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UNITED STATES v. CEN-CARD AGENCY

November 8, 1989

UNITED STATES OF AMERICA and UNITED STATES POSTAL SERVICE, Plaintiffs,
v.
CEN-CARD AGENCY/C.C.A.C., a New Jersey Corporation, SANTO RIGATUSO, a/k/a BOB HARRIS, an individual, and DIANA RIGATUSO, an individual, Defendants



The opinion of the court was delivered by: SAROKIN

 Introduction

 Defendants in this case preyed upon a segment of our society which finds itself unable to obtain credit that many, if not most, consumers take for granted. Defendants through intentionally false and misleading advertising suggested that customers could obtain major credit cards through the payment of a substantial fee. In fact, the payment of that fee entitled the consumer to the dubious distinction of being able to purchase on credit from catalogues, only merchandise manufactured or distributed by defendants or their affiliated companies.

 Defendants challenge the court's power to order the return of moneys obtained by them to the consumers so defrauded. Defendants suggest that the victims of their fraud may only be reimbursed by bringing direct suits against Cen-Card, and that the government has neither the standing nor the power to obtain or return these funds.

 Defendants surely recognize that individual suits to recover $ 39.95 or $ 49.95 do not make economic sense and that a class action is both expensive and time consuming. The court concludes for the reasons hereinafter set forth that the government has the right and, indeed, the duty to procure these refunds for the victims of defendants' fraud. Government performs a vital service when it protects consumers from avarice and fraud in the marketplaces and restores what was wrongfully taken from those who were its victims.

 The court now considers motions by the United States for summary judgment and awards of restitution and prejudgment interest, and a cross-motion by defendant Diana Rigatuso for summary judgment on the claims against her.

 Background

 This action stems from Cen-Card's solicitation in July 1988, of seven million persons, which offered credit cards with an initial charge limit of $ 2,850 without any credit investigation. The company's advertising suggested that customers would receive VISA, Mastercard or other nationally recognized credit cards for a $ 39.95 annual or $ 49.95 lifetime fee. The 28,000 respondents to this solicitation either never heard from Cen-Card or received a cardboard card entitling them to purchase from an enclosed catalog of costume jewelry and reconditioned appliances and electric merchandise manufactured or distributed by companies which defendants owned and controlled.

 The United States filed suit in this court under 18 U.S.C. sections 1341, 1343, 1345, and 39 U.S.C. 3007 seeking restitutionary and preliminary and final injunctive relief against Cen-Card. On September 23, 1988, the court granted plaintiff's request for a preliminary injunction enjoining Cen-Card's allegedly fraudulent solicitations, allowing detention of Cen-Card's mail, freezing the company's assets, and ordering prompt compliance with government discovery requests. This order was affirmed by the Third Circuit. See United States v. Cen-Card Agency, 872 F.2d 411 (3rd Cir. 1989). In the meantime, defendant Santo Rigatuso, Cen-Card's owner, was held in criminal contempt for non-compliance with discovery requests, for conducting a renewed solicitation effort, and for dissipating and secreting Cen-Card assets with the aid of his wife, defendant Diana Rigatuso, a Cen-Card director who had not been active in the company's solicitations. (See Government's Stipulation of Facts, Diana Rigatuso Aff., Defendants' Exh. 1).

 The Government now moves for summary judgment, arguing that no genuine issues of material fact remain as to whether Cen-Card's activities were a scheme or artifice to defraud or whether Cen-Card made use of the mails and wires in its solicitations, as required under 18 U.S.C. secs. 1341 and 1343. Furthermore, the Government seeks final injunctive relief barring prospective fraudulent solicitations, and a money judgment providing restitution to all of Rigatuso's pre-mail detention victims with pre-judgment interest.

 LEGAL DISCUSSION:

 Motion of the United States for ...


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