FTC seeks to enforce '97 order over failure to turn over assets

Daily Record and the Kansas City Daily News-Press, Sep 24, 2008 by Donna Walter

The Federal Trade Commission wants a federal judge to jail a convicted scammer until he pays a $3.2 million fine for violating an 11-year-old injunction against making false claims while marketing training and business programs.

Richard C. Neiswonger was one of the owners of the now-defunct Asset Protection Group, which promised people they could get rich by becoming asset protection consultants. APG went out of business two years ago after the news broke that the FTC was investigating the company, according Neiswonger's lawyer, Robert McAllister, of Denver.

The day before he left the U.S. District Court in July, Judge Stephen N. Limbaugh Sr. entered a civil contempt order against Neiswonger, William S. Reed and APG for falsely claiming consumers could earn six-figure incomes by becoming asset protection consultants. Consumers paid $9,800 for training in how to market services to clients who wanted to hide assets from litigants, creditors, law enforcement and federal judges.

McAllister said consumers were mostly satisfied with APG. "No one is before the court complaining they should get a refund," he said, noting the business had thousands of clients in the eight years it was open. Whenever consumers complained to the company, APG resolved them with full or partial refunds, he said.

Neiswonger, Reed and APG appealed the July order to the 8th U.S. Circuit Court of Appeals and filed a motion to stay the district court proceedings. McAllister said the appeal is based on the fact that Limbaugh issued the order without holding a hearing.

On Friday, the FTC filed a motion asking Judge Stephen N. Limbaugh Jr., who is overseeing the case now, to issue an order directing Neiswonger to show why he shouldn't be held in contempt for ignoring the elder Limbaugh's civil contempt order. The FTC said in the filing that Neiswonger should be put in jail until he complies with the order.

The pending motion to stay the proceedings doesn't divest the court of the authority to enforce the July order, said Melinda Claybaugh, an attorney with the FTC in Washington, D.C. She also said Neiswonger had a full opportunity to be heard before the judge issued his July order.

According to that order, Neiswonger is to pay a $3.2 million judgment. If he failed to pay the full amount within 10 days, he was to turn over certain assets to the FTC and the court-appointed receiver. Those assets include a $600,000 retirement account and a Las Vegas mansion he bought in 2005 for $1.8 million, according to the FTC's motion.

"Neiswonger is unlikely to comply without substantial coercion, as demonstrated by his prior history of ignoring this Court's orders and his failure to pay any portion of the contempt judgment," the FTC argued in the filing. "Therefore, fines are likely to be ineffective and Neiswonger should be subject to imprisonment in order to coerce his compliance."

The motion doesn't seek a civil contempt order against Reed, even though he, too, hasn't complied with the July order. "The FTC retains the discretion to pursue all available legal remedies against Mr. Reed in the future," Claybaugh said.

In the July order, Reed and APG were found to be jointly and severally liable for $5.7 million. Reed's lawyer, Leonard Frankel, of Frankel, Rubin, Bond, Dubin, Siegel & Klein in Clayton, didn't return a call seeking comment.

The FTC said in Friday's motion that 94 percent of the consumers didn't even earn back the money they paid for their training. Neiswonger and Reed earned more than $19 million, the FTC said in the filing.

McAllister said the evidence shows that many people made "substantial profits." Those who didn't make a lot of money didn't do what it takes to succeed, he said. "It is a business opportunity, and when people get into it they are provided with materials, and ... it's up to them to sell it," he said.

The FTC leveled charges of deceptive business practices against Neiswonger about 11 years ago. In 1997, Neiswonger settled with the FTC, agreeing to a permanent injunction that would bar him from such activity. In 1998, he pleaded guilty to federal charges of wire fraud and money laundering related to his earlier business activity. Judge Rodney Sippel sentenced him to 18 months in federal prison and ordered him to pay $2.75 million in restitution. In all, Neiswonger paid about $4 million to the government for his earlier dishonesty, the FTC said in a court filing.

Neiswonger and Reed incorporated APG in 1998, a few months before Neiswonger entered federal prison.