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May 19, 2008

Attorney General Alleges Telemarketing Fraud by "Galaxy Member Benefits"

Attorney General Tom Miller filed a consumer fraud lawsuit Monday alleging consumer fraud by a Florida-based operation doing business as Galaxy Member Benefits.

Miller said: “We allege Galaxy’s telemarketers called Iowans and used deception to entangle them in unwanted memberships, and in some cases made unauthorized credit card charges or withdrawals from consumers’ bank accounts. Galaxy sometimes charged consumers without any knowledge or approval by the consumer and in amounts approaching $300.”

According to the lawsuit, Galaxy telemarketers got the attention of some consumers by claiming to offer $100 worth of free gas. Other Iowans reported that their first contact with Galaxy involved a telemarketing call offering a so-called government grant for thousands of dollars. Such calls were followed by unauthorized charges to consumers’ bank accounts and credit cards. Some unauthorized charges were recurring, and some charges were about $300.

“Instead of getting a substantial government grant deposited in their account, as they were promised, some consumers discovered hundreds of dollars were taken from their bank account without authorization,” Miller said.

Defendants in the lawsuit, which was filed Monday in Polk County District Court, are Galaxy Gadgets and Gizmos LLC of Palm Harbor, Florida, doing business as Galaxy Member Benefits, and John E. Bartholomew, Jr., whom the AG believes is responsible for the alleged violations.

The suit alleges the defendants marketed membership programs to Iowa consumers through telemarketing and by mail, but failed to provide consumers the protections and disclosures required by Iowa law – including written contracts and written notices of cancellation rights. “We allege the defendants ignored these basic requirements,” Miller said.

Consumers who tried to follow-through on the offer found themselves entangled in an unwanted membership and, in some cases, later discovered unauthorized bank account withdrawals or credit card charges up to several hundred dollars, according to the lawsuit.

Miller’s suit also alleged that consumers who contacted Galaxy to get charges removed encountered lengthy periods on hold, disconnected numbers, rude treatment, and claims that nothing could be done.

The lawsuit asks the Court to order restitution for consumers and civil penalties up to $40,000 per violation. It asks the Court to enter an injunction preventing further violation of the Iowa Consumer Fraud Act and requiring compliance with the Iowa Buying Club Membership Law.

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The AG’s lawsuit cited several examples to illustrate Galaxy’s alleged consumer fraud violations:

* In the last year a 63-year-old woman from Primghar, Iowa, received telephone calls from Galaxy representatives, but declined any and all offers presented. Nevertheless, she later received a letter indicating that more than $100 had been withdrawn from her bank account by Galaxy. She phoned Galaxy repeatedly but was either disconnected or treated rudely. A promised refund was never received.

* In 2007 a man from Council Bluffs discovered three unauthorized withdrawals from his bank account, in the approximate amounts of $19, $29, and $299. He learned that he was being charged for a Galaxy “membership club.” Working with his bank, he managed to reverse some, but not all, of the unauthorized charges.

* A 74-year-old Clinton resident received a phone call last year from a Galaxy representative offering him free gasoline. He was asked to provide his credit card number, which he did, only to later discover unauthorized charges.

* An Aplington resident received a call from a Galaxy representative informing him that he would be receiving a government grant in the amount of $10,000. He was told that the grant would be deposited into his bank account. However, he was instructed to respond “yes” to a series of tape-recorded questions, one of which involved enrolling as a Galaxy member. On the first run-through he said “no” when one of the questions asked if he wished to be a Galaxy member, and so he was again instructed to respond only in the affirmative, and the series of questions was repeated. He later discovered an unauthorized withdrawal by Galaxy from his bank account in the approximate amount of $240, which he managed to have reversed. He never received the promised government grant.


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