Developments in the FTC v Innovative Marketing et al lawsuit
"We sometimes forget that Justice wields a sword..."
My regular readers will recall that the temporary restraining order won by the FTC expired on 12 December 2008 at 6.15pm, and that each individual, corporate and relief defendant was ordered to appear before the Court at 3.30pm on that same day to show due cause why a Preliminary Injunction should not be entered. Well, guess what, they didn't turn up at the Court hearing, and they have failed to comply with the requirements of the temporary restraining order.
Jain apparently didn't attend court because his assets are frozen and he can't spend any money. Reno made a similar excuse. The Judge's reaction to the claims is an absolute gem. He said "I understand. The defendants are too culpable to come here to the courtroom.".
Judge Richard D Bennett is also quoted as saying "People are hiding out. ... The time for hiding out will be over as of 4 o'clock next Wednesday.", and promised to issue arrest warrants if his orders are further ignored.
An "Order to show cause why defendants Sam Jain, Kristy Ross, James Reno, Bytehosting Internet Services LLC, Marc D'Souza and Innovative Marketing should not be held in contempt of court" was issued on the 12th of December. The Order requires the defendants to "submit to this Court all evidence, if any, demonstrating why they should not be held in contempt of court for failure to comply with the Temporary Restraining Order entered by this Court on December 2, 2008.".
The plaintiff's memorandum of points and authorities in support of its motion for the above order notes that:
- None of the defendants had complied with the order to produce business records to the FTC by December 6, 2008.
- The defendants had failed to provide an accounting of their assets to the FTC.
- The defendants had ignored the Court's order to cease marketing their products through domain names registered with false information, and appear to have taken no steps to halt their deceptive advertising. They have also failed to stop using websites registered with false contact information.
An interesting piece of information drawn from the memorandum of points and authorities is that Sam Jain and Innovative Marketing were served when a Jack Palladino accepted service on behalf of Jain and Innovative as Jain and Innovative's attorney. Service was effected at a "luxury condominium property" in San Francisco that is rented out to a "Jack Palladino, Esq" on behalf of Innovative Marketing since 19 May 2008. Sam Jain has been listed on the homeowner information form as the resident of that unit since 19 May 2008.
A preliminary injunction has also been issued in the proceedings. Some of the terms of this injunction are:
- The defendants are preliminarily restrained and enjoined from directly or indirectly misrepresenting, expressly or by implication, that: (1) a computer scan or any other type of remove or local computer analysis had been performed... (2) security or privacy problems have been detected on a computer.
- The defendants are preliminarily restrained and enjoined from concealing or attempting to concealing their identity by, among other things: (A) using any domain names that have been registered using false or incomplete information; and (B) claiming that they place advertisements on behalf of, or otherwise represent, individuals or entities, unless they possess written authorisation to represent such individuals or entities.
- The defendants, any party hosting webpages or websites for any defendant, any domain registrar who has provided domain name registration services for any defendant or pursuant to any agreement between any defendant and third party, are preliminarily restrained and enjoined from failing to: (A) immediately take whatever steps may be necessary to ensure that webpages or websites operated, in whole or in part, by the defendants cannot be accessed by the public; and (B) prevent the destruction or erasure of the webpages or websites operated, in whole or in part, by the defendants, preserving such documents in the format in which they are currently maintained, and prevent the destruction or erasure of all records relating to the defendants.
There is also a comprehensive Asset Freeze in effect, binding the defendants and relief defendant, and an order that each individual defendant, the relief defendant, and each corporate defendant shall serve upon counsel for the FTC, no later than (3) business days after receiving notice of the Order, completed financial statements, verified under oath and accurate as of the date of entry of the Order.
There is a order binding any financial or brokerage institution, business entity of person served with a copy of the Order that holds, controls or maintains custody of any account or asset (or has held, controlled or maintained custody.
There is a "foreign asset accounting" order binding the defendants, a "no interference" order, a "preservation of records" order, a "record keeping/business operations" order to make sure that they continue generating business records, an order allowing for commencement of discovery, and an order to give the FTC access to business records. Not only that, there is an "identification of affiliates" order (getmosales.com immediately springs to mind >grin<) and an order to identify products and web sites, and a "distribution of order" order - all in all, a pretty comprehensive result :)
So, what's next... we wait to see if arrest warrants are issued... I'm loving this, can you tell? :)