Settlement Plan Wouldn’t Aid Chat Line Investors
The Federal Trade Commission has negotiated a $2.5-million judgment against American Fortune 900, a Los Angeles company accused of fleecing investors in several celebrity chat lines, including one featuring LaToya Jackson.
The deal, which requires court approval, won’t benefit investors much. Federal investigators said American Fortune 900 has about $81,000 in its bank accounts and has few other assets. The outfit has been in receivership since January.
“We will make our best efforts to recover the remaining funds, but we can’t say how likely success will be,” said Greg Shapiro, an FTC attorney.
Several investors Tuesday blasted the deal and the FTC, saying company funds have been depleted by attorneys’ fees. About $49,000 of American Fortune’s funds has been paid to the court-appointed receiver, John F. Carroll, and his attorney, who could not be reached for comment.
“Investors are not happy,” said Carl Kowalke, an Ohio computer consultant elected head of the investor group. The government investigation “is taking the last blood out of the animal,” he said.
Howard Hamilton, a Tennessee horse trainer who invested $55,000 in American Fortune 900, was also dissatisfied with the proposed settlement.
“We’re getting a raw deal all around,” he said.
American Fortune 900 raised nearly $3 million from 170 investors by promising them fantastic returns on 900-number chat lines. The centerpiece of American Fortune’s pitch was a “Jackson Family Secrets Line” with gossip from LaToya Jackson about brother Michael Jackson and the rest of her family. Investors were told that other celebrity lines included New York cop-turned-Playboy model Carol Shaya and a Hollywood gossip line by former New York Newsday columnist Michael Shain.
Investigators said that although the Jackson line did exist, investors’ claims to it were tenuous. The phone line was operated by a third party not named in the investigation.
Authorities said investors’ funds were used to advertise the Jackson phone service in the National Enquirer and other publications. In return, investors were to receive a portion of the profit from “Jackson Family Secrets.” The FTC said the deal was so unfavorable that investors were unlikely to recover their costs.
Authorities said investors’ funds were further depleted by high commissions American Fortune 900 paid brokers to sell partnerships.
Last month, the FTC obtained a $100,000 judgment against Rory Cypers, a principal in American Fortune 900 and its alleged mastermind. The FTC accused Cypers of duping investors by promising them a sixfold gain on a minimum investment of $10,000 within two years. Cypers, who did not admit guilt, has dismissed the accusations as “phony.”
