Owners of an online shopping club the Federal Trade Commission says swindled consumers out of millions of dollars via illegal credit card charges and bank account debits settled with the agency, agreeing to get out of the business.
The defendants, Classic Closeouts LLC, owner Daniel Greenberg, his wife Stephanie and others faced their first FTC complaint during Operation Short Change – a July 2009 crackdown on scammers taking advantage of the recession to bilk vulnerable consumers.According to the complaint, Greenberg made unauthorized charges and debits to consumers' accounts months or years after they bought low-cost clothing or household goods from the Classic Closeouts website.
The defendants made unauthorized charges and debits to consumers' accounts ranging from $59.99 to $79.99, and charged some multiple times, according to the FTC. Consumers who attempted to contact the defendants to dispute the charges typically received no response.
Many consumers disputed the charges with their credit card company or bank, and some initially succeeded in eliminating them.
However, in those instances, the defendants contested these disputes, falsely claiming that consumers had chosen to join the Classic Closeouts' "frequent shopping club." As a result, financial institutions often reinstated the charges.
Under the settlement, Greenberg is banned from owning, controlling or consulting for any online business that handles consumers' credit card or debit card accounts. He's also prohibited from making unauthorized charges to consumers' accounts and making false or misleading statements while selling any goods or services and using a false or assumed name -- including an unregistered, fictitious company name -- in business dealings.
Greenberg was fined $2.08 million, but because he recently filed for bankruptcy and is unable to pay, the penalty will be suspended once he and his wife surrender certain possessions.
These ill-gotten goods include the following: Two Bose sound systems; three pens (Montblanc, Louis Vuitton and Cartier); MacKenzie-Childs dishes and serving pieces; a diamond tennis bracelet; a Locman ladies watch; a Locman men's watch; a Breitling watch; an Audemars Royal Oak watch; an Audemars gold watch; an International Watch Company watch; a Patek Phillippe men's watch; a Rolex watch; all guitars and equipment; and all cuff links.
If Greenberg is found to have lied to the FTC about his financial condition, the full $2.08 million fine will automatically be due.
At a court hearing in June 2009, the court halted Classic Closeouts' operations, froze its assets and placed it in receivership. In July 2009, the FTC amended its complaint and named two more individuals – Jonathan Bruk and Stephanie Greenberg – along with several companies, as defendants.
In December 2010, the FTC again amended its complaint to make Stephanie Greenberg a "relief defendant," accusing her of receiving significant sums of money from the unlawful scheme.
'Classic Closeouts' Settles With FTC Over Accusations of Bogus Charges