A federal court on Tuesday halted a now-defunct Scottsdale company and six other corporations elsewhere that scammed investors out of $15 million.
“Lots of money came in and lots of money went out,” said Deborah Dawson, an attorney with the Federal Trade Commission’s Dallas office.
Four Florida residents and one Tennessee resident are named in the FTC’s lawsuit against seven companies the defendants operated. The suit alleges they ran an illegal business opportunity scheme, using deceptive practices to market prepaid telephone calling cards, business franchises and Internet kiosks.
A federal district court in Tennessee on Tuesday granted an injunction against Florida residents David Cutler, Paul Bonnallie, Tisa Christina Spraul, Michael Hatch and Tennessee resident Cindy Gannon, documents state.
In addition, the court made permanent a restraining order halting the seven companies from doing business.
Those companies include: First Choice Terminal, which had an office in Scottsdale and one in Louisiana; National Event Coordinators, RPM Marketing Group and OneSet-Price, all based in Florida; B&C Ventures, based in Nevada; and Internet Marketing Group, based in Tennessee, court records state.
Attorneys representing the defendants did not return calls seeking comment.
Dawson said although the Scottsdale office played a “nominal role” in what she described as a Ponzi-like marketing scheme, that office was under the control of Cutler and Bonnallie in Florida.
Arizona Corporation Commission records indicate the Scottsdale office was dissolved in April 2004. The company failed to file annual reports with the commission in 2005 and 2006, plus the company had issued a bad check to the commission when it sought to renew its corporate status, commission records show.
The Scottsdale office was located in a suite in the 7300 block of Butherus Drive, records state.
Dawson said the FTC investigation started in October 2003 when the agency began fielding complaints from people who said they were getting automated telemarketing calls even though they had signed on to the National Do Not Call Registry.
The automated telemarketing calls promoted business opportunities but did not specify what type of business, Dawson said.
The bogus business franchises sold at prices ranging from $12,995 to $249,950, the FTC said.
The defendants used the companies to pay for car insurance, rent, mortgage payments and gasoline, Dawson said.
“They treated the companies like they were their own personal piggy bank,” she said.
In addition to freewheeling personal spending, the five spent millions of dollars promoting the seminars and shows they used to market the business opportunities, she said.
Most of the money will not be recovered, said Brick Kane, chief financial officer of Robb Evans and Associates, the California-based receivership firm.
The company has the task of recovering the money.
“It’s a dismal picture and it continues to be,” Kane said, adding his group has recovered so far about $50,000.
All seven companies are out of business, Kane said.