Duping hundreds across the United States into buying public-access Internet kiosk business opportunities based on misleading information has gotten a pair of California groups into trouble with the Federal Trade Commission, the FTC announced April 6.
The FTC’s charges concern two groups and their members who are accused of selling Internet kiosks—free-standing structures housing computers and mechanisms to accept payments and that enable the public use the Internet for a fee from bowling alleys, restaurants, casinos, convenience stores, and other locations. The kiosks were sold at between $4,000–$7,000 each to consumers learning about them through telephone, e-mail, or in-person solicitations from local insurers and financial planners the two groups recruited and trained as sales agents, the FTC said.
One of the two groups, which the FTC called the Belivaqua Entities, based in Escondido, Calif., agreed to drop claims to $1.5 million seized from their bank accounts by the FBI in the case, as well as agreeing not to sell any business or franchise venture in the future, the FTC said.
The FTC is still pursuing the matter against the second group, the Brea-based Castro Entities, with the FTC seeking a temporary restraining order stopping them from doing business and freezing their assets.
The two groups are accused of going from soliciting potential buyers to using deceptive promotional materials to promise them "secured profitable locations, a guaranteed monthly income generated by the kiosk usage," and annual 12 percent or better returns on their investments. The Castro group sold the units and the Bevilaqua group agreed to install, manage, and service the units, the FTC said. And once they bought into the idea, the commission continued, consumers believed they owned Internet kiosk business opportunities at designated locations, and that Bevilaqua would manage the businesses.
But those consumers, the FTC said, turned out to be investing in "[something] like a Ponzi scam, since some purchasers received monthly payments not from the revenue generated by the kiosk usage, but paid to the first purchasers by using the initial payments from new purchasers, leaving the majority of buyers holding worthless interests in nonexistent kiosks."
The Castro group comprised individuals Charles and Elizabeth Castro, Gregory High, and Phillis Watson, as well as formal business names Network Services Depot, Network Services Marketing, Net Depot, Network Services Distribution, and Sunbelt Marketing. The Bevilaqua group comprised Edward Bevilaqua, Bikini Vending Corp., 360 Wireless Group, and MyMart Inc.
The FTC also charges that the two groups knowingly provided deceptive promotional materials to independent agents, which helped those agents mislead consumers, and failing to provide consumers with required disclosure documents as well as failing to have a reasonable basis or documented substantiation for any earnings claims.
The Bevilaqua settlement included an $18 million judgment suspended due to Edward Bevilaqua's inability to pay, the FTC said, but it would become due at once if he is found to have misrepresented his own financial condition, the commission added.
