FTC Stops Deceptive Office Supply Scam That Targeted Small Businesses and Nonprofits

At the Federal Trade Commission’s request, a federal court has temporarily halted and frozen the assets of an operation that bilked nonprofits, businesses, and municipalities out of millions of dollars by deceptively sending them overpriced light bulbs and cleaning supplies that they never ordered. The FTC seeks to permanently stop the illegal practices and make the defendants return victims’ money...

According to a complaint filed by the FTC, the defendants called organizations throughout the country and falsely indicated that they had previously done business with them; that the call was to confirm a shipping or mailing address or follow up on a supposed previous order; that they were offering a free sample, catalog or gift; or that they needed an employee’s name and contact information for some purpose other than a sale. The defendants often did not identify themselves accurately or clearly disclose that it was a sales call, and sent consumers merchandise after misleading them and without their consent.

Many consumers paid the defendants’ invoices, thinking the employee named on the invoice had ordered the merchandise. The person who processed the invoices was often not the same person who received the shipments and did not know the merchandise was never ordered.  Consumers who paid thinking they were obligated to do so became targets for future shipments of unordered merchandise. Those who questioned the invoices were often pressured into paying by the defendants’ claiming that they had audio recordings verifying the order (which they failed to produce) or stating they would accept a “discounted” price as payment in full.

The defendants are charged with violating the FTC Act, the Telemarketing Sales Rule and the Unordered Merchandise Statute by shipping and billing for unordered merchandise.

The defendants are Midway Industries Limited Liability Company, also doing business as Midway Industries, Midway Industries LLC, and Midway Industries of Delray Beach LLC; Commercial Industries LLC, also d/b/a Commercial Industries, Commercial Industries of Palm Beach LLC, and State Electric & Power LLC; National LLC, also d/b/a National Distributors, National Lighting & Maintenance, National, and National of Delray Beach LLC; State Power & Lighting LLC; Standard Industries LLC, also d/b/a Standard Industries and Standard Industries, LLC; Essex Industries, LLC; Johnson Distributing Limited Liability Company, also d/b/a Johnson Distributing, Johnson Distributing MD, Johnson Distribution, and Johnson Distributors; Hansen Supply LLC; Environmental Industries LLC; Mid Atlantic Industries LLC; Midway Management, LLC; B & E Industries, LLC; Eric A. Epstein; and Brian K. Wallen.

The Commission vote authorizing the staff to file the complaint was 5-0. The complaint was filed in the U.S. District Court for the District of Maryland. The court entered a temporary restraining order against the defendants on July 21, 2014.

The FTC appreciates the assistance of the Better Business Bureau of Greater Maryland in helping to investigate and bring this case.

“The FTC is committed to taking action against deceptive schemes that take advantage of people who work in nonprofits and small businesses,” said Jessica Rich, director of the Federal Trade Commission’s Bureau of Consumer Protection. “Scam artists who lie to employees about orders and then demand payment are a magnet for FTC enforcement.”

To learn more about scams that target small businesses and nonprofits, read the FTC’s Small Business Scams.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.