Case 8:19-cv-02109-JVS-ADS Document 1 Filed 11/04/19 Page ...

Case 8:19-cv-02109-JVS-ADS Document 1 Filed 11/04/19 Page 1 of 24 Page ID #:1

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1 ALDEN F. ABBOTT General Counsel

2 STEPHEN T. FAIRCHILD

3 WA Bar No. 41214; sfairchild@

RICHARD MCKEWEN 4 WA Bar No. 45041; rmckewen@

5 FEDERAL TRADE COMMISSION

6

915 Second Avenue, Suite 2896 Seattle, WA 98174

7 Tel.: (206) 220-6350; Fax: (206) 220-6366

8 ROBERT J. QUIGLEY, Local Counsel

9 CA Bar No. 302879; rquigley@

1o FEDERAL TRADE COMMISSION

10990 Wilshire Boulevard, Suite 400 11 Los Angeles, CA 90024

12 Tel.: (310) 824-4300; Fax: (310) 824-4380

No fee..

un NOV -4 AH 9: 30

13 Attorneys for Plaintiff 14

15

UNITED STATES DISTRICT COURT

16

CENTRAL DISTRICT OF CALIFORNIA

17 FEDERAL TRADE COMMISSION,

18 Plaintiff,

19

20

v.

21 AMERICAN FINANCIAL SUPPORT 22 SERVICES INC.,

23 ARETE FINANCIAL GROUP, a

24 corporation, also d/b/a Arete Financial 25 Freedom,

Civ. No. SACV 19 - 02109 JVS (ADS )

COMPLAINT FOR PERMANENT INJUNCTION AND OTHER EQUITABLE RELIEF

FILED UNDER SEAL

26 ARETE FINANCIAL GROUP LLC, 27 28 CBC CONGLOMERATE LLC, also

Case 8:19-cv-02109-JVS-ADS Document 1 Filed 11/04/19 Page 2 of 24 Page ID #:2

1 d/b/a 1file.mg,

2 DIAMOND CHOICE INC., also d/b/a 3 Interest Rate Solutions,

4 J&L ENTERPRISE LLC, also d/b/a 5 Premier Solutions Servicing,

6 LA CASA BONITA INVESTMENTS, 7 INC., f/k/a La Casa Bonita Investments

8 LLC, also d/b/a Education Loan

Network, also d/b/a Edunet,

9

10 US FINANCIAL FREEDOM CENTER, 11 INC., a corporation,

12 CAREY G. HOWE, individually and as

13

an officer or manager of Arete Financial Group; Arete Financial Group LLC;

14 CBC Conglomerate LLC; and La Casa

15 Bonita Investments, Inc.,

16 ANNA C. HOWE, individually and as 17 an officer of CBC Conglomerate LLC,

18 SHUNMIN "MIKE" HSU, individually

19 and as an officer or manager of Arete

20

Financial Group; Arete Financial Group LLC; CBC Conglomerate LLC; and La

21 Casa Bonita Investment, Inc.,

22

RUDDY PALACIOS a/k/a RUDDY

23 BARAHONA, individually and as an

24 officer of Arete Financial Group; Arete

Financial Group LLC; and Diamond

25 Choice Inc.,

26

27

OLIVER POMAZI, individually and as an officer or director of Arete Financial

28 Grou2; Arete Financial Group LLC; and

COMPLAINT FOR PERMANENT INJUNCTION AND OTHER EQUITABLE RELIEF - 2

Case 8:19-cv-02109-JVS-ADS Document 1 Filed 11/04/19 Page 3 of 24 Page ID #:3

1 J&L Enterprise LLC, and

2 JAY SINGH, individually and as an

3 officer of American Financial Support Services Inc. and US Financial Freedom

4 Center Inc.,

5

6

Defendants,

7 MJ WEALTH SOLUTIONS, LLC,

8 Relief Defendant.

9

10

Plaintiff, the Federal Trade Commission ("FTC" or "Commission"), for its

11 Complaint alleges:

12

1. The FTC brings this action under Sections 13(b) and 19 of the Federal

13 Trade Commission Act ("FTC Act"), 15 U.S.C. ?? 53(b) and 57b, and the

14 Telemarketing and Consumer Fraud and Abuse Prevention Act ("Telemarketing

15 Act"), 15 U.S.C. ?? 6101-6108, to obtain temporary, preliminary, and permanent

16 injunctive relief, rescission or reformation of contracts, restitution, the refund of

17 monies paid, disgorgement of ill-gotten monies, and other equitable relief for

18 Defendants' acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C.

19 ? 45(a), and the FTC's Telemarketing Sales Rule ("TSR"), 16 C.F.R. pt. 310, in

20 connection with Defendants' ongoing deceptive marketing and sale of student loan

21 debt relief services.

22

2. Since at least April 2014, Defendants have operated an unlawful debt

23 relief scheme that preys on consumers with student loan debt. Defendants promise

24 consumers that, in exchange for the payment of an upfront fee and subsequent

25 monthly fees, Defendants will reduce consumers' monthly student loan payments

26 or eliminate all, or a substantial portion of, their federal student loan debt by

27 enrolling consumers in student loan forgiveness, consolidation, or repayment

28 programs. In numerous instances, however, Defendants fail to reduce or eliminate

COMPLAINT FOR PERMANENT INJUNCTION AND OTHER EQUITABLE RELIEF - 3

Case 8:19-cv-02109-JVS-ADS Document 1 Filed 11/04/19 Page 4 of 24 Page ID #:4

1 consumers' loan balances or monthly loan payments. Defendants also break their

2 promises that they will apply consumers' monthly fee payments to Defendants

3 toward the consumers' loans and assume responsibility for servicing those loans,

4 leaving consumers on the hook for adverse consequences like increased interest

5 and delinquency. As a result, consumers who already struggle to pay their student

6 loans lose even more money to Defendants. Since the beginning of their scheme,

7 Defendants have pocketed at least $43 million in revenues from consumers.

8

JURISDICTION AND VENUE

9

3. This Court has subject matter jurisdiction pursuant to 28 U.S.C.

10 ?? 1331, 1337(a), and 1345.

11

4. Venue is proper in this District under 28 U.S.C. ? 1391(b)(l), (b)(2),

12 (c)(l), (c)(2), and (d), and 15 U.S.C. ? 53(b).

13

PLAINTIFF

14

5. The FTC is an independent agency of the United States government

15 created by statute. 15 U.S.C. ?? 41-58. The FTC enforces Section 5(a) of the FTC

16 Act, 15 U.S.C. ? 45(a), which prohibits unfair or deceptive acts or practices in or

17 affecting commerce. The FTC also enforces the Telemarketing Act, 15 U.S.C. ??

18 6101-6108. Pursuant to the Telemarketing Act, the FTC promulgated and enforces

19 the TSR, 16 C.F.R. pt. 310, which prohibits deceptive or abusive telemarketing acts

20 or practices.

21

6. The FTC is authorized to initiate federal district court proceedings, by

22 its own attorneys, to enjoin violations of the FTC Act and the TSR, and to secure

23 such equitable relief as may be appropriate in each case, including rescission or

24 reformation of contracts, restitution, the refund of monies paid, and the

25 disgorgement of ill-gotten monies. 15 U.S.C. ?? 53(b), 57b, and 6102(c).

26

27

28

COMPLAINT FOR PERMANENT INJUNCTION AND OTHER EQUITABLE RELIEF - 4

Case 8:19-cv-02109-JVS-ADS Document 1 Filed 11/04/19 Page 5 of 24 Page ID #:5

1

DEFENDANTS

2

Corporate Defendants

3

7. Defendant American Financial Support Services Inc. ("AFSS") is a

4 Delaware corporation with its current principal place of business at 500 Ygnacio

5 Valley Road, Suite 430, Walnut Creek, CA 94596. At all times material to this

6 Complaint, acting alone or in concert with others, or as part of the common

7 enterprise described in Paragraph 22, AFSS has advertised, marketed, offered to

8 provide, sold, or provided student loan debt relief services to consumers in this

9 District and throughout the United States.

10

8. Defendant Arete Financial Group, also doing business as Arete

11 Financial Freedom ("Arete Financial Freedom"), is a California corporation with

12 its current principal place of business at 1261 East Dyer Road, Suite 100, Santa

13 Ana, CA 92705. From approximately June to August 2017, Arete Financial

14 Freedom also listed its principal place of business in California Secretary of State

15 filings as 5772 Bolsa Avenue, Suite 220, Huntington Beach, CA 92649. At all

16 times material to this Complaint, acting alone or in concert with others, or as part

17 of the common enterprise described in Paragraph 22, Arete Financial Freedom has

18 advertised, marketed, offered to provide, sold, or provided student loan debt relief

19 services to consumers in this District and throughout the United States.

20

9. Defendant Arete Financial Group LLC is a California limited

21 liability company with its principal place of business listed in California Secretary

22 of State filings as 1261 East Dyer Road, Suite 100, Santa Ana, CA 92705. Arete

23 Financial Group LLC sometimes also does business as Arete Financial Freedom.

24 Arete Financial Group LLC has also operated under the name Arete Finacial [sic]

25 Group LLC, a California limited liability company that was registered with the

26 California Secretary of State on or about February 15, 2017, and dissolved on or

27 about March 26, 2018. At all times material to this Complaint, acting alone or in

28 concert with others, or as part of the common enterprise described in Paragraph 22,

COMPLAINT FOR PERMANENT INJUNCTION AND OTHER EQUITABLE RELIEF - 5

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