FTC Stops Alleged Deceptive Office Supply Scam That Targeted Charitable Organizations and Small Businesses

At the Federal Trade Commission’s request, a federal court has temporarily halted and frozen the assets of an operation that the FTC alleges bilked millions of dollars from nonprofit organizations and small businesses through an office supply scam. The FTC seeks to permanently stop the illegal practices and make the defendants return victims’ money.

According to the FTC’s complaint, individuals from Liberty Supply Co., also doing business as Omni Services, initiated calls to churches, schools and businesses, stated that the company was going out of business, and offered pens, paper clips and other office supplies at low prices. The complaint alleges that the defendants quoted a per-unit price even though they only sold multi-unit quantities, causing consumers to believe the quoted price applied to a package of items, instead of an individual item. The defendants did not disclose the final price, quantity or shipping cost, even when asked, according to the complaint. For example, the complaint alleges that if a consumer asked for a purchase order for their organization to approve, instead of sending a purchase order the defendants sent unordered merchandise and an invoice.

The FTC’s complaint alleges that the defendants aggressively sought payment for unordered merchandise. When consumers paid the full amount, the defendants called to thank them, and then offered and sent a free gift, along with more unordered merchandise and an invoice for it, according to the complaint. When consumers questioned the invoices, the defendants allegedly said they had a transcript of the conversation in which the order was placed, but refused to produce the transcript to the customer.

According to the complaint, Consumers who wanted to return merchandise learned they had to pay a restocking fee, typically 15 percent of the invoice amount. Some consumers paid for the products in order to avoid the burden or expense of the defendants’ onerous return policy, but the prices they paid were typically higher than the amount the defendants had stated in their initial phone call.

The defendants Liberty Supply Co., Mia McCrary and John B. Hart, are charged with violating the FTC Act, the Telemarketing Sales Rule, and the Unordered Merchandise Statute. The FTC complaint also names Nor-Jay Enterprises Inc. as a relief defendant who profited from the scheme.

The Commission vote authorizing the staff to file the complaint was 4-0. The complaint was filed in the U.S. District Court for the Eastern District of Texas, Sherman Division. The court entered a temporary restraining order against the defendants on December 4, 2015.

To learn more, read the FTC’s Small Business Scams.

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