Opinion ID: 2718331
Heading Depth: 3
Heading Rank: 1

Heading: Line of Credit Scheme

Text: Kimoto does not challenge his individual liability for injunctive relief with respect to the Line of Credit scheme. Further, the government’s evidence establishes that Kimoto possessed the requisite scienter to be personally liable for restitution because he either knew that Vertek was engaged in deceptive advertising in connection with the Line of Credit scheme or was recklessly indifferent as to that fact. Publ’g Clearing House, 104 F.3d at 1171. Kimoto arranged Vertek’s entire operation. He organized the companies, recruited personnel who had been involved in his prior deceptive marketing schemes, and directed Vertek’s activities. This alone is enough to conclude that he had knowledge sufficient to support personal liability for restitution damages. Id. (“The extent of an individual’s involvement in a fraudulent scheme alone is sufficient to establish the requisite knowledge for personal restitutionary liability.”). Additionally, Kimoto declared that he thought it was “important for [him] to understand and know [the language on the deceptive landing pages], because that was [his] job to take it out to the affiliate marketer.” In light of Kimoto’s prior troubles with the FTC, which also involved inadequately disclosed “upsells,” his level of participation in the scheme and knowledge of deceptive web pages shows that he knew about, or was recklessly indifferent as to FTC V. KIMOTO 15 Vertek’s deceptive practices. See Publ’g Clearing House, 104 F.3d at 1171 (holding an individual liable where she filed a business license at the direction of someone facing criminal charges due to deceptive telemarketing, and had worked at a predecessor company that had been shut down due to a fraud investigation); FTC v. Amy Travel, 875 F.2d, 564, 574–75 (7th Cir. 1989) (holding individuals liable where they wrote deceptive scripts and managed the day-to-day activities of the corporation). Kimoto argues that the FTC has not established the requisite scienter because he sought the advice of counsel, and was imprisoned at the time Vertek received many of the consumer complaints and chargebacks related to Global Gold. Kimoto is mistaken on both counts. It is well established that “reliance on advice of counsel [is] not a valid defense on the question of knowledge” required for individual liability. FTC v. Cyberspace.Com, LLC, 453 F.3d 1196, 1202 (9th Cir. 2006) (quoting Amy Travel, 875 F.2d at 575). Nor is it relevant that many of the consumer complaints and chargebacks—which can constitute evidence of an individual’s knowledge—were received after Kimoto was incarcerated. As previously discussed, Kimoto was well aware of the fraudulent nature of the schemes before he was imprisoned. The fact that he did not receive additional information that would have heightened his knowledge of Vertek’s FTC Act violations does not absolve him.