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UNITED STATES DISTRICT COURT
DISTRICT OF NEVADA

FEDERAL TRADE COMMISSION,  
Plaintiff
v.

 

 
SEASILVER USA, INC.,
AMERICALOE, INC, BELA BERKES,
JASON BERKES, BRETT
RADEMACHER, individually and d/b/a
Netmark International and Netmark Pro,
and DAVID R. FRIEDMAN, D.C.
Defendants

 

CV-S-03-0676--RLH(LRL)

 

STIPULATED PRELIMINARY
INJUNCTION WITH ASSET
FREEZE AND OTHER
EQUITABLE RELIEF

WHEREAS Plaintiff Federal Trade Commission, pursuant to Section 13(b) of the Federal Trade Commission Act ("FTC Act"), § 15 U.S.C. 53(b), filed a complaint for a permanent injunction and other relief in this matter, and applied ex parte for a temporary restraining order with asset freeze, order appointing temporary receiver, and order to show cause why a preliminary injunction should not issue ("TRO");

WHEREAS, the Court granted a TRO on June 13, 2003, setting a preliminary injunction hearing date of June 26, 2003, which was continued by stipulation of the parties until July 10, 2003;

WHEREAS, Defendants have received service of the Complaint, Summons, and TRO;

NOW, THEREFORE, Plaintiff and Defendants hereby stipulate to entry of a preliminary injunction with the following findings of fact and order:

FINDINGS

1. This Court has jurisdiction over the subject matter of this case and jurisdiction over all parties, and venue in this district is proper;

2. Weighing the equities and considering Plaintiff's likelihood of ultimate success, a preliminary injunction with asset freeze, appointment of a receiver and other equitable relief is in the public interest;

3. Defendants have not admitted liability as to the charges in the Complaint, and their consent to entry of this preliminary injunction, including by providing purchasers with information as required herein and by the finding that the relief agreed to herein is in the public interest, shall not be interpreted to constitute an admission by any of them that they have engaged in violations of any law or regulations; and

4. No security is required of any agency of the United States for issuance of a preliminary injunction. Fed. R. Civ. P. 65(c).

ORDER

DEFINITIONS

For the purposes of this Order, the following definitions shall apply:

1. "Advertising" means any written or verbal statement, illustration or depiction that is designed to effect a sale or create interest in the purchasing of goods or services, whether it appears in a brochure, newspaper, magazine, pamphlet, leaflet, circular, mailer, book insert, free standing insert, letter, catalogue, poster, chart, billboard, public transit card, point of purchase display, packaging, package insert, label, film, slide, radio, television or cable television, audio program transmitted over a telephone system, program-length commercial ("infomercial"), Internet, or in any other medium;

2. "Assets" means any legal or equitable interest in, right to, or claim to, any real and personal property, including, but not limited to, chattels, goods, instruments, equipment, fixtures, general intangibles, effects, leaseholds, mail or other deliveries, inventory, checks, notes, accounts, credits, receivables (as those terms are defined in the Uniform Commercial Code), contracts, shares of stock, and all cash, wherever located; 3. "Continuity program" means any plan, arrangement, or system pursuant to which a consumer receives periodic shipments of target products without prior notification by the seller before each shipment or service period, regardless of any trial or approval period allowing the consumer to return or be reimbursed for the product.

4. "Defendants" means Seasilver USA, Inc., Americaloe, Inc., Bela Berkes, Jason Berkes, Brett Rademacher, and David R. Friedman, D.C., and each of them, and any entity through which they do business, including, but not limited to, Netmark International and NetmarkPro;

5. "Receivership Defendants" means, collectively, Seasilver USA, Inc., and Americaloe, Inc., and their respective subsidiaries, divisions, affiliates, successors, and assigns; and "Receivership Defendant" means either of the Receivership Defendants;

6. "Target product" means any food, drug, or device within the meaning of Section 12 of the FTC Act, 45 U.S.C. § 52, or any dietary supplement, including, but not limited to Seasilver, however formulated, or any product containing aloe vera, phytosilver, sea vegetables, or the herb Pau D'Arco that is manufactured or distributed by, or on behalf of, any of the Defendants herein; and

7. The terms "and" and "or" in this Order shall be construed conjunctively or disjunctively as necessary, to make the applicable sentence or phrase inclusive rather than exclusive.

I. PROHIBITED BUSINESS ACTIVITIES

IT IS HEREBY ORDERED that Defendants and their officers, directors, agents, servants, employees, salespersons, distributors, corporations, subsidiaries, affiliates, successors, assigns, and those persons or entities in active concert or participation with them who receive actual notice of this Order by personal service, facsimile, or otherwise are hereby enjoined from making, or assisting others in making, expressly or by implication, including through the use of endorsements, any false or misleading oral or written statement or representation in connection with the advertising, marketing, promotion, offer for sale, distribution, or sale of any target product, including, but not limited to:

A. Misrepresenting that any target product, or any ingredients or aspects of a target product, cures or treats cancer;

B. Misrepresenting that any target product, or any ingredients or aspects of a target product, enables nine out of ten diabetes patients to completely stop their insulin medication;

C. Misrepresenting that any target product, or any ingredients or aspects of a target product, causes rapid, substantial, and permanent weight loss without dieting;

D. Misrepresenting that any target product, or any ingredients or aspects of a target product, is clinically or scientifically proven to be effective in treating or curing over 650 diseases, including cancer and AIDS;

E. Misrepresenting that any target product, or any ingredients or aspects of a target product, is clinically or scientifically proven to be effective in treating or curing typhoid and anthrax;

F. Misrepresenting that any target product, or any ingredients or aspects of a target product, is clinically or scientifically proven to be non-toxic;

G. Misrepresenting the ingredients of any target product; and

H. Making any representation about the health benefits, efficacy, or safety of any target product, or the performance of the product as it relates to health benefits, efficacy or safety of any target product or any ingredients or aspects of a target product, unless, at the time of making such representation, Defendants possess and rely upon competent and reliable scientific evidence that substantiates the representation. For purposes of this provision, "Competent and reliable scientific evidence" shall mean tests, analyses, research, studies, or other evidence based on the expertise of professionals in the relevant area, that have been conducted and evaluated in an objective manner by persons qualified to do so, using procedures generally accepted in the profession to yield accurate and reliable results.

For the purposes of this Paragraph, the term "endorsement" shall mean as defined in 16 C.F.R. § 255.0(b).

II. PACKAGING AND LABELING RECALL AND DISTRIBUTION

A. IT IS FURTHER ORDERED that Defendants shall immediately recall from any person, partnership, corporation, or other entity that is offering for sale, selling, or distributing to consumers, all packaging and labeling, including all descriptive materials such as product brochures, for the target products containing, expressly or by implication, any representations prohibited in Paragraph I above. Provided, however, that in lieu of a recall, Defendants may immediately repackage and relabel all offending packages and labels, including all descriptive materials such as product brochures, of the target products in such a manner as to ensure that no representations prohibited by this Order are disseminated.

B. IT IS FURTHER ORDERED that Defendants may not sell or distribute Seasilver, however formulated, or any product containing aloe vera, phyto-silver, sea vegetables, or the herb Pau D'Arco, to any purchaser, including pursuant to a continuity program, unless Defendants have complied with all of the following conditions:

1. Defendants have provided the purchaser with a clear and prominent notice, consisting of the following verbatim statement (herein "Notice"):

"Previously, Seasilver has claimed that its product can cure cancer, diabetes, and a host of other serious diseases and conditions, and that it results in significant and permanent weight loss without dieting. No clinical studies support these claims. In fact, medical experts state that these claims are highly implausible and likely false. If you are under a physician's care, it is very important that you not discontinue or reduce any prescription medication without consulting your physician.

In addition, at one time Seasilver claimed that its product provided the health benefits of natural cranberries, although it contained no natural cranberry. Rather Seasilver contained artificial cranberry flavoring."

2. Defendants have obtained a signed, written confirmation from the purchaser acknowledging the purchaser's receipt of the Notice and desire to complete the transaction [herein "Confirmation"]; provided, however, in lieu of this procedure, the Defendants may employ any other alternative means as agreed to, in writing, by representatives of the Commission that provides a verifiable record that the purchaser received the Notice; and

3. With regard to sales or distributions to any purchaser who purchases Seasilver for resale, Defendants have obtained from such purchaser a written agreement that the purchaser will (a) provide the above-referenced Notice to consumers prior to the sale, including distribution pursuant to a continuity program, of Seasilver, (b) obtain a Confirmation from the consumer, and (c) forward such Confirmation to Defendants.

Provided further that Defendants and their agents shall not, directly or indirectly, make any oral or written statement contrary to, inconsistent with, or in mitigation of the statement quoted above.

Provided further that "clear and prominent" shall mean: In the event the Notice is provided in written form (in paper or electronic form), the statement contained therein must be in a type size and location sufficiently noticeable for an ordinary consumer to read and comprehend it, in print that contrasts with the background against which it appears. No other text unrelated to the Notice may appear on the printed or electronic page on which the statement appears. If the Notice is provided via mail, e-mail, or facsimile, no other materials unrelated to the Notice, except an order form or order cancellation instructions, may be included with or accompany the Notice. In the event the Notice is provided by audio means, the statement quoted above must be delivered in a volume and cadence sufficient for an ordinary consumer to hear and comprehend it. The audio recording must contain nothing other than the above-quoted statement, except for instructions concerning placing or cancelling an order.

III. MONITORING

The Receivership Defendants are hereby enjoined from:

A. Failing to institute a reasonable program of surveillance adequate to reveal whether any of the Receivership Defendants' officers, directors, agents, employees, salespersons, associates, or distributors are disseminating advertisements or promotional materials that contain any representation that is prohibited by Sections I and II of this order about any target product manufactured by or purchased from the Receivership Defendants.

B. Failing to terminate all sales of any target product and payments or other compensation to any officer, director, agent, employee, salesperson, associate, or distributor who is engaged in disseminating advertisements or promotional materials that contain any representation that is prohibited by Sections I and II of this order about any target product manufactured by or purchased from one or more of the Defendants, as soon as the Receivership Defendants know or should know that such person is or has been engaged in such prohibited conduct.

For purposes of this Section, "distributor" shall mean any purchaser, or other transferee, or promoter of any target product manufactured by or purchased from one or more of the Defendants, with or without valuable consideration, and who sells or promotes, or who has sold or promoted, such product or service to other sellers or to consumers.

IV. ASSET FREEZE

IT IS FURTHER ORDERED that Defendants and their officers, directors, agents, servants, employees, salespersons, distributors, corporations, subsidiaries, affiliates, successors, assigns, and those persons or entities in active concert or participation with them who receive actual notice of this Order by personal service, facsimile, or otherwise, are hereby preliminarily enjoined from:

A. Selling, liquidating, assigning, transferring, converting, loaning, encumbering, pledging, concealing, dissipating, spending, withdrawing, or otherwise disposing of any funds, real or personal property, or other assets or any interest therein, wherever located, including any assets outside the territorial United States, that are:

1. in the actual or constructive possession of any Defendant; or

2. owned or controlled by, or held, in whole or in part for the benefit of, or subject to access by, or belonging to, any Defendant; or

3. in the actual or constructive possession of, or owned or controlled by, or subject to access by, or belong to, any corporation, partnership, trust, or other entity directly or indirectly under the control of any Defendant;

B. Opening or causing to be opened any safe deposit boxes titled in the name of any Defendant, or subject to access by any Defendant;

C. Incurring charges or cash advances on any credit or debit card issued in the name, singly or jointly, of any Defendant, or any corporation, partnership, or other entity directly or indirectly owned, managed, or controlled by any Defendant; and

D. Failing to disclose to the Commission, immediately upon service of this Order, information that fully identifies each asset of any Defendant, and each entity holding such asset, including, but not limited to, the entity's name, address, and telephone number, the number of the account, and the name under which the account is held unless such asset or assets have either been previously disclosed to or discovered by the Temporary Receiver appointed by this Court under the TRO or previously disclosed to or discovered by the Commission.

Provided, however, that the freeze imposed in this Paragraph shall not be construed to apply to assets that Defendants Bela Berkes, Jason Berkes, Brett Rademacher, and David R. Friedman acquire following service of this Order.

Provided further that, pending further order of the Court, Defendants Bela Berkes, Jason Berkes, Brett Rademacher, and David R. Friedman shall each be allowed to spend up to, but no more than, $250 per day of previously acquired assets for living expenses out of a personal account which has been identified to the Commission.

V. RETENTION OF ASSETS BY THIRD PARTIES

IT IS FURTHER ORDERED that, pending further order of this Court, any bank, savings and loan, financial or brokerage institution, fund, escrow agent, trustee, mail receipt facility, or other person or entity served with a copy of this Order, or who otherwise has actual knowledge of this Order, that has possession, custody, or control of any account, asset, safe deposit box, or document held on behalf of, or relating or belonging to Seasilver USA, Inc., Americaloe, Inc., Bela Berkes, Jason Berkes, Brett Rademacher, Netmark International, NetmarkPro, or David R. Friedman, D.C., subject to the Section IV Asset Freeze shall:

A. Continue to hold and retain within such entity's or person's control, and prohibit the withdrawal, removal, assignment, transfer, pledge, hypothecation, encumbrance, disbursement, dissipation, conversion, sale, liquidation, or other disposal of any funds, documents, property, or other assets held by or under such entity's or person's control:

1. on behalf of, or for the benefit of, any Defendant;

2. in any account maintained in the name of, or subject to withdrawal by, any Defendant; or

3. that are subject to access or use by, or under the signatory power of, any Defendant.

B. Continue to deny access to any safe deposit boxes that are:

1. titled in the name, individually or jointly, of any Defendant; or

2. subject to access by any Defendant;

3. Provided, however, that the Receiver may have access to any safe deposit box titled in the name of Seasilver USA, Inc., or Americaloe, Inc., or subject to access by agents of Seasilver USA, Inc., or Americaloe, Inc.;

C. To the extent not previously provided, provide to counsel for the Commission and to the Receiver, within three (3) days, a statement setting forth:

1. the identification of each account or asset titled in the name, individually or jointly, or held on behalf of, or for the benefit of, any Defendant, whether in whole or in part;

2. the balance of each such account, or a description of the nature and value of such asset;

3. the identification of any safe deposit box that is either titled in the name of, individually or jointly, or is otherwise subject to access or control by, any Defendant, whether in whole or in part; and

4. for any account, safe deposit box, or other asset that has been closed or removed within one year from the date of entry of this Order, the date closed or removed and the balance on said date; and

D. Upon request by the Commission or by the Receiver, promptly provide the Commission or the Receiver with copies of all records or other documentation pertaining to such account, asset, or safe deposit box, including, but not limited to, originals or copies of account applications, account statements, signature cards, checks, drafts, deposit tickets, transfers to and from the accounts, all other debit and credit instruments or slips, currency transaction reports, 1099 forms, and safe deposit box logs.

The accounts subject to this Paragraph include assets existing as of June 16, 2003. This Paragraph shall not prohibit transfers or withdrawals in accordance with any provision of this Order, authorized in writing by counsel for the Commission, by the Receiver, or by further order of the Court.

VI. PRESERVATION OF RECORDS AND OTHER EVIDENCE

IT IS FURTHER ORDERED that Defendants, and their officers, directors, agents, servants, employees, salespersons, distributors, corporations, subsidiaries, affiliates, successors, assigns, and those persons or entities in active concert or participation with them who receive actual notice of this Order by personal service, facsimile, or otherwise, are hereby enjoined from:

A. Destroying, erasing, mutilating, concealing, altering, transferring or otherwise disposing of, in any manner, directly or indirectly, contracts, agreements, customer files, customer lists, customer addresses and telephone numbers, correspondence, advertisements, brochures, sales material, training material, sales presentations, documents evidencing or referring to Defendants' target products, data, computer tapes, disks, or other computerized records, books, written or printed records, handwritten notes, telephone logs, "verification" or "compliance" tapes or other audio or video tape recordings, receipt books, invoices, postal receipts, ledgers, personal and business canceled checks and check registers, bank statements, appointment books, copies of federal, state or local business or personal income or property tax returns, and other documents or records of any kind, including electronically-stored materials, that relate to the business practices or business or personal finances of any Defendant or other entity directly or indirectly under the control of any Defendant; and

B. Failing to create and maintain books, records, and accounts which, in reasonable detail, accurately, fairly, and completely reflect the incomes, assets, disbursements, transactions, and use of monies by any Defendant or other entity directly or indirectly under the control of any Defendant.

Provided, however, that Seasilver product, the Seasilver brochure "The Leader in Foundational Health," and the Seasilver booklet "Journey into the World of Foundational Health," may be destroyed under the supervision of the Receiver in accordance with or consistent with the requirement of any Consent Decree of Condemnation and Injunction entered into with the United States Food and Drug Administration so long as the Commission is provided with the opportunity to obtain examples of such product and labeling prior to its destruction.

VII. ACCOUNTING PROVISIONS

IT IS FURTHER ORDERED that, within five (5) business days after service of this Order:

A. Defendants Brett Rademacher and David R. Friedman, D.C., and each of them, and any entity through which they do business, other than the Receivership Defendants, shall serve on counsel for the Commission and on the Receiver a detailed accounting of:

1. all gross revenues obtained from the sale, either directly or through distributors, of all such target products from inception of sales through the date of the entry of this Order;

2. all net profits obtained from the sale, either directly or through distributors, of all such target products from inception of sales through the date of the entry of this Order; and

3. the total amount of all such target products sold;

B. Defendants Bela Berkes and Jason Berkes shall provide the Commission with a statement, in as much detail as possible, of the names and amounts of all ingredients that have been used in the manufacture of Seasilver since January 1, 2001, including the timeframes during which such ingredients were used, and the names and amounts of all ingredients that may be used in any new formulation of Seasilver;

C. Defendants Bela Berkes, Jason Berkes, Brett Rademacher, and David R. Friedman, D.C., and each of them, and any entity through which they do business, other than the Receivership Defendants, shall prepare and provide to the Commission complete and accurate individual or corporate financial statements, as applicable, signed under penalty of perjury, in the form which the Commission has provided;

D. Defendants Bela Berkes, Jason Berkes, Brett Rademacher, and David R. Friedman, D.C., and each of them, and any entity through which they do business, excluding the Receivership Defendants, shall further provide the Commission with statements, verified under oath, of all transfers and assignments of assets and property worth $2,000 or more since January 1, 2002, that shall include the amount or value transferred or assigned, the name of the transferee or assignee, the address of the transferee or assignee upon request of Commission counsel, the date of the transfer or assignment, and the type and amount of consideration paid to any Defendant in return;

E. Defendants Bela Berkes, Jason Berkes, Brett Rademacher, and David R. Friedman, D.C., and each of them, and any entity through which they do business, excluding the Receivership Defendants, shall provide the Commission with an accounting of all assets released by agreement of Commission counsel;

F. Defendants Bela Berkes, Jason Berkes, Brett Rademacher, and David R. Friedman, D.C., and each of them, and any entity through which they do business, other than the Receivership Defendants, shall provide the Commission with a statement of all payments, made directly or indirectly, in any form whatsoever, to them by the Receivership Defendants since January 1, 2001; and

G. Each Defendant shall provide the Commission, and the Receiver with respect to the Receivership Defendants, with access to records and documents pertaining to assets of such Defendant that are held by financial institutions outside the territory of the United States, by signing a document entitled "Consent to Release of Financial Records,"in the form the Commission has provided.

VIII. REPATRIATION OF ASSETS

IT IS FURTHER ORDERED that within five (5) business days following service of this Order, all Defendants shall:

A. Repatriate to the United States all funds, documents, or assets in foreign countries held, jointly or singly, either by, for the benefit of, or under the direct or indirect control of any Defendant;

B. On the same business day as any repatriation under Subparagraph A above,

1. notify the Commission and the Receiver of the name and location of the financial institution or other entity that is the recipient of such funds, documents, or assets; and

2. serve this Order on any such financial institution or other entity;

C. Provide the Commission and the Receiver with a full accounting of all funds, documents, and assets outside of the territory of the United States held, jointly or singly, either by, for the benefit of, or under the direct or indirect control of any Defendant; and

D. Hold and retain all repatriated funds, documents, and assets and prevent any transfer, disposition, or dissipation whatsoever of any such assets or funds.

IX. NOTIFICATION OF BUSINESS ACTIVITIES

IT IS FURTHER ORDERED that Defendants Bela Berkes, Jason Berkes, Brett Rademacher, and David R. Friedman are hereby restrained and enjoined from creating, operating, or exercising any control over any business entity involved in the sale, manufacture, or promotion of any health-related product or service, including any partnership, limited partnership, joint venture, sole proprietorship, or corporation, without first providing counsel for the Commission with a written statement disclosing the following: (1) the name of the business entity; (2) the address and telephone number of the business entity; (3) the names of the business entity's officers, directors, principals, managers, and employees; and (4) a detailed description of the business entity's intended activities.

IT IS FURTHER ORDERED that Defendants Bela Berkes, Jason Berkes, Brett Rademacher, and David R. Friedman shall notify the Commission at least seven (7) days prior to any affiliation with any new or previously inactive business or employment. Each notice shall include the applicable Defendant's new business address and a statement of the nature of the new business or employment and of his duties and responsibilities in connection with that business or employment.

X. APPOINTMENT OF RECEIVER

IT IS FURTHER ORDERED that Thomas W. McNamara is hereby appointed Receiver, with the full power of an equity receiver, for the Receivership Defendants. The Receiver shall be the agent of this Court and solely the agent of this Court in acting as receiver under this Order. The Receiver shall be accountable directly to this Court. The Receiver shall comply with all Local Rules of this Court governing receivers. The Receiver has the directions and authority to:

A. Continue and conduct the business of the Receivership Defendants in such manner, to such extent, and for such duration as the Receiver may in good faith deem to be necessary or appropriate to operate the business profitably and lawfully, if at all; provided, however, that the continuation and conduct of the business shall be conditioned upon the Receiver's good faith determination that the businesses can be lawfully operated at a profit using the assets of the receivership estate;

B. Continue to exercise full control over the Receivership Defendants and all power of the Receivership Defendants' directors, officers, and managers, and remove any officer, independent contractor, employee, attorney, or agent of the Receivership Defendants, from control or management of, or participation in, the affairs of the Receivership Defendants as the Receiver deems necessary and advisable, and to allow those of the Receivership Defendants' directors, officers, managers, independent contractors, employees, attorneys, or agents, including Jason Berkes, Bela Berkes, Vince Petranzeo, James Clark, Joe Miller, Don Burmingham and J. Stephen Deffner, Esq., to participate with the Receiver in the operation and management of the Receivership Defendants as the Receiver deems necessary and advisable to maintain and change the value of the assets of the Receivership Defendant;

C. Continue to exercise exclusive custody, control, and possession of all properties, premises, assets, and documents of, in the possession of, or under the control of, any Receivership Defendant, wherever situated, including, but not limited, to 2045 Corte del Nogal, and 1950, 2310, 2350, and 2385 Camino Vida Roble, all in Carlsbad, California. The Receiver shall have full power to divert mail and to sue for, collect, receive, and take possession of:

1. all assets and documents of the Receivership Defendants and members of the public whose interests are now held by or are under the direction, possession, custody, or control of any Receivership Defendant; and

2. all sums of money now or hereafter due and owing to any Receivership Defendant; provided, however, that the Receiver shall not attempt to collect any amount from a consumer if the Receiver believes the consumer was a victim of the unfair or deceptive acts or practices alleged in the Complaint in this matter;

D. Perform all acts necessary to conserve, hold, manage, and preserve the value of all such assets;

E. Hold, preserve, and administer the business of the Receivership Defendants until further order of this Court, with full authority to perform all acts necessary or incidental thereto, including retaining, hiring, or dismissing any employees, independent contractors, or agents;

F. Take such actions and enter into such agreements in connection with the administration of the Receivership Defendants as the Receiver deems necessary;

G. Choose, engage, and employ attorneys, accountants, appraisers, and other independent contractors, and technical specialists, as the Receiver deems advisable or necessary in the performance of duties and responsibilities under the authority granted by this Order;

H. Make payments and disbursements from the receivership estate that the Receiver deems necessary to secure or preserve the Receivership Defendants' assets or to carry out the Receiver's mandate under this Order;

I. Institute, prosecute and defend, compromise, intervene in, or become party to such actions or proceedings in state, federal, or foreign court that the Receiver deems necessary to collect, recover, protect, maintain, or preserve the value of the assets of the Receivership Defendants or to carry out the Receiver's mandate under this Order;

J. Defend, compromise, or otherwise dispose of any actions or proceedings instituted against the Receiver in his role as Receiver or the Receivership Defendants, whether now pending or hereinafter filed, that the Receiver deems necessary to preserve the assets of the Receivership Defendants or to carry out the Receiver's mandate under this order;

K. Take all steps the Receiver deems necessary to secure the business premises of the Receivership Defendants, including, but not limited to:

1. completing a written inventory of all receivership assets;

2. obtaining pertinent information from all employees and other agents of the Receivership Defendants, such as the name, home address, social security number, job description, method of compensation, accrued and unpaid commission and compensation of each employee or agent; or

3. changing the locks and disconnecting any computer modems or other means of access to the computer or other documents maintained at that location;

L. Obtain, by presentation of this Order, tangible and intangible assets as well as information in the custody or control of any person, firm, or entity sufficient to identify the accounts, employees, properties, or other assets or obligations of the Receivership Defendants;

M. Issue subpoenas to obtain documents pertaining to the receivership, conduct discovery in this action on behalf of the receivership estate, attend any deposition noticed by any party to this action, and ask any question of any deponent which, in the Receiver's opinion, is pertinent to the receivership estate;

N. Allow representatives of the Commission and allow Defendants Jason Berkes and Bela Berkes and their representatives reasonable access to inspect the Receivership Defendants' books, records, accounts, premises, and other property, wherever located;

O. Determine and implement the manner in which the Receivership Defendants will comply with, and prevent violations of, this Order and all other applicable laws, including, but not limited to, revising sales materials and implementing monitoring procedures;

P. Open or maintain one or more bank accounts in San Diego County, California, as designated depositories for funds of the Receivership Defendants. The Receiver shall deposit all funds of the Receivership Defendants in such designated accounts and shall make all payments and disbursements from the receivership estate from such accounts.

XI. COMPENSATION FOR RECEIVER

IT IS FURTHER ORDERED that the Receiver and all personnel hired by the Receiver shall be entitled to reasonable compensation for the services they render to the receivership estate and for the cost of actual out-of-pocket expenses incurred by them, from the assets now held by, in the possession or control of, or which may be received by the Receivership Defendants. The Receiver shall file with the Court and serve on the parties periodic requests for payment, outlining the services rendered and the related fees and expenses, with the first such request filed no more than sixty (60) days after the entry of this Order. The Receiver shall not increase the hourly rates used as the bases for such fee applications without prior approval of the Court.

XII. RECEIVER'S BOND

IT IS FURTHER ORDERED that the Receiver shall maintain on file with the Clerk of this Court a bond in the sum of $25,000.00 with sureties to be approved by the Court, conditioned that the Receiver will well and truly perform the duties of the office and abide by and perform all acts the Court directs.

XIII. DELIVERY OF RECEIVERSHIP PROPERTY

IT IS FURTHER ORDERED that, to the extent that this has not already been accomplished by the Temporary Receiver during the period that the TRO has been in effect, Defendants and any other person or entity served with a copy of this Order, shall immediately deliver or transfer possession, custody, and control of the following to the Receiver:

A. All assets of the Receivership Defendants;

B. All documents and records relating to the assets of the Receivership Defendants, including, but not limited to, financial and accounting records, balance sheets, income statements, bank records (including monthly statements, canceled checks, records of wire transfers, and check registers), distributor lists, and title documents;

C. All keys, lock combinations, passwords, or codes required to open, gain access to, or secure any of the Receivership Defendants' assets or documents, including, but not limited to, access to their business premises, computer systems or files, telephone or other communication systems, and bank accounts; and

D. Information identifying the assets, employees, or obligations of the Receivership Defendants.

IT IS FURTHER ORDERED that in the event any person or entity fails to deliver or transfer any asset or otherwise fails to comply with any provision of this Paragraph, the Receiver may file ex parte an Affidavit of Non-Compliance regarding the failure. Upon filing of the affidavit, the Court may authorize, without additional process or demand, Writs of Possession or Sequestration or other equitable writs requested by the Receiver. The writs shall authorize and direct the United States Marshal or any sheriff or deputy sheriff of any county (pursuant to Fed. R. Civ. P. 4(c)(1)), or any other federal or state law enforcement officer, to seize the asset, document, or other thing and to deliver it to the Receiver.

XIV. COOPERATION WITH THE RECEIVER

IT IS FURTHER ORDERED that all Defendants, and their agents, servants, employees, and attorneys, and all persons or entities directly or indirectly under the control of any of them, and all other persons or entities in active concert or participation with any of them who receive actual notice of this Order by personal service or otherwise, and each such person, shall cooperate fully with and assist the Receiver. Such cooperation and assistance shall include, but not be limited to, providing any information to the Receiver that the Receiver deems necessary to exercise the authority and discharge the responsibilities of the Receiver under this Order; providing any password required to access any computer or electronic files in any medium; or advising all persons who owe money to any of the Receivership Defendants (other than customers) that all debts should be paid directly to the Receiver. Except to the extent requested and permitted by the Receiver, Defendants Bela Berkes, Jason Berkes, Brett Rademacher, and David R. Friedman, D.C., are hereby restrained and enjoined from directly or indirectly:

A. Transacting any of the business of the Receivership Defendants, or transacting business under the names Seasilver USA, Inc., Americaloe, Inc., or any substantially similar names;

B. Destroying, secreting, defacing, transferring, or otherwise altering or disposing of any documents of either of the Receivership Defendants, including, but not limited to, books, records, accounts, or any other papers of any kind or nature;

C. Transferring, receiving, altering, selling, encumbering, pledging, assigning, liquidating, or otherwise disposing of any assets owned, controlled, or in the possession or custody of, or in which an interest is held or claimed by, either of the Receivership Defendants, or the Receiver;

D. Excusing debts owed to any Receivership Defendant;

E. Failing to notify the Receiver of any asset, including accounts, of any Receivership Defendant held in any name other than the name of any Receivership Defendant, or by any person or entity other than the Receivership Defendants, or failing to provide any assistance or information requested by the Receiver in connection with obtaining possession, custody, or control of such assets; or

F. Doing any act or refraining from any act whatsoever to interfere with the Receiver's continuing custody, control, possession, or management of the assets or documents subject to this receivership; or to harass or interfere with the Receiver in any way; or to interfere in any manner with the exclusive jurisdiction of this Court over the assets or documents of any Receivership Defendants; or to refuse to cooperate with the Receiver or the Receiver's duly authorized agents in the exercise of their duties or authority under any order of this Court.

XV. TRANSFER OF FUNDS TO THE RECEIVER

IT IS FURTHER ORDERED that, upon service of a copy of this Order, and to the extent not already accomplished under the TRO, all banks, broker-dealers, savings and loan associations, escrow agents, title companies, commodity trading companies, and other financial institutions shall cooperate with all reasonable requests of the Receiver relating to implementation of this Order, including transferring funds at his direction and producing records related to the assets of either of the Receivership Defendants.

XVI. STAY OF ACTIONS

IT IS FURTHER ORDERED that, except by leave of this Court and except for any federal, state, or local law enforcement or regulatory authority action against the Receivership Defendants, during the pendency of the receivership, Defendants and all other persons seeking to establish or enforce any claim, right, or interest against or on behalf of any Receivership Defendant, be and hereby are stayed from:

A. Commencing, prosecuting, continuing, or enforcing any suit against any Receivership Defendant, except that such actions may be filed to toll any applicable statute of limitations;

B. Commencing, prosecuting, continuing, or enforcing any suit or proceeding in the name of or on behalf of any Receivership Defendant;

C. Accelerating the due date of any Receivership Defendant's obligation or claimed obligation; enforcing any lien upon, or taking, attempting to take, or retaining possession of any Receivership Defendant's assets; attempting to foreclose, forfeit, alter, or terminate any interests of any Receivership Defendant, whether such acts are part of a judicial proceeding or otherwise;

D. Using self-help or executing or issuing any process to impound, take possession of, interfere with, create, or enforce a lien upon any asset owned by or in the possession of any Receivership Defendant, the Receiver, or any agent appointed by the Receiver; and

E. Committing any act to interfere with the Receiver's taking control, possession, or management of the Receivership Defendants and their assets and documents, or to interfere with the exclusive jurisdiction of this Court over the property and assets of the Receivership Defendants.

Provided, however, that this Paragraph does not stay any suit pending in a State court, upon motion and a finding by the Court that the moving party will suffer substantial injury if it is not permitted to proceed.

XVII. EXPEDITED DISCOVERY

IT IS FURTHER ORDERED that the Commission is granted leave at any time after service of this Order to demand the production of documents from any person or entity relating to the nature, status, extent, location, or other relevant information relating to Defendants' assets, income, personal or business financial records, or the location of a Defendant. Forty-eight (48) hours notice shall be deemed sufficient for any such production of documents from the Defendants and three (3) business days notice shall be deemed sufficient for any such production of documents from any other person or entity, including, but not limited to, any bank, savings and loan, financial or brokerage institution, fund, escrow agent, or trustee. The production of documents submitted pursuant to this provision shall not in any way waive the Commission's rights to seek the production of additional documents.

XVIII. RIGHT OF ACCESS

IT IS FURTHER ORDERED that the Receiver shall subsequently allow the Commission's representatives, and the representatives of the Receivership Defendants and of Defendants Bela Berkes and Jason Berkes, and Defendants Bela Berkes and Jason Berkes themselves reasonable access to the business premises of the Receivership Defendants for the purpose of inspecting and copying any and all books, records, accounts, and other property owned by or in the possession of the Receivership Defendants. The Receiver shall have the discretion to determine the time and manner of this access.

IT IS FURTHER ORDERED that if, at the time of service of this Order, any records or property relating to any Defendant's business or assets are located in the personal residence of any individual Defendant, and such records or property have not already been produced to the Commission pursuant to the TRO, then such individual Defendant shall, within forty-eight (48) hours of service of this Order, produce to the Commission, at a location designated by the Commission:

A. All contracts, accounting data, written or electronic correspondence, advertisements, computer tapes, discs, or other computerized or electronic records, books, written or printed records, handwritten notes, telephone logs, telephone scripts, telephone bills, receipt books, ledgers, membership records and lists, refund records, receipts, ledgers, bank records (including personal and business monthly statements, canceled checks, records of wire transfers, and check registers), appointment books, copies of federal, state, and local business or personal income or property tax returns, 1099 forms, title records, and other documents or records of any kind that relate to any Defendant's business and assets; and

B. All computers and data in whatever form, used by Defendants, in whole or in part, relating to any Defendant's business and assets.

XIX. CONSUMER REPORTS

IT IS FURTHER ORDERED that the Commission may obtain consumer reports concerning any Defendant pursuant to Section 604(a)(1) of the Fair Credit Reporting Act, 15 U.S.C. § 1681b(a)(1), and that, upon written request, any credit reporting agency from which such reports are requested shall provide them to the Commission.

IT IS FURTHER ORDERED that the Commission may provide to the Receiver copies of any consumer reports it receives pursuant to this provision.

XX. DISTRIBUTION OF ORDER BY DEFENDANTS

IT IS FURTHER ORDERED that the Receivership Defendants, acting through the Receiver and on behalf of Defendants Bela Berkes and Jason Berkes, shall immediately provide a copy of this Order to each affiliate, subsidiary, division, sales entity, successor, assign, officer, director, employee, independent contractor, distributor, agent, attorney, ad broker, advertising agency, fulfillment house, call center, domain registrar, mail receipt facility, and representative of the Defendants, and, within ten (10) calendar days following entry of this Order, the Receivership Defendants, acting through the Receiver, shall provide the Commission with an affidavit identifying the names, titles, addresses, and telephone numbers of the persons and entities that have been served with a copy of this Order in compliance with this provision.

XXI. CONFIDENTIALITY

The Commission agrees to keep the information provided in Sections V, VII, VIII, IX, X, XIII, XV, XVII, XVIII, XIX, and XX above confidential.

Provided however, that the Commission may provide such information to any person or entity to whom the Commission is permitted or obligated under applicable statutory or regulatory law to provide such information, or to whom the Commission is otherwise legally obligated to provide such information.

Provided further that if the Commission intends to provide such information to a person or entity other than a government entity, it shall provide at least 10 calendar days' written notice to Defendants' counsel so that Defendants may take whatever steps Defendants decide are appropriate to protect the confidentiality of that information. Provided further that the Commission may provide such information to the Receiver without notice to Defendants.

XXII. SERVICE OF THIS ORDER

IT IS FURTHER ORDERED that copies of this Order may be served by any means, including facsimile transmission, upon any financial institution or other entity or person that may have possession, custody, or control of any documents or assets of any Defendant, or that may be subject to any provision of this Order.

XXIII. RIGHT TO INVESTIGATE AND ADD ADDITIONAL PARTIES AND CLAIMS

Nothing in this Preliminary Injunction should be construed as limiting or restricting the Commission's right or ability to investigate, take discovery from, add to this action, or bring further actions against any person or entity not specifically named herein as a Defendant who may be in active concert or participation with any Defendant.

XXIV. SERVICE UPON THE COMMISSION

IT IS FURTHER ORDERED, with regard to any correspondence, pleadings, or notifications related to this order. that service on the Commission shall be provided to:

DAVID M. NEWMAN
Federal Trade Commission
901 Market Street, Suite 570
 
and
CHRISTA VECCHI
Federal Trade Commission
601 New Jersey Ave., N.W.
Mail Drop NJ-3212
Washington, DC 20001
Phone (202) 326-3166

 

XXV. EXPIRATION OF THIS ORDER

IT IS FURTHER ORDERED that this Preliminary Injunction shall remain in full force and effect as to each Defendant until such time as a final order is entered against and served on such Defendant or the mater is dismissed as to such Defendant.

XXVI. RETENTION OF JURISDICTION

IT IS FURTHER ORDERED that this Court shall retain jurisdiction of this matter for all purposes.

IT IS SO ORDERED:

Dated July 15, 2003
 
__________________________________
UNITED STATES DISTRICT JUDGE

So stipulated:

FEDERAL TRADE COMMISSION
Dated 7/14/03
David M. Newman
Janice L. Charter
Christa Vecchi
Matthew Daynard
Karen Muoio
Edwrd F. Glannon
Dated 7/7/03
Jason Berkes, individually and on behalf
of Seasilver USA and Americaloe, Inc.
Dated: _____________________
Bela Berkes
Dated: _____________________
Brett Rademacher
Dated: _____________________
David R. Friedman
APPROVED AS TO FORM AND CONTENT
Dated: _____________________
KLEINFIELD, KAPLAN, & BECKER
By: Anthony L. Young
       Jennifer A. Davidson
       Stacey L. Valerio
       Anne V. Maher, Of Counsel
Attorneys for Defendants Seasilver USA, Inc., and Americaloe, Inc.
Dated: _____________________
ALTHEIMER & GRAY
By: Graham R. Taylor
Attorneys for Defendants Jason Berkes and Bela Berkes
Dated: _____________________
BELL, BOYD & LLOYD
By: George M. Burditt
Attorneys for Defendant David R. Friedman
Dated: _____________________
Ronald J. Fichera
Attorney for Defendant Brett Rademacher

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This page was posted on July 21, 2003.