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Federal Trade Commission v. Consumer Advocates Group Experts

June 7, 2012

FEDERAL TRADE COMMISSION, PLAINTIFF,
v.
CONSUMER ADVOCATES GROUP EXPERTS, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY, ALSO D.B.A. CONSUMER ADVOCATES GROUP; PARAMOUNT ASSET MANAGEMENT CORP., A CALIFORNIA CORPORATION, ALSO D.B.A. NATIONAL FINANCIAL RESCUE CORP., NATIONAL FINANCIAL RESCUE GROUP, AND AMERICAN FORENSIC LOAN AUDITORS; ADVOCATES FOR CONSUMER AFFAIRS EXPERT, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY; AND RYAN ZIMMERMAN, DEFENDANTS.



The opinion of the court was delivered by: Dean D. Pregerson United States District Judge

PRELIMINARY INJUNCTION WITH ASSET FREEZE, APPOINTMENT OF TEMPORARY RECEIVER AND OTHER EQUITABLE RELIEF

Date: June 7, 2012 Time: 10:30 a.m.

Place: Courtroom 3, the

Honorable Judge

Dean D. Pregerson

Plaintiff, the Federal Trade Commission ("FTC"), pursuant to Sections 13(b) and 19 of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. §§ 53(b) and 57b, and the 2009 Omnibus Appropriations Act, Public Law 111-8, Section 626, 123 Stat. 524, 678 (Mar. 11, 2009) ("Omnibus Act"), as clarified by the Credit Card Accountability Responsibility and Disclosure Act of 2009, Public Law 111-24, Section 511, 123 Stat. 1734, 1763-64 (May 22, 2009) ("Credit Card Act"), and amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act, Public Law 111-203, Section 1097, 124 Stat. 1376, 2102-03 (July 21, 2010) ("Dodd-Frank Act"), filed its Complaint for Permanent Injunction and Other Equitable Relief, and an Ex Parte Temporary Restraining Order with Asset Freeze, Appointment of Temporary Receiver, Expedited Discovery, and Other Equitable Relief, and Order to Show Cause Why Preliminary Injunction Should Not Issue, and Supporting Memorandum ("Memorandum of Points and Authorities in Support of Plaintiff's Ex Parte TRO"), pursuant to Rule 65 of the Federal Rules of Civil Procedure.

On May 30, 2012, this Court granted Plaintiff's Ex Parte Application for a Temporary Restraining Order and entered a Temporary Restraining Order ("TRO") with an Order to Show Cause Why a Preliminary Injunction Should Not Issue against Defendants Consumer Advocates Group Experts, LLC ("CAG"), Paramount Asset Management Corporation ("Paramount"), Advocates for Consumer Affairs Expert, LLC ("ACA"), and Ryan Zimmerman (hereinafter referred to collectively as "Defendants"). All Defendants were served with the Summons, Complaint, TRO, and other related papers filed in this action on June 1, 2012.

DISPOSITION

Having duly considered the parties' pleadings, papers, and argument, the Court hereby GRANTS the Preliminary Injunction against Defendants CAG, Paramount, ACA, and Ryan Zimmerman.

FINDINGS OF FACT

1. This Court has jurisdiction over the subject matter of this case, and there is good cause to believe it will have jurisdiction over the Defendants.

2. Venue lies properly with this Court.

3. There is good cause to believe that Defendants CONSUMER ADVOCATES GROUP EXPERTS, LLC, also d.b.a. Consumer Advocates Group; PARAMOUNT ASSET MANAGEMENT CORP., also d.b.a. National Financial Rescue Corp., National Financial Rescue Group, and American Forensic Loan Auditors; ADVOCATES FOR CONSUMER AFFAIRS EXPERT, LLC; and RYAN ZIMMERMAN have engaged in, and are likely to engage in, acts and practices that violate Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), and the Mortgage Assistance Relief Services Rule, 16 C.F.R. Part 322 (effective December 29, 2010, except for Section 322.5, which became effective on January 31, 2011), recodified as Mortgage Assistance Relief Services (Regulation O), 12 C.F.R. Part 1015 ("Regulation O") (effective December 30, 2011) ("MARS Rule"), and that the FTC is therefore likely to prevail on the merits of this action.

4. There is good cause to believe that immediate and irreparable damage to the Court's ability to grant effective final relief for consumers in the form of monetary restitution and disgorgement of ill-gotten gains will occur from the transfer, dissipation, or concealment by Defendants of their assets or business records unless Defendants are restrained and enjoined by Order of this Court.

5. Good cause exists for continuing the appointment of the Temporary Receiver over Corporate Defendants and the asset freeze imposed pursuant to the TRO in this case; permitting the FTC access to Defendants' business premises at the discretion of the Temporary Receiver; and the other equitable relief ordered herein.

6. Weighing the equities and considering the FTC's likelihood of ultimate success, this Order is in the public interest.

7. No security is required of any agency of the United States for issuance of a preliminary injunction. Fed. R. Civ. P. 65.

ORDER

DEFINITIONS For purposes of this Order, the following definitions shall apply:

A. "Asset" or "Assets" means any legal or equitable interest in, right to, or claim to, any real, personal, or intellectual property of any Defendant, or held for the benefit of any Defendant, wherever located, whether in the United States or abroad, including, but not limited to, chattel, goods, instruments, equipment, fixtures, general intangibles, effects, leaseholds, contracts, mail or other deliveries, shares of stock, commodities, futures, inventory, checks, notes, accounts, credits, receivables (as those terms are defined in the Uniform Commercial Code), cash, and trusts, including but not limited to any trust held for the benefit of any Defendant, the Individual Defendant's minor children, if any, or the Individual Defendant's spouse, if any, and shall include both existing assets and assets acquired after the date of entry of this Order.

B. "Defendants" means the Individual Defendant and all of the Corporate Defendants, individually, collectively, or in any combination, and each of them by whatever names each might be known.

1. "Corporate Defendants" means Consumer Advocates Group Experts, LLC, Paramount Asset Management Corp., and Advocates for Consumer Affairs Expert, LLC, and their successors, assigns, affiliates, or subsidiaries, and each of them by whatever names each might be known.

2. "Individual Defendant" means Ryan Zimmerman and any other names by which he might be known.

C. "Document" and "Electronically Stored Information" are synonymous in meaning and equal in scope to the usage of the terms in Rule 34(a) of the Federal Rules of Civil Procedure and include but are not limited to:

1. The original or a true copy of any written, typed, printed, electronically stored, transcribed, taped, recorded, filmed, punched, or graphic matter or other data compilations of any kind, including, but not limited to, letters, email or other correspondence, messages, memoranda, interoffice communications, notes, reports, summaries, manuals, magnetic tapes or discs, tabulations, books, records, checks, invoices, work papers, journals, ledgers, statements, returns, reports, schedules, or files; and

2. Any electronically stored information stored on any Blackberrys, flash drives, personal digital assistants ("PDAs"), desktop personal computer and workstations, laptops, notebooks, and other portable computers, or other electronic storage media, whether assigned to individuals or in pools of computers available for shared use, or personally owned but used for work-related purposes; backup disks and tapes, archive disks and tapes, and other forms of offline storage, whether stored onsite with the computer used to generate them, stored offsite in another company facility, or stored, hosted, or otherwise maintained offsite by a third-party; and computers and related offline storage used by Defendants or Defendants' participating associates, which may include persons who are not employees of the company or who do not work on company premises.

D. "Electronic Data Host" means any person or entity that stores, hosts, or otherwise maintains electronically stored information.

E. "Financial Institution" means any bank, savings and loan institution, credit union, or any financial depository of any kind, including, but not limited to, any brokerage house, trustee, broker-dealer, escrow agent, title company, commodity trading company, or precious metal dealer.

F. "Material fact" means any fact that is likely to affect a person's choice of, or conduct regarding, goods or services.

G. "Mortgage assistance relief product or service" means any product, service, plan, or program, offered or provided to the consumer in exchange for consideration, that is represented, expressly or by implication, to assist or attempt to assist the consumer with any of the following:

1. stopping, preventing, or postponing any mortgage or deed of trust foreclosure sale for the consumer's dwelling, any repossession of the consumer's dwelling, or otherwise saving the consumer's dwelling from foreclosure or repossession;

2. negotiating, obtaining, or arranging a modification of any term of a dwelling loan, including a reduction in the amount of interest, principal balance, monthly payments, or fees;

3. obtaining any forbearance or modification in the timing of payments from any dwelling loan holder or servicer on any dwelling loan;

4. negotiating, obtaining, or arranging any extension of the period of time within which the consumer may (i) cure his or her default on a dwelling loan, (ii) reinstate his or her dwelling loan, (iii) redeem a dwelling, or (iv) exercise any right to reinstate a dwelling loan or redeem a dwelling;

5. obtaining any waiver of an acceleration clause or balloon payment contained in any promissory note or contract secured by any dwelling; or

6. negotiating, obtaining, or arranging (i) a short sale of a dwelling, (ii) a deed in lieu of foreclosure, (iii) or any other disposition of a dwelling loan other than a sale to a third party that is not the dwelling loan holder.

The foregoing shall include any manner of claimed assistance, including, but not limited to, auditing or examining a consumer's mortgage or home loan application and offering to provide or providing legal services.

H. "Person" means any individual, group, unincorporated association, limited or general partnership, corporation, or other business entity.

I. "Receivership Assets" means and includes any legal or equitable interest in, right to, or claim to, any real, personal, or intellectual property of any Receivership Defendant, or held for the benefit of, or in constructive trust for, any Receivership Defendant, wherever located, whether in the United States or abroad, including, but not limited to, chattel, goods, instruments, equipment, fixtures, general intangibles, effects, leaseholds, contracts, mail or other deliveries, shares of stock, commodities, futures, inventory, checks, notes, accounts, credits, receivables (as those terms are defined in the Uniform Commercial Code), cash, and trusts, and shall include both existing assets and assets acquired after the date of entry of this Order. "Receivership Assets" also expressly means and includes any asset of the Receivership Defendants, as defined above, held by a third party, whether a party to the above-referenced action or not.

J. "Receivership Estate" means and includes the estate of the Receivership Defendants created by this Order, and as may be modified or expanded by subsequent orders of this Court, including, but not limited to, all Receivership Assets as defined herein, regardless of whether such Receivership Assets are held by any Defendant or Individual Defendant, or third party not presently a party to the above-referenced action.

K. "Receivership Defendants" means Consumer Advocates Group Experts, LLC, Paramount Asset Management Corp., and Advocates for Consumer Affairs Expert, LLC, and their successors, assigns, affiliates, or subsidiaries, and each of them by whatever names each might be known, provided that the Temporary Receiver has reason to believe they are owned or controlled in whole or in part by any of the Defendants.

L. The words "and" and "or" shall be understood to have both conjunctive and disjunctive meanings as necessary to make the applicable phrase or sentence inclusive rather than exclusive.

I. PROHIBITED REPRESENTATIONS IT IS THEREFORE ORDERED that Defendants and their officers, agents, servants, employees, and attorneys, and those persons or entities in active concert or participation with any of them who receive actual notice of this Order by personal service, facsimile transmission, email, or otherwise, whether acting directly or through any corporation, subsidiary, division, or other device, in connection with the advertising, marketing, promotion, offering for sale, sale, or performance of any mortgage assistance relief product or service, are hereby restrained and enjoined from falsely representing, or from assisting others who are falsely representing, expressly or by implication, any of the following:

A. that any Defendant or any other person:

1. generally will obtain for consumers mortgage loan modifications that will make consumers' payments substantially more affordable,

2. as a result of a loan audit, generally will obtain for consumers mortgage loan modifications that will make consumers' payments substantially more affordable;

3. will give refunds to consumers if the Defendant fails to obtain a mortgage loan modification;

B. The degree of success that any Defendant or any other person has had in performing any mortgage assistance relief service;

C. The nature of any Defendant's or any other person's relationship with any mortgage loan holder or servicer, or other secured or unsecured lender;

D. The amount of time it will take or is likely to take to obtain or arrange a renegotiation, settlement, modification, or other alteration of the terms of any secured or unsecured debt, including but not limited to the modification of any term of a consumer's home loan, deed of trust, or mortgage, including any recapitalization or reinstatement agreement;

E. The consumer's obligation to make scheduled periodic payments or any other payments pursuant to the terms of the consumer's dwelling loan;

F. The amount of money or percentage of the debt amount that a consumer may save by using the mortgage assistance relief service; and

G. The refund policy of any Defendant or any other person, including but not limited to the likelihood of a consumer obtaining a full or partial refund, or the circumstances in which a full or partial refund will be granted to the consumer.

II. REPRESENTATIONS PROHIBITED AND DISCLOSURES REQUIRED BY MARS RULE

IT IS FURTHER ORDERED that Defendants and their officers, agents, servants, employees, and attorneys, and those persons or entities in active concert or participation with any of them who receive actual notice of this Order by personal service, facsimile transmission, email, or otherwise, whether acting directly or through any corporation, subsidiary, division, or other device, in connection with the advertising, marketing, promotion, offering for sale, sale, or performance of any good or service, are hereby restrained and enjoined from engaging in, or assisting others in engaging in, the following conduct:

A. Representing, expressly or by implication, that a consumer cannot or should not contact or communicate with his or her lender or servicer, in violation of 12 C.F.R. § 1015.3(a);

B. Making any representation, expressly or by implication, about the benefits, performance, or efficacy of any mortgage assistance relief service unless, at the time such representation is made, the Defendants possess and/or rely upon competent and reliable evidence that substantiates that the representation is true, including, but not limited to, representations regarding:

1. The amount of time it will take the mortgage assistance relief service provider to accomplish any represented service or result; and

2. The amount of money or the percentage of the debt amount that a consumer may save by using the mortgage assistance relief service, in violation of 12 C.F.R. § 1015.3(c);

C. Failing to make the following disclosure in all general and consumer-specific commercial communications: "[Name of Company] is not associated with the government, and our service is not approved by the government or your lender," in violation of 12 C.F.R. § 1015.4(a)(1) & 1015.4(b)(2);

D.

Failing to make the following disclosure in all general and consumer-specific commercial communications: "Even if you accept this offer and use our service, your lender may not agree to change your loan," in violation of 12 C.F.R. § 1015.4(a)(2) & 1015.4(b)(3);

E. Failing to make the following disclosure in all consumer-specific commercial communications: "You may stop doing business with us at any time. You may accept or reject the offer of mortgage assistance we obtain from your lender [or servicer]. If you reject the offer, you do not have to pay us. If you accept the offer, you will have to pay us [insert amount or method for calculating the amount] for our services." For the purposes of this section, the amount "you will have to pay" shall consist of the total amount the consumer must pay to purchase, receive, and use all of the mortgage assistance relief services that are the subject of the sales offer, including but not limited to, all fees and charges, in violation of 12 C.F.R. § 1015.4(b)(1);

F. Failing, in all general commercial communications, consumer-specific commercial communications, and other communications in cases where any Defendant or person has represented, expressly or by implication, in connection with the advertising, marketing, promotion, offering for sale, sale, or performance of any mortgage assistance relief service, that the consumer should temporarily or permanently discontinue payments, in whole or in part, on a dwelling loan, to place clearly and prominently, and in close proximity to any such representation the following disclosure: "If you stop paying your mortgage, you could lose your home and damage your credit rating," in violation of 12 C.F.R. § 1015.4(c).

III. PROHIBITION ON COLLECTION OF ADVANCE FEES IT IS FURTHER ORDERED that Defendants and their officers, agents, servants, employees, and attorneys, and those persons or entities in active concert or participation with any of them who receive actual notice of this Order by personal service, facsimile transmission, email, or otherwise, whether acting directly or through any corporation, subsidiary, division, or other device, in connection with the advertising, marketing, promotion, offering for sale, sale, or performance of any mortgage assistance relief service, are hereby restrained and enjoined from asking for or receiving ...


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