Stipulated Final Judgment And Order For Permanent Injunction And Other Equitable Relief As To Sweet Song Corporation, Tsavorite Sword Corporation, Ron Hudson, Inc., And Hari Jiwan Singh Khalsa

RA'OUF M. ABDULLAH
ALICE SAKER HRDY
Federal Trade Commission
600 Pennsylvania Avenue, N.W.
Washington, D.C. 20580
(202) 326-3024; (202) 326-2009
(202) 326-3392 Telecopier

RAYMOND McKOWN
Federal Trade Commission
10877 Wilshire Boulevard, Suite 700
Los Angeles, California 90024
(310) 824-4325
(310) 824-4380 Telecopier

Attorneys for Plaintiff

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

FEDERAL TRADE COMMISSION, Plaintiff,

vs.

SWEET SONG CORPORATION, in its own name and d/b/a WINDSOR & WHITE TRADING CO. and d/b/a PACIFIC WELLINGTON ASSOCIATES; TSAVORITE SWORD CORPORATION, in its own name and d/b/a PACIFIC WELLINGTON ASSOCIATES; RON HUDSON, INC., in its own name and d/b/a PACIFIC WELLINGTON ASSOCIATES; HARI JIWAN SINGH KHALSA, a/k/a STEPHEN JON OXENHANDLER, a/k/a BOB THOMAS; SIRI RAM SINGH KHALSA a/k/a WILLIAM TAYLOR, a/k/a PHILLIP ANDERSON, Defendants.

CV-97-4544 LGB (JGx)

[proposed]
STIPULATED FINAL JUDGMENT AND ORDER FOR PERMANENT INJUNCTION AND OTHER EQUITABLE RELIEF AS TO
SWEET SONG CORPORATION, TSAVORITE SWORD CORPORATION, RON HUDSON, INC., AND HARI JIWAN SINGH KHALSA

WHEREAS, plaintiff, Federal Trade Commission ("FTC" or "Commission"), filed this action under Sections 5(a), 13(b) and 19 of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. §§ 45(a), 53(b) and 57b, on June 20, 1997;

WHEREAS, the Court entered an ex parte Temporary Restraining Order with Asset Freeze and Other Equitable Relief on June 22, 1997, and the Court entered a Preliminary Injunction with Asset Freeze and Other Equitable Relief on July 10, 1997, after a noticed hearing; and

WHEREAS, the FTC and defendants Sweet Song Corporation, Tsavorite Sword Corporation, Ron Hudson, Inc., and Hari Jiwan Singh Khalsa a/k/a Stephen Jon Oxenhandler and a/k/a Bob Thomas ("settling defendants") have agreed to entry of this Stipulated Final Judgment and Order for Permanent Injunction and Other Equitable Relief ("Order") and stipulate to the Court’s findings below;

THEREFORE, the Court being advised in the premises, now finds:

1. This Court has jurisdiction over the Commission’s claim pursuant to 28 U.S.C. §§ 1331, 1337(a) and 1345, and 15 U.S.C. §§ 45(a), 53(b), 57b(a), 6102(c) and 6105. This Court has jurisdiction over the parties.
2. Venue in the Central District of California, United States District Court, is proper.
3. This is an action instituted by the FTC under Sections 5(a), 13(b) and 19 of the FTC Act, 15 U.S.C. §§ 45(a), 53(b) and 57b. The Complaint seeks both permanent injunctive relief and consumer redress for alleged deceptive practices by defendants in connection with the offering for sale and sale of gemstones as investments in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a) and of the Telemarketing Sales Rule, 16 C.F.R. Part 310, promulgated August 23, 1995.
4. Plaintiff Commission has the authority to seek the relief it requests, and the Court has the authority to grant it under Sections 13(b) and 19 of the FTC Act, 15 U.S.C. §§ 53(b) and 57b.
5. The activities of the settling defendants are in or affecting commerce, as the term is defined in Section 4 of the FTC Act, 15 U.S.C. § 44.
6. Settling defendants have stipulated to the entry of this Order but do not admit the allegations set forth in the complaint.
7. This Order constitutes the final adjudication of all claims of plaintiff Commission in connection with the matters alleged in the Complaint. Other than any enforcement proceedings brought in connection with this Final Judgment, the Commission will not seek any further relief from the settling defendants arising out of the facts as alleged in the Complaint filed in this action. Notwithstanding the foregoing, this action and the relief awarded herein are in addition to, and not in lieu of, other remedies by parties other than the Commission as may be provided by law, including both civil and criminal remedies. All relief set forth in this Order is purely remedial in nature and is not a fine, penalty, punitive assessment, exemplary damage or forfeiture.
8. Entry of this Order is in the public interest.

IT IS THEREFORE ORDERED, ADJUDGED AND DECREED, AS FOLLOWS:

DEFINITIONS

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

A. Assisting others shall mean knowingly providing any of the following to any person or entity:

(1) performing customer service functions, including, but not limited to, receiving or responding to consumer complaints;

(2) formulating or providing, or arranging for the formulation or provision of, any telephone sales script or any other marketing material;

(3) providing names of, or assisting in the generation of, potential customers; or

(4) performing marketing services of any kind.

B. Documents shall be synonymous in meaning and equal in scope to the usage of the term in Rule 34(a) of the Federal Rules of Civil Procedure, and shall include writings, drawings, graphs, charts, photographs, audio and video recordings, computer records, and other data compilations from which information can be obtained and translated, if necessary, through detection devices into reasonably usable form. Each draft or non-identical copy shall constitute a separate document.

C. Investment opportunity shall mean any service, product or interest, tangible or intangible, that is offered for sale, sold, or traded based wholly or in substantial part on representations, either express or implied, about past, present, or future income, profit, or appreciation.

D. Telemarketing shall mean any business activity that involves attempts to induce consumers:

(1) to purchase any item, good, service, investment opportunity, partnership interest, trust interest or other beneficial interest;

(2) to make a charitable contribution; or

(3) to enter a contest for a prize, either exclusively or primarily through means of telephone sales presentations regardless of whether the telephone calls are initiated or received.

(4) The term telemarketing shall exclude transactions that are not completed until after a face-to-face contact between the seller or solicitor and the consumer solicited, but shall include:

(i) managing others who are engaged in telemarketing activities;

(ii) operating or owning an enterprise that is engaged in telemarketing activities; or

(iii) otherwise participating as an officer, director, employee, or independent contractor of an enterprise that is engaged in telemarketing activities.

PROHIBITED BUSINESS ACTIVITIES

I. IT IS THEREFORE ORDERED, ADJUDGED AND DECREED, that the settling defendants and their officers, agents, servants, employees, and attorneys and all other persons in active concert or participation with them who receive actual notice of this Order by personal service or otherwise, in connection with the advertising, promotion, offering for sale, or sale of any investment opportunity, including but not limited to gemstones, coins or bullion, are hereby permanently enjoined from:

A. Falsely representing, expressly or by implication, that any investment opportunity is sold at or close to the price at which a consumer could resell it;

B. Falsely representing, expressly or by implication, the degree of risk of any investment opportunity;

C. Falsely representing, expressly or by implication, that any investment opportunity sold to consumers has appreciated in value since the time of purchase;

D. Falsely representing, expressly or by implication, that a consumer can easily rebroker or liquidate a gemstone or any other investment opportunity;

E. Falsely representing, expressly or by implication, the past appreciation, the future appreciation, the income potential, or the origin of any investment opportunity;

F. Falsely representing, expressly or by implication, any other fact material to a consumer’s decision to purchase gemstones, coins, bullion or any other investment opportunity;

G. Violating or assisting others in violating any provision of the Commission’s Telemarketing Sales Rule, 16 C.F.R. Part 310, as amended from time to time (current version attached as Appendix B), including but not limited to misrepresenting, directly or by implication, "[a]ny material aspect of an investment opportunity." 16 C.F.R. § 310.3(a)(2)(vi).

H. Falsely representing, expressly or by implication, the terms, effect, basis or purpose of this Order.

I. Assisting others in the acts or practices prohibited in subsections A through H, of this Section I.

BOND REQUIREMENTS

II. IT IS FURTHER ORDERED that:

A. Settling defendant Hari Jiwan Singh Khalsa is permanently restrained and enjoined from engaging in telemarketing or assisting others engaged in telemarketing unless he first obtains a surety bond in the principal sum of ONE HUNDRED THOUSAND DOLLARS ($100,000).

B. This bond shall be conditioned upon compliance with Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), the Telemarketing Sales Rule, 16 C.F.R. Part 310, and with the provisions of this Order. The bond shall be continuous and remain in full force and effect as long as settling defendant Hari Jiwan Singh Khalsa continues to engage in telemarketing or assists others engaged in telemarketing, and for at least three (3) years after settling defendant Hari Jiwan Singh Khalsa has ceased to engage in such activities.

C. The bond shall cite this Order as the basis of the bond, and shall provide surety thereunder to consumers against financial loss resulting from any violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), the Telemarketing Sales Rule, 16 C.F.R. Part 310, or the provisions of this Order.

D. The surety bond required by this section shall be an insurance agreement providing surety for financial loss issued by a surety company that is admitted to do business in each of the states in which settling defendant Hari Jiwan Singh Khalsa does business; and that holds a Federal Certificate of Authority As Acceptable Surety On Federal Bond and Reinsuring.

E. The surety bond shall be in favor of both:

(1) the Commission for the benefit of any consumer injured as a result of any false or misleading representation made by settling defendant Hari Jiwan Singh Khalsa, his agents or any other persons acting in concert with him or under his authority, supervision or control, while engaged in telemarketing or assisting others engaged in telemarketing; and

(2) any consumer so injured.

F. The bond required pursuant to this Section is in addition to, and not in lieu of, any other bond required by federal, state, or local law. This bond requirement shall not be construed to limit or preempt the regulatory powers of any other federal, state, regional, county, local or other government agency or authority.

G. At least ten days before commencing telemarketing or assisting others engaged in telemarketing, settling defendant Hari Jiwan Singh Khalsa shall provide a copy of the bond required by this Section to the Associate Director for Service Industry Practices at the address specified in Section V of this Order.

H. Settling defendant Hari Jiwan Singh Khalsa, directly or through his officers, agents, servants, employees, attorneys, or any other persons acting in concert or participation with him or under his authority, supervision or control shall not disclose the existence of the surety bond to any consumer or prospective customer without simultaneously making the following disclosure: "THIS BOND IS REQUIRED BY ORDER OF THE U.S. DISTRICT COURT IN SETTLEMENT OF CHARGES THAT HARI JIWAN SINGH KHALSA a/k/a STEPHEN JON OXENHANDLER AND A/K/A BOB THOMAS ENGAGED IN FALSE AND MISLEADING REPRESENTATIONS IN THE PROMOTION AND SALE OF GEMSTONES AS INVESTMENTS." The required written disclosure shall be set forth in a clear and conspicuous manner, separated from all other text, in 100% black ink against a light background, in print at least as large as the main text of the sales material or document, and enclosed in a box containing only the required disclosure.

RECORD KEEPING PROVISIONS

III. IT IS FURTHER ORDERED that, for a period of five (5) years from the date of entry of this Order, in connection with any telmarketing business where any settling defendant is the majority owner or otherwise directly or indirectly manages or controls the business that engages in telemarketing or assists others who are engaged in telemarketing, the settling defendants are hereby restrained and enjoined from failing to create, and from failing to retain for a period of three (3) years following the date of such creation, unless otherwise specified:

A. Books, records and accounts that, in reasonable detail, accurately and fairly reflect the cost of goods or services sold, revenues generated, and the disbursement of such revenues;

B. Records accurately reflecting: the legal name, address, and telephone number of each person that any of the above-referenced businesses employs in any capacity, including as an employee, consultant, independent contractor, free-lancer or otherwise; that person's job title or position; duties; the date upon which the person commenced work; and the date and reason for the person's termination, if applicable. The businesses subject to this subsection shall retain such records for any terminated employee for a period of three (3) years following the date of termination;

C. Records containing the names, addresses, phone numbers, dollar amounts paid, quantity of items or services purchased, and description of items or services purchased, or amounts donated, for all consumers to whom any of the above-referenced businesses has sold, invoiced or shipped any goods or services, or from whom any of the above-referenced businesses has accepted money or other items of value;

D. Records that reflect, for every consumer complaint or refund request, whether received directly or indirectly or through any third party or other means:

(1) the consumer's name, address, telephone number and the dollar amount paid by the consumer;

(2) the written complaint or refund request, if any, and the date of the complaint or refund request;

(3) the basis of the complaint, including the name of any salesperson complained against, and the nature and result of any investigation conducted concerning the validity of any complaint;

(4) each response and the date of the response;

(5) the name of the person(s) who investigated the complaint;

(6) any final resolution and the date of the resolution;

(7) in the event of a denial of a refund request, the reason for such denial; and

(8) Copies of all sales scripts, training packets, advertisements, or other marketing materials utilized.

EMPLOYEE NOTIFICATION

IV. IT IS FURTHER ORDERED that, for a period of five (5) years from the date of entry of this Order, in connection with any telemarketing business where any settling defendant is the majority owner or otherwise directly or indirectly manages or controls the business that engages in telemarketing or assists others who are engaged in telemarketing, the settling defendants shall:

A. Provide a copy of this Order to, and obtain a signed and dated acknowledgment of receipt of same from, each director, officer, each individual serving in a management capacity, all personnel involved in responding to consumer complaints or inquiries, and all sales personnel, whether designated as employees, consultants, independent contractors, free-lancers or otherwise, immediately upon employing or retaining any such persons; and

B. Maintain for a period of three (3) years after creation and, upon reasonable notice, make available to representatives of the Commission, the original signed and dated acknowledgments of the receipt of copies of this Order, as required in Subsection A of this Section IV. In making this material available, the settling defendants shall permit representatives of the Commission to inspect and copy all such original dated acknowledgments.

MONITORING PROVISIONS

V. IT IS FURTHER ORDERED that, to facilitate the Commission’s monitoring of settling defendant Hari Jiwan Singh Khalsa’s compliance with this Order, settling defendant Hari Jiwan Singh Khalsa shall:

A. Notify the Commission in writing, within seven (7) days of entry of this Order, of his current residential address, mailing address, business and home telephone numbers, and employment status, including the names, telephone numbers, and business addresses of any current employers; and

B. Notify the Commission in writing, for a period of five (5) years from the date of entry of this Order, of any changes in his name, residential or mailing addresses, telephone numbers, or employment status, within thirty (30) days of the date that any such change occurs.

C. For the purposes of this Order, all written notifications to the Commission shall be mailed to:

Associate Director for
Service Industry Practices
Room H-200
Federal Trade Commission
Washington, D.C. 20580

Re: FTC v. Sweet Song Corp., et al.
File X970051.

D. For purposes of this Section V, the term employment includes the performance of services as an agent, servant, employee, consultant, independent contractor, free-lancer or otherwise; and the term employers include any individual or entity for whom settling defendant Hari Jiwan Singh Khalsa performs services as an employee, agent, consultant, independent contractor, free-lancer or otherwise.

E. For a period of five (5) years from the date of entry of this Order, the settling defendants shall permit representatives of the Commission:

(1) Access during normal business hours to any office, or facility storing documents, of any telemarketing business where any settling defendant is the majority owner or otherwise directly or indirectly manages or controls the business that engages in telemarketing or assists others who are engaged in telemarketing. In providing such access, settling defendants shall permit representatives of the Commission to inspect and copy all documents relevant to any matter contained in this Order. Access to documents does not include access to any documents that are protected by the attorney-client privilege or the attorney work product privilege; and

(2) To interview or depose the directors, officers, and employees, including all personnel involved in responding to consumer complaints or inquiries, and all sales personnel, whether designated as employees, consultants, independent contractors, free-lancers or otherwise, of any business to which subsection E(1) of this Section V applies, concerning matters relating to compliance with the terms of this Order. The person interviewed or deposed may have counsel present. Provided that, the Commission may otherwise monitor the settling defendants’ compliance with this Order by all lawful means available, including the use of compulsory process, seeking production of documents, or the taking of depositions, and the use of investigators posing as consumers or suppliers.

MONETARY RELIEF

VI. IT IS FURTHER ORDERED that:

A. Judgment for equitable monetary relief is hereby entered against settling defendants jointly and severally in the amount of FOUR MILLION DOLLARS ($4,000,000) as equitable monetary relief, including but not limited to consumer redress, and for paying any attendant expenses of administering any redress fund and/or disgorgement.

B. The judgment for equitable monetary relief shall be fully satisfied as follows:

(1) Settling Defendant Hari Jiwan Singh Khalsa, by signing this Order, forever waives, releases, discharges, and disclaims all right, title, and interest in:

(a) All inventory, gemstones, and assets transferred to or held by the court-appointed Receiver on behalf of the receivership entities, including but not limited to all funds held by the Receiver in the possession of Bank of America; and

(b) All assets in the following accounts:

(i) Great Western Bank Account 024-817048-2, and

(ii) International Advisory Corporation Account AKS-229111.

(2) Hari Jiwan Singh Khalsa and his wife, Sat Bachan Kaur Khalsa, upon receiving notice of the entry of this Order, shall cause all assets described in Subsections B(1)(b)(i) and (ii), of this Section VI to be transferred to the Commission.

(3) To the extent they have not already done so, within one (1) business day after receiving notice of entry of this Order, settling defendant Hari Jiwan Singh Khalsa and his wife, Sat Bachan Kaur Khalsa, shall take specific steps, as set forth below, to sell all interests in the real property owned by settling defendant Hari Jiwan Singh Khalsa and Sat Bachan Kaur Khalsa, known as Lot 539, Phase IV, Las Campanas, New Mexico ("Property"):

(a) Settling Defendant Hari Jiwan Singh Khalsa and Sat Bachan Kaur Khalsa shall execute a listing agreement approved by counsel for the Commission and place the Property in a standard electronic multiple listing service ("MLS"). Denise Sherwin, of Sante Fe Land & Home, Sante Fe, New Mexico, shall serve as the initial listing agent for the Property. Settling Defendant Hari Jiwan Singh Khalsa and Sat Bachan Kaur Khalsa shall continue to list the Property in a MLS for no fewer than nine months, or until the Property is sold pursuant to this Section;

(b) Settling Defendant Hari Jiwan Singh Khalsa and Sat Bachan Kaur Khalsa shall immediately comply with any request by the Commission during the above-mentioned nine-month period to select a different listing agent other than Ms. Sherwin so long as such a change does not violate the terms of any listing agreement signed by settling defendant Hari Jiwan Singh Khalsa and Sat Bachan Kaur Khalsa;

(c) At all times while the Property is listed for sale, settling defendant Hari Jiwan Singh Khalsa and Sat Bachan Kaur Khalsa shall comply with any written directive by the Commission as to the price at which the Property is to be listed for sale. Settling defendant Hari Jiwan Singh Khalsa and Sat Bachan Kaur Khalsa must direct the listing agent to notify counsel for the Commission of the amount of any offer to purchase the Property immediately upon receiving any such offer;

(d) Settling defendant Hari Jiwan Singh Khalsa and Sat Bachan Kaur Khalsa shall direct the listing agent for the Property to accept any offer to purchase the Property that is approved in writing by counsel for the Commission. Within the nine-month period following the date of entry of this Order, settling defendant Hari Jiwan Singh Khalsa and Sat Bachan Kaur Khalsa shall not accept any offer to purchase the Property that is not approved in writing by counsel for the Commission;

(e) Settling defendant Hari Jiwan Singh Khalsa and Sat Bachan Kaur Khalsa shall execute all documents necessary to effectuate a transfer of all interests in the golf membership in Las Campanas held by them or to effectuate the transfer or establishment of an equity golf membership in Las Campanas if a Property purchaser obtains or seeks to obtain an equity golf membership.

(f) Settling defendant Hari Jiwan Singh Khalsa and Sat Bachan Kaur Khalsa shall not further encumber the Property. Nothing contained herein requires settling defendant Hari Jiwan Singh Khalsa or Sat Bachan Kaur Khalsa to make any payments on any mortgage that presently encumbers the Property;

(g) If, after nine months from the date this Order is entered, all interests in the Property have not been sold, settling defendant Hari Jiwan Singh Khalsa and Sat Bachan Kaur Khalsa shall cooperate with all efforts by the Commission to immediately retain an auction company and shall direct the auction company to sell all interests in the Property at public auction. If the Commission determines a public auction should occur prior to nine months after entry of this Order, settling defendant Hari Jiwan Singh Khalsa and Sat Bachan Kaur Khalsa shall cooperate with all efforts to conduct a public auction. With regard to any public auction required pursuant to this Section VI, counsel for the Commission shall designate the company that shall auction the property, specify the terms under which the Property is auctioned, and determine together with the auction company the best possible date to hold the auction.

(h) Defendant Hari Jiwan Singh Khalsa and Sat Bachan Kaur Khalsa shall execute any and all documents necessary to ensure that all proceeds from the sale or auction of all interests in the Property are titled to and immediately remitted to the Commission.

(i) By signing this agreement, Sat Bachan Kaur Khalsa acknowledges that she is contractually bound to carry out her obligations under this Section VI, and she further acknowledges that the Commission’s agreement to settle this lawsuit with her husband, settling defendant Hari Jiwan Singh Khalsa, is adequate consideration for the promises she makes herein.

(4) The Receiver for settling defendants Sweet Song Corporation, Tsavorite Sword Corporation, and Ron Hudson, Inc., shall transfer title and possession of all Receivership assets to the Commission after payment of the Receiver's fees and other expenses approved by this Court.

C. Funds received by the Commission pursuant to this Section VI shall be deposited into a consumer redress account maintained by the Commission. The settling defendants forever disclaim all right, title and interest in all assets transferred to the Commission. Settling defendant Hari Jiwan Singh Khalsa agrees that none of the assets described in this Section VI shall be returned to him, his successors, heirs, or assigns. Said funds shall be distributed to consumers pursuant to a Court-approved distribution plan, which the Commission shall submit to the Court. The settling defendants shall have no right to review, amend, approve or object to the manner or contents of the distribution plan. If the Commission, in its sole discretion, deems that it is impractical or infeasible to distribute the consumer redress fund to consumers, the Commission may transfer the funds to the United States Treasury as a disgorgement remedy.

D. If settling defendant Hari Jiwan Singh Khalsa fully complies with each of the equitable monetary relief provisions in this Section VI, the judgment for equitable monetary relief established by this Order shall be deemed fully satisfied as to him, and, upon his request, the Commission shall file a notice of his full satisfaction of the judgment. The Commission makes no claims against any other assets of settling defendant Hari Jiwan Singh Khalsa, real or personal, other than those assets enumerated in Section VI.B. of this Order.

E. If settling defendant Hari Jiwan Singh Khalsa fails to fully comply with the provisions set forth in this Section VI, settling defendant Hari Jiwan Singh Khalsa immediately shall be liable for the entire judgment. Provided that the Commission shall not seek an amount in excess of said judgment and reasonable costs.

F. Further, if settling defendant Hari Jiwan Singh Khalsa fails to fully comply with the provisions set forth in Section VI, he shall provide the Commission with his federal and state tax returns for the preceding two years, and with a full financial disclosure, using the disclosure form provided by the Commission, within ten business days of receiving a request from the Commission to do so. The Commission may also verify all information provided on the financial disclosure form with all appropriate third parties, including but not limited to financial institutions.

G. Subsection F, of this Section VI, shall not be deemed a waiver of the Commission’s right to seek an order to show cause why settling defendant Hari Jiwan Singh Khalsa should not be held in contempt for failure to comply with the Order.

H. The facts as alleged in the Complaint shall be taken as admitted and true for the sole purpose of any subsequent litigation to collect amounts due pursuant to this Order, including but not limited to any subsequent bankruptcy proceeding. In this subsequent litigation, settling defendants agree to waive their right to assert affirmative defenses. This waiver does not constitute a waiver of settling defendant Hari Jiwan Singh Khalsa’s rights, if any, under the Fifth Amendment to the United States Constitution or similar provisions in state constitutions or statutes.

RIGHT TO REOPEN, RECEIPT OF ORDER AND
REAFFIRMATION OF FINANCIAL INFORMATION

VII. IT IS FURTHER ORDERED that the Commission's agreement to this Order is expressly premised upon the material truthfulness, accuracy, and completeness of settling defendant Hari Jiwan Singh Khalsa’s financial condition as represented in the financial information previously submitted to the Commission on July 21, 1997, July 28, 1997, January 6, 1998, and as amended by letter dated April 6, 1998, which constitute material information relied upon by the Commission in negotiating and agreeing to this Order. If, upon motion by the Commission, this Court finds that settling defendant Hari Jiwan Singh Khalsa failed to disclose any material asset, materially misrepresented the value of any asset, or made any other material misrepresentation or material omission, the Commission may request that this Order be reopened for the limited purpose of allowing the Commission to modify his monetary liability; provided however, that in all other respects this Order shall remain in full force and effect unless otherwise ordered by the Court; and, provided further, that proceedings instituted under this provision by the Commission shall be in addition to and not in lieu of any other civil or criminal remedies as may be provided by law, including any other proceedings the Commission may initiate to enforce this Order. Settling defendant Hair Jiwan Singh Khalsa waives any and all rights to contest any of the allegations in the Commission's Complaint in this matter in any subsequent proceeding conducted under this Section VII.

VIII. IT IS FURTHER ORDERED that, within three (3) business days after receiving notice of entry of this Order, settling defendant Hari Jiwan Singh Khalsa shall submit to the Commission a truthful sworn affidavit, in the form attached to this Order as Appendix A, that shall:

A. Reaffirm and attest to the material truth, accuracy and completeness of the financial information referenced in Section VII, above, and

B. Acknowledge receipt of this Order.

ASSET FREEZE

IX. IT IS FURTHER ORDERED that this Order supersedes the Preliminary Injunction, with asset freeze, entered in this matter on July 10, 1997, as modified by this Court on October 22, 1997, to the extent specified in this Order. The freeze of the settling defendant Hari Jiwan Singh Khalsa’s assets shall be lifted upon execution of the listing agreement referenced in Section VI.B(2) and the sworn affidavit referenced in Section VII and upon written acknowledgment by counsel for the Commission of receipt of the listing agreement and sworn statement.

FEES AND COSTS

X. IT IS FURTHER ORDERED that each party to this stipulated Order hereby agrees to bear its own costs and attorneys’ fees incurred in connection with this action.

RECEIVERSHIP AND WAIVER OF CLAIMS

XI. IT IS FURTHER ORDERED that the settling defendants waive all rights to seek judicial review or otherwise challenge or contest the validity of this Order. The settling defendants waive any claims they had or may have under the Equal Access to Justice Act, 28 U.S.C. § 2412, concerning the prosecution of this action to the date of entry of this Order.

XII. IT IS FURTHER ORDERED that nothing in this Order shall affect the receivership provisions contained in Sections VIII through XIII of the Preliminary Injunction entered by this Court on July 10, 1997, nor shall this Order affect the Preliminary Injunction as it applies to the remaining defendant, Siri Ram Singh Khalsa. Settling defendant Hari Jiwan Singh Khalsa shall cooperate with the Receiver in preparing final income tax returns for the receivership entities and provide assistance in:

A. Identifying and interpreting computer records of the corporate defendants;

B. Identifying customers and explaining customer transactions;

C. Identifying vendors and explaining vendor transactions; and D. Identifying and interpreting business records of the corporate defendants.

XIII. IT IS FURTHER ORDERED that settling defendant Hari Jiwan Singh Khalsa hereby consents to the Receiver settling all claims with the Commission on behalf of the receivership entities. Settling defendant Hari Jiwan Singh Khalsa hereby releases and discharges the Receiver from any and all claims, demands, liabilities, causes of action, actions, damages, judgments, obligations, costs, losses or expenses of any kind, whether based on tort, contract, or other theories of recovery, whether now known or unknown, suspected or unsuspected, matured or unmatured, whether having arisen or hereafter to arise, which settling defendant Hari Jiwan Singh Khalsa may now or hereafter have against the Receiver.

XIV. IT IS FURTHER ORDERED that the Receiver hereby releases and discharges settling defendant Hari Jiwan Singh Khalsa from any and all claims, demands, liabilities, causes of action, actions, damages, judgments, obligations, costs, losses or expenses of any kind, whether based on tort, contract, or other theories of recovery, whether now known or unknown, suspected or unsuspected, matured or unmatured, whether having arisen or hereafter to arise, which the Receiver may now or hereafter have against settling defendant Hari Jiwan Singh Khalsa.

RETENTION OF JURISDICTION

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

MULTIPLE EXECUTION OF STIPULATION

XVI. IT IS FURTHER ORDERED that the parties to this Order may execute it in mulitple counterparts that taken together shall constitute the one and the same Order.

ENTRY OF THIS JUDGMENT

XVII. IT IS FURTHER ORDERED that pursuant to Fed. R. Civ. P. 54(b) and Local Rule 14.10, the Clerk shall enter this Order immediately.

STIPULATED AND AGREED TO AS TO FORM AND CONTENT:

IT IS SO ORDERED.

Dated, Los Angeles, California, the _____ day of ______________, 1998.

________________________________
Lourdes G. Baird
United States District Judge

APPENDIX A
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

FEDERAL TRADE COMMISSION,

Plaintiff,

vs.

SWEET SONG CORPORATION, in its own name and d/b/a WINDSOR & WHITE TRADING CO. and d/b/a PACIFIC WELLINGTON ASSOCIATES; TSAVORITE SWORD CORPORATION, in its own name and d/b/a PACIFIC WELLINGTON ASSOCIATES; RON HUDSON, INC., in its own name and d/b/a PACIFIC WELLINGTON ASSOCIATES; HARI JIWAN SINGH KHALSA, a/k/a STEPHEN JON OXENHANDLER, a/k/a BOB THOMAS; SIRI RAM SINGH KHALSA a/k/a WILLIAM TAYLOR, a/k/a PHILLIP ANDERSON; Defendants.

CV-97-4544 LGB (JGx)

AFFIDAVIT OF
DEFENDANT HARI
JIWAN SINGH KHALSA

Hari Jiwan Singh Khalsa, being duly sworn, hereby states and affirms as follows:

1. My name is Hari Jiwan Singh Khalsa. My current residence address is ______________________________________________________. I am a citizen of the United States and am over the age of eighteen. I have personal knowledge of the facts set forth in this Affidavit.
2. I am a defendant in FTC v. Sweet Song, et al., CV-97-4544 LGB (C.D. Cal. 1997), a case in the Central District of California.
3. On [date Order received], I received a copy of the STIPULATED FINAL JUDGMENT AND ORDER FOR PERMANENT INJUNCTION AND OTHER FINAL RELIEF AS TO SWEET SONG CORPORATION, TSAVORITE SWORD CORPORATION, RON HUDSON, INC., AND HARI JIWAN SINGH KHALSA ("Order"), which was signed by the Honorable Lourdes G. Baird and entered by the Court on [date of entry of Order]. A true and correct copy of the Order I received, upon which I have affixed my signature in the presence of the subscribed notary, is appended to this Affidavit.
4. Also attached to this Affidavit are true and correct copies of the financial disclosures dated July 21, 1997, July 28, 1997, January 6, 1998, and April 6, 1998, that were provided to the Federal Trade Commission on my behalf.
5. The above-mentioned financial disclosures, including the amendments contained in the letter of April 6, 1998, were materially true, accurate, and complete, to the best of my knowledge, as of the dates that they were signed.

I declare under penalty of perjury under the laws of the United States that the foregoing is true and correct. Executed on [date signed], at [city and state].

___________________________________
[Full name of defendant]

State of ____________________, City of ____________________

Subscribed and sworn to before me
this _____ day of _________, 1998.

_____________________________
Notary Public
My Commission Expires:
_________________________

APPENDIX B

PART 310: TELEMARKETING SALES RULE

Sec.
310.1 Scope of regulations in this part.
310.2 Definitions.
310.3 Deceptive telemarketing acts or practices.
310.4 Abusive telemarketing acts or practices.
310.5 Recordkeeping requirements.
310.6 Exemptions.
310.7 Actions by states and private persons.
310.8 Severability.
Authority: 15 U.S.C. 6101-6108.

§ 310.1 Scope of regulations in this part.

This part implements the Telemarketing and Consumer Fraud and Abuse Prevention Act, 15 U.S.C. 6101-6108.

§ 310.2 Definitions.

(a) Acquirer means a business organization, financial institution, or an agent of a business organization or financial institution that has authority from an organization that operates or licenses a credit card system to authorize merchants to accept, transmit, or process payment by credit card through the credit card system for money, goods or services, or anything else of value.

(b) Attorney general means the chief legal officer of a State.

(c) Cardholder means a person to whom a credit card is issued or who is authorized to use a credit card on behalf of or in addition to the person to whom the credit card is issued.

(d) Commission means the Federal Trade Commission.

(e) Credit means the right granted by a creditor to a debtor to defer payment of debt or to incur debt and defer its payment.

(f) Credit card means any card, plate, coupon book, or other credit device existing for the purpose of obtaining money, property, labor, or services on credit.

(g) Credit card sales draft means any record or evidence of a credit card transaction.

(h) Credit card system means any method or procedure used to process credit card transactions involving credit cards issued or licensed by the operator of that system.

(i) Customer means any person who is or may be required to pay for goods or services offered through telemarketing.

(j) Investment opportunity means anything, tangible or intangible, that is offered, offered for sale, sold, or traded based wholly or in part on representations, either express or implied, about past, present, or future income, profit, or appreciation.

(k) Material means likely to affect a person's choice of, or conduct regarding, goods or services.

(l) Merchant means a person who is authorized under a written contract with an acquirer to honor or accept credit cards, or to transmit or process for payment credit card payments, for the purchase of goods or services.

(m) Merchant agreement means a written contract between a merchant and an acquirer to honor or accept credit cards, or to transmit or process for payment credit card payments, for the purchase of goods or services.

(n) Outbound telephone call means a telephone call initiated by a telemarketer to induce the purchase of goods or services.

(o) Person means any individual, group, unincorporated association, limited or general partnership, corporation, or other business entity.

(p) Prize means anything offered, or purportedly offered, and given, or purportedly given, to a person by chance. For purposes of this definition, chance exists if a person is guaranteed to receive an item and, at the time of the offer or purported offer, the telemarketer does not identify the specific item that the person will receive.

(q) Prize promotion means:

(1) A sweepstakes or other game of chance; or

(2) An oral or written express or implied representation that a person has won, has been selected to receive, or may be eligible to receive a prize or purported prize.

(r) Seller means any person who, in connection with a telemarketing transaction, provides, offers to provide, or arranges for others to provide goods or services to the customer in exchange for consideration.

(s) State means any State of the United States, the District of Columbia, Puerto Rico, the Northern Mariana Islands, and any territory or possession of the United States.

(t) Telemarketer means any person who, in connection with telemarketing, initiates or receives telephone calls to or from a customer.

(u) Telemarketing means a plan, program, or campaign which is conducted to induce the purchase of goods or services by use of one or more telephones and which involves more than one interstate telephone call. The term does not include the solicitation of sales through the mailing of a catalog which: contains a written description or illustration of the goods or services offered for sale; includes the business address of the seller; includes multiple pages of written material or illustrations; and has been issued not less frequently than once a year, when the person making the solicitation does not solicit customers by telephone but only receives calls initiated by customers in response to the catalog and during those calls takes orders only without further solicitation. For purposes of the previous sentence, the term "further solicitation" does not include providing the customer with information about, or attempting to sell, any other item included in the same catalog which prompted the customer's call or in a substantially similar catalog.

§ 310.3 Deceptive telemarketing acts or practices.

(a) Prohibited deceptive telemarketing acts or practices.

It is a deceptive telemarketing act or practice and a violation of this Rule for any seller or telemarketer to engage in the following conduct:

(1) Before a customer pays (1) for goods or services offered, failing to disclose, in a clear and conspicuous manner, the following material information:

(i) The total costs to purchase, receive, or use, and the quantity of, any goods or services that are the subject of the sales offer; (2)

(ii) All material restrictions, limitations, or conditions to purchase, receive, or use the goods or services that are the subject of the sales offer;

(iii) If the seller has a policy of not making refunds, cancellations, exchanges, or repurchases, a statement informing the customer that this is the seller's policy; or, if the seller or telemarketer makes a representation about a refund, cancellation, exchange, or repurchase policy, a statement of all material terms and conditions of such policy;

(iv) In any prize promotion, the odds of being able to receive the prize, and if the odds are not calculable in advance, the factors used in calculating the odds; that no purchase or payment is required to win a prize or to participate in a prize promotion; and the no purchase/no payment method of participating in the prize promotion with either instructions on how to participate or an address or local or toll-free telephone number to which customers may write or call for information on how to participate; and

(v) All material costs or conditions to receive or redeem a prize that is the subject of the prize promotion;

(2) Misrepresenting, directly or by implication, any of the following material information:

(i) The total costs to purchase, receive, or use, and the quantity of, any goods or services that are the subject of a sales offer;

(ii) Any material restriction, limitation, or condition to purchase, receive, or use goods or services that are the subject of a sales offer;

(iii) Any material aspect of the performance, efficacy, nature, or central characteristics of goods or services that are the subject of a sales offer;

(iv) Any material aspect of the nature or terms of the seller's refund, cancellation, exchange, or repurchase policies;

(v) Any material aspect of a prize promotion including, but not limited to, the odds of being able to receive a prize, the nature or value of a prize, or that a purchase or payment is required to win a prize or to participate in a prize promotion;

(vi) Any material aspect of an investment opportunity including, but not limited to, risk, liquidity, earnings potential, or profitability; or

(vii) A seller's or telemarketer's affiliation with, or endorsement by, any government or third-party organization;

(3) Obtaining or submitting for payment a check, draft, or other form of negotiable paper drawn on a person's checking, savings, share, or similar account, without that person's express verifiable authorization. Such authorization shall be deemed verifiable if any of the following means are employed:

(i) Express written authorization by the customer, which may include the customer's signature on the negotiable instrument; or

(ii) Express oral authorization which is tape recorded and made available upon request to the customer's bank and which evidences clearly both the customer's authorization of payment for the goods and services that are the subject of the sales offer and the customer's receipt of all of the following information:

(A) The date of the draft(s);

(B) The amount of the draft(s);

(C) The payor's name;

(D) The number of draft payments (if more than one);

(E) A telephone number for customer inquiry that is answered during normal business hours; and

(F) The date of the customer's oral authorization; or

(iii) Written confirmation of the transaction, sent to the customer prior to submission for payment of the customer's check, draft, or other form of negotiable paper, that includes:

(A) All of the information contained in §§ 310.3(a)(3)(ii)(A)-(F); and

(B) The procedures by which the customer can obtain a refund from the seller or telemarketer in the event the confirmation is inaccurate; and

(4) Making a false or misleading statement to induce any person to pay for goods or services.

(b) Assisting and facilitating. It is a deceptive telemarketing act or practice and a violation of this Rule for a person to provide substantial assistance or support to any seller or telemarketer when that person knows or consciously avoids knowing that the seller or telemarketer is engaged in any act or practice that violates §§ 310.3(a) or (c), or § 310.4 of this Rule.

(c) Credit card laundering. Except as expressly permitted by the applicable credit card system, it is a deceptive telemarketing act or practice and a violation of this Rule for:

(1) A merchant to present to or deposit into, or cause another to present to or deposit into, the credit card system for payment, a credit card sales draft generated by a telemarketing transaction that is not the result of a telemarketing credit card transaction between the cardholder and the merchant;

(2) Any person to employ, solicit, or otherwise cause a merchant or an employee, representative, or agent of the merchant, to present to or deposit into the credit card system for payment, a credit card sales draft generated by a telemarketing transaction that is not the result of a telemarketing credit card transaction between the cardholder and the merchant; or

(3) Any person to obtain access to the credit card system through the use of a business relationship or an affiliation with a merchant, when such access is not authorized by the merchant agreement or the applicable credit card system.

§ 310.4 Abusive telemarketing acts or practices.

(a) Abusive conduct generally. It is an abusive telemarketing act or practice and a violation of this Rule for any seller or telemarketer to engage in the following conduct:

(1) Threats, intimidation, or the use of profane or obscene language;

(2) Requesting or receiving payment of any fee or consideration for goods or services represented to remove derogatory information from, or improve, a person's credit history, credit record, or credit rating until:

(i) The time frame in which the seller has represented all of the goods or services will be provided to that person has expired; and

(ii) The seller has provided the person with documentation in the form of a consumer report from a consumer reporting agency demonstrating that the promised results have been achieved, such report having been issued more than six months after the results were achieved. Nothing in this Rule should be construed to affect the requirement in the Fair Credit Reporting Act, 15 U.S.C. 1681, that a consumer report may only be obtained for a specified permissible purpose;

(3) Requesting or receiving payment of any fee or consideration from a person, for goods or services represented to recover or otherwise assist in the return of money or any other item of value paid for by, or promised to, that person in a previous telemarketing transaction, until seven (7) business days after such money or other item is delivered to that person. This provision shall not apply to goods or services provided to a person by a licensed attorney; or

(4) Requesting or receiving payment of any fee or consideration in advance of obtaining a loan or other extension of credit when the seller or telemarketer has guaranteed or represented a high likelihood of success in obtaining or arranging a loan or other extension of credit for a person.

(b) Pattern of calls. (1) It is an abusive telemarketing act or practice and a violation of this Rule for a telemarketer to engage in, or for a seller to cause a telemarketer to engage in, the following conduct:

(i) Causing any telephone to ring, or engaging any person in telephone conversation, repeatedly or continuously with intent to annoy, abuse, or harass any person at the called number; or

(ii) Initiating an outbound telephone call to a person when that person previously has stated that he or she does not wish to receive an outbound telephone call made by or on behalf of the seller whose goods or services are being offered.

(2) A seller or telemarketer will not be liable for violating § 310.4(b)(1)(ii) if:

(i) It has established and implemented written procedures to comply with § 310.4(b)(1)(ii);

(ii) It has trained its personnel in the procedures established pursuant to § 310.4(b)(2)(i);

(iii) The seller, or the telemarketer acting on behalf of the seller, has maintained and recorded lists of persons who may not be contacted, in compliance with § 310.4(b)(1)(ii); and

(iv) Any subsequent call is the result of error.

(c) Calling time restrictions. Without the prior consent of a person, it is an abusive telemarketing act or practice and a violation of this Rule for a telemarketer to engage in outbound telephone calls to a person's residence at any time other than between 8:00 a.m. and 9:00 p.m. local time at the called person's location.

(d) Required oral disclosures. It is an abusive telemarketing act or practice and a violation of this Rule for a telemarketer in an outbound telephone call to fail to disclose promptly and in a clear and conspicuous manner to the person receiving the call, the following information:

(1) The identity of the seller;

(2) That the purpose of the call is to sell goods or services;

(3) The nature of the goods or services; and

(4) That no purchase or payment is necessary to be able to win a prize or participate in a prize promotion if a prize promotion is offered. This disclosure must be made before or in conjunction with the description of the prize to the person called. If requested by that person, the telemarketer must disclose the no-purchase/no-payment entry method for the prize promotion.

§ 310.5 Recordkeeping requirements.

(a) Any seller or telemarketer shall keep, for a period of 24 months from the date the record is produced, the following records relating to its telemarketing activities:

(1) All substantially different advertising, brochures, telemarketing scripts, and promotional materials;

(2) The name and last known address of each prize recipient and the prize awarded for prizes that are represented, directly or by implication, to have a value of $25.00 or more;

(3) The name and last known address of each customer, the goods or services purchased, the date such goods or services were shipped or provided, and the amount paid by the customer for the goods or services; (3)

(4) The name, any fictitious name used, the last known home address and telephone number, and the job title(s) for all current and former employees directly involved in telephone sales; provided, however, that if the seller or telemarketer permits fictitious names to be used by employees, each fictitious name must be traceable to only one specific employee; and

(5) All verifiable authorizations required to be provided or received under this Rule.

(b) A seller or telemarketer may keep the records required by § 310.5(a) in any form, and in the manner, format, or place as they keep such records in the ordinary course of business. Failure to keep all records required by § 310.5(a) shall be a violation of this Rule.

(c) The seller and the telemarketer calling on behalf of the seller may, by written agreement, allocate responsibility between themselves for the recordkeeping required by this Section. When a seller and telemarketer have entered into such an agreement, the terms of that agreement shall govern, and the seller or telemarketer, as the case may be, need not keep records that duplicate those of the other. If the agreement is unclear as to who must maintain any required record(s), or if no such agreement exists, the seller shall be responsible for complying with §§ 310.5(a)(1)-(3) and (5); the telemarketer shall be responsible for complying with § 310.5(a)(4).

(d) In the event of any dissolution or termination of the seller's or telemarketer's business, the principal of that seller or telemarketer shall maintain all records as required under this Section. In the event of any sale, assignment, or other change in ownership of the seller's or telemarketer's business, the successor business shall maintain all records required under this Section.

§ 310.6 Exemptions.