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09/12/2018

Court to FTC: Effort to freeze assets goes too far

In the ongoing Cupo case (FTC v. Vylah Tec LLC), Court denies FTC’s motion to re-freeze CoA Institute’s clients’ assets, including a house and personal bank accounts

Washington, D.C. Cause of Action Institute (CoA) successfully defeated the Federal Trade Commission’s (FTC) efforts to re-freeze some personal assets of CoA client Dennis Cupo and marital assets of Robert Cupo. The assets were frozen at the outset of the case, but upon appeal, the 11th Circuit Court of Appeals unfroze the assets and remanded the case back to the District Court. Judge Sheri Polster Chappell’s order, published yesterday evening, is a major victory for the defendants, especially Dennis Cupo – the Court agreed with CoA’s argument that the Government failed to tie Dennis Cupo’s personal assets to any of the allegations. Much of the case, FTC v. Vylah Tec LLC, centers on the FTC’s aggressive action, including seizing the now-freed assets, securing a temporary restraining order in secret, and using aggressive policing tactics – such as raiding the defendant’s office with armed police officers.

“Yesterday’s ruling and this case are broader than a simple enforcement action by the FTC – it’s about an agency that routinely exceeds its authority to crack down on businesses with aggressive tactics that are meant to scare, intimidate, and bully companies and individual entrepreneurs,” said John Vecchione, president and CEO of Cause of Action Institute. “The Court’s opinion makes clear that the FTC cannot charge Americans with wrongdoing and seize assets, while failing to prove a defendant’s connection to the case or justify the asset seizure. This is a significant victory for the defendants and an important victory in our effort to curb the FTC’s abuse of power.”

Importantly, the Court found that the Government has failed to produce any evidence of wrongdoing about one of the named defendants, Dennis Cupo.  As the Court said, “For one thing, it only works if Dennis is a ‘wrongdoer.’ The evidence above clearly suggests otherwise.”

The case involves a small family-run tech support company, Vylah Tec, LLC (“V-Tec”). After obtaining a secret court order, the Federal Trade Commission targeted the company and conducted an hours-long raid of the company’s headquarters on suspicion of “deceptive” sales practices. The raid was initiated as part of a politically-hyped campaign known as Operation Tech Trap headed by the FTC in conjunction with the Florida Attorney General’s office. Despite the hostile raid and seizure of all computers and records, FTC investigators were unable to produce evidence tying any alleged improper conduct to the unfrozen assets, or wrongdoing of any kind to Dennis Cupo.

Not only did the FTC demand a freeze of assets of the defendants, but they also went so far as to demand a freeze of the jointly held marital assets of the wife of one of the defendants. After the 11th Circuit Court of Appeals reversed this freeze – the FTC filed a new motion to recapture the same personal assets without the evidence needed in equity. Judge Chappell strongly rebuked the motion.

“The FTC often lives in a world of its own reality and tries to summarily dictate the law to businesses,” Vecchione added. “In these cases, the FTC plays with a stacked deck as they are granted a much lower bar to proving wrongdoing or seizing assets. The Court found that the FTC did not meet even the lower standard. The Court’s order means a Florida couple can proceed with their lives without a Government threat to leave them homeless, and we hope will lead to Mr. Dennis Cupo being dismissed from the case. We are gratified by this ruling, denying the FTC’s lawless effort to seize assets without following the process every American is due.”

The case highlights much-needed reform in the FTC due to its aggressive, overbearing, and unfair enforcement process. Cause of Action Institute recently filed more than 15 pages of recommended changes that can read here.

About Cause of Action Institute

Cause of Action Institute is a 501(c)(3) non-profit working to enhance individual and economic liberty by limiting the power of the administrative state to make decisions that are contrary to freedom and prosperity by advocating for a transparent and accountable government free from abuse.

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03/26/2018

FTC Raids Small Business and then Obscures Participation in the Raid

Update: On Thursday, March 29, 2018, after clarifying that there was no legal impediment to its production, CoA Institute received from the FMPD the unredacted body cam footage showing the raid on Vylah Tec’s offices.

On May 3, 2017, the Federal Trade Commission (“FTC”) raided a small family-run tech support company, Vylah Tec, LLC (“V-Tec”), on suspicion of “deceptive” sales practices. The hours-long raid was initiated as part of a politically-hyped campaign known as Operation Tech Trap headed by the FTC in conjunction with the Florida Attorney General’s office. The FTC’s sting-like raid, assisted by local police, included hands-in-the air orders, temporary confiscation of employee cell phones, and police-escorted bathroom breaks.

On January 4, 2018, Cause of Action Institute (“CoA Institute”), under Florida’s “Sunshine Law,” requested from the Fort Myers Police Department access to the body camera recordings taken by officers participating in the raid at V-Tec’s headquarters. In the request, CoA Institute specifically  stated that any denial of access to the requested records should be accompanied by an identification of the statutory exemption relied upon.

On March 15, 2018, two body cam recordings were produced to CoA Institute. Despite the multi-hour duration of the raid, the recordings were brief: ten minutes and eighteen minutes. The recordings showed Fort Myers police officers entering V-Tec’s offices, ordering V-Tec employees to put their hands in the air, and shepherding the employees into a small office vestibule where the employees were told they were being held until they were interviewed by unidentified people who had not yet arrived.

Curiously, although the police officers and the employees were clearly visible on the recording, several minutes into the recording, when other people entered the scene, the view immediately became obscured. Even more curiously, at times only a portion of the view is obscured so that the image of the employees is still clear, but people on the other side of the room cannot be seen – such as in the image below.

CoA Institute reached out the Fort Myers Police Department, seeking an explanation of what appeared to be redacted footage. In response, the FMPD confirmed that the footage had been redacted because they could not release the “agency” portion of the video. The Florida Sunshine law is very broad and does not include an exception to its broad disclosure requirements for images of agency personnel operating in their official capacity. It thus appears that the FMPD was instructed to deny access to body cam footage that shows the participation of those entities in the raid of V-Tec’s offices.

On March 16, 2018, CoA Institute requested that the FMPD “state in writing and with particularity the reasons for the conclusion that the record is exempt or confidential’ as required by Fla. Stat. § 119.07(1)(f)” because CoA Institute believes that the FMPD’s refusal to release an unredacted version of the footage to be improper.

Cynthia Crawford is senior counsel at Cause of Action Institute

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10/3/2017

The FTC Raided My Office, Found Nothing, And Is Destroying My Business Anyway

The FTC Raided My Office, Found Nothing, And Is Destroying My Business Anyway

ROBERT CUPO

Without due process or conviction in a court of law, the government is destroying my family’s business.

In early May, federal investigators raided my small tech-support company, Vylah Tec LLC, d/b/a “V-Tec,” on suspicion of “deceptive” sales practices. The raid was part of a politically hyped campaign by the Federal Trade Commission with the Florida Attorney General’s office, dubbed Operation Tech Trap, to “crack down on tech-support scams.” The problem: My business is not a scam.

Read the full article at Investor’s Business Daily.

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08/9/2017

FTC Destroying Family-Run Tech Support Business Without Evidence of Wrongdoing or Due Process

Washington, D.C. – Cause of Action Institute (“CoA Institute”) is stepping in to defend a small family-run tech support company, Vylah Tec, LLC (“V-Tec”), after the Federal Trade Commission (“FTC”) targeted the company and conducted an hours-long raid of the company’s headquarters on suspicion of “deceptive” sales practices. The raid was initiated as part of a politically-hyped campaign known as Operation Tech Trap headed by the FTC in conjunction with the Florida Attorney General’s office.

V-Tec is a small start-up owned by Robert Cupo that operates out of a single office in Fort Myers, Florida, and provides tech support to customers who buy electronic devices from the Home Shopping Network and other shopping channels. Individuals who purchase electronic devices such as laptops, printers and tablets are provided pre-paid tech support with their purchase. On top of its tech support operation, V-Tec also generates revenue from selling third-party antivirus and other data security software to customers who want additional security on their devices.

The FTC’s sting-like raid, assisted by local police, included hands-in-the air orders, the temporary confiscation of employee cell phones, and police-escorted bathroom breaks. One mother was told she could not leave to pick up her kids from daycare and police officers would use her phone to call and tell them she had been detained for questioning. Despite the hostile raid, FTC investigators were apparently unable to uncover any concrete evidence of wrongdoing by the company.

Nevertheless, a Florida District Court judge was sufficiently convinced by FTC lawyers to grant the government a preliminary injunctive order against V-Tec. This punitive process includes turning the company’s operation over to a third-party receiver and freezing the assets of the Cupo family members. CoA Institute has filed a motion to stay the District Court’s order.

CoA Institute Senior Counsel Cynthia Crawford: “When the government puts a company in its crosshairs, the process becomes the penalty. In this case, the court’s decision to allow an injunctive order is akin to using a sledgehammer to swat a fly. Freezing assets and turning the business over to a receiver is steadily draining V-Tec’s finances and destroying its reputation. Meanwhile the court’s action is harming the thousands of customers who are not receiving the support they paid for. We urge the court to reevaluate the flawed evidence FTC presented and stay this destructive order so that the Cupo family can have their day in court before the company is destroyed.”

In court, the FTC argued that V-Tec’s sales pitches for the software are deceptive, citing two examples of recorded calls. However, the FTC clearly mischaracterized its evidence and failed to support accusations fundamental to FTC’s case. Much of the evidence presented is either incomplete or incorrect. For example, the government in open court, played a portion of a tech support call that they wrongly alleged as deceptive “upselling.” What the government omitted, however, was that the technical support representative stayed on the phone after the customer declined to purchase additional software and addressed the caller’s problem.

A second transcript the FTC submitted in court mislabeled the so-called guilty party as a V-Tec employee, when in fact the person trying to harm the consumer did not actually work for V-Tec. A brief investigation of the call and the surrounding context would have made that clear. A V-Tec support representative actually protected the consumer in that instance, disconnecting the other individual from the call and disabling his remote access to the caller’s computer.

Instead of protecting consumers, the court’s injunction order is causing the most significant consumer harm. Since May 3, 2017, V-Tec has failed to answer over 100,000 customer calls. Many of these are likely customers with lifetime service contracts who, instead of receiving the product they paid for, are stuck in a never-ending hold loop. The order also froze assets of individuals with no actual stake in V-Tec. These individuals cannot access their savings and are struggling to pay for basic life expenses, or in one case, access funds of a wholly unrelated business.

The full motion for stay is available here.

For information regarding this press release, please contact Zachary Kurz, Director of Communications: zachary.kurz@causeofaction.org

 

 

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