Stars, stripes – and scams
Between the picture of the President and Vice-President standing in front of the American flag and the references to government funds to stabilize the economy, it’s understandable that people who signed up for the service advertised on the Grant Connect website thought they were on their way to landing a grant. Promoters even described Grant Connect as “a unique, consumer-friendly US government grant program that delivers all of the tools for the consumer to search multiple databases, write grant proposals, and deliver polished plans. . .”
Not so, alleged the FTC in a lawsuit against Juliette Kimoto, Johnnie Smith, and others behind the Grant Connect operation. The FTC also charged the defendants with making misleading claims for other products, including First Plus Platinum, an online shopping club represented to be a line of credit; One Hour Wealth Builder, a purported work-at-home business opportunity; and Acai Total Burn, a purported weight loss pill the defendants falsely claimed had been endorsed by Oprah Winfrey and Rachael Ray.
But deceptive product claims were just the start. The FTC also alleged that the defendants signed people up for negative option plans and billed their credit cards month after month for the grant service — and other unrelated products — without adequately disclosing the nature of the transaction.
How did the operation work? According to the FTC, the defendants advertised that people could buy their service for a “processing fee” of between 99 cents and $2.78. But buried in a complicated array of pop-ups and fineprint blocks of “terms and conditions” was the fact that the nominal fee covered only a seven-day trial membership. After that, according to the complaint, the defendants billed people $39.95 each month for Grant Connect — plus hefty additional monthly fees for things like ID theft prevention services, legal services, and “SmartHealth Gold medical and lifestyle benefits.”
The FTC says that many consumers didn’t know they’d been enrolled in these pricey negative option plans until they opened their credit card bills and saw the unauthorized charges. The complaint alleges that the defendants’ course of conduct violated the FTC Act, the Electronic Fund Transfer Act, and Reg E.
Settlements with Juliette Kimoto, Johnnie Smith, and four companies Ms. Kimoto owned permanently bar them from marketing products and services similar to those they allegedly used to deceive consumers — and forbids the use of testimonials in future ads. The settlements also impose a judgment of close to $30 million, which will be suspended upon payment of certain assets. In Ms. Kimoto’s case, that includes numerous bank accounts, a 7-carat princess cut diamond, Rolex watches, firearms, a Yamaha piano, her financial interest in a play, and a 1967 Chevy Camaro.
The main messages for businesses:
• Consumers — and the FTC — don’t respond positively to negative options that aren’t clearly disclosed. Before signing customers up for any offer that involves periodic charges to their credit cards, be careful to spell out the specifics and get their affirmative OK. In this instance, silence isn’t golden.
• The terms of a trial offer can be tougher to convey than you might imagine. If the lower advertised price covers just a limited period, the onus is on you to clearly and conspicuously explain the details of the deal before buyers sign up.
• Think twice before using words or imagery that consumers could reasonably understand to convey an affiliation with the government or easy access to government grants. It’s unwise to promote misleading short-cuts to financial success, especially in tough economic times.