For Immediate Release
August 1, 2002
For More Information Contact:
Randy Romanski 608/266-1221
MADISON – Attorney General Jim Doyle announced today that his office, in conjunction with the Federal Trade Commission (FTC) and attorneys general from two other states, has reached a settlement with a Virginia company over fraudulent telemarketing and advanced-fee loan operations.
Doyle said the settlement requires American Savings Discount Club (ASDC), also known as the Tungsten Group, Inc., Portsmouth, Virginia, and two of its officers to establish a consumer redress fund of nearly $3 million. The company and its officers will also be subject to a lifetime ban on credit-related telemarketing and face a lifetime telemarketing bond of $500,000 before conducting any telemarketing or sales. The two officers of the company named in the complaint and settlement are Robert J. Demellweek, owner/officer of the Tungsten Group, and David Vincent Jensen, an officer of the Tungsten Group II, the sales arm of ASDC.
"This company and its officers took advantage of consumers who were in financial need, providing little or nothing in return for their up-front payments," Doyle said. "This cooperative effort sends a clear message to scam artists that the states and federal government will track them down and prosecute them if they rip off consumers."
According to the complaint filed by the three states and the FTC, beginning in about 1999, the defendants began to offer advance-fee loans or other extensions of credit in Wisconsin, North Carolina and Virginia. The complaint alleges that ASDC violated state and federal consumer protection laws and rules by using telemarketing boiler rooms to operate their vast advance-fee loan scam that illegally debited consumers' bank accounts $100 in advance of loans they promised, but rarely delivered.
The states and the FTC estimate that the company pitched the fraudulent advance-fee loan promotion to hundreds of thousands of consumers nationwide, including thousands of Wisconsin consumers. In reality, consumers who signed up for the purported advance-fee loan program were enrolled, without their knowledge, in a "discount club," and were required to be "members" of the club for three months prior to applying for the promised loan. Additionally, consumers were charged a $30 monthly membership fee to remain in the club and be "eligible" to apply for the loan. It is believed that the defendants collected almost $50 million over five-years, with only $9 million paid out to consumers through loans, discounts or other benefits.
In connection with this advance-fee loan scheme, the agencies stated, the defendants' telemarketers represented that consumers would get a low-interest loan of between $500 and $1,500 in exchange for an up-front payment of $100, consisting of a $40 administrative fee and the first and last monthly loan payments of $30 each. If the consumer agreed, the $100 was deducted from his or her bank account almost immediately via electronic transfer. Many consumers who tried to cancel were told that the $40 fee was non-refundable, according to the complaint.
The defendants also will be prohibited from making misrepresentations similar to those alleged in the complaint, prohibited from violating the federal Telemarketing Sales Rule as charged in the complaint and required to comply with the state laws they are alleged to have violated.
Finally, the order contains other provisions such as a prohibition on the distribution of the defendants' customer lists, standard record-keeping and compliance provisions and requirements related to the defendants' distribution of the order for five years.
In addition to Wisconsin, the states cooperating with the FTC in this investigation and settlement include, North Carolina and Virginia. As part of the settlement agreement, the states will divide $100,000 for costs and attorneys fees.
U.S. District Judge Raymond A. Jackson from the Eastern District of Virginia approved the settlement.
Wisconsin consumers who were victimized by this advanced fee loan scam and wish to seek a refund can contact Attorney General Doyle's Office of Consumer Protection at 800-998-0700.
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