Trudeau Civil Case Documents OLD Docs 336 04 16 10 and 267 and 269 11 13 09 PDF

Case: 1:03-cv-03904 Document #: 336 Filed: 04/16/10 Page 1 of 1 PageID #:5637
UNITED STATES DISTRICT COURT FOR THE Northern District of Illinois CM/ECF LIVE, Ver 4.0.3 Eastern Division Federal Trade Commission Plaintiff, v. Kevin Trudeau, et al. Defendant. Case No.: 1:03cv03904 Honorable Robert W. Gettleman
NOTIFICATION OF DOCKET ENTRY
This docket entry was made by the Clerk on Friday, April 16, 2010: MINUTE entry before Honorable Robert W. Gettleman: Supplemental order modifying the stipulated final order for permanent injunction and awarding monetary relief entered. Defendant Trudeau is ordered to obtain and maintain in force a performance bond in the principal amount of $2,000,000.00. In lieu of a performance bond, he may establish an interestbearing escrow account fund. As a sanction for defendant Trudeau's contempt of the Final Order, and affirmed by the USCA, he is ordered to pay forthwith to plaintiff FTC the sum of $37,616.161.00, representing consumer loss. Plaintiff FTC's report on status of reimbursement efforts is due by 7/23/2010. Status hearing is set for 7/29/2010, at 10:00 a.m. This court shall retain jurisdiction. Mailed notice(gds, )
ATTENTION: This notice is being sent pursuant to Rule 77(d) of the Federal Rules of Civil Procedure or Rule 49(c) of the Federal Rules of Criminal Procedure. It was generated by CM/ECF, the automated docketing system used to maintain the civil and criminal dockets of this District. If a minute order or other document is enclosed, please refer to it for additional information. For scheduled events, motion practices, recent opinions and other information, visit our web site at www.ilnd.uscourts.gov.
GIN Network Truth (the smart group). NOTE: These are older documents, for historical perspective of the case.
IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS : : : : : : : :
FEDERAL TRADE COMMISSION, Plaintiff, v. KEVIN TRUDEAU, Defendant.
Civil Action No. 03-C-3904
FTCS RENEWED MOTION FOR ENTRY OF COMPENSATORY MONETARY REMEDY AGAINST KEVIN TRUDEAU
Introduction Plaintiff Federal Trade Commission (FTC or Commission) renews its motion for entry of a monetary remedy against Kevin Trudeau to compensate consumers harmed by his deceptive infomercials for his Weight Loss Cure diet book. The Seventh Circuit has affirmed the Courts November 2007 Order finding Trudeau in contempt. FTC v. Trudeau, 579 F.3d 754, 762-68 (7th Cir. 2009). In so holding, the Seventh Circuit took no issue with the amount of the remedy imposed by the Court $37.6 million which was based on consumer losses from direct response sales of Trudeaus book. Rather, the Circuit Court found that the Courts order lacked just two details: (1) sufficient findings explaining how the Court arrived at that figure; and (2) procedures specifying how the remedy should be administered. Id. at 770. Thus, the Seventh Circuit vacated the contempt remedy and remanded with instructions to add these details.1 The Seventh Circuit rejected Trudeaus argument that this contempt remedy can only be based on his ill-gotten gains. 579 F.3d at 771-72. The court also rejected Trudeaus suggestion that he should be entitled to additional procedural safeguards in these remedy proceedings on remand, such as a new judge, a jury trial, and a beyond-a-reasonable-doubt standard of proof. Rather, the court held that Trudeau is not entitled to any special process on remand, other than notice, discovery, and an opportunity to present evidence. 579 F.3d at 776. Trudeau has already received all of the process he was due, and there is a robust record from which the Court can fashion an order consistent with the Seventh Circuits opinion. Accordingly, the FTC: (1) renews its request for entry of a compensatory contempt remedy against Trudeau in the amount of $46.9 million, the amount consumers lost from direct response and retail sales of Trudeaus book during the time his deceptive infomercials were broadcast; and (2) submits a proposed order with findings supporting that calculation and procedures for administering the remedy, consistent with the Seventh Circuits opinion. I. Background
The Seventh Circuit also vacated the Courts three-year infomercial ban against Trudeau, which the Court had entered in lieu of the performance bond the FTC requested in its Motion to Modify the 2004 Order. D.187. The FTC is concurrently filing a Renewed Motion to Modify the 2004 Order.
A.
The Court Held Trudeau in Contempt for Deceptively Promoting His Weight Loss Cure Book in Infomercials
Trudeau has been the subject of multiple FTC civil actions and contempt proceedings before this Court for his deceptive infomercials promoting cures for everything from cancer to depression, hair loss, chronic pain, and obesity. To rein in his unlawful conduct, the Court entered a Stipulated Permanent Injunction in this action in September 2004 (2004 Order) banning Trudeau from participating in infomercials for any product, program, or service. D.56, 2004 Order at Part I, p. 8. The ban contains a limited exception for infomercials regarding books and other publications, provided that, among other things, the infomercial for any such book . . . must not misrepresent the content of the book. But that didnt stop him. In September 2007, the Commission moved the Court to hold Trudeau in civil contempt for violating the 2004 Order by misrepresenting the content of his diet book, The Weight Loss Cure They Dont Want You to Know About, in infomercials. D.62. Following a show cause hearing, the Court issued a decision and order in November 2007 (Contempt Order). D.93, FTC v. Trudeau, 567 F.Supp.2d 1016 (N.D. Ill. 2007). The Court found that throughout his infomercials, Trudeau falsely and intentionally misled consumers to believe that the diet described in his book was easy and that, once finished, would allow the consumer to eat anything he or she wants. Thus, the Court concluded that Trudeau misrepresented the content of the book in his infomercials in flagrant violation of Section I of the Order, and held him in contempt. B. The Courts Extensive Proceedings Concerning the FTCs Request for Monetary Relief
Next, the FTC filed a motion for entry of a monetary remedy against Trudeau, pursuant to the Courts inherent contempt power. On essentially the same track, Trudeau filed a motion asking the Court to reconsider its order holding him in contempt. In the course of the remedy proceedings, Trudeau received ample notice of the relief sought by the FTC and a full opportunity to take discovery and present evidence, more than satisfying the required procedural safeguards. The Court gave the parties more than six months
to complete discovery and briefing on the motions, from December 2007 through July 2008.2 The parties extensively briefed the motions and submitted voluminous supporting exhibits.3 The FTC filed both its Contempt Remedy Motion (D. 186) and Motion to Modify the 2004 Order (D.187) on March 7, 2008; Trudeau was given more than 40 days to respond, until April 18. A few weeks earlier, Trudeau filed his motion for reconsideration of the Contempt Order in February 2008, D.95, which the parties also fully briefed. In July 2008, this Court held a full evidentiary hearing and oral argument on the motions over a three-day period.4 At the hearing, the FTC rested its case as to the contempt remedy on its briefs and exhibits, and cross-examined Trudeaus witnesses. Trudeau testified on his own behalf and presented testimony from three other witnesses, as described further below. In accordance with well-established authority, the FTC sought a compensatory contempt remedy against Trudeau for a reasonable approximation of the amount of consumers net losses. FTC v. Febre, 128 F.3d 534 (7th Cir. 1997). D.186, Contempt Remedy Brief at 3-8. This is the appropriate measure of monetary relief here because the net sales to consumers of the Weight Loss Cures book which Trudeau aggressively touted in his widespread infomercials on television and the Internet is well-documented in the record, and can be calculated without difficulty. In addition, consumers who purchased the book directly in response to the infomercials can be readily identified from customer records, and those who purchased the book at retail can be identified through notice by publication. The record evidence shows that consumers lost $37.6 million from direct response sales of the book (i.e., sales made to consumers who called the telephone number specified in the infomercials or web sites promoting the book, less returns or refunds), FTC Ex. 20 at ITV-KT 1 (Net Direct Response Sales of Book), and $9.3 million from retail sales (e.g., books sold at Barnes & Noble, Walmart, and
See D.94, 141 (November 21, 2007 Scheduling Order; June 26, 2008 Order extending discovery cutoff date to July 11, 2008). The FTCs exhibits were filed with its Contempt Motion, D.67, Contempt Remedy Briefs, D.108, D.132, and as additional trial exhibits. See D.182 (FTC Motion to Admit Evidence), D.212 (Order Regarding Trial Exhibits). All references to these exhibits herein are cited as FTC Ex. __.
4 3
See D.152-55.
Amazon.com). FTC Ex. 21 (Net Retail Sales of Book). Thus, the FTC sought compensatory relief equal to consumers total net losses of $46.9 million. In its remedy briefs, the Commission also presented the Court with a reasonable approximation of Trudeaus ill-gotten gains from his contumacious conduct. Between the consideration he received under his contract with ITV Global which handled direct response sales and royalty payments made to him from retail sales of the book, the FTC estimated that Trudeau reaped more than $11 million in profits from deceptively advertising his book. D.186, Contempt Remedy Opening Brief at 8-14; D.130, Contempt Remedy Reply Brief at 11-12. The FTC showed, however, that basing the monetary remedy on disgorgement of ill-gotten gains is not appropriate where consumer losses are readily calculable, as they are here. It is particularly ill-suited in the case of Trudeau, whom the Court found lacked any credibility. See Nov. 4, 2008 Tr. At 18:9-15. As discussed below in II.C, through evasive discovery responses, clever obfuscation in his contract and dealings with ITV, and by deferring or failing to collect monies owed to him by ITV, Trudeau has made it difficult to calculate the amount of his ill-gotten gains with precision. At the evidentiary hearing held on July 17, 23, and 25, 2008, Trudeau presented four witnesses. Jeffrey Harris, a former FTC attorney, and Trudeau himself testified in support of Trudeaus Motion for Reconsideration of the Contempt Order, contending that Trudeaus conduct did not violate the Courts 2004 Order. The Court found, inter alia, that Trudeau was not a credible witness. Nov. 4, 2008 Tr. at 18:9-15. Next, Trudeaus business, tax, and financial planning counsel, Marc Lane, testified that the Court should not impose any monetary remedy against Trudeau because he is insolvent and cannot afford to pay any judgment. Lanes testimony was premised on a balance sheet he had prepared, which excluded $130 million in assets of Trudeau and his many affiliated entities at the request of management, i.e., Trudeau. See July 23, 2008 Tr. at 107:10-122:6 (cross-examination of Lane). The Court found that the balance sheet prepared by Lane was not worth the paper it was written on. D.157, Aug. 7, 2008 Order at 9. Finally, Trudeau presented the testimony of Avin Domnitz, who he proffered as an expert on the marketing of books in bookstores. Domnitz had expressed a general opinion in his report,
Def. Ex. VV, that infomercials do not usually influence consumers book purchasing decisions, an opinion noticeably absent from his direct testimony at trial. See July 23, 2008 Tr. at 25-38. On cross-examination, however, Domnitz admitted, among other things, that it is unusual for a book to be marketed via infomercials and in bookstores, as Trudeau did so aggressively here with his widespread, deceptive infomercials. Domnitz further admitted that he had no knowledge of any other book marketed via infomercials. Id. at 38-41. Thus, for these and other reasons discussed in II.B.2.b below, Domnitz had little or no basis for opining on the effect Trudeaus widespread deceptive infomercials had on sales of his Weight Loss Cure book. In August 2008, following the evidentiary hearing, the Court issued a decision and order rejecting Trudeaus motion for reconsideration of contempt liability, and fixing the amount of the monetary contempt remedy. D.157. The Court ordered Trudeau to disgorge approximately $5.2 million, which the Court found to be a conservative estimate of the royalties Trudeau realized from the sale of the Weight Loss Cure book. The Commission then moved for reconsideration of the Courts order to correct a mathematical error in the Courts calculation of disgorgement. D.165. Trudeau countered that there was no evidentiary support for any monetary remedy at all, that he received no royalties from the sale of his book, and that the correct disgorgement amount is zero. D.191, at 5. Addressing these arguments, on November 4, 2008, the Court issued a Supplemental Order abandoning a disgorgement approach and imposing a monetary contempt remedy in the amount of $37.6 million, representing a reasonable approximation of the loss consumers suffered as a result of defendants deceptive infomercials. D.220. Thereafter, the Court denied Trudeaus motion to amend or stay the judgment, D.229, and Trudeau appealed to the Seventh Circuit, challenging every aspect of the Courts orders in the contempt proceedings. C. Seventh Circuit Opinion
On August 27, 2009, the Seventh Circuit issued a detailed opinion affirming the Courts contempt ruling, but vacating the monetary remedy and remanding the matter to this Court for further proceedings consistent with its opinion. FTC v. Trudeau, 579 F.3d 754 (7th Cir. 2009). The Seventh Circuit instructed the Court to add sufficient findings to the contempt remedy order explaining how the remedy was calculated. The Circuit Court took no issue, however, with the amount of the monetary relief imposed by this Court. Indeed, the court affirmed that consumer 5
loss is an appropriate measure for the contempt remedy, which was precisely the method employed by this Court. Citing FTC v. Febre, 128 F.3d 530, 535 (7th Cir. 1997), the Circuit Court also affirmed that once the FTC reasonably approximated the amount of consumer loss, the burden shifted to Trudeau to rebut the FTCs calculations. The Seventh Circuit further held that the remedy order should specify how the remedy will be administered, and provided guidelines for doing so. In addition to requiring that these details be added to the remedy order, the Seventh Circuit rejected Trudeaus contention that he is entitled to any greater procedural safeguards on remand, such as a new trial before a jury, a different judge, or a proof-beyond-a-reasonable doubt standard. 579 F.3d at 769, 775-76. Rather, the Seventh Circuit held that Trudeau is not entitled to any special process on remand, other than notice, discovery, and opportunity to present evidence .... [T]he law does not require more than that for civil contempt sanctions. 579 F.3d at 776. Trudeau has already received all the process he was due in the prior proceedings, and there is a robust record from which the Court can fashion a contempt remedy order consistent with the Seventh Circuits opinion. II. ARGUMENT This Court has the inherent power to enforce the 2004 Order against Trudeau by ordering monetary relief for his contempt, and broad discretion to fashion the appropriate remedy. It is well-established that consumer loss is the appropriate contempt remedy where consumers have been deceived by a defendants false and misleading advertising, the defendants misrepresentations were widely disseminated, and consumer loss is readily calculable. All of these factors apply here. Accordingly, the FTC requests that the Court enter a judgment for monetary relief against Trudeau in the amount of $46.9 million, representing the total consumer loss from both direct response and retail sales of Trudeaus Weight Loss Cure book during the period his deceptive infomercials were blanketing the airwaves. The FTC also submits with this Motion a proposed order containing detailed findings supporting the calculation of the remedy, and procedures for administering it, consistent with the Seventh Circuits opinion. Accordingly, the FTC respectfully requests that the Court: (1) grant this Motion; and (2) enter the FTCs proposed order.
A.
The Court Has the Power to Enter A Monetary Contempt Remedy For Full Remedial Relief
This Court has the inherent power to enforce its own orders through civil contempt proceedings. Shilitani v. United States, 384 U.S. 364, 370 (1966). [T]he measure of the courts power is determined by the requirements of full remedial relief. McComb v. Jacksonville Paper Co., 336 U.S. 187, 193 (1949). Moreover, as the Seventh Circuit emphasized, this Court has broad discretion to fashion contempt remedies and the particular remedy chosen should be based on the nature of the harm and the probable effect of alternative sanctions. 579 F.3d at 771-72 (citing Connolly v. J.T. Ventures, 851 F.2d 930, 933 (7th Cir. 1988)). Based on the evidence of the extensive consumer harm caused by Trudeaus contempt, the appropriate remedy is a judgment for the full amount of consumer loss. Any lesser, alternative remedy will fall short of fully compensating consumers for the injury he has caused. B. The Appropriate Contempt Remedy is $46.9 Million, the Full Amount of Consumer Loss 1. Consumer Loss is the Appropriate Measure for the Contempt Remedy
Consumer loss is a common measure for civil sanctions in contempt proceedings and direct FTC actions. Trudeau, 579 F.3d at 771 (citing FTC v. Febre, 128 F.3d 530, 536 (7th Cir. 1997)(direct action under FTC Act 13(b)); FTC v. Kuykendall, 371 F.3d 745, 764-66 (10th Cir. 2004)(en banc)(contempt proceeding)). Indeed, as the Seventh Circuit noted, some courts, including ours, have held that in certain cases consumer loss is a more appropriate measure than ill-gotten gains. Id. (emphasis added) (citing FTC v. Stefanchik, 559 F.3d 924, 932 (9th Cir. 2009); Febre, 128 F.3d at 536). Basing the remedy on consumer loss is particularly appropriate where the defendants misrepresentations were widely disseminated, or the defendant was engaged in a pattern or practice of contemptuous conduct as opposed to isolated instances of contumacy. Id. at 772 (citing Kuykendall, 371 F.3d at 764; FTC v. Figgie Intl, Inc., 994 F.2d 595, 606 (9th Cir. 1993); FTC v. Sec. Rare Coin & Bullion Corp., 931 F.2d 1312, 1316 (8th Cir. 1991)). Here, Trudeaus infomercials blanketed broadcast television and were readily accessible for viewing over the Internet. The Infomercial Monitoring Service (IMS) ranked one of Trudeaus infomercials promoting Weight Loss Cure as one of the top ten most frequently 7
broadcast infomercials in February and March 2007. FTC Ex.13 at 6.5 Similarly, a different Weight Loss Cure infomercial ranked among the ten most frequently broadcast infomercials during July 2007. FTC Ex. 13 at 7. Records produced by ITV Global, the company that produced the infomercials and arranged for them to be broadcast, show that from December 15, 2006 through November 2007, Trudeaus deceptive infomercials were broadcast more than 32,000 times on national and local television markets.6 Furthermore, the media schedules demonstrate that ITV arranged to have the Weight Loss Cure infomercials broadcast both nationally and in highly populated local markets such as Chicago, New York, Boston, Los Angeles and San Francisco. See, e.g., FTC Ex. 18a, ITV Media Schedules at ITV_KT 146-56. In addition to broadcast television, consumers could also view these infomercials 24 hours a day via the Internet at www.naturalcures.com and www.itvventures.com. FTC Ex. 14, Investigator Declaration, at 4, 6 and FTC Ex. 14(c) and 14(e). The record therefore supports a finding that Trudeaus contumacious and deceptive infomercials were widely disseminated. 2. Consumer Losses Are Readily Calculable from the Record Evidence and Total More than $46.9 Million
A reasonable approximation of consumers total losses from direct response and retail sales of the Weight Loss Cures book attributable to Trudeaus contumacious conduct is $46,952,067 ($37,616,161 + $9,335,906.30). Trudeau failed to submit any factual evidence at
Trudeau used three different versions of his infomercial. IMS, a business that electronically records and monitors more than 40 television networks 24 hours a day, detected Trudeaus first infomercial promoting Weight Loss Cure on December 23, 2006, his second infomercial on January 8, 2007 and his third infomercial on June 17, 2007. FTC Ex. 13, IMS Decl. 3-7. IMS issues National Cable Infomercial Ranking-Frequency Reports, which rank infomercials based upon the frequency with which they are aired on networks monitored by IMS. FTC Ex. 13 at 4. This total is based upon the FTCs count of the infomercial airings reflected in records produced by ITV. Specifically, ITV produced records reflecting media buys made by two entities, Mercury Media and Euro Media. Excerpts from these records are included at FTC Ex. 18. The FTC has not attached these records in their entirety because they number more than 900 pages. Upon request, the FTC can provide the complete records to the Court. However, the FTC estimates that ITV aired the violative infomercials a total of 32,888 times. This figure includes 28,113 airings reflected in the ITV Mercury Media Schedules at ITV_KT 16-828 and 4,775 airings evidenced by the ITV Euro Media Schedules at ITV_ KT 829-940. (28,113 + 4,775= 32,888).
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trial rebutting these calculations. Accordingly, the FTC respectfully requests that the Court enter a contempt remedy against Trudeau in this amount. a. Consumers Lost $37,616,161 Purchasing Weight Loss Cure Via Direct Response Sales
Trudeaus infomercials spurred consumers to call a toll-free number to purchase the Weight Loss Cure book. See FTC Ex. 13a, 13d, and 13h (infomercial recordings) and transcripts (e.g., FTC Ex. 14a at 15, 26, 31; 14b at 15-18, 23, 25-26, 29-32; 14d at 21, 23-26, 33-36). Consumers bought more than 850,000 copies of the book directly in response to the infomercials and via the Internet. FTC Ex. 20, ITV Sales at ITV_KT 1; FTC Ex. 19, ITV. Dep. 131. Direct response sales from Trudeaus infomercials exceeded $39 million. FTC Ex. 20, ITV Sales at ITV_KT 1-14.7 When this total sales figure is adjusted for returns of the book, the total net direct response sales amount is $37,616,161. (Direct Response Sales of $39,049,079 through November 2007 minus $1,432,918 in returns equals $37,616,161). See FTC Ex. 20 at ITV_KT1. b. Consumers Lost $9,335,906 Purchasing Weight Loss Cure Through Retail Outlets
In addition to direct response sales, consumers also purchased Weight Loss Cure at retail outlets through Perseus Book Group, the retail distributor for the book. See FTC Ex. 26 (retail sales agreement between Trudeau and CDS, Inc., predecessor of Perseus); FTC Ex. 29, Alliance Dep. at 75-85. Retail outlets included not only brick and mortar book stores such as Barnes and Nobles and Borders, but also on-line sellers such as amazon.com. In his infomercials, Trudeau explicitly urged consumers to buy the book at retail stores: You can buy this in Wal-Marts, in Costcos, in Sams Club. You can go to Borders or Waldenbooks. Its a national, runaway best seller. FTC Ex. 14d at 23-24. Consumers did just that. Perseus records show that retail sales adjusted for returns totaled $9,335,906.30. FTC Ex. 21, Net Retail Sales of WLC Book. There is ample support for including these retail sales in the calculation of consumer loss. As a matter of law, when misleading advertising is widely disseminated, there is a presumption of consumer harm that applies to all purchasers of the product advertised. See McGregor v.
ITVs sales figures also include a small portion of sales resulting from orders placed via ITV internet sites. ITV promoted the WLC book using both infomercials and interactive internet sites. See FTC Ex. 19, ITV Dep. at 63. ITVs websites made the infomercials accessible via the internet. See FTC Ex. 14 Investigator Declaration, at 4, 6 and Exs. 14(c) and 14(e).
Chierico, 206 F.3d 1378, 1388 (11th Cir. 2000); Figgie Intl, Inc., 994 F.2d at 605-6. This presumption applies to Trudeaus ubiquitous infomercials, the very purpose of which was to saturate the air waves and the internet with his false and misleading representations to induce consumers to buy his book both in direct response to the infomercial and at retail outlets. This presumption is buttressed by several key facts. As noted above, in his widely disseminated infomercials, Trudeau explicitly urged consumers to buy the book at retail stores, and specifically named stores where the book was sold. Moreover, the jacket cover of every copy of Trudeaus Weight Loss Book prominently featured a big, gold sticker reading AS SEEN ON TV, reinforcing his misleading infomercials in the minds of consumers purchasing the book in retail outlets. Def. Exh. UU (physical copy of book). The only evidence Trudeau offered at trial to rebut this strong presumption and these supporting facts was the opinion of Mr. Domnitz. In his report (Def. Ex. VV) although tellingly, nowhere in his trial testimony Domnitz expressed a general opinion that infomercials do not usually influence consumers book purchasing decisions. But as Domnitz himself admitted, this is not the usual case. This is a case where Trudeau was blanketing the airwaves with his deceptive infomercials marketing his Weight Loss Cure book more than 32,000 times, over a 1-year period, while the book was being sold at retail outlets. On cross-examination at trial, Domnitz admitted: that it is uncommon for a book to be marketed via infomercials and in bookstores; that he did not know of any books other than Trudeaus that had been so marketed; that he had never even seen Trudeaus infomercials or read the book; and that he had neither spoken to any consumers who purchased the book, nor conducted any surveys or studies of the sales of the book. July 23, 2008 Tr. At 38:21-41:24. Thus, Domnitz had little or no basis for opining on the effect Trudeaus widespread deceptive infomercials had on sales of his Weight Loss Cure book, and his testimony is of no relevance here. It most certainly does not rebut the strong legal presumption and supporting facts showing that all sales of Trudeaus book, including retail sales, were tainted by his widespread and deceptive infomercials promoting the book. Accordingly, the $9,335,906.30 net loss to consumers from retail sales should be included in the monetary contempt remedy. *****
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In sum, consumer loss can be readily calculated from the record evidence detailing the total amount consumers paid to purchase the book through direct response and retail outlets, less total returns or refunds. The record amply supports entering a contempt remedy against Trudeau for $46,952,067 ($37,616,161 + $9,335,906.30), the total consumer loss caused by his contempt. C. Trudeaus Ill-Gotten Gains Exceed $11 Million
For the reasons stated above, consumer loss is the most appropriate measure for calculating the contempt remedy in this case. Disgorgement is inappropriate because consumer loss is readily calculable. Moreover, the amount of consumer loss is significantly greater than any estimate of Trudeaus ill-gotten gains, which Trudeau through his typical deceit and machinations has purposefully made it difficult to calculate with precision. Basing the remedy on Trudeaus ill-gotten gains would not even come close to compensating consumers for the harm caused by his contempt of this Courts order. Nevertheless, for the sole purpose of specifying the procedures for administering the contempt remedy and addressing the related dicta in the Seventh Circuits opinion regarding the return-to-contemnor issue, see infra at II.D, the record supports a finding that Trudeaus ill-gotten gains exceed $11 million. As best as can be determined in light of Trudeaus efforts to conceal his profits, a reasonable approximation of Trudeaus ill-gotten gains from direct response sales caused by his deceptive infomercials is $5.75 million. In addition, Trudeau received $5,316,359 in royalties from retail sales of his diet book, which were also tainted by his false and misleading infomercials. Taken together, a reasonable approximation of Trudeaus total ill-gotten gains is $11,066,359 ($5.75 million from direct response sales + $5,316,359 from retail sales). 1. Trudeaus Gains from Direct Sales Exceed $5 Million
Trudeau promoted Weight Loss Cure in infomercials pursuant to a Stock and Asset Purchase Agreement (2006 Agreement) he executed with ITV on June 26, 2006. This agreement called for ITV to pay Trudeau $121 million over a ten-year period, a portion of which is undoubtedly attributable to the direct response sales generated by Trudeaus Weight Loss Cure infomercials. FTC Ex. 22.8 On its face, the 2006 Agreement references the sale to ITV of the stock of certain Trudeau entities and assets related to Trudeaus Natural Cures book. Yet both
FTC Ex. 22 includes the 2006 Agreement as well as its related Schedules, Promissory Note and Amendments.
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Trudeau and ITV testified that the 2006 Agreement included an unwritten handshake deal and understanding granting to ITV the right to sell Trudeaus Weight Loss Cure book via direct response marketing. Both Trudeau and ITV testified that this 2006 Agreement also gave ITV the right to have Trudeau promote the books, including the series of deceptive infomercials promoting Weight Loss Cure. See FTC Ex. 17, Trudeau Dep. 64-65, 147; FTC Ex. 19, ITV Dep. 26-30; 58-59. The 2006 Agreement, which was secured by a Promissory Note and Security Agreement, called for Trudeau to receive an initial payment of $1 million upon execution followed by 120 monthly payments of $1 million starting on September 1, 2006. See FTC Ex. 22, at KT 82, 100101. See FTC Ex. 22 at KT 82. Although not all of these funds promised to Trudeau related to Weight Loss Cure, Trudeaus and ITVs failure to produce relevant evidence on this point has made it difficult to pin down how the $121 million was calculated, and hence what portion related to his promotion of Weight Loss Cure in the deceptive infomercials. Despite these payment provisions, the record shows that Trudeau, through his whollyowned affiliate TRUCOM, received $2,000,050 under this Agreement as of November 2007. See FTC Ex. 22 at KT 108, 2006 Agreement Amendment at 3 (memorializing $1 million payment made by ITV to TRUCOM in June 2006); FTC Ex. 23 (ITV record showing $1,000,050 in payments from ITV to TRUCOM from December 2006 through November 2007). There is no evidence in the record that Trudeau took any action to enforce the payment terms of the 2006 Agreement before the trial on the contempt remedy concluded.9 The FTC pursued more detailed information regarding the 2006 Agreement in discovery.10 However, while both Trudeau and ITVs representatives conceded that the 2006
At a post-trial hearing on the FTCs motion for reconsideration of the remedy provisions of the Courts order on November 4, 2008, Trudeaus counsel stated that the 2006 Agreement had just been canceled in an arbitration, and that some assets came back from ITV but no further cash payments. Nov. 4, 2008 Tr. at 28-31. However, representations of counsel are no substitute for admissible, record evidence. As the Court found at that hearing: [T]here is nothing in the record other than the fact that he did have this right [i.e., the right to payments from ITV] against them. Id. at 31. Moreover, the Court found that the notion that Trudeau received nothing further from ITV defies belief. Id. See FTC Ex. 24a, 24b and 24c which includes Defendants Responses to FTC Discovery Requests (FTC Ex. 24a at Requests 7-11; FTC Ex. 24b at Interrogatories 7-11) and the FTCs Fed. R. 30(b)(6) specifications regarding revenue sources (FTC Ex. 24c at Specifications 7-8 and 14).
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Agreement governed Trudeaus promotion of books via infomercials, neither of them provided meaningful testimony regarding what portion of the payments made and promised to Trudeau under the Agreement were allocable to his infomercial promotions generally, or Weight Loss Cure specifically. See FTC Ex. 17, Trudeau Dep. 64-65, 141-147; FTC Ex. 19, ITV Dep. 30-36. This recalcitrance and obfuscation weighs heavily against Trudeau in any disgorgement calculation. As the Seventh Circuit and other courts in this District have held, [t]o the extent that either the Defendants records create uncertainty in determining the amount of redress or the Defendants failure to produce relevant evidence makes it impossible to accurately determine the proper amount, the risk of uncertainty should fall on the wrongdoer whose illegal conduct created the uncertainty. FTC v. Bay Area Bus. Council, 2004 U.S. Dist. LEXIS 6192, *39-40 (N.D. Ill. 2004) (quoting Febre, 128 F.3d at 535). Thus, Trudeau cannot escape disgorgement of profits flowing from his contumacious conduct simply by concealing or obfuscating them in his contracts and dealings with ITV, or by deferring payments or failing to enforce the contract until the contempt proceedings concluded, all of which Trudeau in fact did. Rather, these self-induced ambiguities provide all the more reason why the contempt remedy should be based on the consumer loss he caused, and why it is inappropriate to base the remedy on the elusive amount of his ill-gotten gains. Nevertheless, based on the dicta in the Seventh Circuits decision regarding how the consumer loss remedy should be administered, we turn to calculating a reasonable approximation of Trudeaus ill-gotten gains. Given the lack of clarity regarding what consideration Trudeau received under the 2006 Agreement related to Weight Loss Cure, it is reasonable to start by analyzing what portion of the $2,000,050 paid to Trudeau pursuant to the Agreement, and the $1 million monthly payments set out in the Agreement, are attributable to the time period in which he appeared in the contumacious infomercials. As disclosed in records produced by ITV, Trudeaus infomercials aired from December 15, 2006 through November 2007 when this Court ordered them taken off the air a period of 11.5 months. See FTC Ex. 18a at ITV_KT 16, 828. Hence, $11.5 million is a reasonable starting point in determining Trudeaus profits under the 2006 Agreement attributable to Weight Loss Cure. Recognizing, however, that Trudeau also promoted his Natural Cures books in ITV infomercials during the same time period, which are not the subject of these contempt proceedings, an adjustment that 13
divides the $11.5 million dollar figure in half to account for these other infomercial activities represents a reasonable approximation of Trudeaus gains owing to his Weight Loss Cure activities. Thus, in accordance with the controlling standard under Febre, 128 F.3d at 535, the record supports a finding that a reasonable approximation of Trudeaus ill-gotten gains from direct response sales of Weight Loss Cure, is $5.75 million. 2. Trudeaus Royalties from Retail Sales Exceed $5 Million
Trudeau also received substantial royalties for the retail sales of Weight Loss Cure through his company, Alliance Publishing, from Perseus, the retail distributor.11 Alliance is an entity wholly-owned by Trudeau through a chain of domestic and off-shore shell companies, and an off-shore trust of which Trudeau is the grantor and primary beneficiary. See FTC Ex. 25 at KT 291 (Alliance Publishing Group and its Ownership), and KT 292 (Kevin Trudeau and Affiliated Entities); FTC Ex. 17, Trudeau Dep. 10-13, 20. The agreement among Trudeau, Alliance, and the predecessor of Perseus (CDS, Inc.) governing retail sales of the Weight Loss Cure book also identified Trudeau as the beneficial owner of Alliance. FTC Ex. 26 at 1. Indeed, Trudeau initially served as President of Alliance and testified that Alliance is his company and a paper company during his deposition. FTC Ex. 29, Alliance Dep. 23; FTC Ex. 17, Trudeau Dep. 69-72, 74-75. Perseus records show that the royalties received by Alliance for retail sales of the Weight Loss Cure book through November 2007 totaled $5,316,359. FTC Ex. 30 (Royalty Statement for period ending Nov. 30, 2007). For all of the reasons stated above in Argument II.B.2.b, Trudeaus royalties from retail sales constitute additional ill-gotten gains from Trudeaus deceptive infomercials promoting the book. ***** Accordingly, a reasonable estimate of Trudeaus total ill-gotten gains is $5.75 million from direct response sales of the Weight Loss Cure book, plus $5,316,359 in royalties from retail sales of the book, which equals $11,066,359. To the extent the Court decides to incorporate the
11
These royalties were paid as a result of a royalty agreement between Alliance and CDS (later known as Perseus Books Group), the retail distributor of Weight Loss Cure. FTC Ex. 29, Alliance Dep. 75-85. The royalty agreement provided for payments to Alliance based upon retail sales of Weight Loss Cure. FTC Ex. 26, March 23, 2006 Distribution Agreement at 1-5.
14
amount of Trudeaus ill-gotten gains in the procedures for administering the contempt remedy, the FTC requests that the Court use $11,066,359 as the appropriate amount. D. The FTCs Proposed Order Complies with the Seventh Circuits Instructions Regarding the Procedures for Administering the Remedy
Lastly, the Seventh Circuit held that the contempt remedy order should outline how the remedy will be administered. Trudeau, 579 F.3d at 774. Specifically, the Circuit Court explained that the order should set forth procedures by which the FTC may compensate consumers, and provide that the FTC may use part of the remedy award to cover the costs of compensation, such as locating book purchasers and mailing checks. Id. The Seventh Circuit also recognized that the Court may order funds not used to compensate consumers to be disgorged to the United States Treasury. In so holding, the court rejected Trudeaus contention that any such funds must be returned to Trudeau to avoid any portion of the contempt remedy becoming punitive rather than compensatory. As we have held in direct FTC actions, the Circuit Court noted, disgorgement to the United States Treasury does not transform compensatory damages into punitive damages .... [D]isgorgement is designed to be remedial. Id. (citing Febre, 128 F.3d at 537). The Seventh Circuit also expressly declined to opine whether this Court must include a return-to-contemnor provision if it finds that Trudeaus unjust enrichment, i.e., his ill-gotten gains, is less than the total remedy amount, which it is under the relief requested by the FTC in this Motion. In dicta, however, the Seventh Circuit suggested that if the FTC determines that is not possible to distribute funds that it recovers on the contempt remedy judgment to consumers in whole or in part, then the Court may order such funds to be disgorged to the U.S. Treasury in an amount up to Trudeaus total ill-gotten gains, and the remaining funds, if any, should be returned to Trudeau. Id. at 775. The FTCs proposed order incorporates this suggestion, using $11,066,359 as the amount of Trudeaus ill-gotten gains, and complies with all of the Seventh Circuits instructions.
15
IV.
CONCLUSION For the foregoing reasons, the FTC respectfully requests that the Court grant this Motion,
and enter the FTC proposed order, as attached.
Dated: November 13, 2009
Respectfully submitted, Willard Tom, General Counsel
David A. OToole (dotoole@ftc.gov) Federal Trade Commission 55 W. Monroe St., Suite 1825 Chicago, IL 60603 Phone: 312-960-5601 Fax: 312-960-5600
/s/ Michael Mora Michael Mora (mmora@ftc.gov) Sandhya Brown (sbrown5@ftc.gov) Federal Trade Commission 601 New Jersey Ave., N.W., Suite 2215 Washington, DC 20001 Phone: 202-326-3373, -2040 Fax: 202-326-2559
16
Case: 1:03-cv-03904 Document #: 267-2 Filed: 11/13/09 Page 1 of 12 PageID #:3970
(Proposed) CONTEMPT REMEDY ORDER On November 16, 2007, this Court entered an Order (D.93) holding Defendant Kevin Trudeau in contempt of the Stipulated Final Order for Permanent Injunction entered against Trudeau in this action in 2004 (D.56), for misrepresenting the content of his book, The Weight Loss Cure They Dont Want You to Know About, in infomercials promoting the book. On July 22, 23, and 25, 2008, after extensive discovery and briefing by the parties, the Court held an evidentiary hearing to address, inter alia, the FTCs compensatory contempt remedy motion and Trudeaus motion to reconsider the Courts contempt finding. On August 7, 2008, the Court entered an order (D.220) denying Trudeaus motion for reconsideration and entering judgment against Trudeau for a contempt remedy in the amount of $5,173,000, which the Court found represented a conservative estimate of the royalties Trudeau received from the sale of his diet book through the offending infomercials. Thereafter, the FTC filed a motion for reconsideration seeking to correct a mathematical error in the Courts disgorgement calculation. In response, Trudeau countered that there was no support for any contempt remedy, that he received no royalties from the sale of his book, and
that the correct disgorgement amount is zero. The Court held a hearing on the FTCs motion and invited further briefs and arguments from the parties. Based on the parties submissions, on November 4, 2008, the Court entered a Supplemental Order (D.220) abandoning its disgorgement approach and finding that the appropriate amount of the contempt remedy is $37,616,161, which the Court found represented a reasonable approximation of the loss suffered by consumers as a result of Trudeaus deceptive infomercials. Trudeau appealed the Courts orders to the Seventh Circuit. On August 27, 2009, the Circuit Court issued an opinion upholding the Courts contempt finding. However, the Seventh Circuit vacated the contempt remedy, and remanded to this Court with instructions to explain the basis for the remedy in more detail, and add procedures for administering the remedy, in accordance with the courts opinion. Thereafter, the FTC filed a Renewed Motion for Contempt Remedy. D.__. The Court having held a hearing and considered the arguments and evidence presented, and based on the entire record in these proceedings, makes the following findings: Contempt Remedy 1. It is undisputed that Trudeaus deceptive infomercials for his Weight Loss Cure
diet book were broadcast from December 2006 through December 2007. D.123, Def. Contempt Remedy Response Br. at 12, n. 13; D130, FTC Contempt Remedy Reply Brief at 12, n. 18.1 During that period, the book was sold through both direct response and retail sales channels.
All citations to FTC exhibits in the record are abbreviated as FTC Ex. followed by the exhibit number. Citations to Defendant Trudeaus exhibits in the record are cited as Def. Ex. followed by the exhibit letter identifier. Page 2 of 12
Direct response sales include consumers who purchased the book by calling the telephone number specified in the television infomercials, and through Internet web sites broadcasting the infomercials. See FTC Ex. 19, ITV Dep. at 63. Consumers also purchased the book during the relevant time period at retail outlets such as book stores, and large discount chains. See FTC Ex. 29, Alliance Dep. at 75-85. 2. Trudeaus deceptive infomercials were widely disseminated. The infomercials
were broadcast on television more than 32,000 times between December 2006 and November 2007, both nationally and in highly populated local markets such as Chicago, New York, and Los Angeles. See FTC Ex.18a, 18b (excerpts from voluminous records reflecting when and where the infomercials were broadcast on television); D.186, FTC Contempt Remedy Br. at 11, n. 7 (summarizing the voluminous infomercial broadcast records). During this period, the infomercials were also available for viewing 24 hours a day via the Internet at www.naturalcures.com and www.itvventures.com. FTC Ex.14, Investigator Declaration, at 4, 6 and FTC Ex. 14(c) and 14(e). 3. The FTC has submitted more than sufficient evidence from which the total
amount of consumer loss can be reasonably approximated. Detailed sales records from ITV Global, Inc. (ITV), which handled direct response sales of the Weight Loss Cure book pursuant to a contract with Trudeau, establish that consumers bought 878,511 copies of the book during the relevant time period, directly in response to the infomercials and via the Internet.2 FTC Ex. 20 at ITV_KT 1-14; see also FTC Ex.19, ITV Dep. at 131. The records further show
ITVs sales figures included a small portion of sales resulting from orders placed via web sites on the Internet, see FTC Ex.19, ITV Dep. at 63, where consumers could view Trudeaus deceptive infomercials online. See FTC Ex.14, Investigator Declaration, at 4, 6 and Exs. 14(c) and 14(e). Page 3 of 12
that the total amount of revenue from those sales was $39,049,079, and the total of returns or refunds related to those sales was $1,432,918. Id. at ITV_KT 1. Thus, the net amount that consumers lost from direct response sales of the book is $37,616,161. 4. During the period that Trudeaus deceptive infomercials were broadcast on
television and the Internet, consumers also purchased his Weight Loss Cure book at retail outlets through Perseus Book Group, the retail distributor for the book. See FTC Ex. 26, Alliance Dep. at 75-85. Trudeau explicitly urged consumers to buy the book at retail stores in his infomercials, stating: You can buy this in Wal-Marts, in Costcos, in Sams Club. You can go to Borders or Waldenbooks. Its a national, runaway best seller. FTC Ex. 14d at 23-24. Consumers did just that. Perseus records show that the net amount of revenues from retail sales during the relevant time period was $9,335,906.30. FTC Ex. 21, Net Retail Sales of Weight Loss Cures Book. 5. It is reasonable to include these retail sales in computing the contempt remedy.
When misleading advertising is widely disseminated, there is a presumption of consumer harm that applies to all purchasers of the product advertised. See McGregor v Chierico, 206 F.3d 1378, 1388 (11th Cir. 2000); FTC v. Figgie Intl, Inc., 994 F.2d 595, 605-6 (9th Cir. 1993). This presumption applies to Trudeaus ubiquitous infomercials, the very purpose of which were to saturate the air waves and the Internet with his false and misleading representations to induce consumers to buy his book. 6. This presumption is also buttressed by several key facts. In his widely
disseminated infomercials, Trudeau explicitly urged consumers to buy the book at retail stores, and specifically named stores where the book was sold. Moreover, the jacket cover of every copy of Trudeaus Weight Loss Book prominently featured a big, gold sticker reading AS Page 4 of 12
SEEN ON TV, reinforcing his misleading infomercials in the minds of consumers purchasing the book in retail outlets. Def. Exh. UU (physical copy of book as published). 7. Trudeau did not submit any factual evidence at trial rebutting the FTCs
reasonable approximation of consumer loss. The only evidence Trudeau proffered to rebut the FTCs approximation was the opinion of Mr. Domnitz, an expert on book sales. Domnitz expressed a general opinion about factors that may drive retail book sales, such as whether the customer knows what book they want to purchase or is just browsing, in-store product placement and displays, and the design and content of the book jacket. Def. Ex. VV, Domnitz Report; July 23, 2008 Tr. at 25-38. Domnitz also expressed an opinion in his report although not in his trial testimony that infomercials do not usually influence consumers book purchasing decisions. On cross-examination, however, Domnitz admitted: (1) that it is uncommon for a book to be marketed via infomercials and in bookstores; (2) that he himself did not know of any books other than Trudeaus that had been so marketed; (3) that he had never even seen Trudeaus infomercials or read the book; (4) that he had not spoken to any consumers who purchased the book; and (5) that he had not conducted any surveys or studies of the sales of the book. July 23, 2008 Tr. at 38:21-41:24. The Court finds that Domnitz opinions do not rebut the strong legal presumption and supporting facts showing that all sales of Trudeaus book, including retail sales, were tainted by his widespread and deceptive infomercials promoting the book. 8. Accordingly, the Court concludes that the contempt remedy should be based on
consumer loss from both direct response and retail sales of the book during the period Trudeaus contumacious and deceptive infomercials were broadcast. The Court will enter a judgment in the amount of $46,952,067 ($37,616,161 from direct response sales + $9,335,906.30 from retail sales), representing a reasonable approximation of consumer loss. Page 5 of 12
Trudeaus Ill-Gotten Gains 9. The Court finds that basing the contempt remedy on Trudeaus ill-gotten gains is
not appropriate in the circumstances of this case. Nevertheless, the Court finds that it should arrive at a reasonable approximation of that figure in order to specify the procedures for administering the compensatory contempt remedy, in accordance with the Seventh Circuits opinion. 10. Consumer loss is the best method for determining the remedy because, inter alia,
it can be readily calculated from the record evidence, and it is the only remedy that can fully compensate the book purchasers deceived by Trudeaus infomercials. In contrast, the record shows that calculating Trudeaus ill-gotten gains with precision is an elusive goal and, at best, would only compensate consumers for a fraction of the harm he has caused. 11. Using ill-gotten gains as the measure for the contempt remedy is particularly
inappropriate in the case of Trudeau. The Court found that Trudeau is not a credible witness, and his profits from his deceptive infomercials cannot be calculated with precision because of actions Trudeau himself took or didnt take, directly or indirectly through entities that he beneficially owns. 12. Trudeau obfuscated his profits from direct response sales of the Weight Loss Cure
book in his contract and dealings with ITV. Trudeau promoted Weight Loss Cure in infomercials pursuant to a Stock and Asset Purchase Agreement he executed with ITV on June 26, 2006 (2006 Agreement). The 2006 Agreement required ITV to pay Trudeau $121 million over a ten-year period, a portion of which is undoubtedly attributable to the direct response sales generated by Trudeaus Weight Loss Cure infomercials. FTC Ex. 22 (2006 Agreement). On its face, however, the contract only references the sale to ITV of the stock of certain of Trudeaus Page 6 of 12
affiliated business entities and assets related to a different book that Trudeau authored, Natural Cures; the contract itself does not even reference Trudeaus Weight Loss Cure book. Yet both Trudeau and ITV admit that the direct response marketing of the Weight Loss Cure book through Trudeaus infomercials was governed by the contract. See FTC Ex.17, Trudeau Dep. 64-65, 147; FTC Ex.19, ITV Dep. 26-30; 58-59. 13. Moreover, under the 2006 Agreement, ITV was obligated to pay Trudeau $1
million a month for 121 months. The evidence shows that Trudeau, through his affiliate TRUCOM, LLC, received $2,000,050 in contractual payments from ITV between June 2006 and November 2007. See FTC Ex. 22 at KT 108, Amendment to 2006 Agreement at 3 (memorializing $1 million payment made by ITV to TRUCOM as of June 2006); FTC Ex. 23 (summary of payments from ITV to TRUCOM from December 2006 through November 2007). But there is no evidence in the record that Trudeau took steps to enforce his contractual rights and collect the other payments owed to him from ITV, up to the time of the trial in these contempt proceedings in August 2008. 14. The record also shows that the FTC pursued more detailed information from
Trudeau and ITV in discovery to ascertain what portion of the consideration Trudeau received under the 2006 Agreement related to his contumacious conduct. But neither Trudeau nor ITV provided any meaningful responses on this point. See FTC Ex.17, Trudeau Dep. 64-65, 141147; FTC Ex.19, ITV Dep. 30-36; see also FTC Ex. 24a, 24b and 24c which include Defendants Responses to FTCs Discovery Requests (FTC Ex. 24a at Requests 7-11; FTC Ex. 24b at Interrogatories 7-11) and the FTCs Fed. R. Civ. P. 30(b)(6) specifications regarding revenue sources (FTC Ex. 24c at Specifications 7-8 and 14).
Page 7 of 12
15.
Nevertheless, the Court finds that Trudeaus profits attributable to the direct
response sales of the Weight Loss Cure book can be reasonably approximated, by estimating the portion of the consideration received by Trudeau under the 2006 Agreement attributable to his deceptive infomercials for his Weight Loss Cure book. 16. The 2006 Agreement governing direct response sales of the Weight Loss Cure
book required ITV to pay Trudeau, through his affiliate TRUCOM, $1 million upfront and then $1 million per month thereafter, beginning in September 2006. It is undisputed that Trudeaus infomercials aired from December 15, 2006 through November 2007, a period of 11.5 months. D.123, Def. Contempt Remedy Response Br. at 12, n. 13; D.130, FTC Contempt Remedy Reply Brief at 12, n. 18. Thus, the total amount of contractually required payments attributable to that period, $11.5 million, is a reasonable starting point for approximating Trudeaus total profits from direct response sales. Dividing that figure in half to account for the fact that the contract also related to Trudeaus Natural Cures book, which is not the subject of these contempt proceedings, yields an approximation of $5.75 million as Trudeaus ill-gotten gains from direct response sales of the Weight Loss Cure book. Under the circumstances, the Court finds that this approximation is reasonable. 17. Trudeau also received substantial royalties for the retail sales of Weight Loss
Cure through his company, Alliance Publishing, from Perseus, the retail distributor.3 Trudeau is the beneficial owner of Alliance through a chain of domestic and off-shore shell companies, and an off-shore trust of which Trudeau is the grantor and primary beneficiary. See FTC Ex. 25 at
These royalties were paid as a result of a royalty agreement between Alliance and the predecessor of Perseus (CDS, Inc.), the retail distributor of Weight Loss Cure. FTC Ex. 29, Alliance Dep. at 75-85. The royalty agreement provided for payments to Alliance based upon retail sales of Weight Loss Cure. FTC Ex. 26, March 23, 2006 Distribution Agreement at 1-5. Page 8 of 12
KT 291, Alliance Publishing Group and its Ownership, and at KT 292, Kevin Trudeau and Affiliated Entities; see also FTC Ex.17, Trudeau Dep. at 10-13, 20. The agreement among Trudeau, Alliance, and the predecessor of Perseus (CDS, Inc.) governing retail sales of the Weight Loss Cure book identified Trudeau as the beneficial owner of Alliance. FTC Ex. 26 at 1. Trudeau also initially served as President of Alliance and testified that Alliance is his company and a paper company. FTC Ex. 29, Alliance Dep. at 23; FTC Ex.17, Trudeau Dep. at 69-72, 74-75. 18. Perseus records show that the royalties received by Alliance for the Weight Loss
Cure book from March 2006 through November 2007, during which time Trudeaus deceptive infomercials were blanketing the airwaves, totaled $5,316,359. FTC Ex. 30, Cumulative Weight Loss Cure Royalty Statement through November 2007. For the reasons previously stated above with respect to the calculation of total consumer loss for purposes of the contempt remedy, the Court finds that Trudeaus royalties from retail sales represent additional ill-gotten gains from Trudeaus contumacious and deceptive infomercials promoting the book. 19. Other than the testimony of Mr. Domnitz, which the Court has found is
insufficient to rebut the presumption of consumer harm arising from Trudeaus deceptive infomercials for all sales of his diet book, Trudeau did not put forward any factual evidence at trial rebutting the FTCs approximation of Trudeaus ill-gotten gains. Instead, Trudeau claims that he made no profits from the sale of his book, i.e., he claims that the correct disgorgement amount is zero. D.191, Def. Response to FTC Motion for Reconsideration at 5. Given Trudeaus contumacious conduct and lack of credibility, the Court is highly skeptical of Trudeaus claim, to say the least.
Page 9 of 12
20.
Based on the record evidence, the Court finds that the FTCs approximation of
Trudeaus total ill-gotten gains from his deceptive infomercials, $11,066,359 representing $5,750,000 from direct response sales plus $5,316,359 in royalties from retail sales is reasonable. Accordingly, the Court will use this figure as the amount of Trudeaus ill-gotten gains for purposes of fashioning procedures for administering the contempt remedy in accordance with the Seventh Circuits opinion. Administration of Remedy 21. Finally, in the order provisions below, the Court outlines how the contempt
remedy should be administered, in accordance with the Seventh Circuits opinion. Trudeau, 579 F.3d at 774-75. The Court finds that the FTC may use any funds it recovers to reimburse consumers, and to cover the costs of reimbursement, such as locating consumers and issuing checks. If the FTC determines that it is not possible to distribute such funds to the victims of Trudeaus wrongdoing in whole or in part, the FTC shall disgorge such funds to the U.S. Treasury in an amount up to $11,066,359, which the Court has found is the amount of Trudeaus ill-gotten gains, and the remaining funds, if any, shall be returned to Trudeau. ***** Accordingly, the Court grants the FTCs Renewed Motion for Entry of Compensatory Contempt Remedy, and ORDERS as follows: DEFINITIONS For the purposes of this Contempt Remedy Order, the following definitions shall apply: A. B. Defendant means Kevin Trudeau. Eligible Purchaser means any consumer who purchased Defendants book, The
Weight Loss Cure They Dont Want You to Know About, between December 15, 2006, and Page 10 of 12
December 30, 2007, via direct response or retail sales, and has not previously received a refund or chargeback for the total purchase cost, including any shipping and handling charges. I. COMPENSATORY CONTEMPT REMEDY JUDGMENT IT IS ORDERED that Judgment is hereby entered against Defendant Kevin Trudeau in favor of the FTC in the amount of forty-six million nine hundred fifty-two thousand sixty-seven dollars ($46,952,067) as a compensatory contempt remedy for his violation of the 2004 Order, and is immediately due and payable. The Commission is authorized to execute upon the judgment immediately and engage in discovery in aid of execution. II. CONSUMER COMPENSATION PROCEDURES IT IS FURTHER ORDERED that all funds recovered by the Commission pursuant to this Order shall be deposited into an account administered by the Commission or its agent. Such funds shall be used to provide consumer compensation to Eligible Purchasers and pay attendant expenses for administering consumer compensation. If the FTC determines in its sole discretion that providing compensation to Eligible Purchasers is wholly or partially impracticable, funds not used for consumer compensation shall be disgorged to the United States Treasury in an amount up to $11,066,359, which the Court has found is the amount of Trudeaus ill-gotten gains, and the remaining funds, if any, shall be returned to Trudeau. III. CUSTOMER RECORDS IT IS FURTHER ORDERED that, within 14 days after entry of this Order, Defendant, any corporation or other entity under Defendants direct or indirect control, ITV Global, Inc., and any other third party served with this Order and in possession or control of customer records relating to the sale of The Weight Loss Cure They Dont Want You to Know About to Eligible Purchasers, shall turnover such records to the Commission. Page 11 of 12
IV. RETENTION OF JURISDICTION IT IS FURTHER ORDERED that this Court shall retain jurisdiction of this matter for purposes of construction, modification, and enforcement of this Order. IT IS SO ORDERED, this ___ day of ____________, 2009
____________________________________ UNITED STATES DISTRICT JUDGE ROBERT W. GETTLEMAN
Page 12 of 12
FTCS RENEWED MOTION TO MODIFY THE STIPULATED FINAL ORDER FOR PERMANENT INJUNCTION AS TO DEFENDANT KEVIN TRUDEAU1 Plaintiff Federal Trade Commission (FTC or Commission) moves to modify the September 2004 Stipulated Final Order for Permanent Injunction (2004 Order or Order) pursuant to Fed. R. Civ. P. 60(b) to effectuate its purpose of protecting consumers.2 The 2004 Order sought to protect consumers by banning Trudeau from all infomercials except those for books and other informational publications. Trudeaus contempt of that order through his blatant misrepresentations in infomercials for his weight loss book the latest in a long line of deceptive conduct reflects the failure of the 2004 Order, as currently written, to adequately protect consumers. Rule 60(b) permits modification of an order where, as here, its purpose has not been achieved. The FTC has proposed three categories of modification that would: (1) require Trudeau to obtain a performance bond of $10 million before engaging in infomercial activity for books and other informational publications (just as proposed last March); (2) prohibit certain false or misleading representations in advertising for informational publications; and (3) update the provisions that enable the FTC to monitor Trudeaus compliance. These modifications serve the purpose of the Order by better protecting consumers in the event that Trudeaus less-than-
The FTC first filed its Motion to Modify the Stipulated Final Order for Permanent Injunction as to Defendant Kevin Trudeau on March 6, 2008. D.187.
2
The FTC has filed concurrently a Renewed Motion for Entry of Compensatory Monetary Remedy Against Kevin Trudeau.
stellar track record continues. Finally, to the extent the Court considers re-imposing a limited ban similar to the one it entered in November 2008, Trudeaus post-order conduct and stated intentions demonstrate that such a ban fails to adequately protect consumers. I. BACKGROUND A. Prior FTC Actions Against Trudeau
Kevin Trudeau has a long and inglorious history of violating the law, deceiving consumers and defying court orders. In addition to his felony convictions for credit card fraud and depositing bad checks,3 Trudeau has repeatedly violated consumer protection laws. The FTC first introduced Trudeau to this Court in 1998, alleging in its complaint that he made false or misleading claims about six different products in his infomercials.4 FTC Ex. 4, Complaint, FTC v. Kevin Trudeau, 98 C 0168 (N.D. Ill.). That action resulted in the first of several court orders against him. FTC Ex. 5, 1998 Order (N.D. Ill. Jan. 14, 1998).5 But Trudeau did not let the Courts 1998 Order stand in the way of his consumer deception agenda. In later infomercials, Trudeau made unsubstantiated claims that, among other things, Coral Calcium Supreme cured terminally ill cancer patients, and Biotape an adhesive pain-relief product permanently eliminated pain from arthritis, migraines and sciatica. FTC Ex. 6, 2003 FTC Contempt Memorandum at 6-9. Thus, in 2003, the Commission was compelled to return to this Court to enforce its 1998 Order. During those proceedings, the Court issued a stipulated Preliminary Injunction that enjoined Trudeau from making his outlandish claims about Coral Calcium. FTC Ex. 8, 2003 Preliminary Injunction at 4-5. In a brazen display of indifference to that injunction, even while still in the midst of the Coral Calcium/Biotape litigation, Trudeau disseminated a letter and
FTC Exs. 2 and 3.
Trudeau claimed that the products sold in his infomercials caused dramatic results, including significant weight loss, reversal of hair loss, and achievement of a photographic memory. FTC Ex. 4 at 8-18; 2161. He also claimed that certain products could cure addictions to heroin, alcohol, cigarettes, and food, as well as cure diseases like depression and arthritis. Id. at 8-10, 14, 21-27, 40-46. The 1998 Stipulated Order for Permanent Injunction prohibited Trudeau from making any unsubstantiated representation about the benefits, performance, or efficacy of any product. Significantly, it also required Trudeau to post a $500,000 performance bond or fund an escrow account in connection with any future infomercials. FTC Ex. 5 at 12-16.
5
infomercial claiming that Coral Calcium cured cancer, causing the Court to hold Trudeau in contempt. FTC Ex. 9, 2004 Contempt Order. In its contempt ruling, the Court described Trudeaus bogus cancer claim as a lie and clearly violative, not just of the order, but of any standard of truthfulness. FTC Ex. 10, Hrg. Tr. at 6-7 (March 31, 2004). On September 2, 2004, the Court resolved the Coral Calcium/Biotape case by entering the Stipulated Final Order for Permanent Injunction that further restricted Trudeaus infomercial activities and required him to pay a $2 million judgment. FTC Ex. 1, 2004 Order, FTC v. Trudeau, Civ. No. 03-C-3904, Civ. No. 98 C 0168 (N.D. Ill. Sept. 3, 2004).6 The Order banned Trudeau from producing, disseminating, making or assisting others in making any representation in an infomercial, but included one exception that permitted Trudeau to appear in infomercials promoting books and other informational publications. FTC Ex. 1, 2004 Order at Part I. B. The Weight Loss Cure Contempt Proceedings
On November 16, 2007, the Court again held Trudeau in contempt, this time for violating the 2004 Order by misrepresenting the content of a book he was selling via infomercial. D.93. The Court found that the infomercials promoting The Weight Loss Cure They Dont Want You To Know About (Weight Loss Cure), were replete with misrepresentations about the nature of the diet Trudeau was selling in his book. Specifically, the Court found that Trudeau falsely described the diet as easy and misled viewers into believing that it involved no long-term dietary restrictions. Accordingly, the Court found that these infomercial misrepresentations flagrantly violated the 2004 Order and held Trudeau in contempt. Significantly, Trudeaus contumacious conduct, which deceived thousands of purchasers of Weight Loss Cure, demonstrates that the Order has failed to achieve its purpose of protecting consumers. Therefore, separate and aside from any contempt sanction, in March 2008, pursuant to Fed. R. Civ. P. 60(b), the FTC filed a motion seeking modification of the 2004 Order to better protect consumers. Specifically, the FTC requested that the Court modify the 2004 Order to prohibit Trudeau from participating in infomercials for books or other informational publications
The monetary relief included collection on the $500,000 performance bond that the 1998 Order had required Trudeau to obtain. 2004 Order at Part XIII B.
6
unless he first posted a $10 million bond to provide insurance for consumers should Trudeau again engage in deceptive infomercial marketing for any books. D.187. This related-but-separate Rule 60(b) Motion was litigated concurrently with the FTCs request for a monetary contempt sanction. The litigation included full-blown discovery, extensive briefing, and a three-day evidentiary hearing in July 2008. On August 7, 2008, the Court issued a Memorandum Opinion and Order that reaffirmed the contempt holding, imposed a monetary contempt sanction of $5.2 million, and further restricted Trudeaus infomercial activities by prohibiting him, for a three-year period, from participating in any infomercials for any product, including books, in which he had an interest. D.157. The Commission then moved, pursuant to Fed. R. Civ. P. 59(e), for reconsideration of the order to correct a mathematical error in the calculation of the contempt sanction and to draw the Courts attention to certain flaws in the three-year infomercial ban. D.165. Specifically, the FTC expressed concern about a ban that applied only to infomercials for products in which Trudeau had an interest. Unfortunately, as discussed in Section III.C.4., infra, Trudeaus postorder conduct has proven this concern prescient. On November 4, 2008, the Court entered a Supplemental Order and Judgment, which changed the contempt sanction award to $37.6 million and revisited the injunction the Court had issued in August. D.220. The Court expressly decreed that the 2004 Order remained in effect, and required that, for a three-year period, Trudeau be prohibited from disseminating, or assisting others in disseminating any infomercial that promoted the sale or distribution of any book, newsletter, or informational publication in which he had any interest. Id. Trudeau filed a motion requesting that the Court alter or amend its Supplemental Order and Judgment, or that, in the alternative, the Court stay the Order pending appeal. D.224. On December 12, 2008, the Court denied Trudeaus motion, D.229, and soon thereafter, Trudeau appealed. C. The Seventh Circuit Decision
In his appeal, Trudeau urged the Seventh Circuit to overturn virtually every aspect of this Courts contempt-related rulings, including the contempt finding, the monetary sanction, and the infomercial ban. In a detailed opinion (hereinafter Opinion), the Seventh Circuit strongly affirmed the contempt ruling, but vacated the monetary sanction and infomercial ban and 4
remanded for further proceedings. FTC v. Trudeau, 579 F.3d 754 (7th Cir. 2009). However, the Opinion makes clear, not only that this Courts contempt finding was correct, but that the Court has the authority to modify the 2004 Order on the FTCs motion so long as Trudeau has notice and an opportunity to be heard with respect to any stiffer injunction that might be entered against him. And with respect to the performance bond requested by the FTC, he already has. 1. The District Court was Right in Finding Trudeau in Contempt.7
The Seventh Circuit upheld the contempt finding against Trudeau, concurring with this Courts analysis in all significant respects. 579 F.3d at 762-67. The Seventh Circuit agreed that Trudeaus infomercial claims about Weight Loss Cure were contradicted by the books description of the diet protocol and therefore misrepresented its content. Id. at 764-67. The Opinion variously describes Trudeaus infomercial claims as patently false, troubling, and erroneous and deceiving, and concludes that he outright lied. Id. at 766-67. 2. The District Court Can Modify the 2004 Order Provided that Trudeau Has Received Due Process
The Seventh Circuit did not quarrel with the necessity or propriety of enhancing the injunction against Trudeau, but it addressed order modification only tangentially within a broader discussion of the three-year infomercial ban.8 Although the Seventh Circuit found that the stiffer injunction in this case did not appear to have resulted from either the granting of the FTCs Rule 60(b) Motion or this Courts sua sponte modification of the 2004 Order, it nonetheless indicated that order modification would be proper so long as Trudeau were given due process. Id. at 778-79. Specifically, the Opinion states, the district court could modify the Consent Order, on motion from the FTC or on its own motion, provided it give Trudeau sufficient notice and an opportunity to be heard on the matter. Id. at 779. The FTCs initial Rule 60(b) motion gave Trudeau notice that it was seeking a performance bond. Therefore Trudeau received his due process with respect to entry of such a bond, but not, in the opinion of the Seventh Circuit, with respect to the ban ultimately entered by the Court. Thus, despite
579 F.3d at 768.
The Seventh Circuit devoted much of this discussion to whether the infomercial ban could be sustained as a civil contempt remedy and, finding that it was neither compensatory nor coercive, determined it could not. 579 F.3d at 776-77.
setting aside the three-year infomercial ban, the Seventh Circuit found that modification of the 2004 Order would be wholly appropriate, provided that the procedural prerequisites are met. II. ARGUMENT The FTC continues to seek modification of the 2004 Order on the same grounds and by largely similar means with the exception of a modification to Parts I and II as it proposed in its original papers.9 Modification is appropriate, pursuant to Rule 60(b), where an injunction has not achieved its purpose. The purpose of the 2004 Order, as noted by the Seventh Circuit, was to protect consumers from Trudeaus deception. Trudeaus misleading infomercials for Weight Loss Cure illustrate the failure of the order to fully effectuate this purpose. Therefore, the FTC has proposed specific modifications aimed at better protecting consumers from Trudeaus deceptive practices. A. Rule 60(b) Modification is Appropriate Where an Order Has Not Achieved Its Purpose
Parties seeking modification of court orders, including consent decrees, do so pursuant to Fed. R. Civ. P. 60(b). See United States v. Krilich, 303 F.3d 784, 789 (7th Cir. 2002); Protectoseal Co. v. Barancik, 23 F.3d 1184, 1187 (7th Cir. 1994). Rule 60(b)(5) provides in relevant part that, upon motion and such terms as are just, a party may seek relief from a final judgment or order when it is no longer equitable that the judgment should have prospective application. Fed. R. Civ. P. 60(b)(5). Where the plaintiff, i.e., the proponent of the injunction, seeks modification to make an order more stringent, the determinative question is whether the purpose of the original order has been achieved. See United States v. United Shoe Machinery, 391 U.S. 244 (1968). In United Shoe, the government sought to modify an injunction in an antitrust case because the goals of the order restoring competition to the shoe machinery market had not been accomplished in the ten years since the orders entry. 391 U.S. at 247. The Supreme Court decided that, because time and experience had demonstrated that the purposes of the order had not been achieved, it was appropriate to prescribe other, and if necessary more definitive, means to achieve the result. 391 U.S. at 249, 252; see also Epic Metals Corp. v. Souliere, 181 F.3d 1280, 1283-84
D.187 and D.131.
(11th Cir. 1999) (applying United Shoe where plaintiff sought to modify injunction); United States v. Local 560, 974 F.2d 315, 331-32 (3d Cir. 1992) (same); Exxon Corp. v. Texas Motor Exchange of Houston, Inc., 628 F.2d 500, 503-04 (5th Cir. 1980) (same).10 The FTC has obtained substantial modifications in cases where defendants contumacious conduct evidenced a need for more stringent injunctive relief. See, e.g., FTC v. Vocational Guides, Inc., Case No. 3-01-0170, 2009 U.S. Dist. LEXIS 29509 (M.D. Tenn. April 6, 2009) (entering a modified, enhanced injunction following defendants contempt of the permanent injunction); FTC v. Intl Product Design, Inc., Case No. 1:97-cv-01114 (E.D. Va. July 12, 2007) (same) (appended to previous filing at D.110); FTC v. Neiswonger, 494 F. Supp. 2d 1067, 1082-84 (E.D. Mo. 2007) (same). B. Trudeaus Contempt Reflects the Failure of the 2004 Order to Achieve Its Purpose
As the Seventh Circuit recognized, the 2004 Order was meant to prevent Trudeau from misleading consumers: The 2004 Consent Order had two purposes: to protect consumers from deceptive practices and to compensate those already deceived. 579 F.3d at 764 (emphasis added). Therefore, modification is warranted if the 2004 Order has not effectively protected consumers from Trudeaus deceptive advertising, which it has not. In multiple infomercials, Trudeau lied about, among other things, the Weight Loss Cure regimen being easy and about its lack of dietary restrictions upon completion. This Court and the Seventh Circuit both concluded that Trudeaus infomercial claims about Weight Loss Cure were patently false. See Sections I.B. and I.C., supra. Thus, Trudeau deceived thousands of additional consumers since
Where the defendant, i.e., the enjoined party, seeks relief in order to escape the impact of an injunction, a different standard applies. See Rufo v. Inmates of Suffolk Co. Jail, 502 U.S. 367, 383 (1992)). Under the Rufo test, the party seeking modification bears the burden of establishing that a significant change in circumstances warrants revision of the decree. 502 U.S. at 383; Krilich, 303 F.3d at 790. If the moving party meets this initial burden, the court considers whether the proposed modification is suitably tailored to the changed circumstance. Id. Where, as here, the government enforcer of the order seeks modification to enhance its effectiveness in protecting consumers, the United Shoe standard, focusing on whether the purpose of the original order has been achieved, appears better suited. See New York v. Microsoft Corp., Civil Action No. 98-1233, 2008 WL 254126, at *23-26 (D.D.C. Jan. 29, 2008) (appended to previous filing at D.110) (discussing applicability of both the United Shoe and Rufo standards). Nonetheless, modification in this case would be warranted under either standard as Trudeaus contumacious conduct undoubtedly constitutes changed circumstances. See id.
10
entry of the 2004 Order, notwithstanding its goal of preventing just that. It follows then that the 2004 Order must be enhanced to effectuate its purpose. Indeed, to truly protect consumers from Trudeaus deceptive practices, any modifications to the 2004 Order must address the nature of his offensive conduct. At its core, Trudeaus behavior reflects a dedicated effort to engage in deception, thereby subverting the law, not abiding by it. Since 1998, the FTC has initiated a number of actions against Trudeau for deceptive infomercial claims, each resulting in the entry of stricter orders against him. See Section I.A., supra. Nonetheless, this Court was compelled to twice find Trudeau in contempt for violating these orders. These findings of contempt have hardly chastened Trudeau. Just recently, on the heels of the Seventh Circuits decision, Trudeau proclaimed to a Chicago newspaper, Im very proud of being held in contempt. FTC Ex. 58, Greg Burns, Newest Pitch by Infomercial Kingpin Trudeau: Im Poor, CHI. TRIB., Sept. 14, 2009. Trudeaus boasting demonstrates that the Court should not count on Trudeaus good faith compliance with its orders, but just the opposite. Perhaps the Court recognized as much when it stated at the November 4, 2008 hearing that, Mr. Trudeau is not a credible witness. There is not much that he can say about himself or about his conduct that I would credit. FTC Ex. 59, Nov. 4, 2008 Tr. at 18:10-12. Therefore, a modified order must account for Trudeaus dubious view of compliance, his propensity to engage in deceit, and the possibility that his first inclination may be to disregard the order or exploit its loopholes. C. The FTCs Proposed Modifications Advance the Purpose of the Order by Better Protecting Consumers The FTC proposes three modifications aimed at protecting consumers in light of Trudeaus conduct: (1) an additional provision requiring Trudeau to obtain a performance bond of $10 million before engaging in any infomercial activity related to books and other informational publications; (2) modifications to Parts I and II of the 2004 Order to prohibit Trudeau from making certain false or misleading statements in advertising for books and other informational publications; and (3) updated provisions related to compliance reporting, record keeping, and distribution of the Order to aid the FTC in monitoring Trudeaus compliance. These modifications are reasonable and suitably tailored to address Trudeaus order violations. 8
Finally, we also address the folly of reinstating the limited 3-year ban on book infomercials because, as Trudeau has already demonstrated since the ban was entered, it would likely fail to adequately protect consumers. 1. A Performance Bond Protects Consumers
A substantial performance bond protects consumers by ensuring that a fund will be available to reimburse them in the event that Trudeau continues to flout the law and this Courts orders. The FTC has sought and obtained performance bonds in other cases where such relief was necessary to protect consumers. See FTC v. US Sales Corp., 785 F. Supp. 737, 753 (N.D. Ill. 1992) (requiring FTC defendants to obtain a performance bond in light of their contumacious behavior); affd FTC v. Vlahos, 51 F.3d 275 (7th Cir. 1995); see also FTC v. 1263523 Ontario, Inc., 205 F. Supp. 2d 205 (S.D.N.Y. 2002) (ordering a performance bond of $10 million); FTC v. SlimAmerica, Inc., 77 F. Supp. 2d 1263 (S.D. Fla. 1999) (ordering a performance bond of $5 million); FTC v. Career Assistance Planning, Inc., No. 1:96-CV-2187, 1996 WL 929696 (N.D. Ga. Sept. 19, 1996) (appended to previous filing at D.110) (ordering a performance bond of $6 million). Courts have ordered performance bonds in FTC cases where, as here, the defendant has a history of recidivism. In FTC v. US Sales Corp., this Court held that a bond requirement was appropriate because merely prohibiting the advertisements discussed in this opinion is insufficient, especially considering Defendants contemptuous behavior in violating the Preliminary Injunction Order. 785 F. Supp. at 753. Similarly, in Career Assistance Planning, the district court ordered a performance bond of $6 million in a case involving unlawful telemarketing, stating that it was warranted in light of [defendants] proven propensity to engage in fraud and to refuse cooperation of law enforcement authorities. 1996 WL 929696, at *4. While the performance bond amount of $10 million is substantial, ultimately, it is a mere fraction of the consumer harm caused by Trudeaus contumacious misrepresentations. The bond amount should reflect an estimation of the consumer harm that would be caused by a similar order violation in the future, thereby guaranteeing a means for reimbursing consumers. Thus, it would be appropriate for the Court to require Trudeau to obtain a bond in the amount of consumer harm he caused in this case. The FTC has nonetheless proposed a far lower bond in 9
recognition of the fact that Trudeau will continue to receive scrutiny from the FTC and, in the event that Trudeaus infomercials promoting informational publications demand enforcement action again, both the Commissions and this Courts familiarity with the issues, after these proceedings, would facilitate any such action moving even more swiftly.11 In light of the fact that Trudeau failed to cease broadcast of his infomercials even upon notice of the FTCs filing of a contempt action in September 2007, the FTC may also seek a temporary restraining order at the outset of any future contempt action in an attempt to further reduce harm to consumers.12 2. Prohibiting Misrepresentations About the Benefits, Performance, or Efficacy of Any Product, Program or Service in Advertising for Informational Publications Protects Consumers
Parts I and II of the 2004 Order also should be modified to ensure that Trudeau does not make certain false or misleading statements in advertising for books and other informational publications. Part I of the Order bans Trudeau from all infomercials except those promoting books and other informational publications, provided that, among other things, he not misrepresent their content. Part II of the Order bans Trudeau from making health benefit claims for any product, program or service, but includes a similarly-constructed exception for book advertising. In light of the prolific growth in Trudeaus book advertising since entry of the 2004 Order and the risks such advertising poses for consumers (as evidenced by Trudeaus flagrant contempt), it is now clear that these exceptions provide Trudeau too much leeway to deceive consumers. Specifically, in pertinent part, the Part I and Part II exceptions allow Trudeau to participate in book advertising in any form, including but not limited to infomercials, and make any representation... in connection with ... any book, newsletter or other informational publication in any format provided that any such book, newsletter or other informational publication: 1) does not reference, directly or indirectly, any branded or trademarked product,
The time it takes for the FTC to file an action is influenced by a number of factors unique to each case, not the least of which include the duration of the investigation and the internal process of authorization by the Commission.
12
11
In this case, the violative infomercials remained on the air for 3 months after the FTC filed its contempt action (the action was filed on September 13, 2007 and the infomercials remained on the air until mid-December 2007). FTC Ex. 18.
10
program or service that Defendants are promoting; 2) is not, directly or indirectly, an advertisement for any product, program or service; and 3) is not sold, promoted or marketed, directly or indirectly, in conjunction with any product, program or service that is related to the content of the book, newsletter or informational publication or infomercial FTC Ex. 1 (emphasis added). The FTC agreed to the Part I and II exceptions because the three provisos appeared sufficient to fence in the advertising Trudeau might engage in with respect to informational publications. However, the FTC failed to anticipate the explosion of book marketing that Trudeau would initiate following entry of the 2004 Order, as well as Trudeaus skill at exploiting an unintentional loophole in the Order. For example, to the extent one of Trudeaus books describes a non-branded program (e.g., a debt, weight loss, or recession cure) and his advertising for the book falsely touts the benefits of that program (even if it accurately reflects what is in the book), none of the provisos protects consumers from such misrepresentations. Additionally, because the exceptions for book advertising in Parts I and II permit any representation, they interfere with the FTCs ability to enforce Part IV of the Order. Specifically, Part IV of the 2004 Order enjoins Trudeau from making misrepresentations about the benefits, performance, or efficacy of any product, program or service unless that representation is true and non-misleading. This provision provides important protections for consumers from Trudeaus deceptive advertising. Therefore, to the extent that Trudeaus advertising for books and other informational publications misrepresents the benefits, performance, or efficacy of any product, program or service, consumers should be protected from it. But as written, the Parts I and II exceptions permitting any representation arguably trump the prohibition laid out in Part IV. Thus, the Court should modify Parts I and II so that they remain unambiguously consistent with, and expressly adopt, the mandate of Part IV of the 2004 Order. There is good reason to believe that the FTCs concerns in this regard are not merely hypothetical. In a letter to the FTC dated September 25, 2009, Trudeaus counsel, Mark Lane, writes that his client is planning to write a revised version of his Weight Loss Cures book and have it published, utilizing his previously produced infomercial . . . to promote the book. FTC Ex. 58 (emphasis added). The letter goes on: Mr. Trudeau is confident that the previously 11
produced infomercial, when aired in combination with the revised book, would be fully in compliance with the court orders. Id. Trudeaus intent, therefore, is to merely revise the book to match the existing infomercial notwithstanding any misrepresentations that infomercial may make with respect to the benefits, performance, or efficacy of any product, program or service referenced in the book. The Order, as written, arguably permits such misrepresentations, thereby failing to protect consumers to the full extent of the law. In sum, if Trudeaus book advertising makes misrepresentations that would violate Part IV, such false or misleading claims should be barred by the Order, irrespective of whether the book parrots those misrepresentations. Therefore, the phrase truthful, non-misleading should be inserted between the words any and representation in the exceptions to Parts I and II. Additionally, these Parts should specifically prohibit Trudeau from misrepresenting the benefits, performance, or efficacy of any product, program or service referenced in a book Trudeau advertises (as would be otherwise required by Part IV). Such modification is essential to protect consumers and places no additional burden on Trudeau because it is already what the law requires.13 3. Updating the Compliance-Monitoring Provisions Protects Consumers
Trudeaus history and contumacious conduct also justify updating the provisions in the Order that allow the FTC to monitor Trudeaus compliance. In FTC cases, courts routinely include such provisions to ensure a defendants compliance with the permanent injunction. See FTC v. Direct Marketing Concepts, Inc., 2009 WL 2707554, at *9 (D. Mass. Aug. 13, 2009); FTC v. Think Achievement Corp., 144 F. Supp. 2d 1013, 1018 (N.D. Ind. 2000). The compliance-monitoring provisions are particularly important where, as here, the defendant has a history of poor diligence. 144 F. Supp. 2d at 1018. The FTC proposes that the Order include the latest, up-to-date versions of these provisions that are routinely used in orders entered in FTC
The proposed supplemental order deletes the penultimate sentence of Part I because that provision applied only to conduct occurring before December 31, 2004. Additionally, the proposed order retains the final sentence of Part I, which limits the application of Part I to consumers/addresses located in the United States. However, the FTC has not yet obtained the customer list for Weight Loss Cure, and in the event that the FTC learns that Trudeaus infomercials harmed consumers located beyond the United States, the FTC may seek to have this provision modified as well.
13
12
cases, and that their time periods begin to run anew.14 Accordingly, Trudeau would be required to distribute the Order for an additional period of ten years; report on his compliance with the Order every year for an additional period of ten years; and create and retain records for an additional period of thirteen years. These provisions will provide the FTC with tools it needs to monitor Trudeaus compliance. 4. A Limited Ban on Infomercials for Books in which Trudeau Has an Interest Does Not Protect Consumers
To the extent the Court considers re-imposing it, a limited ban on infomercials for books in which Trudeau has an interest fails to enhance the 2004 Order in a way that protects consumers. The interest requirement provides Trudeau too great an opportunity to sidestep the ban, and enormously complicates the FTCs ability to enforce it. In fact, Trudeaus post-order activities to date show that he would (and already has) deftly worked to render such a ban ineffectual. The Courts three-year ban went into effect on November 4, 2008 and remained operative until it was vacated by the Seventh Circuit on August 27, 2009. In that time, Trudeau has been busy cranking out new books as well as infomercials to promote them. Unsurprisingly, he claims to have no interest in the books and that he appears in the infomercials merely as a spokesperson, as expressly permitted by the Courts order.15 See FTC Exs. 59-60. In letters to the FTC this year, Trudeaus counsel, Marc Lane notified the FTC of Trudeaus intent to appear in infomercials for four different new Trudeau-style cures: Recession Cures, Tax Cures, Debt Cures 2, and Kevin Trudeaus Free Money They Dont Want You to Know About. Id. Lane represented that Trudeau was not the author or publisher of any of the books, though he is allowing the publishers to identify him as the author of the books without charge. Id. Lane also represented that Trudeau does not own the
14
The primary variation from the version of these provisions included in the 2004 Order is that the newer version requires annual compliance reporting. See proposed supplemental order at Part IV.
Interest means any direct or indirect monetary, financial, or other material benefit, including but not limited to royalty payments on the sale of any book, newsletter, or other informational publication in any format endorsed by Trudeau, or any benefit received in exchange for partial or full ownership of, or rights to, any book, newsletter, or other informational publication in any format written or created by him, but excluding payments made to Trudeau solely in exchange for his appearance as a spokesman for a book, newsletter, or other informational publication in which he does not have an interest. D.220, Supplemental Order at 3.
15
13
publishers directly or indirectly, and that he is merely acting as an unpaid spokesman for the books. Id. Mr. Lane takes the position that, under these alleged circumstances, Trudeau has no interest in the books as that term is defined in the Courts Supplemental Order. As Trudeau has demonstrated, he is both clever and resourceful, and if his participation in infomercials is conditioned on disavowing any interest in the books he sells, he will do everything in his power to make it so. The key consideration is whether such a ban accomplishes the goal of protecting consumers, and because of Trudeaus intent and ability to continue business-as-usual, it clearly does not. Rather, the ban impacts Trudeau only to the extent that he must structure his book deals and infomercial appearances in a way that allows him to disclaim interest, making it difficult for the FTC to prove otherwise by clear and convincing evidence. All the while, consumers will be afforded little, if any, protection from his propensity to engage in deception. Frankly, such a ban is a ban in name only. IV. CONCLUSION For the foregoing reasons, the FTC moves this Court to modify the Stipulated Final Order for Permanent Injunction as to Defendant Kevin Trudeau. A proposed supplemental order is attached.
Dated: November 13, 2009
Respectfully submitted, Willard Tom, General Counsel
David A. OToole (dotoole@ftc.gov) Federal Trade Commission 55 W. Monroe St., Suite 1825 Chicago, IL 60603 Phone: 312-960-5601 Fax: 312-960-5600
s/ Sandhya P. Brown Michael Mora (mmora@ftc.gov) Sandhya P. Brown (sbrown5@ftc.gov) Federal Trade Commission 601 New Jersey Ave., N.W., Suite 2215 Washington, DC 20001 Phone: 202-326-3373, -2040 Fax: 202-326-2559
14
Case: 1:03-cv-03904 Document #: 269-2 Filed: 11/13/09 Page 1 of 19 PageID #:3998 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS : : : : : : : :
PLAINTIFF FTC'S EXHIBITS IN SUPPORT OF ITS RENEWED MOTION TO MODIFY THE STIPULATED FINAL ORDER FOR PERMANENT INJUNCTION AS TO DEFENDANT KEVIN TRUDEAU FTC Ex. 56 Sept. 14, 2009 Chicago Tribune article by Greg Burns, Newest Pitch by Infomercial Kingpin Trudeau: Im Poor FTC Ex. 57 FTC Ex. 58 FTC Ex. 59 FTC Ex. 60 Excerpt from Nov. 4, 2008 Court Transcript Letter from Marc Lane to FTC dated Sept. 25, 2009 Letter from Marc Lane to FTC dated Feb. 24, 2009 Letter from Marc Lane to FTC dated June 19, 2009
FTC Ex 56
Kevin Trudeau, FTC prepare for showdown over business activities -- chicagotribune.com Page 1 of 3 Case: 1:03-cv-03904 Document #: 269-2 Filed: 11/13/09 Page 3 of 19 PageID #:4000 www.chicagotribune.com/business/columnists/chi-mon-burns-infomercial-0914-sep14,0,584242.column
chicagotribune.com
Kevin Trudeau, FTC prepare for showdown over business activities
Court has imposed $37.6 million penalty; author says, 'I've been pretty much wiped out'
Greg Burns September 14, 2009 Ex-felon-turned-author Kevin Trudeau has fine-tuned the infomercial sales pitch into a big-time moneymaker. But now he says he's not making any money. The Federal Trade Commission has branded him a dangerous huckster, and it obtained a court order that drastically restricts his business activities. Trudeau calls himself a consumer advocate and whistleblower whom corrupt bureaucrats are determined to silence. All sides agree on this: Trudeau sells books -- millions of books for millions of dollars. In fact, just one of his books brought in more than $46 million in revenue, according to FTC estimates. And that's the starting point for a looming showdown in federal court in Chicago over just how much Trudeau has made and whether he should pay a $37.6 million penalty after a judge found that he misled would-be dieters in an infomercial. As the unemployment rate climbs and the economy limps along, it might seem incredible that a book advising readers to repeatedly rinse out their colons could have made such a fortune. Yet, "The WeightLoss Cure 'They' Don't Want You to Know About" became a runaway best seller, even though regulators have been after its author for years. Trudeau's infomercials typically involve a staged interview in which he responds to questions about his "cures" for everything from hair loss and weak memory to excessive levels of debt. He launched his writing career after a prison stint in the early 1990s for bad checks and credit card fraud, according to federal records. In 2004, the FTC imposed a sweeping consent decree that, among other restrictions, forbids him from misrepresenting the content of his "Weight-Loss Cure." The book is based on a 50-year-old method that involves prescription hormone injections, a month of colonics and a 500-calorie-per-day diet regimen. Sounds easy, right? U.S. District Judge Robert Gettleman didn't think so. By repeatedly touting the diet as "easy," Trudeau violated the consent decree, the judge ruled. Then the case took an unusual turn. At first, Gettleman imposed a $5.2 million fine. The FTC petitioned for a modest increase, and without a
FTC Ex. 56
11/5/2009
http://www.chicagotribune.com/business/columnists/chi-mon-burns-infomercial-0914-sep...
Kevin Trudeau, FTC prepare for showdown over business activities -- chicagotribune.com Page 2 of 3 Case: 1:03-cv-03904 Document #: 269-2 Filed: 11/13/09 Page 4 of 19 PageID #:4001 detailed explanation the judge jacked it up to $37.6 million, the regulator's estimate of how much the book took in through infomercials. Although the court record is massive, it establishes very little about Trudeau's finances or the book's performance, and the author is pleading poverty. "I've been pretty much wiped out," he said in an interview last week. "Their intent is to bury me." An FTC spokesman declined to comment. In a hearing before Gettleman last year, one of Trudeau's advisers pegged the author's net worth at a negative $9.5 million, which the judge said "is not worth the paper it is written on." On crossexamination, the adviser conceded that if certain assets in dispute were included, Trudeau's wealth would climb to a positive $121 million. The FTC calculated revenue from the diet book at $46 million, which includes infomercial sales, plus another $9 million through bookstores, mass merchants and Web sites. Profits were $12 million, the agency said. Trudeau's lawyer, Kimball Anderson at Chicago's Winston & Strawn, said he doesn't buy those numbers. "Guesstimates," he calls them. The author, meanwhile, said the book generated a much smaller profit margin than the FTC assumes. And besides, he received no money from it at all, he said. Trudeau sold his interest in the infomercials to a Massachusetts company that never paid him, he said, and all proceeds from non-infomercial sales went to a Chicago-area publisher. Though the court record states that he received royalties, Trudeau said that's not the case. So he got no money? "No," he insisted. Then why write the book and appear in the infomercials? Altruism, Trudeau replied. "I just did it as a service to the public." That claim is likely to be put to the test. In an Aug. 27 ruling, the 7th U.S. Circuit Court of Appeals upheld Gettleman's contempt finding against Trudeau. But it also ordered the case back to the lower court for more explanation about the penalties, which included a three-year ban on Trudeau infomercials as well as the $37.6 million fine. Scheduling conferences and additional discovery appear likely to follow, as does a trial. Trudeau said he views the appellate decision as "a huge victory." The fine deserves to be thrown out, he said, and the infomercial ban is "government suppression, like Stalin." As for the finding of contempt based on touting his diet as "easy," Trudeau said he will appeal to the U.S. Supreme Court. "I'm very proud of being held in contempt," he said. "What I'm doing is helping people."
FTC Ex. 56
11/5/2009
Kevin Trudeau, FTC prepare for showdown over business activities -- chicagotribune.com Page 3 of 3 Case: 1:03-cv-03904 Document #: 269-2 Filed: 11/13/09 Page 5 of 19 PageID #:4002 Copyright 2009, Chicago Tribune
FTC Ex. 56
11/5/2009
FTC Ex 57
Case: 1:03-cv-03904 Document #: 269-2 Filed: 11/13/09 Page 7 of 19 PageID #:4004 1
1 2 3
IN THE UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION FEDERAL TRADE COMMISSION, ) ) ) ) ) ) ) ) )
4 Plaintiff, 5 vs. 6 KEVIN TRUDEAU, 7 Defendant. 8 9 10 11 APPEARANCES: 12 For the Plaintiff: 13 14 15 16 17 18 For the Defendant: 19 20 21 22 23 Official Reporter: 24 25
No. 03 C 3904 Chicago, Illinois November 4, 2008 11:00 a.m.
TRANSCRIPT OF PROCEEDINGS - STATUS BEFORE THE HONORABLE ROBERT W. GETTLEMAN
FEDERAL TRADE COMMISSION 600 Pennsylvania Avenue, NW NJ-3212 Washington, DC 20580 BY: MS. LAUREEN KAPIN MS. SANDYA PRABHU FEDERAL TRADE COMMISSION 55 West Monroe Street Chicago, Illinois 60603 BY: MR. DAVID O'TOOLE WINSTON & STRAWN LLP 35 West Wacker Drive Chicago, Illinois 60601 BY: MR. KIMBALL R. ANDERSON
JENNIFER S. COSTALES, CRR, RMR 219 South Dearborn Street Room 1706 Chicago, Illinois 60604 (312) 427-5351
FTC Ex. 57
The facts remain the same.
Mr. Trudeau gave up
2 substantial consideration in exchange for a promise by the FTC 3 that it would not use the consent decree as an admission of 4 liability, and five days later they went to the world and 5 breached that promise. That's my point here. And my point is
6 this is a civil case where equitable remedies are sought, and 7 claimants who themselves have breached the very order or very 8 agreement that they're trying to enforce ought not to be 9 overreaching here trying to obtain a disgorgement of funds that 10 Mr. Trudeau never received, has no ability whatsoever to repay. 11 And I just think that this is just total overreaching,
12 and I think we've set forth our position about as well as I can 13 state it in our brief. 14 15 enough. 16 All right. Let me just respond to a couple of things. THE COURT: All right. Thank you. I think I've heard
17 First of all, you know, Mr. Anderson, you came in the case late. 18 A lot of these points that you are trying to make now frankly I 19 think were waived at the original contempt finding that I made 20 back in November, last November, because, you know, an 21 unclean-hands argument really should have been presented then, if 22 there was such a thing, because that's when they came in for the 23 contempt finding, which I entered. 24 So it's a little late now.
I don't think the FTC comes to this Court on this I mean, if they
25 contempt motion at any time with unclean hands.
FTC Ex. 57
1 did something wrong back then, that's back then. 2 nothing to do with today.
That has
What has to do with today and back in
3 August and the rest of it was Mr. Trudeau's contemptuous 4 violation of the injunction in misrepresenting the content of the 5 book, which I don't think I have to go into again. 6 findings have been made. 7 Those
They're not going to change.
We're really talking about remedy here, and that's all
8 this proceeding began with when Mr. Bradford was still in the 9 case about remedy. We had the trial. I have held, I continue to
10 believe, I continue to find, rather, that Mr. Trudeau is not a 11 credible witness. There is not much that he can say about And I've had
12 himself or about his conduct that I would credit. 13 years of experience with him now. 14 make.
And that finding is mine to
And it's not a finding that any defense lawyer likes to
15 hear, but that's how I feel about Mr. Trudeau. 16 His position that he made these infomercials, they were
17 published, that he wrote the book, but he didn't get a nickel out 18 of it, I just don't believe him, okay. 19 at all. I just don't believe him
He is not the kind of man who would do something out of
20 the goodness of his heart. 21 He has a claim against ITV that he's never pursued. I
22 can assume that he has $119 million left on that claim. 23 know where that is at the moment.
I don't
But one of the points you made
24 that you didn't address just now, you don't have to, because you 25 made it in writing, is that I am supposed to take into
FTC Ex. 57
FTC Ex 58
FTC Ex. 58
FTC Ex. 58
FTC Ex 59
FTC Ex. 59
FTC Ex. 59
FTC Ex 60
FTC Ex. 60
FTC Ex. 60
FTC Ex. 60
(Proposed) SUPPLEMENTAL ORDER MODIFYING THE STIPULATED FINAL ORDER FOR PERMANENT INJUNCTION AS TO DEFENDANT KEVIN TRUDEAU On September 2, 2004, this Court entered a Stipulated Final Order for Permanent Injunction (Final Order) against Defendant Kevin Trudeau (Defendant Trudeau) and others. Pursuant to Fed. R. Civ. P. 60(b), Plaintiff Federal Trade Commission (FTC or Commission) filed a motion seeking modification of the Final Order as to Defendant Trudeau in order to effectuate its purpose of protecting consumers. Having considered the arguments and evidence presented, including at any hearings on this matter, the Court finds and orders: FINDINGS 1. 2004. 2. Defendant Trudeau was served with the Final Order on September 2, 2004 and This Court entered the Final Order against Defendant Trudeau on September 2,
had knowledge of its contents. 3. 4. The purpose of the Final Order is to protect consumers from deceptive practices. Part I of the Final Order enjoins Defendant Trudeau from making any
representations in infomercials for any product, program or service, but excluded infomercials
for books, newsletters, or other informational publications, provided that certain conditions were met. Part I of the Final Order also requires that the infomercial for any such book, newsletter or informational publication must not misrepresent the content of the book, newsletter or informational publication. 5. On September 13, 2007, the FTC filed a Motion for Defendant Kevin Trudeau to
Show Cause Why He Should Not Be Held in Contempt, alleging violations of the Courts Final Order as a result of Defendant Trudeaus infomercial marketing of his book, The Weight Loss Cure They Dont Want You to Know About (Weight Loss Cure). 6. The Court concluded that Defendant Trudeau violated Part I of the Final Order by
misrepresenting the content of Weight Loss Cure in infomercials. Specifically, Defendant Trudeau misrepresented that the weight loss protocol contained in the book is easy and allows dieters, after finishing the protocol, to eat whatever they want without restriction. 7. The Final Order therefore failed to achieve its purpose of protecting consumers
from Defendant Trudeaus deceptive practices. 8. Pursuant to Fed. R. Civ. P. 60(b), the Final Order must be modified so that it
protects consumers from Defendant Trudeaus deceptive practices, and the modifications set forth herein are intended to achieve this purpose. 9. herein. 10. Entry of this Supplemental Order is in the public interest. The Final Order remains in full force and effect, except as specifically superceded
Page 2 of 15
PROHIBITED BUSINESS ACTIVITIES I. (Supercedes Part I of the Final Order as to Defendant Trudeau) IT IS THEREFORE ORDERED that Defendant Trudeau, directly or through any corporation, partnership, subsidiary, division, trade name, or other entity, and his officers, agents, servants, employees, and all persons and entities in active concert or participation with him who receive actual notice of this order by personal service or otherwise, in connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of any product, program or service, in or affecting commerce, is hereby permanently enjoined and restrained from producing, disseminating, making or assisting others in making any representation in an infomercial aired or played on any television or radio media (including but limited to network television, cable television, radio, and television or radio content that is disseminated on the Internet). This Part I does not prohibit Defendant Trudeau from making any truthful, nonmisleading representation in any television or radio media in connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of any book, newsletter, or other informational publication in any format provided that any such book, newsletter or other informational publication: 1) does not reference, directly or indirectly, any branded or trademarked product, program or service that Defendants are promoting; 2) is not, directly or indirectly, an advertisement for any product, program or service; and
Page 3 of 15
3) is not sold, promoted or marketed, directly or indirectly, in conjunction with any product, program or service that is related to the content of the book, newsletter or informational publication or infomercial; Provided further that, Defendant Trudeau: 1) does not misrepresent the content of any such book, newsletter or informational publication; and 2) does not misrepresent the benefits, performance, or efficacy of any product, program or service referenced in any such book, newsletter or other informational publication. Additionally, the infomercial for any such book, newsletter or informational publication must also comply with the requirements of Part X of the Final Order, reproduced herein. For purposes of this Part I only, Defendant Trudeau will not be deemed to be disseminating television or radio media on the Internet provided that he does not, directly or indirectly, accept, process, or refer to third parties any orders from any addresses in the United States or consumers located in the United States. II. (Supercedes Part II of the Final Order as to Defendant Trudeau) IT IS FURTHER ORDERED that Defendant Trudeau, directly or through any corporation, partnership, subsidiary, division, trade name, or other entity, and his officers, agents, servants, employees, and all persons and entities in active concert or participation with him who receive actual notice of this order by personal service or otherwise, in connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of any product, program or service, in or affecting commerce, is hereby permanently enjoined and restrained from making or assisting others in making, expressly or by implication, including Page 4 of 15
through the use of endorsements or product names, any representation regarding the health benefits of such product, program or service or that such product, program or service can cure, treat, or prevent any disease. This Part II does not prohibit Defendant Trudeau from making any truthful, nonmisleading representation in any television or radio media in connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of any book, newsletter, or other informational publication in any format provided that any such book, newsletter or other informational publication: 1) does not reference, directly or indirectly, any branded or trademarked product, program or service that Defendants are promoting; 2) is not, directly or indirectly, an advertisement for any product, program or service; and 3) is not sold, promoted or marketed, directly or indirectly, in conjunction with any product, program or service that is related to the content of the book, newsletter or informational publication or infomercial; Provided further that, Defendant Trudeau: 1) does not misrepresent the content of any such book, newsletter or informational publication; and 2) does not misrepresent the benefits, performance, or efficacy of any product, program or service referenced in any such book, newsletter or other informational publication. This Part II prohibits the making of any misrepresentations for, among others, the following products: any coral calcium product, Biotape, Edens Secret Natures Purifying Product, Sable Hair Farming System, and Dr. Callahans Addiction Breaking System.
Page 5 of 15
FINAL ORDER PROVISION REPRODUCED WHEREFORE as Part X of the Final Order is referenced in this Supplemental Order, it is reproduced here:
FINAL ORDER, PART X IT IS FURTHER ORDERED that Defendant Trudeau, directly or through any corporation, partnership, subsidiary, division, or other device, in connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of any product or program in or affecting commerce, shall not create, produce, sell or disseminate: A. Any advertisement that misrepresents, directly or by implication, that it is not a paid advertisement; B. Any television commercial or other video advertisement fifteen (15) minutes in length or longer or intended to fill a broadcasting or cablecasting time slot of fifteen (15) minutes in length or longer that does not display visually, clearly and prominently, and for a length of time sufficient for an ordinary consumer to read, within the first thirty (30) seconds of the advertisement and immediately before each presentation of ordering instructions for the product or service, the following disclosure: THE PROGRAM YOU ARE WATCHING IS A PAID ADVERTISEMENT FOR [THE PRODUCT OR SERVICE]. Provided that, for purposes of this provision, the oral or visual presentation of a telephone number, email address or mailing address for viewers to contact for further information or to place an order for the product or service shall be deemed a presentation of ordering instructions so as to require the display of the disclosure provided herein; or C. Any radio commercial or other radio advertisement five (5) minutes in length or longer that does not broadcast, clearly and audibly, within the first thirty (30) seconds of the advertisement and immediately before each presentation of ordering instructions for the product or service, the following disclosure: THE PROGRAM YOU ARE LISTENING TO IS A PAID ADVERTISEMENT FOR [THE PRODUCT OR SERVICE]. Provided that, for purposes of this provision, the presentation of a telephone number, email address or mailing address for listeners to contact for further information or to place an order for the product or service shall be deemed a presentation of ordering instructions so as to require the announcement of the disclosure provided herein.
III. PERFORMANCE BOND IT IS FURTHER ORDERED that Defendant Trudeau shall, in connection with producing, disseminating, making or assisting others in making any representation in an infomercial for any book, newsletter, or other informational publication, obtain and maintain in force a performance bond in the principal sum of ten million dollars ($10,000,000). Said bond shall be conditioned upon compliance by Defendant Trudeau with the requirements of Part I of this Supplemental Order. The bond shall be deemed continuous and remain in full force and Page 6 of 15
effect so long as, and for at least five (5) years after: (a) Defendant Trudeau produces, disseminates, makes or assists others in making any representation in an infomercial for any book, newsletter, or other informational publication; or (b) any infomercial containing any such representation is aired or played on any television or radio media (including but limited to network television, cable television, radio, and television or radio content that is disseminated on the Internet). The bond shall cite this Supplemental Order as the subject matter of the bond and provide surety against Defendant Trudeaus failure to pay any judgment that may be ordered: (a) in consequence of a court finding of a violation of Part I of this Supplemental Order or (b) in settlement of an action by the FTC alleging a violation of Part I of this Supplemental Order. Such performance bond shall be an insurance agreement providing surety and shall be issued by a surety company that is admitted to do business in each state in which Defendant Trudeau is doing business and that holds a Certificate of Authority issued by the U.S. Department of Treasury as acceptable surety on federal bonds and reinsuring. Defendant Trudeau shall provide a copy of such performance bond to the Commission prior to the commencement of any business activity for which such bond is required. Provided, however, in lieu of a performance bond, Defendant Trudeau may establish and fund, pursuant to the terms set forth herein, an interest-bearing escrow account in the principal sum of ten million dollars ($10,000,000) in cash, or such other assets of equivalent value, which the Commission, in its sole discretion, has approved in writing. Defendant Trudeau shall maintain such amount in that account for so long as, and for at least five (5) years after: (a) Defendant Trudeau produces, disseminates, makes or assists others in making any representation in an infomercial for any book, newsletter, or other informational publication; or (b) any infomercial containing any such representation is aired or played on any television or radio Page 7 of 15
media (including but limited to network television, cable television, radio, and television or radio content that is disseminated on the Internet). The escrow agreement shall cite this Supplemental Order as the subject matter of the escrow agreement and direct the escrow agent to pay the Commission from funds in the escrow account in the event of Defendant Trudeaus failure to pay any judgment that may be ordered: (a) in consequence of a court finding of a violation of Part I of this Supplemental Order or (b) in settlement of an action by the FTC alleging a violation of Part I of this Supplemental Order. Defendant Trudeau shall pay all costs associated with the creation, funding, operation, and administration of the escrow account. The Commission shall, in its sole discretion, select the escrow agent. The escrow agreement shall be in substantially the form attached to this Supplemental Order as Attachment A. The performance bond or escrow agreement shall provide that the surety company or escrow agent, within thirty (30) days following receipt of notice that a judgment has been entered either in consequence of a court finding of a violation of Part I of this Supplemental Order or in settlement of an action by the FTC alleging a violation of Part I of this Supplemental Order, shall pay the Commission so much of the performance bond or funds of the escrow account as is equal to the lesser of: (a) the amount of judgment ordered and which remains unsatisfied at the time notice is provided to the surety company or escrow agent, or (b) the amount of the bond or escrow fund. A copy of the notice provided for herein shall be mailed to Defendant Trudeau at his last known address. Defendant Trudeau shall not disclose the existence of the performance bond or escrow account to any consumer, or other purchaser or prospective purchaser, to whom any book, newsletter, or other informational publication is advertised, promoted, offered for sale, sold, or distributed by means of an infomercial, without also disclosing, at the same time and in a like Page 8 of 15
manner, that the performance bond or escrow account is required by order of the United States District Court for the Northern District of Illinois following findings that Defendant Trudeau made representations in infomercials that deceived consumers. IV. COMPLIANCE REPORTING BY DEFENDANT (Supercedes Part XVII of the Final Order as to Defendant Trudeau) IT IS FURTHER ORDERED, in order that compliance with the provisions of the Final Order and this Supplemental Order may be monitored: A. For a period of ten (10) years from the date of entry of this Supplemental Order,
Defendant Trudeau shall notify the Commission of the following: 1. Any changes in Defendant Trudeau's residence, mailing addresses, or
telephone numbers, within ten (10) days of the date of such change; 2. Any changes in Defendant Trudeau's employment status (including
self-employment), and any change in Defendant Trudeau's ownership of any business entity, within ten (10) days of the date of such change. Such notice shall include the name and address of each business that Defendant Trudeau is affiliated with, employed by, creates or forms, or performs services for; a detailed description of the nature of the business; and a detailed description of Defendant Trudeau's duties and responsibilities in connection with the business or employment; 3. fictitious names; and 4. Any changes in corporate structure of any business entity that Defendant Any changes in Defendant Trudeau's name or use of any aliases or
Trudeau directly or indirectly control(s), or has an ownership interest in, that may affect compliance obligations arising under the Final Order or this Supplemental Order, including but Page 9 of 15
not limited to: a dissolution, assignment, sale, merger, or other action that would result in the emergence of a successor entity; the creation or dissolution of a subsidiary, parent, or affiliate that engages in any acts or practices subject to the Final Order or this Supplemental Order; the filing of a bankruptcy petition; or a change in the corporate name or address, at least thirty (30) days prior to such change, provided that, with respect to any such change in a business entity about which the Defendant learns less than thirty (30) days prior to the date such action is to take place, Defendant shall notify the Commission as soon as is practicable after obtaining such knowledge. B. One hundred eighty (180) days after the date of entry of this Supplemental Order,
and on the same date each year thereafter for a period of ten (10) years from the date of entry of this Supplemental Order, Defendant Trudeau shall provide a written report to the FTC, which is true and accurate and sworn to under penalty of perjury, setting forth in detail the manner and form in which he has complied and is complying with the Final Order and this Supplemental Order. This report shall include, but not be limited to: 1. Defendant Trudeau's then-current residence address, mailing addresses,
and telephone numbers; 2. Defendant Trudeau's then-current employment status (including
self-employment), including the name, addresses, and telephone numbers of each business that Defendant Trudeau is affiliated with, employed by, or performs services for; a detailed description of the nature of the business; and a detailed description of Defendant Trudeau's duties and responsibilities in connection with the business or employment; 3. A copy of each acknowledgment of receipt of the Final Order and this
Supplemental Order, obtained pursuant to Part VI; Page 10 of 15
4. Supplemental Order; 5.
A copy of any Performance Bond obtained pursuant to Part III of this
Copies of all then-current advertisements, promotional materials, sales
scripts, training materials, or other marketing materials utilized by Defendant Trudeau in the advertising, marketing, promotion, offering for sale, distribution, or sale of any book, newsletter, or other informational publication in any format; and 6. C. Any other changes required to be reported under subpart A of this Part.
For the purposes of this Order, Defendant Trudeau shall, unless otherwise
directed by the Commission's authorized representatives, send by overnight courier all written notifications to the Commission to: Associate Director for Enforcement Federal Trade Commission 601 New Jersey Ave., N.W. Suite NJ-2122 Washington, D.C. 20001 Re: FTC v. Kevin Trudeau, Civil Action No. 03-3904. Provided that, in lieu of overnight courier, Defendant Trudeau may send such reports or notifications by first-class mail, but only if Defendant Trudeau contemporaneously sends an electronic version of such report or notification to the Commission at: DEBrief@ftc.gov D. For the purpose of the compliance reporting required by the Final Order and this
Supplemental Order, Defendant Trudeau shall provide the Commission with his counsel's name and address for the purpose of communications regarding this Supplemental Order and shall notify the Commission of any change in his counsel for the purpose of this Supplemental Order. V. RECORD KEEPING PROVISIONS (Supercedes Part XVIII of the Final Order as to Defendant Trudeau)
Page 11 of 15
IT IS FURTHER ORDERED that, for a period of thirteen (13) years from the date of entry of this Supplemental Order, Defendant Trudeau and any business for which he is a majority owner, officer, or director, or which he directly or indirectly manages or controls, are hereby restrained and enjoined from failing to create and retain the following records: A. Accounting records that reflect the cost of goods or services sold, revenues
generated, and the disbursement of such revenues; B. Personnel records accurately reflecting: the name, address, and telephone number
of each person employed in any capacity by such business, including as an independent contractor; that person's job title or position; the date upon which the person commenced work; and the date and reason for the person's termination, if applicable; C. Customer files containing the names, addresses, phone numbers, dollar amounts
paid, quantity of items or services purchased, and a description of items or services purchased, to the extent such information is obtained in the ordinary course of business; D. Complaints and refund requests (whether received directly, indirectly, or through
any third party) and any responses to those complaints or requests; E. Copies of all advertisements, promotional materials, sales scripts, training
materials, or other marketing materials utilized by Defendant Trudeau in the advertising, marketing, promotion, offering for sale, distribution, or sale of any book, newsletter, or other informational publication in any format; F. All records and documents necessary to demonstrate full compliance with each
provision of the Final Order and this Supplemental Order, including but not limited to, copies of acknowledgments of receipt of the Final Order and this Supplemental Order required by Part VI
Page 12 of 15
of this Supplemental Order, and all reports submitted to the FTC pursuant to Part IV of this Order; and G. All materials that were relied upon in making any representations contained in the
materials identified in Subpart E, including all documents evidencing or referring to the accuracy of any claim therein, as well as all evidence that confirms, contradicts, qualifies, or calls into question the accuracy of such claims. VI. DISTRIBUTION OF FINAL ORDER AND SUPPLEMENTAL ORDER (Supercedes Part XV of the Final Order as to Defendant Trudeau) IT IS FURTHER ORDERED, for a period of ten (10) years from the date of entry of this Supplemental Order, Defendant Trudeau shall deliver copies of the Final Order and this Supplemental Order as directed below: A. Defendant Trudeau as Control Person: For any business that Defendant Trudeau
controls, directly or indirectly, or in which Defendant Trudeau has a majority ownership interest, Defendant Trudeau must deliver a copy of the Final Order and this Supplemental Order to all: (1) principals, officers, directors, and managers of that business; (2) all employees, agents, and representatives of that business who engage in conduct related to the subject matter of the Final Order and this Supplemental Order; and (3) any business entity resulting from any change in structure set forth in Subsection IV.A.4 of this Supplemental Order. For current personnel, delivery shall be within (5) days of service of this Supplemental Order upon Defendant Trudeau. For new personnel, delivery shall occur prior to them assuming their responsibilities. For any business entity resulting from any change in structure set forth in Subsection IV.A.4 of this Supplemental Order, delivery shall be at least ten (10) days prior to the change in structure.
Page 13 of 15
B.
Defendant Trudeau as employee or non-control person: For any business where
Defendant Trudeau is not a controlling person of a business but otherwise engages in conduct related to the subject matter of the Final Order and this Supplemental Order, Defendant Trudeau must deliver a copy of the Final Order and this Supplemental Order to all principals and managers of such business before engaging in such conduct. C. Defendant Trudeau must secure a signed and dated statement acknowledging
receipt of the Final Order and this Supplemental Order, within thirty days of delivery, from all persons receiving a copy of the Final Order and this Supplemental Order pursuant to this Part VI. VII. ACKNOWLEDGMENT OF RECEIPT OF SUPPLEMENTAL ORDER IT IS FURTHER ORDERED that Defendant Trudeau, within five (5) business days of receipt of this Supplemental Order as entered by the Court, must submit to the Commission a truthful sworn statement acknowledging receipt of this Supplemental Order.
Page 14 of 15
VIII. RETENTION OF JURISDICTION IT IS FURTHER ORDERED that this Court shall retain jurisdiction of this matter for purposes of construction, modification, and enforcement of this Supplemental Order.
IT IS SO ORDERED, this ___ day of ____________, 2009
____________________________________ UNITED STATES DISTRICT JUDGE ROBERT W. GETTLEMAN
Page 15 of 15
ATTACHMENT A THIS ESCROW AGREEMENT, made and entered into this____day of________,_____, by and between Kevin Trudeau (hereinafter Trudeau); and Federal Trade Commission, an agency of the Government of the United States of America, by and through ________________ (hereinafter FTC); and ________________ (hereinafter Escrow Agent); WITNESSETH: WHEREAS, the District Court for Northern District of Illinois entered a Supplemental Order Modifying the Stipulated Final Order For Permanent Injunction (hereinafter Supplemental Order) (attached hereto); and WHEREAS, the Supplemental Order requires that Trudeau, in connection with producing, disseminating, making, or assisting others in making any representation in an infomercial for any book, newsletter, or other informational publication, establish and fund an escrow account, under the terms and conditions specified in the Supplemental Order; NOW, WHEREFORE, in accordance with the terms of the Supplemental Order, which are incorporated herein by reference, the parties covenant and agree as follows: 1. By _______________, 20__, or by the date of entry of the Supplemental Order, whichever occurs later, Trudeau shall establish an interest-bearing Escrow Account at __________________________, to be styled Trudeau Escrow Account, ____________________, Escrow Agent. Trudeau shall deposit into the Trudeau Escrow Account the amount required by Part II of the Supplemental Order. 2. The Escrow Agent shall be the sole signatory on the Escrow Account and access to the funds held in that account shall be solely through the Escrow Agent. It is understood by the parties to this Escrow Agreement that upon signing this Agreement, Trudeau relinquishes to the Escrow Agent, all legal title to the escrow funds, except as to such amounts in the Escrow Account that are in excess of ten million dollars ($10,000,000.00). Until and unless the Escrow Account is terminated as provided for herein, Trudeau agrees to make no claim to or demand for return of the funds, directly or indirectly, through counsel or otherwise. 3. The Escrow Agent and the parties hereto agree that the escrow funds shall be held only in accordance with the terms of the Supplemental Order and the Escrow Agreement. Trudeau shall pay all costs associated with the creation, funding, operation, and administration of the Escrow Account as they become due. In the event that Trudeau fails to pay such costs as they become due, the Escrow Agent shall pay the costs from the interest earned on the escrow funds. 4. The escrow funds may be invested from time to time, to the extent possible, in United States Treasury Bills having a remaining maturity of 90 days or less or repurchase obligations secured by such United States Treasury Bills with any remainder being deposited and maintained in a money market deposit account with Escrow Agent. Escrow Agent is authorized
to liquidate in accordance with its customary procedures any portion of the escrowed funds consisting of investments to provide for payments required to be made under this Agreement. 5. The Escrow Agent, within thirty (30) days following receipt of notice that a judgment has been entered either in consequence of a court finding of a violation of Part I of the Supplemental Order or in settlement of an action by the FTC alleging a violation of Part I of the Supplemental Order, shall pay the Commission so much of the funds of the Escrow Account as is equal to the lesser of: (a) the amount of judgment ordered and which remains unsatisfied at the time notice is provided to the Escrow Agent, or (b) the amount of escrow funds. The Escrow Agent shall have the power to convert to cash so much of the Escrow Account assets as are necessary to satisfy the obligation of the judgement. 6. The Escrow Account shall continue until at least five years after Defendant Trudeau produces, disseminates, makes, or assists others in making any representations in an infomercial for any book, newsletter, or other informational publication, or any infomercial containing any such representation is aired or played on any television or radio media (including but not limited to network television, cable television, radio, and television or radio content that is disseminated on the Internet), after which time, if there is no pending FTC investigation, legal or administrative action by the FTC against Trudeau, or unsatisfied obligation pursuant to a judgement or order described in paragraph 5 herein, for which a claim could be made against the escrow funds under the terms of the Supplemental Order, the FTC shall, upon Trudeaus request, instruct the Escrow Agent to terminate the Escrow Account and return the balance of the Escrow Account to Trudeau. At such time, the Escrow Agent shall be fully and completely released from its agency as herein described. The legal title to the escrow funds shall vest in Trudeau at such time as the Escrow Agent, pursuant to instructions from the FTC, returns the funds to Trudeau. In Witness hereof, each of the parties has caused this Escrow Agreement to be executed on its behalf by its duly authorized representatives.
DATED:_______________________ ___________________________________ Kevin Trudeau ___________________________________ For the Federal Trade Commission ___________________________________ For the Escrow Agent

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Case: 1:03-cv-03904 Document #: 336 Filed: 04/16/10 Page 1 of 1 PageID #:5637

NOTIFICATION OF DOCKET ENTRY

Case: 1:03-cv-03904 Document #: 267 Filed: 11/13/09 Page 1 of 17 PageID #:3953

FEDERAL TRADE COMMISSION, Plaintiff, v. KEVIN TRUDEAU, Defendant.

Civil Action No. 03-C-3904

Case: 1:03-cv-03904 Document #: 267 Filed: 11/13/09 Page 2 of 17 PageID #:3954

Case: 1:03-cv-03904 Document #: 267 Filed: 11/13/09 Page 3 of 17 PageID #:3955

Case: 1:03-cv-03904 Document #: 267 Filed: 11/13/09 Page 4 of 17 PageID #:3956

Case: 1:03-cv-03904 Document #: 267 Filed: 11/13/09 Page 5 of 17 PageID #:3957

Case: 1:03-cv-03904 Document #: 267 Filed: 11/13/09 Page 6 of 17 PageID #:3958

Case: 1:03-cv-03904 Document #: 267 Filed: 11/13/09 Page 7 of 17 PageID #:3959

Case: 1:03-cv-03904 Document #: 267 Filed: 11/13/09 Page 8 of 17 PageID #:3960

Case: 1:03-cv-03904 Document #: 267 Filed: 11/13/09 Page 9 of 17 PageID #:3961

Case: 1:03-cv-03904 Document #: 267 Filed: 11/13/09 Page 10 of 17 PageID #:3962

Case: 1:03-cv-03904 Document #: 267 Filed: 11/13/09 Page 11 of 17 PageID #:3963

Case: 1:03-cv-03904 Document #: 267 Filed: 11/13/09 Page 12 of 17 PageID #:3964

Case: 1:03-cv-03904 Document #: 267 Filed: 11/13/09 Page 13 of 17 PageID #:3965

Case: 1:03-cv-03904 Document #: 267 Filed: 11/13/09 Page 14 of 17 PageID #:3966

Case: 1:03-cv-03904 Document #: 267 Filed: 11/13/09 Page 15 of 17 PageID #:3967

Case: 1:03-cv-03904 Document #: 267 Filed: 11/13/09 Page 16 of 17 PageID #:3968

Case: 1:03-cv-03904 Document #: 267 Filed: 11/13/09 Page 17 of 17 PageID #:3969

and enter the FTC proposed order, as attached.

Dated: November 13, 2009

Respectfully submitted, Willard Tom, General Counsel

Case: 1:03-cv-03904 Document #: 267-2 Filed: 11/13/09 Page 1 of 12 PageID #:3970

FEDERAL TRADE COMMISSION, Plaintiff, v. KEVIN TRUDEAU, Defendant.

Civil Action No. 03-C-3904

Case: 1:03-cv-03904 Document #: 267-2 Filed: 11/13/09 Page 2 of 12 PageID #:3971

Case: 1:03-cv-03904 Document #: 267-2 Filed: 11/13/09 Page 3 of 12 PageID #:3972

Case: 1:03-cv-03904 Document #: 267-2 Filed: 11/13/09 Page 4 of 12 PageID #:3973

Case: 1:03-cv-03904 Document #: 267-2 Filed: 11/13/09 Page 5 of 12 PageID #:3974

Case: 1:03-cv-03904 Document #: 267-2 Filed: 11/13/09 Page 6 of 12 PageID #:3975

Case: 1:03-cv-03904 Document #: 267-2 Filed: 11/13/09 Page 7 of 12 PageID #:3976

Case: 1:03-cv-03904 Document #: 267-2 Filed: 11/13/09 Page 8 of 12 PageID #:3977

Case: 1:03-cv-03904 Document #: 267-2 Filed: 11/13/09 Page 9 of 12 PageID #:3978

Case: 1:03-cv-03904 Document #: 267-2 Filed: 11/13/09 Page 10 of 12 PageID #:3979

Case: 1:03-cv-03904 Document #: 267-2 Filed: 11/13/09 Page 11 of 12 PageID #:3980

Case: 1:03-cv-03904 Document #: 267-2 Filed: 11/13/09 Page 12 of 12 PageID #:3981

____________________________________ UNITED STATES DISTRICT JUDGE ROBERT W. GETTLEMAN

Case: 1:03-cv-03904 Document #: 269 Filed: 11/13/09 Page 1 of 14 PageID #:3984

FEDERAL TRADE COMMISSION, Plaintiff, v. KEVIN TRUDEAU, Defendant.

Civil Action No. 03-C-3904

Case: 1:03-cv-03904 Document #: 269 Filed: 11/13/09 Page 2 of 14 PageID #:3985

FTC Exs. 2 and 3.

Case: 1:03-cv-03904 Document #: 269 Filed: 11/13/09 Page 3 of 14 PageID #:3986

Case: 1:03-cv-03904 Document #: 269 Filed: 11/13/09 Page 4 of 14 PageID #:3987

Case: 1:03-cv-03904 Document #: 269 Filed: 11/13/09 Page 5 of 14 PageID #:3988

579 F.3d at 768.

Case: 1:03-cv-03904 Document #: 269 Filed: 11/13/09 Page 6 of 14 PageID #:3989

D.187 and D.131.

Case: 1:03-cv-03904 Document #: 269 Filed: 11/13/09 Page 7 of 14 PageID #:3990

Case: 1:03-cv-03904 Document #: 269 Filed: 11/13/09 Page 8 of 14 PageID #:3991

Case: 1:03-cv-03904 Document #: 269 Filed: 11/13/09 Page 9 of 14 PageID #:3992

Case: 1:03-cv-03904 Document #: 269 Filed: 11/13/09 Page 10 of 14 PageID #:3993

Case: 1:03-cv-03904 Document #: 269 Filed: 11/13/09 Page 11 of 14 PageID #:3994

Case: 1:03-cv-03904 Document #: 269 Filed: 11/13/09 Page 12 of 14 PageID #:3995

Case: 1:03-cv-03904 Document #: 269 Filed: 11/13/09 Page 13 of 14 PageID #:3996

Case: 1:03-cv-03904 Document #: 269 Filed: 11/13/09 Page 14 of 14 PageID #:3997

Dated: November 13, 2009

Respectfully submitted, Willard Tom, General Counsel

FEDERAL TRADE COMMISSION, Plaintiff, v. KEVIN TRUDEAU, Defendant.

Civil Action No. 03-C-3904

Case: 1:03-cv-03904 Document #: 269-2 Filed: 11/13/09 Page 2 of 19 PageID #:3999

IT IS SO ORDERED, this _ day of __________, 2009