In May 2018, Scott Cooper and his companies, World Patent Marketing Inc. and Desa Industries Inc., agreed to a settlement with the Federal Trade Commission that bans them from the invention promotion business, and ordered payment of $25,987,192. The FTC charged World Patent Marketing with being nothing more than a scam, bilking millions of dollars from inventors. “The record supports a preliminary finding that Defendants devised a fraudulent scheme to use consumer funds to enrich themselves,” concluded United States District Judge Darrin P. Gayles as he issued a preliminary injunction in August 2017. Matthew G. Whitaker, the Acting Attorney General of the United States who ascended to the position with the resignation of Jeff Sessions, served on the advisory board of World Patent Marketing. Worse, as PatentlyO reported yesterday, Whitaker was involved in some of the egregious intimidation that led to the charges, issuance of an injunction and ultimately the settlement.
The Federal Trade Commission originally charged the operators of World Patent Marketing with deceiving consumers and suppressing complaints about the company by using threats of criminal prosecution against dissatisfied customers. At least one such threat of criminal prosecution was made by Whitaker.
“I am a former United States Attorney for the Southern District of Iowa and I also serve on World Patent Marketing’s Advisory Board,” wrote Whitaker via e-mail in August 2015 to a disgruntled inventor who was attempting to get relief from World Patent Marketing for broken promises. “Your emails and message from today seem to be an apparent attempt at possible blackmail or extortion. You also mentioned filing a complaint with the Better Business Bureau and to smear World Patent Marketing’s reputation online. I am assuming you understand that there could be serious civil and criminal consequences for you if that is in fact what you and your ‘group’ are doing.”
Any attorney threatening a non-attorney with criminal prosecution when that person is demanding a refund after having been scammed is unconscionable. Calling a demand for a refund extortion is also grossly inaccurate, and borders on unethical conduct. Making a threat to sue and/or file complaints with the Better Business Bureau unless a refund is provided does not rise to extortion, and Whitaker knows or should have known that — any competent attorney would. Indeed, if such a statement does constitute the criminal act of extortion we would need to build far more jails because every litigator in the country has or will engage in that same type of pre-suit settlement banter. But for an attorney to make such egregiously inaccurate claims to a non-attorney at a minimum shows disregard for the candor expected by Rules 4.1 and 4.4 of the ABA Model Rules of Professional Conduct, if not a violation of those ethical Rules directly.
Indeed, as I wrote previously, the most egregious of the charges brought against World Patent Marketing, in my opinion, were the threats and intimidation directed toward complaining customers. Inventors are a hopeful and eternally optimistic bunch, that is what makes them successful. Scams that prey on that hope and optimism are an abomination, and need to be stopped. Stomping on that hope and engaging in a scheme to defraud inventors coupled with intimidation tactics is nothing short of reprehensible. And Whitaker participated in that intimidation.
Explaining his concerns about World Patent Marketing’s scheme of intimidation (although not Whitaker specifically) at the preliminary injunction stage, Judge Gayles wrote:
When customers became frustrated and complained to Defendants that WPM did not fulfill its promises, many threatened to report WPM’s actions to the Better Business Bureau (“BBB”), offices of state attorneys general, the FTC, and other consumer agencies. In response, Defendants—including Cooper and WPM’s head of security—and WPM’s lawyers intimidated and threatened customers to prevent them from complaining and to compel them to retract complaints.
Judge Gayles then recounted the events surrounding one particular customer who was intimidated and threatened. Judge Gayles wrote:
After months of trying to receive a refund or services, she filed a complaint with the BBB. She received a letter from a second lawyer who told her that seeking a refund constitutes extortion under Florida law and, “since you used email to make your threats, you would be subject to a federal extortion charge, which carries a term of imprisonment of up to two years and potential criminal fines. See 18 U.S.C. § 875(d).”
“Defendants made a series of misrepresentations to potential customers to induce them to purchase WPM services. Even after customers made initial investments, Defendants continued making misrepresentations to induce them to purchase more services and to make larger investments,” wrote Judge Gayles. Gayles would go on to specifically detail more than a dozen typical misrepresentations made by World Patent Marketing to customers.
Important questions need to be answered. Did Whitaker know about the fraudulent scheme devised by World Patent Marketing? Was he unwittingly allowing his name to be used on a Board of Advisors without really knowing what was going on inside the business? What are the facts surrounding his August 21, 2015 e-mail threatening civil and criminal prosecution if the defrauded inventor went to the Better Business Bureau?
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