases.com/2015/08/16/new-bankruptcy-opinion-federal-trade-commission-v-first-time-credit-solution-corp-dist-court-cd-california-2015-2/
Timestamp: 2017-12-13 01:55:22
Document Index: 529308821

Matched Legal Cases: ['§ 45', '§ 1679', '§ 1746', '§ 523', '§ 157', '§ 523', '§ 157', '§ 1409', '§ 41', '§ 45', '§ 1679', '§ 1679', '§ 53', '§ 45', '§ 1679', '§ 1679', '§ 1679', '§ 1679', '§ 1679', '§ 45', '§ 1679', '§ 45', '§ 45', '§ 1679', '§ 1679', '§ 1679', '§ 1679', '§ 45', '§ 523', '§ 523', '§ 1961', '§ 523', '§ 157', '§ 523', '§ 157', '§ 523', '§ 523', '§ 502']

Case No. CV15-01921 DDP (PJWx).
JONATHAN E. NUECHTERLEIN, General Counsel, DOTAN WEINMAN, RHONDA PERKINS, Federal Trade Commission, Washington, DC., STACY R. PROCTER, (Local Counsel), Federal Trade Commission, Los Angeles, CA, Attorneys for Plaintiff, FEDERAL TRADE COMMISSION.
AMENDED STIPULATED ORDER FOR PERMANENT INJUNCTION AND MONETARY JUDGMENT AS TO GUILLERMO LEYES [CLOSED]
2. The Complaint charges that Defendant Leyes participated in deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), and unlawful practices in violation of Section 404 of CROA, 15 U.S.C. § 1679b.
1. “Corporate Defendant” means First Time Credit Solution, Corp., also d/b/a FTC Credit Solutions, 1st Consumer Credit USA, and Doctor De Credito, and its successors and assigns.
D. Any submission to the Commission required by this Order to be sworn under penalty of perjury must be true and accurate and comply with 28 U.S.C. § 1746, such as by concluding: “I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct. Executed on: ___” and supplying the date, signatory’s full name, title (if applicable), and signature.
KIMBERLY L. NELSON (VA Bar No. 47224)
600 Pennsylvania Ave., NW, CC-9528
(202) 326-3304 (Nelson)
(202) 326-3197 (fax)
STACY R. PROCTER, CA Bar No. 221078
(310) 824-4343 (tel.)
In re GUILLERMO NELSON LEYES, Case No. 1:15-bk-10497-MB
FEDERAL TRADE COMMISSION, Adv. No. ____
Plaintiff, COMPLAINT FOR
v. NONDISCHARGEABILITY OF DEBT
OWED TO FEDERAL TRADE
GUILLERMO NELSON LEYES, COMMISSION
Defendant. Hon. Martin R. Barash
The Federal Trade Commission (“FTC” or “Commission”) brings this adversary proceeding pursuant to 11 U.S.C. § 523(a)(2)(A) and (c). seeking an order determining that a judgment obtained by the Commission against Defendant Guillermo Nelson Leyes (the “Debtor” or “Leyes”) is excepted from discharge. nondischargeability complaint
1. This Court has subject matter jurisdiction pursuant to 28 U.S.C. §§ 157 and 1334, and 11 U.S.C. § 523. This Adversary Proceeding is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(I).
2. Venue in the Central District of California is proper under 28 U.S.C. § 1409(a).
3. This Adversary Proceeding relates to In re Guillermo Nelson Leyes, No. 1:15-bk-10497-MB (Bankr. CD. Cal.) now pending in this Court (the “Bankruptcy Case”). The FTC is a creditor with a general unsecured claim against the Debtor pursuant to a Stipulated Order for Permanent Injunction and Monetary Judgment As to Guillermo Leyes (the “Stipulated Judgment”) entered in the United States District Court for the Central District of California in the case styled Federal Trade Commission v. First Time Credit Solution, Corp., et at, Case No. CV15-01921-DDP (PJWx) (the “Enforcement Action”). A copy of the Stipulated Judgment is attached hereto and incorporated as Exhibit 1.
4. The Stipulated Judgment includes equitable monetary relief in favor of the FTC and against the Debtor and certain of his co-defendants, jointly and severally, in the amount of $2,400,000.00. Ex. 1, Section III. As part of the Stipulated Judgment, Debtor further agreed that the Stipulated Judgment was not dischargeable in his pending Bankruptcy Case. [1] See Ex. 1, Section IV.
5. Plaintiff FTC is an independent agency of the United States Government created by statute. 15 U.S.C. §§ 41-58. The Commission is charged with, inter alia, enforcement of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), which prohibits unfair or deceptive acts or practices in or affecting commerce. The Commission also enforces Section 404(a) of CROA, 15 U.S.C. § 1679b(a), which prohibits the use of untrue or misleading statements to induce the purchase of credit repair services, and Section 404(b) of CROA, 15 U.S.C. § 1679b(b), which prohibits credit service organizations from charging or receiving money or other valuable consideration for the performance of credit repair services before such services are fully performed.
6. The FTC is authorized to initiate federal district court proceedings, by its own attorneys, to enjoin violations of the FTC Act and CROA, and to secure such equitable relief as maybe appropriate in each case, including rescission or reformation of contracts, restitution, the refund of monies paid, and the disgorgement of ill-gotten monies. 15 U.S.C. §§ 53(b), 56(a)(2)(A), 56(a)(2)(B), 57b and 1679h(b).
7. Leyes is the debtor in the Bankruptcy Case now pending before this Court.
COURSE OF PROCEEDINGS AND DEFENDANT’S CONDUCT
GIVING RISE TO THE NONDISCHARGEABLE DEBT
8. Enforcement Action Defendant First Time Credit Solution, Corp. (“FTC Credit”) does business as FTC Credit Solutions, 1st Consumer Credit USA, and Doctor De Credito, and its principal place of business is at 4255 E. Florence Avenue, Bell, California. On its websites, including ftccreditsolutions.org. FTC Credit refers to the Florence Avenue office as the “main office,” and also claims to have offices in San Francisco, New York, Dallas, Miami, and Chicago.
9. Leyes is the Marketing Director of FTC Credit. He is or was, during the period relevant to this Complaint, a signatory for the company’s bank account. Defendant Leyes has personally promoted the services of FTC Credit on the radio and on videos posted on the Internet, and his image is displayed prominently on company websites and in printed advertisements. At all times material to this Complaint, acting alone or in concert with others, Defendant Leyes has formulated, directed, controlled, had the authority to control, or participated in the acts and practices of FTC Credit, including the acts and practices set forth in this Complaint.
10. The remaining defendants in the Enforcement Action are: Jimena Perez (Chief Executive Officer and Secretary of FTC Credit as well as a Director of the company); Maria Bernal (General Manager and VP Sales Accountant for FTC Credit); and Fermin Campos (Chief Financial Officer of FTC Credit). Leyes, FTC Credit and the remaining co-defendants are referred to herein as the “Enforcement Action Defendants.”
A. The Debtor’s and His Co-Defendants’ Deceptive Business Practices
11. Since at least January 2013, the Enforcement Action Defendants have deceptively marketed, advertised, promoted, offered to sell, and sold credit repair services to consumers, preying primarily on Spanish-speaking consumers with burdensome debts and troubled credit histories.
12. Defendants market their services through Internet websites — including ftccreditsolutions.org, ftccreditsolutions.com, drdecredito.com, and doctordecredito.org, printed advertisements, social media, and on the radio.
13. In their advertising and in verbal communications with consumers, the Enforcement Action Defendants represent that they are affiliated or licensed with the Commission, while using the Commission’s name and a seal that is substantially similar to the Commission’s official seal.
14. The Enforcement Action Defendants, however, are neither affiliated with nor licensed by the Commission.
15. The Enforcement Action Defendants offer credit repair services to consumers, representing that their purported affiliation with the Commission, among other false credentials, allows them to lawfully remove negative information — such as late payments, defaults, foreclosures and bankruptcies — from consumers’ credit reports, even when such information is accurate and non-obsolete.
16. A credit repair service, however, cannot lawfully remove accurate and nonobsolete negative information from a consumer’s credit report.
17. In addition to promising the lawful removal of negative information from credit reports, the Enforcement Action Defendants also “guarantee” consumers a credit score of 700 or more within six months or less, regardless of the consumer’s current credit score or credit history.
18. For example, on February 12, 2015, Leyes made the following representations while advertising the company’s services on the radio station KBLA 1580 am (translated from Spanish):
Fourteen years working in banking tells you that I can help you. I was the first to come here on the radio, bringing you what is called credit restructuring. And what many ask, how are we going to remove a bankruptcy? This is impossible. How are you going to remove it? They have had to hold their tongues and say, well, we don’t know how he does it. And I am not going to tell them either. Because to do it I have not rested my brain, to do it I studied and to do it I have a license direct[ly] from the FTC, the Federal Trade Commission.
We will directly ask you, when you sit with Maria Bernal, or Maricarmen Caballero, or Jimena [Lopez] my daughter, to directly ask the FTC to immediately send us your complete credit history, from the moment you had Social Security, Okay? Like that we use the good and the bad. In this way we will completely restructure your credit and in . . . no more, sorry, than 90, maximum 120 days, you will come out with a score of 700, guaranteed in writing.
19. Likewise, on February 23, 2015, Enforcement Action Defendant Bernal made the following representations during an undercover call with a Commission investigator posing as a consumer seeking to improve her credit (translated from Spanish):
DEFENDANT BERN AL: For those people who have gone bankrupt, like you, the bankruptcy has to be deleted and each of the accounts has to be put into a positive state, so that they don’t keep on affecting you badly and so that you can reestablish your credit. . .
INVESTIGATOR: Okay. And how, and how — how do I get — I mean, how, how are they deleted? Sorry, that — How do you delet —? DEFENDANT BERNAL: We work under — No, no, no, no, no. Don’t worry, this is one of the questions that I need . . . to explain it to you. INVESTIGATOR: That’s right.
DEFENDANT BERNAL: Okay, look. We work under the Federal Trade Commission, which is a law that was signed by the President in 2010, so that all the negative, all the stains can be deleted. Last year around August, he signed a law to delete student loans . . . and the hospital accounts, people always have them. We apply and use all of this. You won’t have to do absolutely anything . . . Look, let me explain something to you. We have — we have more than 7000 customers. You can check us out on our website. You can see all of this, all the peo[ple], there you can see the people to whom we have deleted, that we have deleted the bankruptcies for too. . .
INVESTIGATOR: Okay, and how long more or less, more or less does this take to — I mean, to, to, so that I can start to get?
BERNAL: It’s a maximum of six months. That’s the maximum, but there are people that have it completed in 60 to 90 days.
20. The Enforcement Action Defendants typically perform their credit repair services by drafting letters to creditors and the major consumer reporting agencies, Equifax, Experian and TransUnion (“dispute letters”).
21. The dispute letters challenge the accuracy of negative information appearing on the credit reports of the Enforcement Action Defendants’ customers.
22. The dispute letters often do not mention the Enforcement Action Defendants or indicate that the Enforcement Action Defendants drafted them. Instead, the Enforcement Action Defendants draft the letters in English to appear as if they were drafted by their customers.
23. The dispute letters often contain untruthful information, including fabricated disputes of negative information on the credit reports of the Enforcement Action Defendants’ customers that is accurate or non-obsolete.
24. The Enforcement Action Defendants unlawfully charge and collect hundreds of dollars from their customers in advance of full performance of the credit repair services they promise to their customers.
25. In numerous instances, in connection with the advertising, marketing, promotion, offering for sale, or sale of credit repair services, the Enforcement Action Defendants have represented, expressly or by implication, that they are affiliated or licensed with the Commission.
26. Ill truth and in fact, the Enforcement Action Defendants have never been affiliated or licensed with the Commission.
27. In numerous instances, in connection with the advertising, marketing, promotion, offering for sale, or sale of credit repair services, the Enforcement Action Defendants have represented, expressly or by implication, that they can lawfully remove negative information, including accurate and non-obsolete information, from consumers’ credit reports.
28. In truth and in fact, in many of these instances, the Enforcement Action Defendants cannot lawfully remove negative information, including accurate and non-obsolete information, from consumers’ credit reports.
29. In numerous instances, in connection with the advertising, marketing, promotion, offering for sale, or sale of credit repair services, the Enforcement Action Defendants have represented, expressly or by implication, that they can guarantee consumers a credit score of 700 or higher within six months or less.
30. In truth and in fact, in many of these instances, the Enforcement Action Defendants cannot guarantee consumers a credit score of 700 or higher within six months or less.
31. Enforcement Action Defendants’ representations or deceptive omissions of material fact, as set forth in paragraphs 8 through 30, constitute deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).
B. The Enforcement Action Defendants’ Conduct Violated CROA
32. Section 402(b) of CROA, 15 U.S.C. § 1679(b), explains that the purposes of the CROA are:
33. Section 404(a)(3) of CROA, 15 U.S.C. § 1679b(a)(3), provides that “[n]o person may . . . make or use any untrue or misleading representation of the services of the credit repair organization.”
34. Section of 404(b) of CROA, 15 U.S.C. § 1679b(b), prohibits credit repair organizations from charging or receiving any money or other valuable consideration for the performance of any service which the credit repair organization has agreed to perform before such service is fully performed.
35. The Enforcement Action Defendants fall under the definition of “credit repair organization,” as the term is defined in Section 403(3) of CROA, 15 U.S.C. § 1679a(3):
[A]ny person who uses any instrumentality of interstate commerce or the mails to sell, provide, or perform (or represent that such person can or will sell, provide, or perform) any service, in return for the payment of money or other valuable consideration, for the express or implied purpose of. . . improving any consumer’s credit record, credit history, or credit rating.
36. Pursuant to Section 410(b)(1) of CROA, 15 U.S.C. § 1679h(b)(1), any violation of any requirement or prohibition of CROA constitutes an unfair or deceptive act or practice in commerce in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).
37. Pursuant to Section 410(b)(2) of CROA, 15 U. S. C. § 1679h(b)(2), all functions and powers of the Commission under the FTC Act are available to the Commission to enforce compliance with CROA in the same manner as if the violation had been a violation of any Commission trade regulation rule.
38. Enforcement Action Defendants’ representations and conduct, as set forth in paragraphs 8 through 30, constitute violations of CROA, which means they are also deceptive acts or practices that violate Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).
(NONDISCHARGEABILITY OF STIPULATED JUDGMENT)
39. The Commission repeats and realleges the allegations in || 1 through 38.
40. In numerous instances, in connection with the advertising, marketing, promotion, offering for sale, or sale of credit repair services, Debtor and the Enforcement Action Defendants have represented, expressly or by implication:
a. that they are affiliated or licensed with the Commission;
b. that they can lawfully remove negative information, including accurate and non-obsolete information, from consumers’ credit reports; or
c. that they can guarantee consumers a credit score of 700 or higher within six months or less.
41. In truth and in fact, in many of these instances, the Enforcement Action Defendants:
a. have never been affiliated or licensed with the Commission;
b. cannot lawfully remove negative information, including accurate and nonobsolete information, from consumers’ credit reports; or
c. cannot guarantee consumers a credit score of 700 or higher within six months or less.
42. Debtor’s representations and failures to disclose or disclose adequately, as outlined in Paragraphs 8-30 and 40-41, are false and misleading and constitute deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).
43. In numerous instances, in connection with the advertising, marketing, promotion, offering for sale, or sale of services to consumers by a credit repair organization, as that term is defined in Section 403(3) of CROA, 15 U.S.C. § 1679a(3), Debtor and the Enforcement Action Defendants have made untrue or misleading representations to consumers, including that the Enforcement Action Defendants:
a. are affiliated or licensed with the Commission;
b. can lawfully remove negative information, including accurate and nonobsolete information, from consumers’ credit reports; and
c. can guarantee consumers a credit score of 700 or above within six months or less.
44. In numerous instances, in connection with the advertising, marketing, promotion, offering for sale, or sale of services to consumers by a credit repair organization, as that term is defined in Section 403(3) of CROA, 15 U.S.C. § 1679a(3), the Enforcement Action Defendants have charged or received money or other valuable consideration for the performance of credit repair services that the Enforcement Action Defendants have agreed to perform before such services were fully performed.
45. Debtor’s and the Enforcement Action Defendants’ acts or practices described in Paragraphs 43 and 44 of this Complaint violate Sections 404(a)(3) and 404(b) of CROA, 15 U.S.C. §§ 1679b(a)(3) and 1679b(b).
46. Pursuant to Section 410(b)(1) of CROA, 15 U.S.C. § 1679h(b)(1), any violation of any requirement or prohibition of CROA constitutes an unfair or deceptive act or practice in commerce in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).
47. Debtor’s activities described above were conducted with knowledge that he was engaged in a fraudulent scheme and with knowledge of the falsity of the representations in the course of that scheme, or with reckless disregard of the truth or falsity of the representations.
48. Debtor injured consumers by knowingly engaging in a fraudulent scheme and knowingly making false representations to consumers or omitting material information from consumers. These false representations and false pretenses were material to consumers in the course of deciding to purchase the services offered by the Debtor and his co-defendants. Consumers’ reliance on the Debtor’s representations was justifiable.
49. The total amount of money the Debtor and certain of his Enforcement Action codefendants obtained from consumers by such false pretenses, false representations or actual fraud is at least $2,400,000.00, the monetary portion of the Stipulated Judgment against the Debtor in the FTC’s Enforcement Action.
50. Consequently, the Debtor’s judgment debt to the FTC is one for money, property, or services obtained by false pretenses, false representations or actual fraud, and is excepted from discharge pursuant to 11 U.S.C. § 523(a)(2)(A).
WHEREFORE, Plaintiff FTC requests that the Court:
(a) Determine that the monetary portion of Stipulated Judgment against Debtor in the Enforcement Action in the amount of $2,400,000.00 is nondischargeable pursuant to 11 U.S.C. § 523(a)(2)(A);
(b) Enter judgment against the Debtor in the amount of $2,400,000.00, plus applicable interest in accordance with 28 U.S.C. § 1961, in accordance with Section IV of the Stipulated Judgment; and
(c) Grant the FTC such other and further relief as this case may require and the Court deems just and proper.
Dated: ________, 2015 Respectfully submitted,
In re GUILLERMO NELSON LEYES, Case No. 1:15-bk-10497-AA
Plaintiff, the Federal Trade Commission (“FTC” or “Commission”) filed a Complaint to Determine Nondischargeability of Debt under Section 523 of the Bankruptcy Code, 11 U.S.C. § 523 (the “Complaint”) against Debtor Guillermo Nelson Leyes (“Debtor” or “Leyes”). Debtor waives service of the Summons and Complaint, and agrees to entry of a Stipulated Judgment for Nondischargeability, as set forth herein.
1. This Court has subject matter jurisdiction over this action pursuant to 28 U.S.C. §§ 157 and 1334, and 11 U.S.C. § 523.
3. This Adversary Proceeding is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(I).
4. This Adversary Proceeding relates to In re Guillermo Nelson Leyes, Case No. 15-10497 (Bankr. CD. Cal.) now pending in this Court (“Bankruptcy Case”). The FTC is a creditor with a general unsecured claim against the Debtor pursuant to a Stipulated Order for Permanent Injunction and Monetary Judgment As to Guillermo Leyes (the “Stipulated Judgment”) entered in the United States District Court for the Central District of California in the case styled Federal Trade Commission v. First Time Credit Solution, Corp., et at, Case No. CV15-01921-DDP (PJWx) (the “Enforcement Action”). [1]
5. The Stipulated Judgment includes equitable monetary relief in favor of the FTC and against the Debtor and certain of his co-defendants, jointly and severally, in the amount of $2,400,000.00. Stipulated Judgment, Section III.
6. In Section IV of the Stipulated Judgment, the Debtor agreed that the Stipulated Judgment is nondischargeable in his pending bankruptcy case pursuant to 11 U.S.C. § 523(a)(2)(A), and agreed to execute this Stipulated Judgment for Nondischargeability of Debt.
7. Judgment is hereby entered in favor of the Commission and against the Debtor/Defendant, Guillermo Nelson Leyes, determining that the Stipulated Judgment entered in the Enforcement Action, in the amount of $2,400,000.00 is nondischargeable pursuant to 11 U.S.C. § 523(a)(2)(A).
8. All other provisions of the Stipulated Judgment in the Enforcement Action, including the injunctive provisions, remain in full force and effect.
9. Undersigned counsel of record in this action represent that they are fully authorized to execute and enter into this Stipulated Judgment for Nondischargeability on behalf of the respective parties whom they represent and acknowledge they have authority to bind the parties in the Adversary Proceeding.
Dated:______________________________ ____________________________________
STIPULATED AND AGREED TO AND SUBMITTED BY:
Date: 5/7/2015 Date: _______, 2015
_________________________ /s/ Kimberly L. Nelson
Guillermo Nelson Leyes Kimberly L. Nelson (VA Bar No. 47224)
Mailstop CC-9528
Telephone: (202) 326-3304
Facsimile: (202) 326-3197
Attorneys for Plaintiff, Federal Trade
[1] Section IV of the Stipulated Judgment provides:
3. To the allowance of a general unsecured claim in the Leyes Bankruptcy Case under Section 502 of the Bankruptcy Code, 11 U.S.C. § 502, in favor of the Commission in the amount of $2,400,000,000, less the sum of any payments previously made, and that the Commission is entitled to participate in any distributions made to creditors in the Leyes Bankruptcy Case, on account of the Commission’s filed, general unsecured claim.
[1] Those defendants to the Enforcement Action that were not named in the Stipulated Judgment between the FTC and the Debtor are subject to separate orders.
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