FINAL ORDER TO CEASE AND DESIST

Transcription

1 ADMINISTRATIVE PROCEEDING BEFORE THE SECURITIES COMMISSIONER OF MARYLAND IN THE MATTER OF: * BES ENTERPRISES, LLC, * d.b.a. FRANKLIN FINANCIAL, a.k.a. FRANKLIN FINANCIAL SOLUTIONS, * a.k.a. FRANKLIN FINANCIAL MARKETING, a.k.a. FRANKLIN MARKETING * Case No and * BLAINE SCRIBNER, * Respondents * * * * * * * * * * * * * * * FINAL ORDER TO CEASE AND DESIST WHEREAS, the Securities Division of the Office of the Attorney General of Maryland (the Securities Division ) initiated an investigation into the activities of BES Enterprises, LLC and Blaine Scribner (collectively Respondents ) under the authority granted under the Maryland Business Opportunities Sales Act, MD. CODE ANN. BUS. REG et seq. (2010 Repl. Vol. and Supp. 2012) (the Maryland Business Opportunity Act ); and WHEREAS, as a result of that investigation, the Maryland Securities Commissioner (the Commissioner ) concluded that grounds existed to allege that Respondents violated the anti-fraud, registration, and disclosure provisions of the Maryland Business Opportunity Act in relation to offers and sales of Internet-based business opportunities in Maryland; and WHEREAS, on November 7, 2012, the Commissioner issued an Order to Show Cause against Respondents, requiring them to show cause why they should not be ordered to cease and

2 desist from the offer and sale of business opportunities in violation of the anti-fraud, registration, and disclosure provisions of the Maryland Business Opportunity Act and be permanently barred from engaging in the offer and sale of business opportunities in Maryland; and WHEREAS, the Order to Show Cause gave Respondents notice of the opportunity for a hearing in this matter, provided Respondents submit an answer within 15 days of service of the Order to Show Cause, including a request for a hearing, and further gave notice to Respondents that failure to file a written answer, including a request for a hearing, shall be deemed a wavier of the right to a hearing and shall result in entry of a final order directing Respondents to permanently cease and desist from the offer and sale of business opportunities in violation of the Maryland Business Opportunity Act; and WHEREAS, a copy of the Order to Show Cause was served on Respondent Blaine Scribner on November 13, 2012; and WHEREAS, a copy of the Order to Show Cause was served on Respondent BES Enterprises, LLC on November 15, 2012; and WHEREAS, Respondents did not file an answer or request for a hearing in response to the Order to Show Cause within the deadline required under the Order to Show Cause; and WHEREAS, the Commissioner has determined that it is in the public interest to issue this Final Order to Cease and Desist; NOW, THEREFORE, THE COMMISSIONER HEREBY FINDS AND ORDERS: I. JURISDICTION 1. The Commissioner has jurisdiction in this proceeding pursuant to (a) of the Maryland Business Opportunity Act. 2

3 II. FINDINGS OF FACT A. Respondents 2. BES Enterprises, LLC ( BES Enterprises ), is a Wyoming limited liability company with a principal office address of 401 Rampart Drive, Rock Springs, Wyoming BES Enterprises was incorporated in Wyoming on October 6, Prior to October 2011, BES Enterprises was a Nevada limited liability company. 5. BES Enterprises does business primarily from Arizona under the trade names Franklin Financial, Franklin Financial Solutions, Franklin Financial Marketing, and Franklin Marketing ( collectively Franklin Financial ). 6. Blaine Scribner ( Scribner ) was, at all times relevant to this action, the owner of BES Enterprises. 7. BES Enterprises is a trade name registered with the Arizona Secretary of State and owned by Scribner. 8. Scribner previously was managing member of BES Enterprises, LLC, the Nevada limited liability company, which was dissolved in October BES Enterprises and Franklin Financial both received mail at the same business address, a private mail box at a UPS Store located at Suite 110, West Bell Road, Surprise, Arizona B. The Franklin Financial Business Opportunity 10. Respondents marketed the Franklin Financial business opportunity throughout the US, including in Maryland. 11. Franklin Financial s business opportunity purported to offer individuals the 3

4 opportunity to earn immediate income, as well as residual income, from operating their own Internet websites, which Respondents represented would generate commissions for the website owners. 12. Respondents represented that buyers would earn income from commissions on the sale and use of credit card terminals for businesses, which is known as merchant processing. 13. Respondents used a complex web of names, affiliated entities, independent sales representatives, and a variety of sales techniques, to market the Franklin Financial business opportunity, often to senior citizens. 14. Respondents used telemarketers to cold call prospective buyers to convince them to purchase the Franklin Financial business opportunity. 15. The first calls that potential buyers received from Respondents sales representatives were to convince them to purchase an Internet website, generally for a fee of between $99-$ In some cases, Respondents contracted with a telemarketing firm for telemarketers to call prospects at home to offer them the Franklin Financial business opportunity. 17. Sales representatives and agents working for Respondents told prospective buyers that they could invest in a unique business opportunity that would allow them to earn $1,000-$2,000 a month in return for working 2-3 hours a week. 18. Only days after buyers agreed to purchase an Internet website, Respondents sales representatives contacted those buyers to convince them that, in order to succeed in their Franklin Financial business opportunity, the buyers also must purchase business leads or advertising to generate business by gaining customers who would pay for credit card processing equipment. 19. In some cases, Respondents sales representatives who contacted buyers to purchase business leads or advertising referred to themselves as the buyers mentor or coach. 4

5 20. Respondents, or entities affiliated with or referred by Respondents, sold packages of business leads or advertising to buyers of Respondents websites for additional fees of several thousands of dollars. C. The Sale to TW 21. On or around January 18, 2012, TW, a 93 year old resident of Ocean Pines, Maryland, received an unsolicited telephone call from an individual claiming to be from Franklin Financial Solutions (the FFS Caller ). The FFS Caller stated he had an opportunity for TW to earn income from home. 22. The FFS caller explained that TW would make money by signing up small business leads for financial services through a website. The FFS Caller told TW that he would have to pay $300 up front for the website, but that TW would soon be earning commissions from his Franklin Financial business opportunity. 23. The FFS Caller also told TW that Franklin Financial would assign him a mentor to help set up and operate his business opportunity website. 24. TW gave the FFS Caller his credit card number and authorized a $300 purchase for a financial website. When TW received his following month s credit card statement, he discovered that, on January 19, 2012, his Discover credit card was charged $300, which was paid to Cash Flow Capital of Phoenix, Arizona. TW also learned that on January 20, 2012, an additional $24.99 was charged from his credit card and paid to Franklin Host of Surprise, Arizona. 25. Sometime after TW received the initial call from the FFS Caller, he received a telephone call from an individual who identified himself as Chris Johnson ( Johnson ), the 5

6 mentor assigned to TW by Franklin Financial Solutions to help set up TW s business opportunity. Johnson told TW that he needed to purchase advertising for his website business opportunity in order to earn income. 26. On or around January 24, 2012, TW received a package of information in the mail from Franklin Financial Solutions welcoming him. The welcome package stated, among other things, Your financial website is built and ready for access immediately, and An orientation specialist will be in contact with you within the next 48 hours. 27. The documents delivered to TW s home on or around January 24, 2012 also stated, among other things: You have just purchased a home based business that allows you to generate upfront income as well as residual income from the comfort of your home. You will be given a website that allows us to pitch and close all of the products we offer to business owners and individuals, with merchant processing being our main focus. Customer service will be walking you through your website so that you can access all the materials in your back office. You will be assigned a coach that will help you get started and put you on the fast track to working your business. You won t need a computer or have to go from business to business. You [sic] Coach will be calling you within 3-5 business days to get you started. We have ways to promote the business that fits [sic] every budget. You may also choose to send us qualified leads yourself. * * * Our program is based on processing credit cards from businesses known as merchant processing. Every business needs to take credit cards. You can earn commissions every time your client processes a credit card! Imagine having 5, 50, or 100 businesses all processing credit cards daily. All those companies under your business, while you [sic] earning the commissions each and every month. It s life changing for many of our representatives. * * * Franklin Financial Solutions stand behind our program with a money-back guarantee, giving the client the confidence that they are investing in a cost-conscious and 6

7 effective marketing program without risk. * * * The Franklin Financial Solutions program is designed so you can work independently and earn a substantial income. Follow [sic] our simple program, your first year s earnings could be as much as $100,000. The second year, over $200,000, and your third year, without any additional accounts, could generate a residual income of $200,000 plus! It s more than a possibility, it s math... the more accounts we close for you, the more you make! How much can Affiliates earn? * * * Affiliates earn income by successfully referring individuals or businesses to Franklin Financial Solutions business website and services. We offer solutions for many business and individual needs. When you refer a client who enrolls into any program, you earn an initial referral commission of [sic] minimum of $50.00 and as high as $10,000, depending on the service your client enrolled in On or around January 24, 2012, the same day TW received the package from Franklin Financial Solutions, he received a telephone call from an individual who identified himself as Peter Goldman ( Goldman ) from Franklin Financial Solutions. 29. Goldman asked TW how many credit cards he had, and TW eventually gave Goldman the account numbers from his Discover Card, Master Card, and a third card that was not used. 30. TW later learned that, on or after January 24, 2012, a total of $20,000 in charges were placed on his credits cards payable to Franklin Mrkt of Surprise, Arizona, consisting of $12,000 placed on TW s Discover Card and $8,000 on his Master Card. 31. When TW complained to Franklin Financial Solutions about the charges made on his credit cards, the company noted that it had in its possession a signed invoice authorizing the charges. The invoice indicates that TW agreed to purchase 5 separate packages of business leads from 7

8 Franklin Financial for a total of $20,000, payable on two separate cards. The invoice listed an address for Franklin Financial in Cheyenne, Wyoming. 32. The signature on the January 24, 2012 invoice from Franklin Financial is not TW s signature, and TW did not affix his initials to that invoice. 33. TW has outstanding credit card charges totaling $20, as a result of his purchase of the Franklin Financial business opportunity. These charges consist of the following: $300 paid to Cash Flow Capital ; $24.99 paid to Franklin Host ; and $20,000 paid to Franklin Mrkt. 34. TW has not made any money from his Franklin Financial business opportunity. TW did not receive any information from the company advising him how to set up or access any account. 35. TW and his daughter, who has his power of attorney, have made repeated attempts to obtain a refund of TW s investment, but the company has refused to return any money. 36. On February, 4, 2012, TW s daughter mailed a letter to Franklin Financial at the Wyoming address listed on the Franklin Financial invoice, and she requested cancellation of all transactions and a refund of TW s money. The letter was delivered on February 9, 2012, but the next week the unopened letter was returned with a notation R.T.S. NOT HERE ANY MORE. PLEASE DON T SEND BACK. 37. The FFS Caller who initially contacted TW was a telemarketer with Cash Flow Capital. In addition to receiving funds from TW s purchase of a Franklin Financial website, Cash Flow Capital also received a commission on Franklin Financial s sale of marketing leads to buyers of the Franklin Financial business opportunity. 38. Cash Flow Capital s commission was equal to 30% of the fees that Franklin Financial received from the sale of marketing leads to buyers that Cash Flow Capital referred to Franklin -8-

9 Financial. D. The Sale to LEW 39. On or around November 18, 2011, LEW, a 96 year old resident of Montgomery County, Maryland, received an unsolicited telephone call from someone who identified himself as a representative of Franklin Financial Solutions. The caller stated he had an opportunity for LEW to earn money by signing up small business leads for financial services through a website. 40. On November 18, 2011, LEW agreed to purchase a financial website from Franklin Financial Solution. On that date LEW signed an invoice agreeing to pay Franklin Financial of Cheyenne, Wyoming $250 for a financial website and a monthly web maintenance and hosting fee of $ LEW s next contact with Franklin Financial was on or around January 11, LEW received a telephone solicitation from an individual who said he was calling from Easy Street Merchants and that he was working with Franklin Financial to assist LEW with his financial website. That caller convinced LEW to purchase marketing business leads, a DVD, and guaranteed accounts in order to promote LEW s previously purchased financial website. 42. On January 11, 2011, LEW received an invoice in the mail from Franklin Financial, which he signed. The invoice stated that LEW had agreed to pay Easy Street Merchants of Las Vegas, Nevada $4,000 for business leads, a DVD and guaranteed accounts. 43. LEW s credit card was charged at least $2,000 for the purchase from Easy Street Merchants in addition to the charges paid to Franklin Financial for a website and the web maintenance and hosting fee. 44. Easy Street Merchants is a trade name used by MS Marketing, LLC, ( MS -9-

10 Marketing ), a Wyoming limited liability company with a mailing address of 401 Rampart Drive, Rock Springs, Wyoming That address is the same address as BES Enterprises. 45. MS Marketing was, prior to December 2011, a Nevada limited liability company and was formerly known as MS Enterprises, LLC ( MS Enterprises ). MS Enterprises received mail at a private mail box that MS Enterprises shared with BES Enterprises. 46. LEW has not made any money from his Franklin Financial business opportunity. E. The Sale to DT in Maryland 47. On or around January 23, 2012, DT, an 85 year old resident of Baltimore County, Maryland, received an unsolicited telephone call from an individual claiming to be from Franklin Financial Solutions. The caller stated he had an opportunity for DT to earn income from home. 48. When DT asked the caller how he got his name and number, the caller said that he got DT s contact information from a credit reporting agency, which identified DT as a person with excellent credit. 49. The caller explained that DT would make money by purchasing a website that would allow DT to profit from a business opportunity involving credit card processing equipment. The caller said that DT would be compensated by Franklin Financial as an affiliate. 50. On January 23, 2012, DT agreed to pay Franklin Financial $495 for a website, plus $24.00 a month as an Internet hosting fee. DT gave the caller his credit card information and authorized those charges. 51. DT s credit card statement reflect that on January 23, 2012, charges of $495 were -10-

11 paid to Cash Flow Capital, and charges of $24.99 were paid to Franklin Host. 52. On or about January 30, 2012, DT received a telephone call from an individual who identified himself as Shawn Anderson from Franklin Financial. 53. Anderson told DT that he could earn from the Franklin Financial business opportunity up to $5,000 in one month, $60,000 in days, and then $700 per month in 3-5 years. 54. On or around February 2, 2012, an individual who identified himself as DT s business coach from Franklin Financial contacted DT by telephone and told DT that he needed to invest in a marketing campaign in order to earn money. 55. On February 2, 2012, another individual who represented himself as a Franklin Financial representative called DT at home and urged him to buy a marketing campaign. On that date, DT agreed to pay for a marketing campaign consisting of 850 leads, which the caller described as individuals whom Franklin Financial would contact on DT s behalf as potential sources of business. 56. On February 2, 2012, DT signed an invoice authorizing a total of $8,500 to be paid to Franklin Financial of Cheyenne, Wyoming for DT s marketing campaign. The Invoice reflects that the $8,500 purchase price was to be paid as follows: $5,300 on DT s Master Card; and $3,200 on his Visa. 57. In March, 2012, after earning no income from his Franklin Financial business opportunity, DT disputed the charges paid to Franklin Financial from his Master Card and his Visa credit cards. 58. In response to DT s dispute of charges to his Master Card, Bank of America acknowledged that $5,300 in charges were paid from DT s Master Card to Franklin Mrkt.

12 59. In response to DT s dispute of charges to his Visa, Franklin Financial s Dispute Resolution Department represented to Visa that DT had paid for a marketing campaign Cardholder purchased to promote and advertise the website he has with us. Franklin Financial also acknowledged that Cardholder was contacted by one of our coaches who explained different marketing options available to him. Franklin Financial stated that the marketing purchases were voluntary, and that Franklin Financial had fulfilled its obligations to DT. 60. Franklin Financial also represented to Visa that DT s advertising campaign consisted of 850 business leads and that Franklin Financial uploaded those business leads into DT s website. 61. DT was not successful in disputing the charges made to Franklin Financial on DT s Visa or his Mastercard 62. Franklin Financial s marketing campaign for DT consisted of sending an advertisement to individual recipients at a cost to DT of $10 per each sent. 63. DT never earned any income from his Franklin Financial business opportunity. III. CONCLUSIONS OF LAW The Commissioner concludes that: 64. Respondents offered and sold a business opportunity in Maryland as defined under section of the Maryland Business Opportunity Act. 65. Respondents violated section of the Maryland Business Opportunity Act by offering and selling business opportunities without registering the business opportunity with the Securities Division. 66. Respondents violated section of the Maryland Business Opportunity Act by -12-

13 failing to give prospective Maryland buyers a business opportunity disclosure statement registered by the Securities Division. 67. Respondents violated section of the Maryland Business Opportunity Act by engaging in acts, practices and courses of conduct that defrauded prospective Maryland buyers in connection with the offer and sale of business opportunities. 68. Respondents violated section of the Maryland Business Opportunity Act by making representations to prospective Maryland buyers about the income potential of a business opportunity, but Respondents did not provide substantiation to the prospective Maryland buyers about the income potential when the representations were made. IV. SANCTION NOW, THEREFORE, the Commissioner finds it to be in the public interest to issue this Final Order to Cease and Desist, and HEREBY ORDERS THAT: 69. Respondents BES Enterprises, LLC and Blaine Scribner permanently cease and desist from violations of the Maryland Business Opportunity Act. 70. Respondents BES Enterprises, LLC and Blaine Scribner are permanently barred from engaging in the offer or sale of business opportunities in Maryland. V. JURISDICTION RETAINED 71. Jurisdiction is retained by the Commissioner for the purpose of enabling any party to this Final Order to Cease and Desist to apply for such further orders and directions as may be necessary or appropriate for the construction or enforcement of this Final Order to Cease and Desist. -13-

14 VI. APPEAL RIGHTS 72. Any Respondent may appeal this Final Order to Cease and Desist to the appropriate Circuit Court for the State of Maryland within 30 days from the date this Final Order to Cease and Desist is mail by the Securities Division. SO ORDERED: Dated : December 20, 2012 Commissioner s Signature is on File with Original Document MELANIE SENTER LUBIN SECURITIES COMMISSIONER -14-