Federal Trade Commission v. First Data Merchant Services LLC et al
| Federal Trade Commission |
| First Data Merchant Services LLC, Chi W. Ko and Vincent Ko |
| 1:2020cv03867 |
| May 19, 2020 |
| US District Court for the Southern District of New York |
| Louis L Stanton |
| Other Statutory Actions |
| 15 U.S.C. § 45 |
| None |
Docket Report
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| Filing 19 NOTICE OF APPEARANCE by Judson O Littleton on behalf of First Data Merchant Services LLC..(Littleton, Judson) |
| Filing 18 NOTICE OF APPEARANCE by Kraig Ahalt on behalf of Chi W. Ko..(Ahalt, Kraig) |
| Filing 17 NOTICE OF APPEARANCE by James Walden on behalf of Chi W. Ko..(Walden, James) |
Filing 16
STIPULATED ORDER FOR PERMANENT INJUNCTION AND MONETARY JUDGMENT AS TO CHI W. KO. IT IS ORDERED as follows: IT IS ORDERED that Defendant is permanently restrained and enjoined from Payment Processing or acting as an ISO or Sales Agent, whether directly or through an intermediary, and from assisting others engaged in Payment Processing, whether acting directly or through an intermediary, for any Person: A. Offering to sell, selling, promoting or marketing the following goods or services: 1. Money Making Opportunities; 2. credit repair; 3. credit card protection; 4. identity theft protection; 5. debt collection, debt counseling, debt settlement, or debt consolidation; 6. mortgage or loan modification; 7. government grants; 8. timeshare resale; or 9. nutraceuticals with a Negative Option Feature; B. Engaged in Outbound Telemarketing; C. Listed on the Mastercard Member Alert to Control High-Risk Merchants (MATCH) list for any of the following reasons: excessive Charge backs or fraud, fraud conviction, laundering, identification as a Questionable Merchant per the Mastercard Questionable Merchant Audit Program, merchant collusion, illegal transactions, or identity theft; D. Registered as, or qualifies for registration as, a high risk-merchant type according to Mastercard or Visa's rules and regulations; or E. That is a Covered Client subject to an Order from any lawsuit brought by the Commission or any other state or federal law enforcement agency relating to consumer protection or telemarketing laws or regulations, provided that Defendant received notice of the Order or the Order is publicly available. Provided, however, that (i) this Section shall not prohibit Defendant from owning or being employed by a business that provides hardware or software technology services, including point of sale hardware, software or gateway services, to any Acquirer, Financial Institution, Payment Processor, ISO or Sales Agent, provided that Defendant is not involved in the underwriting. screening, or risk assessment of any High Risk Client or Person falling within subsections A-E of this Section; (ii) this Section shall not prohibit Defendant from being an officer, employee, or contractor as part of Defendant's employment by a publicly traded Acquirer, Financial Institution, Payment Processor, ISO, or Sales Agent in which Defendant does not own more than one percent of the outstanding common shares, provided that Defendant is not involved in the underwriting, screening, or risk assessment of any High Risk Client or Person falling within subsections A-E of this Order. IT IS FURTHER ORDERED that Defendant, Defendant's officers, agents, employees, and attorneys, and all other persons in active concert or participation with any of them, who receive actual notice of this Order, whether acting directly or indirectly, are permanently restrained and enjoined from Credit Card Laundering. IT IS FURTHER ORDERED that Defendant, Defendant's officers, agents, employees,and attorneys, and all other persons in active concert or participation with any of them, who receive actual notice of this Order, whether acting directly or indirectly, are permanently restrained and enjoined from Making, or assisting others in making, expressly or by implication, any false or misleading statement in order to obtain Payment Processing services; and Engaging in any tactics to avoid fraud and risk monitoring programs established by any Financial Institution, Acquirer, or the operators of any payment system, including, but not limited to, balancing or distributing sales transaction volume or sales transaction activity among multiple Merchant Accounts or merchant billing descriptors; splitting a single sales transaction into multiple smaller transactions; or using shell companies to apply for additional Merchant Accounts. IT IS FURTHER ORDERED that Defendant, Defendant's officers, agents, employees, and attorneys, and all other persons in active concert or participation with any of them, who receive actual notice of this Order, whether acting directly or indirectly, are permanently restrained and enjoined from providing substantial assistance or support to any Person that they know, or should know, is engaged in: Misrepresenting, expressly or by implication, any materials aspect of the performance, efficacy, nature, or central characteristics of any goods or services; B. Misrepresenting, expressly or by implication, any material aspect of the nature or terms of any refund, cancellation, exchange, or repurchase policies; C. The unauthorized debiting or charging of consumer bank or credit card accounts; or D. Any deceptive, unfair, or abusive act or practice prohibited by Section 5 of the FTC Act or by the FTC's Telemarketing Sales Rule ("TSR"), 16 C.F.R. Part 310. IT IS FURTHER ORDERED that Defendant, Defendant's officers, agents, employees, and attorneys, and all other persons in active concert or participation with any of them, who receive actual notice of this Order, whether acting directly or indirectly, are permanently restrained and enjoined from participating in Payment Processing or acting as an ISO or Sales Agent for any prospective High Risk Client without first engaging in a reasonable screening of the prospective High Risk Client to determine whether the prospective High Risk Client's business practices are, or are likely to be, deceptive or unfair within the meaning of Section 5 of the FTC Act, or violation of the TSR. Such reasonable screening shall include, but not be limited to as further set forth in this Order. IT IS FURTHER ORDERED that Defendant, Defendant's officers, agents, employees, and attorneys, and all other persons in active concert or participation with any of them, who receive actual notice of this Order, whether acting directly or indirectly, in connection with Payment Processing or acting as an ISO or Sales Agent, are permanently restrained and enjoined from as further set forth in this Order. IT IS FURTHER ORDERED that: A. Judgment in the amount of Two Hundred Seventy Thousand Three Hundred Seventy-Three Dollars and Seventy Cents ($270,373.70) is entered in favor of the Commission against Defendant. B. Defendant is ordered to pay to the Commission Two Hundred Seventy Thousand Three Hundred Seventy-Three Dollars and Seventy Cents ($270,373.70), which, as Defendant stipulates, his undersigned counsel holds in escrow for no purpose other than payment to the Commission. Such payment must be made within seven (7) days of entry of this Order by electronic fund transfer in accordance with instructions previously provided by a representative of the Commission. IT IS FURTHER ORDERED that: A. Defendant relinquishes dominion and all legal and equitable right, title, and interest in all assets transferred pursuant to this Order and may not seek the return of any assets. B. The facts alleged in the Complaint will be taken as true, without further proof, in any subsequent civil litigation by or on behalf of the Commission, including in a proceeding to enforce its rights to any payment or monetary judgment pursuant to this Order, such as a nondischargeability complaint in any bankruptcy case. C. The facts alleged in the Complaint establish all elements necessary to sustain an action by the Commission pursuant to Section 523(a)(2)(A) of the Bankruptcy Code, 11 U.S.C. 523(a)(2)(A), and this Order will have collateral estoppel effect for such purposes as further set forth in this Order. IT IS FURTHER ORDERED that Defendant, and Defendant's officers, agents, employees, representatives, and all others in active concert or participation with any of them, who receive actual notice of this Order, whether acting directly or indirectly are permanently restrained and enjoined from directly or indirectly failing to provide sufficient customer information to enable the Commission to efficiently administer consumer redress. If a representative of the Commission requests in writing any information related to redress, Defendant must provide it, in the form prescribed by the Commission, within 14 days. IT IS FURTHER ORDERED that Defendant must fully cooperate with representatives of the Commission in this case and in any investigation related to or associated with the transactions or the occurrences that are the subject of the Complaint. Defendant must provide truthful and complete information, evidence, and testimony. Defendant must appear for interviews, discovery, hearings, trials, and any other proceedings that a Commission representative may reasonably request upon 5 days written notice, or other reasonable notice, at such places and times as a Commission representative may designate, without the service of a subpoena. IT IS FURTHER ORDERED that Defendant obtains acknowledgments of receipt of this Order: A. Defendant, within 7 days of entry of this Order, must submit to the Commission an acknowledgment of receipt of this Order sworn under penalty of perjury. B. For twenty (20) years after entry of this Order, Defendant, for any business that Defendant, individually or collectively with any other Defendant, is the majority owner or directly or indirectly controls must deliver a copy of this Order to: (1) all principals, officers, directors, and LLC members and managers; (2) all employees, agents, and representatives having managerial responsibilities for conduct related to the subject matter of the Order; and (3) any business entity resulting from any change in structure as set forth in the Section titled Compliance Reporting. Delivery must occur within seven (7) days of entry of this Order for current personnel. For all others, delivery must occur before they assume their responsibilities. C. From each individual or entity to which a Defendant delivered a copy of this Order, that Defendant must obtain, within 30 days, a signed and dated acknowledgment of receipt of this Order. IT IS FURTHER ORDERED that Defendant makes timely submissions to the Commission: A. One year after entry of this Order, Defendant must submit a compliance report, sworn under penalty of perjury as further set forth in this Order. IT IS FURTHER ORDERED that Defendant must create certain records for 20 years after entry of the
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Filing 15
STIPULATED ORDER FOR PERMANENT INJUNCTION AND MONETARY JUDGMENT AS TO FIRST DATA MERCHANT SERVICES LLC. IT IS ORDERED that Defendant, Defendant's officers, agents, employees, and attorneys, and all other persons in active concert or participation with any of them, who receive actual notice of this Order, whether acting directly or indirectly, are permanently restrained and enjoined from: A. Making, or assisting others in making, expressly or by implication, any false or misleading statement in order to obtain Payment Processing services; and B. Engaging in any tactics to avoid fraud and risk monitoring programs established by any Financial Institution, Acquirer, or the operators of any payment system, including, but not limited to, balancing or distributing sales transaction volume or sales transaction activity among multiple Merchant Accounts or merchant billing descriptors; splitting a single sales transaction into multiple smaller transactions; or using shell companies to apply for additional Merchant Accounts. IT IS FURTHER ORDERED that Defendant, Defendant's officers, agents, employees, and attorneys, and all other persons in active concert or participation with any of them, who receive actual notice of this Order, whether acting directly or indirectly, are permanently restrained and enjoined from providing substantial assistance or support to any Person in connection with Payment Processing as further set forth in this Order. IT IS FURTHER ORDERED that Defendant, Defendant's officers, agents, employees, and attorneys, and all other persons in active concert or participation with any of them, who receive actual notice of this Order, whether acting directly or indirectly, are permanently restrained and enjoined from participating in Payment Processing for any prospective Restricted Client without first engaging in a reasonable screening of the prospective Restricted Client to determine whether the prospective Restricted Client's business practices are, or are likely to be, deceptive or unfair within the meaning of Section 5 of the FTC Act, or violation of the Telemarketing Sales Rule. Such reasonable screening shall include, but not be limited to as further set forth in this Order. IT IS FURTHER ORDERED that Defendant, Defendant's officers, agents, employees, and attorneys, and all other persons in active concert or participation with any of them, who receive actual notice of this Order, whether acting directly or indirectly, in connection with Payment Processing are permanently restrained and enjoined from as further set forth in this Order. IT IS FURTHER ORDERED that Defendant must, no later than one hundred eighty (180) days after the effective date of this Order, establish a written oversight program for Wholesale ISOs (the "Wholesale ISO Oversight Program"), implement the program promptly with a completion date of three hundred sixty-five (365) days after the effective date of this Order (unless extended by the Associate Director for Enforcement for good cause), and thereafter maintain the program. The Wholesale ISO Oversight Program shall provide that: (i) the underwriting of new Covered Clients by the Wholesale ISO is performed in compliance with the standards for Merchant underwriting programs, policies and practices established for Wholesale ISOs by Defendant, the Acquiring Bank(s) and card networks with respect to preventing unfair or deceptive acts or practices, including violations of the Telemarketing Sales Rule, or tactics to avoid fraud detection and monitoring by Covered Clients; (ii) the monitoring, investigation, and adverse action with respect to Covered Clients by the Wholesale ISO is performed in compliance with the standards for the monitoring, investigation, and adverse action programs, policies, and practices established for Wholesale ISOs by Defendant, the Acquiring Bank(s), and the card networks with respect to detecting unfair or deceptive acts or practices, violations of the Telemarketing Sales Rule, or tactics to avoid fraud detection and monitoring by Covered Clients; and (iii) Defendant takes timely remedial action in the event that the Wholesale ISO's practices are deficient with respect to (i) or (ii), above. To satisfy this requirement, Defendant must, at a minimum as further set forth in this Order. IT IS FURTHER ORDERED that, in connection with its compliance with Section V of this Order titled Wholesale ISO Oversight Program, Defendant must obtain (i) an initial assessment to be conducted in two or three phases (as detailed in Section VI.I-M) (the "Initial Assessment"); and (ii) two additional annual assessments (as detailed in Section VI.N-P) (the "Annual Assessments") to be conducted beginning twelve months after the completion of the initial assessment and first annual assessment, respectively as further set forth in this Order. IT IS FURTHER ORDERED that Defendant, Defendant's officers, agents, employees, and attorneys, and all other persons in active concert or participation with any of them, who receive actual notice of this Order, whether acting directly or indirectly, in connection with any Assessment required by Section VI of this Order titled Independent Assessment of the Wholesale ISO Oversight Program, must not withhold any material facts from the Assessor, and must not misrepresent, expressly or by implication, any material fact. IT IS FURTHER ORDERED that, in connection with compliance with Section V of this Order titled Wholesale ISO Oversight Program, Defendant shall: For a total of three years, commencing one (1) year after the effective date of this Order, and each year thereafter until the fourth anniversary of the effective date of this Order, provide the Commission with a certification from a senior employee or a senior management committee of Defendant responsible for regulatory compliance or overall management of Defendant's Wholesale ISO line of business, that: (l) Defendant has established, implemented, and maintained the requirements of this Order; (2) Defendant is not aware of any material noncompliance that has not been (a) corrected or (b) disclosed to the Commission; (3) Defendant has cooperated with the Assessor as required by Section VII of this Order; and (4) for certifications filed for periods following the completion of the last Annual Assessment, that the Defendant has not (a) made material changes in the Wholesale ISO Oversight Program, (b) modified related methodologies, policies, and procedures, or (c) materially reduced financial support for the program that alone or in combination could reasonably be expected to diminish the effectiveness of the Wholesale ISO Oversight Program. Each certification issued pursuant to this Section VIII must be based on the personal knowledge of the senior corporate manager, senior officer, or subject matter experts whom the board of directors, or relevant subcommittee thereof, or other equivalent governing body, reasonably relies upon in making the certification. IT IS FURTHER ORDERED that: A. Judgment in the amount of Forty Million Dollars ($40,000,000) is entered in favor of the Commission against Defendant. B. Defendant is ordered to pay to the Commission Forty Million Dollars ($40,000,000). Such payment must be made within seven (7) days of entry of this Order by electronic fund transfer in accordance with instructions previously provided by a representative of the Commission. IT IS FURTHER ORDERED that: Defendant relinquishes dominion and all legal and equitable right, title, and interest in all assets transferred pursuant to this Order and may not seek the return of any assets. The facts alleged in the Complaint will be taken as true, without further proof, in any subsequent civil litigation by or on behalf of the Commission in a proceeding to enforce its rights to any payment or monetary judgment pursuant to this Order, such as a nondischargeability complaint in any bankruptcy case. The facts alleged in the Complaint establish all elements necessary to sustain an action by the Commission pursuant to Section 523(a)(2)(A) of the Bankruptcy Code, 11 U.S.C. 523(a)(2)(A), and this Order will have collateral estoppel effect for such purposes and as further set forth in this Order. IT IS FURTHER ORDERED that Defendant, and Defendant's officers, agents, employees, representatives, and all others in active concert or participation with any of them, who receive actual notice of this Order, whether acting directly or indirectly, are permanently restrained and enjoined from directly or indirectly failing to provide sufficient customer information to enable the Commission to efficiently administer consumer redress. If a representative of the Commission requests in writing any information related to redress, Defendant must provide it, in the form prescribed by the Commission, within fourteen (14) days. IT IS FURTHER ORDERED that Defendant must fully cooperate with representatives of the Commission in this case and in any investigation related to or associated with the transactions or the occurrences that are the subject of the Complaint. Defendant must provide truthful and complete information, evidence, and testimony. Defendant must cause officers, employees, representatives, or agents to appear for interviews, discovery, hearings, trials, and any other proceedings that a Commission representative may reasonably request upon five (5) days written notice, or other reasonable notice, at such places and times as a Commission representative may designate, without the service of a subpoena. IT IS FURTHER ORDERED that Defendant obtain acknowledgments of receipt of this Order as further set forth in this Order. IT IS FURTHER ORDERED that Defendant make timely submissions to the Commission as further set forth in this Order. IT IS FURTHER ORDERED that Defendant must create certain records for three (3) years after entry of the Order, and retain each such record for five (5) years. Specifically, Defendant, in connection with the operation of the Wholesale ISO Oversight Program, must create and retain the following records as further set forth in this Order. IT IS FURTHER ORDERED that, for the purpose of monitoring Defendant's compliance with this
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| Filing 14 NOTICE OF APPEARANCE by Mitchell Craig Shapiro on behalf of Chi W. Ko..(Shapiro, Mitchell) |
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Filing 13
ORDER FOR ADMISSION PRO HAC VICE OF NICHOLAS M. MAY granting #8 Motion for Nicholas M. May to Appear Pro Hac Vice. (Signed by Judge Louis L. Stanton on 5/20/2020) (rro)
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Filing 12
ORDER FOR ADMISSION PRO HAC VICE OF ANNA M. BURNS granting #9 Motion for Anna M. Burns to Appear Pro Hac Vice. (Signed by Judge Louis L. Stanton on 5/20/2020) (rro)
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| Filing 11 MOTION to Approve Consent Judgment [Motion to Enter Stipulated Orders for Permanent Injunction and Monetary Judgment]. Document filed by Federal Trade Commission. (Attachments: #1 Text of Proposed Order, #2 Text of Proposed Order).(May, Nicholas) |
| Filing 10 NOTICE OF APPEARANCE by Michael Courtney Keats on behalf of First Data Merchant Services LLC..(Keats, Michael) |
| CASE OPENING INITIAL ASSIGNMENT NOTICE: The above-entitled action is assigned to Judge Louis L. Stanton. Please download and review the Individual Practices of the assigned District Judge, located at #https://nysd.uscourts.gov/judges/district-judges. Attorneys are responsible for providing courtesy copies to judges where their Individual Practices require such. Please download and review the ECF Rules and Instructions, located at #https://nysd.uscourts.gov/rules/ecf-related-instructions..(jgo) |
| Magistrate Judge Barbara C. Moses is so designated. Pursuant to 28 U.S.C. Section 636(c) and Fed. R. Civ. P. 73(b)(1) parties are notified that they may consent to proceed before a United States Magistrate Judge. Parties who wish to consent may access the necessary form at the following link: #https://nysd.uscourts.gov/sites/default/files/2018-06/AO-3.pdf. (jgo) |
| Case Designated ECF. (jgo) |
| ***NOTICE TO ATTORNEY REGARDING PARTY MODIFICATION. Notice to attorney Nicholas M. May. The party information for the following party/parties has been modified: First Data Merchant Services LLC; Chi W. Ko. The information for the party/parties has been modified for the following reason/reasons: party text was omitted; alias party name was omitted;. (jgo) |
| ***NOTICE TO ATTORNEY REGARDING CIVIL CASE OPENING STATISTICAL ERROR CORRECTION: Notice to attorney Nicholas M. May. The following case opening statistical information was erroneously selected/entered: County code Albany;. The following correction(s) have been made to your case entry: the County code has been modified to XX Out of State;. (jgo) |
| Filing 9 AMENDED MOTION for Anna Mirshak Burns to Appear Pro Hac Vice . Motion and supporting papers to be reviewed by Clerk's Office staff. Document filed by Federal Trade Commission. (Attachments: #1 Affidavit Notarized, #2 Cert. of Good Standing, #3 Text of Proposed Order).(Burns, Anna) |
| Filing 8 AMENDED MOTION for Nicholas M. May to Appear Pro Hac Vice . Motion and supporting papers to be reviewed by Clerk's Office staff. Document filed by Federal Trade Commission. (Attachments: #1 Affidavit Notarized, #2 Cert. of Good Standing, #3 Text of Proposed Order).(May, Nicholas) |
| Filing 7 MOTION for Anna M. Burns to Appear Pro Hac Vice . Motion and supporting papers to be reviewed by Clerk's Office staff. Document filed by Federal Trade Commission. (Attachments: #1 Affidavit, #2 Exhibit Certificate of Good Standing, #3 Text of Proposed Order).(Burns, Anna) |
| Filing 6 NOTICE OF APPEARANCE by Alexander John Willscher on behalf of First Data Merchant Services LLC..(Willscher, Alexander) |
| Filing 5 MOTION for Nicholas M. May to Appear Pro Hac Vice . Motion and supporting papers to be reviewed by Clerk's Office staff. Document filed by Federal Trade Commission. (Attachments: #1 Affidavit, #2 Proof of Good Standing, #3 Text of Proposed Order).(May, Nicholas) |
| Filing 4 WAIVER OF SERVICE RETURNED EXECUTED. Chi W. Ko waiver sent on 5/19/2020, answer due 7/20/2020. Document filed by Federal Trade Commission..(May, Nicholas) |
| Filing 3 WAIVER OF SERVICE RETURNED EXECUTED. First Data Merchant Services LLC waiver sent on 5/19/2020, answer due 7/20/2020. Document filed by Federal Trade Commission..(May, Nicholas) |
| Filing 2 CIVIL COVER SHEET filed..(May, Nicholas) |
| Filing 1 COMPLAINT against First Data Merchant Services LLC, Chi W. Ko. Document filed by Federal Trade Commission..(May, Nicholas) |
| >>>NOTICE REGARDING DEFICIENT MOTION TO APPEAR PRO HAC VICE. Notice to RE-FILE Document No. #5 MOTION for Nicholas M. May to Appear Pro Hac Vice . Motion and supporting papers to be reviewed by Clerk's Office staff... The filing is deficient for the following reason(s): affidavit not notarized;. Re-file the motion as a Corrected Motion to Appear Pro Hac Vice - attach the correct signed PDF - select the correct named filer/filers - attach valid Certificates of Good Standing issued within the past 30 days - attach Proposed Order.. (laq) |
| >>>NOTICE REGARDING PRO HAC VICE MOTION. Regarding Document No. #9 AMENDED MOTION for Anna Mirshak Burns to Appear Pro Hac Vice . Motion and supporting papers to be reviewed by Clerk's Office staff.. The document has been reviewed and there are no deficiencies. (ad) |
| >>>NOTICE REGARDING PRO HAC VICE MOTION. Regarding Document No. #8 AMENDED MOTION for Nicholas M. May to Appear Pro Hac Vice . Motion and supporting papers to be reviewed by Clerk's Office staff.. The document has been reviewed and there are no deficiencies. (laq) |
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