U.S. company fined $25 million for misleading 110,000 people in 'wealth kits' scheme
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The Associated Press
Published Wednesday, October 22, 2014 10:17PM EDT
LOS ANGELES -- A California company that promised lucrative returns for a few hours of work at home was fined $25 million on Wednesday for misleading 110,000 people to buy into the scheme that almost never paid off.
The Zaken Corp. sold "wealth building" kits for $148 that offered "insider secret techniques" and "powerful proven strategies" to earn $3,000 to $6,000 in a few hours of work a week, U.S. District Judge Dean Pregerson said.
Buyers received instructions to locate excess inventory that Zaken was supposed to sell and split the profits. But 99.8 per cent of customers never earned a dime.
Undisputed facts showed the company made false and misleading statements and failed to provide proper disclosures to consumers, the judge said.
After consumers made initial investments, the company aggressively sold additional business tools.
One such come-on encouraged spending $2,300 for what was little more than an outdated telephone directory of defunct businesses, the judge wrote.
"Those who take advantage of Americans searching for an honest day's work, depriving them of their savings, will be held accountable," Acting Assistant Attorney General Joyce R. Branda said in a statement.
The Thousand Oaks company, which has closed, and its president, Tiran Zaken, were also barred from advertising or selling work-at-home business opportunities in the future, the U.S. Justice Department said.
Zaken's lawyers did not immediately return calls for comment and efforts to reach Zaken were unsuccessful.
Zaken stood by his tactics as the marketing of a legitimate business opportunity and insisted nobody was misled by his ads, Pregerson noted in a related ruling in September.
The Federal Trade Commission received complaints about the scheme, and Zaken was part of the agency's "Operation Lost Opportunity" sweep with the Justice Department that targeted companies offering big pay for little effort -- often work-at-home schemes advertised in newspapers and online.
Over a decade, Zaken Corp. paid about $260,000 in commissions, Pregerson said.