FTC targets company’s new owner for actions from 3 years before purchase

FTC Targets owner for actions done three years before purchase of company
Man Controlling Trade sculpture at the offices of the FTC.

On June 5, 2017, the Federal Trade Commission filed two actions in federal court in Salt Lake City against several businesses and individuals.  One of the lawsuits was against a company (Thrive) and its principals; the other was against a number of individuals and entities who had crossed paths with Thrive.

The FTC’s filings included proposed settlements reached with the defendants.  Thrive settled for a payment of $1.6 million.  The other defendants settled for significantly smaller sums.

“My client wants to get the word out to other Utah businesses,” said attorney Karra Porter, who represents defendant Ari Monkarsh.  “If it can happen to him, it can happen to anyone.  When he bought the assets of Thrive in August 2013, he did extensive due diligence.  He hired a well known law firm, including a former U. S. Attorney, to look into the company.

The attorney even flew to New York to evaluate vendors and other business associates.  The client had all of the company’s contracts and business methods reviewed.  He asked the State if there were any ongoing complaints.  The State said no, there had been some problems years ago, but not recently.  This was the most thorough due diligence I’ve ever seen in this type of transaction. None of that mattered to the FTC.  It still kept threatening to sue my client for something that Thrive had supposedly done years ago.”

Further FTC bullying

“This is another example of the FTC’s tactic of blackmailing businesses regardless of the merits,” Porter said.  “I do a lot of FTC work, and I see this all the time.  They threaten to sue my client for $29 million, then they settle for $200,000.  What does that tell you about their case?”

The FTC could not produce any customer complaints about her client’s business, Porter said. “I offered to provide contact information so the government could verify that customers were happy. The FTC’s response literally was, ‘We don’t really care.’  He said the FTC ‘doesn’t like the business model,’ even if it’s completely legal.”

The FTC’s investigation was shoddy, Porter said.  For example, the complaint alleged that her client “sold” business services, but all her client did was provide services that the client had contracted for from someone else.  “At one point, the FTC was demanding that the client shut down all of the clients’ websites.  How was that supposed to help consumers – all of a sudden their websites go dark?”

Porter said she repeatedly asked the FTC for proof of any actual violations by her client, but it couldn’t produce any.   “Unfortunately, economics sometimes dictates these decisions,” she said. “I had to tell my client yes, this is wrong, but that’s why you buy insurance.  Litigating against the FTC for years would take time from your other businesses.  They are also known to retaliate against family members if you don’t settle.”