1306506 Ontario Limited et al - Declaration in Support of its Motion for ex Parte Temporary Restraining Order and ex Parte Motion to File Papers under Seal

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NEW YORK

FEDERAL TRADE COMMISSION
Plaintiff
v.
1306506 ONTARIO LIMITED, a Canadian Corporation;
T.S.I. SERVICE CORP., a Nevada Corporation;
VINNY BUBIC, individually and as a director and officer of 1306506 Ontario Limited and T.S.I. Service Corp.; and
ERROL ALEXANDER, individually and as a director and officer of 1306506 Ontario Limited and T.S.I. Service Corp.;
Defendants.

Civil Action No.

DECLARATION IN SUPPORT OF ITS MOTION FOR EX PARTE TEMPORARY RESTRAINING ORDER AND EX PARTE MOTION TO FILE PAPERS UNDER SEAL

Pursuant to Fed. R. Civ. P. 65(b), David A. O'Toole submits the following declaration:

1. I am an attorney employed by plaintiff Federal Trade Commission ("FTC").

2. Plaintiff has not attempted to notify defendants of its Ex Parte Motion for Temporary Restraining Order and other motions filed contemporaneously, nor should such notice be given, for the following reasons:

a. The evidence set forth in plaintiff's Memorandum of Points and Authorities in Support of its Ex Parte Motion for Temporary Restraining Order and the accompanying exhibits, which I have personally reviewed, show that defendants have engaged, and are likely to continue to engage, in a scheme to deprive consumers of substantial amounts of money through fraud and deception. The evidence shows that defendants, in the telemarketing of a credit card loss protection program have made material misrepresentations and failures to disclose material facts, resulting in substantial consumer injury;

b. The systematic fraud perpetrated by defendants 1306506 Ontario Limited; T.S.I. Service Corp.; Vinny Bubic, individually and as a director and officer of 1306506 Ontario Limited and T.S.I. Service Corp.; and Errol Alexander, individually and as a director and officer of 1306506 Ontario Limited and T.S.I. Service Corp.; provides motivation and opportunity for dissipation of assets and destruction of records;

c. There is good cause to believe that immediate and irreparable damage to the Court's ability to achieve effective final relief for consumers in the form of monetary redress will occur from the sale, transfer, concealment, or other disposition by defendants of their assets, and from the destruction, transfer, concealment, or other disposition of their records, if they are notified of plaintiff's TRO Motion prior to a hearing thereon; and

d. Moreover, as illustrated by the following examples upon information and belief, it has been the FTC's experience that defendants who receive notice of the FTC's intent to file an action alleging fraud have attempted to undermine the FTC's attempts to preserve the status quo by immediately dissipating, concealing, or destroying assets and documents:

i. In FTC v. Academic Guidance Services, No. 92-3001 (AET) (D. N.J. 1992), defendants discovered that the FTC intended to file a case against them (and seek an ex parte TRO) the following week. An informant told the FTC that defendants then leased a document shredder and spent the weekend destroying documents, which was confirmed by one of defendant's employees.

ii. In FTC v. World Class Network, Inc., CV-97-162 AHS (C.D. Cal. 1997), after the Court issued an ex parte TRO, two of the defendants withdrew, spent, and hid $202,000 in assets after being served with the TRO and asset freeze.

iii. In FTC v. American National Cellular, Inc., CV-85-7375 WJR (C.D. Cal. 1985), the court issued an ex parte TRO with an asset freeze on November 12, 1985. A defendant learned of the court's ruling and immediately withdrew $1.2 million from his bank accounts before the banks were served with a copy of the freeze order. The defendant fled California and dissipated the money while living overseas. While ultimately the defendant was prosecuted and convicted of criminal contempt under 18 U.S.C. § 401 for his failure to abide by the terms of the TRO, tens of thousands of dollars were never recovered. See 868 F.2d 315, 316-17 (9^th Cir. 1989).

iv. In FTC v. Osborne Precious Metals, Inc., CV-92-4194 AWT (C.D. Cal. 1992), the court issued an ex parte TRO on July 15, 1992. The receiver and his representatives effected service of the order the following day: first at defendants' offices in Los Angeles, and an hour later, at defendants' offices in Las Vegas. The receiver discovered that a number of business records in the Las Vegas offices had been destroyed shortly before his representatives arrived to secure the premises.

v. In FTC v. Ellis, No. SA CV-96-114 LHM (C.D. Cal. 1996), the court issued an ex parte TRO freezing assets and appointing a temporary receiver, which was served the following day. Defendants disregarded the order and continued to operate the business from a different location, and apart from the receiver.

vi. In FTC v. Equifin International, Inc., CV-97-4526 DT, 1997 U.S. Dist. LEXIS 10288 (C.D. Cal. July 3, 1997), after an ex parte TRO had been issued against the corporate defendants and their owner, and the order had been served on corporate defendants, but before the individual defendant had been personally served with the TRO, he directed an affiliate to withdraw bank funds from an account containing defendants' credit card revenues. Upon demand of the Receiver, the defendant returned the monies.

vii. In FTC v. Intellicom, CV-97-4572 TJH (C.D. Cal. 1997), the FTC obtained an ex parte TRO and served banks at which the defendants were known to have accounts. One defendant, whose bank was served earlier in the day, called the bank and asked the branch manager to wire out approximately $100,000 held in an account that was specifically designated in the TRO as frozen. The branch manager encountered a red flag in the system, discovered the account had been frozen, and refused to release the funds.

viii. In FTC v. IntellinetCom, Inc.,CV-98-2140 CAS (C.D. Cal. 1998), the FTC obtained an ex parte TRO. The FTC served the TRO on banks where the defendants were known or suspected to have accounts. While the person who was serving the TRO for the FTC was at one of the banks and speaking to a branch manager about the TRO, one of the defendants came into the bank, after having been served with the TRO, and attempted to withdraw money from his account there. He was unsuccessful.

ix. In FTC v. Lopinto, CV S-93-561 (LDG) (D. Nev. 1993), the district court issued an ex parte TRO with an asset freeze in June 1993. The order was served on a bank where one of the defendant businesses maintained an account. However, before the bank could implement the freeze, an agent of the defendant business (who knew of the freeze) withdrew $12,300 from the defendant's account.

x. In FTC v. Empress Corporation, d/b/a American Publishers Exchange, CV-S-95-01174-LDG (D. Nev. 1995), defendants disposed of or concealed numerous business records on the night of December 6, 1996. Earlier that day, the U.S. Department of Justice had announced that Attorney General Janet Reno was coming to Las Vegas the next day to make a major announcement regarding enforcement efforts against telemarketing fraud. On December 7, 1996, the FTC executed an ex parte TRO with asset freeze against defendants, and Attorney General Reno announced criminal actions against hundreds of telemarketers nationwide.

xi. In FTC v. Showcase Distributing, Inc., CV-95-1368-PHX-SMM (D. Ariz. 1995), shortly after the individual defendant was served with an ex parte TRO, he and his wife went to an ATM and withdrew money from an account covered by the TRO, "just to show they could do it."

xii. In FTC v. Thomas E. O'Day, No. 94-1108-CIV-ORL-22 (M.D. Fla. 1994), the district court denied the FTC's request to issue a TRO with asset freeze without notice, and scheduled a noticed hearing on the relief sought. Several days later, the Federal Bureau of Investigation executed a search warrant on defendants' business premises as the FTC served notice of its action and the upcoming hearing. Within hours, an individual defendant withdrew approximately $200,000 from one of his bank accounts.

xiii. In FTC v. Applied Telemedia Engineering and Management, Inc., No. 91-635 (S.D. Fla. 1991), defendants were advised, pursuant to an agreement with the FTC, that the FTC had filed its complaint and intended to seek a TRO with an asset freeze from the court. When the FTC's agents went to defendants' offices to serve process, they observed defendants removing boxes of documents from the premises. The FTC moved for, and received, an ex parte TRO the following day. xiv. In FTC v. United Consumer Services, No. 94-CV-3164-CAM (N.D. Ga. 1994), the FTC attempted to serve a TRO with asset freeze upon a defendant who was traveling on business. When defendant's lawyer notified his client of the order, the defendant went directly to his bank and removed $100,000 from a corporate bank account. The FTC learned of the withdrawal only after receiving the account statements from the bank. After being served with an order to show cause why defendant should not be held in contempt for violating the asset freeze, the defendant finally produced the money at a deposition.

3. Accordingly, the FTC respectfully submits that it is in the interest of justice and the public interest that the FTC's Ex Parte Motion for Temporary Restraining Order and Ex Parte Motion for Order to File Papers Under Seal be heard without notice to defendants, and that the file in this matter be placed under seal through and until October 27, 2000, at 5:00 p.m.

I state under penalty of perjury that the foregoing is true and correct to the best of my knowledge.

Executed at Buffalo, New York, on October 23, 2000.

David O'Toole
Federal Trade Commission
55 E. Monroe St., Suite 1860
Chicago, IL 60603
(312) 960-5634
(312) 960-5600 (fax)