The Ninth Circuit Court of Appeals has ruled that a man under Federal Trade Commission (FTC) scrutiny for more than a decade for fraudulent business practices did not directly participate in the online marketing of Acai berries and thus partially reversed a district court grant of summary judgment to the FTC as to the “Acai Total Burn Scheme.” FTC v. Kimoto, No. 11-18023 (9th Cir., decided August 15, 2014). According to the court, while Kyle Kimoto allegedly controlled the company that set up a number of schemes for which he was responsible, including lines of credit, government grant connections and work-from-home enterprises, due to his incarceration when the Acai Total Burn Scheme was planned and launched, the evidence to support his personal involvement in it in violation of the FTC Act was lacking.
The schemes were all the same and allegedly involved false testimonials, hidden “upsells” for additional programs with “free trial” periods and recurring monthly charges that were “exceedingly difficult” to cancel, because the company needlessly transferred “customers to different websites or phone numbers, even though all of the calls ended up in the same service center.” By the time FTC shut down each scheme, the vast majority of subscribers, “after considerable effort on their parts,” had cancelled the subscriptions.
Upholding the lower court’s findings as to the defendant’s involvement in the other schemes, the court rejected his argument that individuals cannot be held liable under the Electronic Fund Transfer Act and also ruled that the injunction imposed was appropriately tailored to his bad acts. In this regard, the court stated, “Kimoto has also consistently engaged in variations on the same deceptive marketing scheme, which in its latest iteration alone, has defrauded consumers of more than $29 million. As the record reveals, the common elements employed in each of the frauds concocted by Kimoto [are] easily transferable both to new product lines and to new modes of communication with consumers.”