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From Antitrust Law Daily, October 8, 2015

Owner of “alcoholism cure” program given choice: compliance or jail

By Greg Hammond, J.D.

The owner of a program that falsely claimed it could cure alcoholism has been ordered to comply with the requirements of a final judgment or face incarceration. At the FTC’s and Florida Attorney General’s request, the federal district court in Jacksonville, Florida, found the owner in civil contempt by failing to pay the $730,000 monetary judgment, consisting of unjust gains, or to otherwise submit to the government agencies sufficient customer information and compliance reports (FTC v. Alcoholism Cure Corp., October 7, 2015, Howard, M.).

The FTC and Florida Office of Attorney General filed suit against Alcoholism Cure Corp., doing business as Alcoholism Cure Foundation (ACF), and the corporation’s owner, Robert Krotzer, alleging false advertising and deceptive practices, in violation of the FTC Act and the Florida Deceptive and Unfair Trade Practices Act (FDUTPA). The court granted default judgment against ACF and summary judgment against ACF’s owner, finding the defendants made false and deceptive representations concerning: (1) the efficacy of ACF’s “Permanent Cure Program’s” ability to cure alcoholism; (2) the scientific substantiation of the Permanent Cure Program; (3) the cost and cancellation policy for the Permanent Cure Program; (4) the professional qualifications of the owner and other ACF employees; and (5) the confidentiality and privacy of consumers’ sensitive personal financial and medical information.

Under the final judgment, ACF’s owner was ordered, in part, to remit unjust gains of over $730,000 as equitable monetary relief, as well as submit customer information and compliance reports. The FTC and Florida Attorney General later filed, and the court granted, a motion for order to show cause why ACF’s owner should not be held in contempt for failing to comply with the final judgment.

Contempt. The court first concluded that the owner failed to pay any of the final judgment and failed to establish an inability defense because he did not show he made, in good faith, all reasonable efforts to comply. Rather, the court found that the owner failed to disclose what happened to the unjust gains; he had assets with which he could have partially satisfied the judgment, despite testifying that he could not pay; he gave no explanation as to why the over $8,000 in payments he received from ACF customers post-judgment were not used to pay down the judgment; and he has neither made payments nor fully disclosed his assets, expenses, liabilities, and banking records.

The owner also failed to comply with the portion of the final judgment requiring that he produce a complete consumer list and send notice to consumers that the court has ruled against ACF based on deceptive and unfair business practices. The court concluded that the owner made a “willful decision” not to comply, despite his “inability to comply” arguments, given his contradictory testimony concerning customer records and testimony that he did not send notice to consumers with whom he was in contact by virtue of continued receipt of checks from them.

Lastly, the court found that the two untimely compliance reports the owner filed did not “substantially comply” with the final judgment because he failed to report information concerning his businesses and entities, and he marketed a book using the term “Molecule Multiplicity,” despite being ordered to cease his use of that trade name or trademark. The owner was therefore found in civil contempt.

Remedies. With regard to the owner’s compliance with the monetary judgment, the court would allow the owner to avoid incarceration if he, within 60 days of the order, remits the $8,099 in proceeds received by ACF post-judgment, and produces comprehensive documentation of: (1) inability to pay the monetary judgment; (2) a detailed accounting of all proceeds received by AFC; (3) any assets transferred to his wife or his family trust after 2005; (4) all current income, assets, and liabilities; (5) his personal and household expenses; and (6) information concerning the structure of and rights in his family trust.

To avoid incarceration for not complying with the customer list and notice requirements, the owner must, within 60 days of the order, prepare and produce the complete customer list and distribute the required notice. If he claims an inability to comply, he must produce comprehensive documentation of his inability to comply and surrender to the FTC and Florida Attorney General all electronic hardware used to communicate with ACF consumers or used to store ACF records.

Finally, in order to avoid incarceration for not complying with the compliance report requirements, the owner must, within 60 days of the order, prepare and produce a compliance report that includes: (1) descriptions of his compliance with each part of the final judgment; (2) use of any terms covered by Part II of the final judgment; (3) use of any fictitious names and aliases, and his business activities since final judgment; and (4) to the extent he must report a lack of compliance, documentation of his inability to comply, including proof of all reasonable, good faith attempts to comply. The court further enjoined the owner from accepting payments in any form from ACF consumers.

The case number is 3:10-cv-266-J-34JRK.

Attorneys: Elise Whang, Federal Trade Commission. Gregory A. Jackson, Jr., Florida Office of Attorney General. Robert Douglas Krotzer, pro se.

Companies: Alcoholism Cure Corp.

MainStory: TopStory Advertising StateUnfairTradePractices FederalTradeCommissionNews FloridaNews

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