News

FTC charges kiosk operators for sales tactics

April 6, 2005

WASHINGTON - According to a news release, the U.S. Federal Trade Commission has charged two groups of California-based defendants with duping hundreds of consumers into buying "Internet kiosk" business opportunities with promises of lucrative earnings. The FTC alleges that the defendants misrepresented the earnings potential of the business opportunity and misrepresented the availability and/or the profitability of locations for the machines.

One group of defendants has agreed to settle the charges and is barred from selling any business venture or franchise in the future. As part of the settlement, these defendants agreed to withdraw all claims they have to more than $1.5 million that the FBI seized from their bank accounts. The case against the other group of defendants is ongoing; the FTC is asking the court to issue a temporary restraining order to halt their illegal conduct and to freeze their assets.

FTC filed separate complaints against Edward Bevilacqua, Bikini Vending Corp., 360 Wireless Corp. and MyMart Inc. (collectively the "Bevilacqua Entities"). All have agreed to settle FTC charges. Also charged were Charles and Elizabeth Castro, Gregory High, Phillis Watson, Network Services Depot Inc., Network Marketing LLC - dba Network Services Marketing LLC - Net Depot Inc., Network Services Distribution Inc., and Sunbelt Marketing Inc. (collectively the "Castro Entities").

"Bevilacqua Entities" is located in Escondido, Calif., and "Castro Entities" is located in Brea, Calif.

According to the FTC, the defendants sold "Internet kiosk" business opportunities to consumers nationwide. Consumers learned about the business opportunity through telephone, mail, or in-person solicitations from local insurance agents and financial planners the defendants recruited and trained as sales agents.

Using promotional materials received from the defendants, the sales agents promised consumers secured profitable locations, a guaranteed monthly income generated by the kiosk usage, and annual returns of 12 percent or more. According to the FTC, more than 450 consumers purchased thousands of kiosks.

Using an interrelated series of agreements, the Castro Entities sold the Internet kiosks to consumers at prices ranging from $4,000 to $7,000 per unit, and Bevilacqua Entities agreed to install the kiosks in designated locations and manage and service the kiosks. After entering into these agreements, consumers believed they owned the Internet kiosk business opportunities at the designated locations and that the businesses would be managed by Bevilacqua Entities.

FTC alleged that the venture was like a Ponzi scam, since some first-time purchasers received monthly compensation from payments made by new purchasers, not revenue generated by the kiosks themselves, leaving the majority of buyers holding worthless interest in nonexistent kiosks.

Click here to read the full release.