Defendants Billed Small Businesses and Nonprofits for Unwanted Merchandise

The Federal Trade Commission has obtained court orders against two Maryland-based office supply operations charged with tricking small businesses, non-profit organizations, and other consumers into paying for overpriced office and cleaning supplies they never ordered. The orders ban the companies and their principals from telemarketing office and cleaning supplies.

Billing for unordered merchandise is against the law, and consumers are under no obligation to return or pay for items they did not order.

According to the FTC, the Lighting X-Change defendants were part of a telemarketing scheme that operated under various names, including Lighting X-Change, American Industrial Enterprises, LMS Lighting and Maintenance Solutions, Easton Chemical Supply, and Werner International Enterprises. The Standard Industries defendants participated in a different telemarketing scheme that used names such as Midway Industries, Commercial Industries, National Lighting & Maintenance, State Power & Lighting, Standard Industries, Essex Industries, Johnson Distributing, Hansen Supply, Environmental Industries, and Mid Atlantic Industries.

The FTC charged both enterprises with engaging in similar deceptive conduct. When calling consumers, telemarketers did not disclose that they were making a sales call, falsely claimed to have done business with the consumers before, and falsely claimed they wanted to send consumers a free sample or catalog. Then they sent light bulbs and cleaning supplies without having disclosed any price, and later, sent an invoice for an amount far above the market price for such items. Businesses that paid, unaware that the merchandise was not ordered, became targets for future shipments of unordered merchandise and invoices seeking payment.

All of the defendants were charged with violating the FTC Act, the Telemarketing Sales Rule, and the Unordered Merchandise Statute. Under the stipulated final orders, they are banned from telemarketing nondurable office or cleaning supplies. In selling any other good or service, by any means, they are prohibited from misrepresenting that they have done business with consumers, that they would only send a free sample or catalog, or that consumers ordered the goods sent.

The Lighting X-Change orders also prohibit Lighting X-Change Company LLC, Vincent StapletonJohn Tharrington, and Benjamin Cox, when selling any other good or service, from misrepresenting any other fact likely to affect a consumer’s buying decision.

The Standard Industries orders also prohibit Eric A. EpsteinAndrew J. StaffordAlan M. Landsman and Brandon D. Riggs, in the sale of any other good or service, from misrepresenting any material terms, conditions, or characteristics regarding the goods and services. In a similar order, the court banned from telemarketing all of the companies named in the Standard Industries action.

In both cases, the orders also prohibit the defendants from violating the Telemarketing Sales Rule and the Unordered Merchandise Statute, and from profiting from consumers’ personal information and failing to dispose of it properly.

The Lighting X-Change orders impose a judgment of more than $6.2 million that will be suspended based on the defendants’ inability to pay. The full judgment will become due immediately if defendants are found to have misrepresented their financial condition. In addition, Cox and a company he used to remove funds from the telemarketing enterprise, TBC Companies Inc., must pay $720,000 as part of their settlement.

Each of the Standard Industries orders imposes a judgment of more than $58 million (except for Landsman, whose judgment is $44 million). All of the judgments are suspended based on the defendants’ inability to pay. The full judgment will become due against any defendant found to have misrepresented his financial condition.

Under the orders, a court-appointed receiver has taken over of all of the assets of the Standard Industries companies and many of Epstein’s assets, altogether valued at more than $5 million. The Commission intends to return funds paid by Cox, and assets held by the Standard Industries receiver, to victims of the fraudulent enterprises.

The Commission vote authorizing the staff to file the stipulated final orders with Stapleton and Lighting X-Change, and with Tharrington, was 3-0. The U.S. District Court for the District of Maryland entered these orders on December 22, 2016. The Commission vote authorizing staff to file the final order with Cox and TBC Companies was 2-0. The Maryland U.S. District Court entered the order on June 8, 2017.

The Commission votes authorizing staff to file the stipulated final orders with Epstein, Stafford, Landsman and Riggs were 3-0. The U.S. District Court for the District of Maryland entered the Epstein, Landsman, and Riggs orders on June 6, 2016. The court entered the Stafford order on August 4, 2016, and it entered the order against all of the Standard Industries companies on August 31, 2016.

NOTE: Stipulated final orders have the force of law when approved and signed by the District Court judge