Metropolitan News-Enterprise


Monday, August 18, 2014


Page 1


Ninth Circuit Upholds Injunction Targeting Imprisoned Fraudster




The Ninth U.S. Circuit Court of Appeals Friday upheld a permanent injunction barring a former Las Vegas resident from engaging in deceptive online marketing tactics, along with an award of nearly $30 million in restitution to victims of several schemes.

Kyle Kimoto,39, claimed that all of the activities cited by the Federal Trade Commission in its complaint, filed three years ago in the U.S. District Court for the District of Nevada, occurred after he turned his business interests over to his then-wife so that he could prepare for a criminal trial resulting from earlier schemes.

Convicted on 14 counts of conspiracy, mail fraud, and wire fraud, Kimoto was sentenced to 29 years in prison. The charges involved millions of phone calls made in an effort to induce consumers with poor credit histories to sign up for a bogus credit card.

Authorities allege over 300,000 people lost $43 million in the fraud. According to Bureau of Prison records, Kimoto is currently housed at a medium-security prison in Beaumont, Texas and is due for release in 2033.

Wife Involved

Juliet Kimoto testified that her then-husband set up Vertek Group, LLC, which she ostensibly owned, with the intent that she be able to profit from the company in the event he was incarcerated. ABC News reported following Kyle Kimoto’s conviction that Juliet Kimoto—a mother of six and former winner of the Mrs. Nevada beauty pageant—settled with the FTC, agreeing not to engage in similar schemes in the future, or to accept preapproved credit card payments, and to forfeit more than $90,000 and personal assets worth over $220,000, along with all assets of her companies.

The four Vertek schemes cited by the FTC involved luring consumers to pay for help in getting free government grants, misleading claims about weight loss supplements involving acai berries, signups for supposed unsecured credit lines that actually were nothing more than an opportunity to purchase goods from an affiliated company, and a supposed opportunity to earn six-figure incomes working a few hours from home each day.

Costly Services

In each instance, the FTC said, consumers were directed to web pages where they had to sign up for services requiring continuing payments of about $40 per month in order to receive the supposed benefits of the scheme. Consumers wishing to cancel the payments were put to considerable effort, the commission said, before the FTC shut down the sites.

In largely affirming the injunction and restitution order Friday, the Ninth Circuit said there was considerable evidence that—with respect to all except the “Acai Burn Scheme”—there was sufficient evidence that Kyle Kimoto controlled Vertek and either knew what it was doing or was “recklessly indifferent” to it, thus meeting the standard for personal liability under the FTC Act, Judge Milan D. Smith Jr. wrote.

The court did, however, overturn the portion of the judgment related to the weight-loss fraud. Smith noted that the scheme was only in operation for a couple of months in 2009, after Kimoto was incarcerated, and said there was no evidence that he controlled the company or directly participated in the scheme from prison.

Judges Sidney R. Thomas and Morgan Christen joined in the opinion.

The case was argued in the Ninth Circuit by Loyola Law School students Peter Borenstein and Michael Dirscoll for Kimoto and by Theodore P. Metzler for the FTC.

The case is Federal Trade Commission v. Kimoto, 11-18023.


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