April 11, 2005, 12:00 AM

FTC charges two organizations with duping consumers in Internet kiosk scam

The Federal Trade Commission has charged two California organizations with duping hundreds of consumers into buying Internet kiosk business opportunities using deceptive sales tactics.

 

The Federal Trade Commission has charged two California organizations with duping hundreds of consumers into buying Internet kiosk business opportunities using deceptive sales tactics.

One of the groups-entities owned by Edward Bevilacqua-already has reached a settlement with the FTC, withdrawing all claims to more than $1.5 million the Federal Bureau of Investigation seized from its bank accounts. The settlement also bars the group from selling any business venture or franchise in the future. Businesses operated by Escondido, CA-base Bevilacqua were Bikini Vending Corp. and MyMart Inc.

The FTC filed a separate claim against Charles Castro, Elizabeth Castro, Gregory High, and Phillis Watson. Their businesses operated under the names of Network Services Depot Inc., Network Marketing LLC, doing business as Network Services Marketing LLC, Net Depot Inc., Network Services Distribution Inc, and Sunbelt Marketing Inc. The companies are based in Brea, CA.

The FTC has asked the court to issue a temporary restraining order against the Castro entities to halt their alleged illegal conduct and to freeze their assets.

Representatives from the companies were unavailable for comment.

According to the complaints, both groups sold Internet kiosk business opportunities via telephone, mail and in-person solicitations from local insurance agents and financial planners trained to be sales agents. Using promotional materials from both companies, the sales agents promised consumers profitable locations, a guaranteed monthly income generated by kiosk usage and annual returns of 12% or more.

The freestanding kiosks housed a computer and a mechanism to accept payments. The kiosks were designed to allow the public to access the Internet for a fee from locations such as hotels, bowling alleys, restaurants, casinos and convenience stores.

Using an interrelated series of agreements, the Castro entities sold the kiosks to consumers at prices ranging from $4,000 to $7,000 per unit, and the Bevilacqua entities agreed to install the kiosks in a designated location and manage and service the kiosks, the FTC says. The FTC says that more than 450 consumers purchased thousands of kiosks.

The FTC alleged the venture operated like a Ponzi scam, with the first purchasers receiving monthly payments from the new purchasers’ initial payments.

The complaints were filed April 5 in the U.S. District Court for the District of Nevada.

 

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