Telemarketing Company’s Assets Frozen
An Orange County telemarketing outfit accused of selling stamps to elderly investors at up to hundredfold markups was seized as part of a 20-state investigation into diverse new investment scams, authorities said Wednesday.
Equifin International Inc. in Newport Beach, which also operated as Financial Frontiers Inc., has been turned over to a receiver and its assets frozen on order of a federal judge, said Ann Jones, director of the Federal Trade Commission’s Los Angeles office.
Ann Guler, who headed the FTC investigation into Equifin, said the operation specialized in “error” stamps that deviate from the intended design, such as the mistakenly printed upside-down Lindbergh airplane.
Some such stamps are indeed rare and expensive, but Equifin was selling $5 to $7 stamps for $525, and $40 to $50 blocks of four stamps for $1,960, Guler said.
“The kinds of errors they had were minor color misprints or perforations not in the right place,” Guler said.
Through his lawyer, Equifin owner F. Jerald Hildreth denied wrongdoing and said he would battle in court to recover his company.
In Washington, federal and state regulators said the Equifin case was part of a national enforcement and consumer education program, “Project Field of Schemes.” They said telemarketing fraud costs investors $40 billion a year.
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The schemes include not just old standbys like pyramid scams, but frauds involving movie production, Internet “shopping malls” and snail ranching, they said.
“Losses from these nontraditional investment schemes are outpacing the amount defrauded from consumers in all other kinds of telemarketing scams,” said Mark Griffin, president of the North American Securities Administrators Assn.
California Department of Corporations officials said they had issued six cease-and-desist orders and served six search warrants, mainly in the San Fernando Valley, targeting investments in Internet-related products and services.
In one case, the regulators said an 85-year-old, partially deaf Ohio man lost his entire $15,000 stake in Home Net Partners of Agoura, whose president, James C.Q. Slaton, allegedly described it as a government-approved investment.
Regulators said in a lawsuit that Home Net bilked consumers of $300 million, promising up to 600% returns on investments in “virtual shopping malls” and pay-per-call telephone services with 900 numbers.
Authorities obtained an asset freeze in the federal suit, which also seeks restitution.
Slaton’s lawyer, Irv Einhorn in Los Angeles, wasn’t available for comment.
In the Equifin case, Hildreth and his company are accused of misrepresenting to elderly people that their stamps would appreciate by 50% per year for three years, could easily be sold at any time and were safe investments.
Hildreth’s lawyer, Steve Silverstein, said he has asked the U.S. 9th Circuit Court of Appeals to overturn the seizure order by U.S. District Judge Dickran Tevrizian in Los Angeles.
The Newport Beach company “should never have been seized,” said Silverstein, who contended that his client made “almost nothing” in profits. “Our stamps weren’t sold at any greater markup than many pharmaceutical products,” he said.
The FTC is seeking court orders installing a receiver permanently and continuing the asset freeze. A hearing on the agency’s request is scheduled before Tevrizian today.
FTC lawyers said Hildreth’s company had been operating since at least July 1994 and appeared to have had $3 million in sales during that time. The FTC is seeking to have those funds repaid to investors.
