Release Date: March 4, 2008

Contact:

Senior Deputy District Attorney Chris Harman

(805) 662-1710

District Attorney Gregory D. Totten announced today that the Consumer and Environmental Protection Unit has filed and settled a civil case against PipelineZ, LLC and Tom Tom Text, LLC, stemming from a series of seminars the companies held to market their products.

The investigation by the District Attorney's Office revealed that in September 2007, PipelineZ and Tom Tom Text held marketing seminars at hotels in Ventura County which were advertised as teaching how to increase profits using eBay, but in fact were used for marketing expensive Web page packages from PipelineZ and a non-exclusive reseller's license for a text messaging product from Tom Tom Text. Those products fall within the definition of a Seller Assisted Marketing Plan ("SAMP"), the sales of which are regulated under California law.

In order to market SAMPs in California , a company must comply with the requirements of Civil Code section 1812.200 et seq., which include registering with the State as a SAMP seller and giving certain disclosures to their potential customers, including the basis for any potential earnings claim, which the companies failed to do. As the sales occurred at seminars, they were also regulated by California law relating to home solicitation contracts and seminar sales solicitation contracts found in Civil Code sections 1689.7 and 1689.21.

In enacting the laws regulating Seller Assisted Marketing Plans, the California Legislature observed that often "purchasers of seller assisted marketing plans are individuals inexperienced in business matters who use their life savings to purchase the seller assisted marketing plan in the hope that they will earn enough money in addition to retirement income or salary to become or remain self-sufficient. Many purchasers are the elderly who are seeking a way to supplement their fixed incomes. The initial payment is usually in the form of a purchase of overpriced equipment or products. California purchasers have suffered substantial losses when they have failed to receive full and complete information regarding the seller assisted marketing plan, the amount of money they can reasonably expect to earn, and the previous experience of the seller assisted marketing plan seller." Civil Code section 1812.200.

The complaint, filed in Ventura County Superior Court, alleges the defendants violated California law by, among other things: (1) engaging in false or misleading advertising; (2) selling "Seller Assisted Marketing Plans" without providing required disclosures to purchasers and without providing substantiation for earnings claims; and (3) conducting seminar sales without notifying purchasers, orally and in writing, that they had three days within which to cancel any contract they signed with the defendants.

Without admitting or denying liability, the defendants stipulated to a final judgment that was signed by Superior Court Judge Glen Reiser. Under the final judgment, PipelineZ and Tom Tom Text were ordered to pay $85,000 in civil penalties, investigation and response costs, and attorney fees. The permanent injunction prohibits the defendants from violating California laws pertaining to the marketing of SAMPs, home solicitation contracts and seminar sales contracts.

Jed Knudsen, president of Tom Tom Text and PipelineZ, and one of his salesmen, Shaun Mitchell, also pled guilty to misdemeanor counts of unlawfully selling SAMPs in violation of Civil Code section 1812.217.

The case was investigated by the Ventura County District Attorney's Office.