Dec 26, 2017 | Consumer Protection, Employment & Technology Archive
Apple iPhone Class Action Filed in the Northern District of California
iPhone Class Action Seeks Injunctive Relief & Damages Due to Apple’s Alleged Failure to Inform Consumers that iPhone 6, iPhone 6S, iPhone SE and iPhone 7 Updates to iOS 10.2.1 and/or iOS 11.2 Would Significantly and Artificially Reduce iPhone Performance.
iPhone Class Action Alleges Apple Failed to Inform Consumers that iPhone Performance Would be Restored by As Much As 70% With a Simple iPhone Lithium-Ion Battery Replacement Costing Less than $100 at an Apple Store.
Image: Pixabay, Andile Moyo (DTech), CC0 1.0 Universal
iPhone Class Action Alleges Apple Purposefully Failed to Disclose That iPhone Update Eroded iPhone Performance
According to an iPhone class action lawsuit filed on December 22, 2017 in United States District Court, Northern District of California, by Plaintiff Nicole Gallmann against Apple Inc.:
In the modern digital age, batteries “wear” over time. The lithium-ion battery used by Apple slowly diminishes its ability to hold a charge with time and use. However, normal lithium-ion battery wear does not reduce performance; a weakening battery has no effect on performance unless there is software that links the two. And that is precisely what Apple did.
In rolling out iOS 10.2.1, Apple claimed to “bug fixes and improve[ ] the security of [the] iPhone or iPad” and “improve[ ] power management during peak workloads to avoid unexpected shutdowns on the iPhone.”[] What Apple purposefully failed to disclose, however, was that the update would act as a latent time-bomb that slowly eroded the phone’s performance to the frustration of the user – the software update throttled the handset’s performance.
The effect of Apple’s actions was to a) purposefully reduce device performance with time, and b) deprive consumers of material information concerning the cause of the decline in performance of [iPhone 6, iPhone 6S, iPhone SE or iPhone 7 devices].
iPhone Class Action Allegations
According to the iPhone class action complaint filed by Plaintiff Gallman:
On January 23, 2017, Apple released iOS 10.2.1. The update specifically addressed aging batteries, and expressly represented that the purpose was to prolong the useful life of the Device. Apple promised to “deliver the best experience for customers, which includes overall performance and prolonging the life of their devices.”[]
For example, the update specifically sought to prevent the handset from shutting down if a performance spike drew too much power—i.e., turning off unexpectedly as if the [iPhone] was dead while the phone’s battery still had a charge. While the battery issue was a reported problem at the time,[] the iOS update did far more than address shutdowns on those few phones that experienced shutdowns – it also surreptitiously and purposefully throttled the performance speed on the iPhone 6, 6S, and SE’s by as much as 70 percent. [Emphasis added]
Furthermore, the update did not even fully address the purported battery “shutdown” issue on all devices: 20 percent of iPhone 6s and 30 percent of iPhone 6 devices that previously experienced unexpected shut down issues continued to experience those issues, according to a statement released by Apple.[] At the time the iPhone 7 was not impacted. However, it is now known that the feature at the center of the iOS 10.2.1 update was later extended to iPhone 7 with the release of iOS 11.2, and will be added to other products in the future. [Emphasis added]
Apple also informed consumers that for those who need it, a message will appear on the screen inside Settings if that phone’s “battery needs service.” Apple did this to “add a bit more transparency to people wondering when Apple considers the battery worn down enough to get swapped out.” Apple even offered consumers tips regarding when to swap out a battery.[]
However, despite all of these disclosure opportunities, Apple never informed consumers that the 10.2.1 update reduced unexpected phone shutdowns by slowing the device’s performance dramatically. [Emphasis added]
Moreover, consumers experiencing these issues were never notified by Apple (as it represented it would) that “the [device’s] battery needs service.” [Emphasis added]
Because Apple failed to informed consumers that the performance issues were artificially caused by the iOS update in conjunction with an older (but still perfectly functional) battery, consumers were denied the opportunity to make an informed decision regarding whether to upgrade their device or instead simply replace the battery. [Emphasis added]
Apple’s failure to disclose the impact of the iOS update 10.2.1 (and the later iOS 11.1) and remedy the issues it produced (and purported to resolve) constitutes an unfair trade practice and breach of the covenant of good faith and fair dealing implied in Apple’s contracts with Plaintiff and the class. Plaintiff and the class were harmed as a direct and proximate result of Apple’s actions.
One source referenced in the class action complaint was a Motherboard story by Jason Koebler, “Apple Throttles iPhones that Have Old Batteries (But Didn’t Tell You About It).” The article stated that
[w]hat makes it worse is that Apple does not make it easy to replace the battery yourself, discourages third party repair, and doesn’t have the first party repair infrastructure to handle large numbers of in-store battery swaps, especially in states that don’t have lots of Apple Stores.
. . .
The scandal here is not that Apple throttles your phone. It’s that it doesn’t tell you it throttles, and makes it hard for you to fix the problem (or for you to know about your repair options). The scandal is in the design of the iPhone itself, which requires proprietary tools to open and various components to be removed in order to replace the only part of the phone that is guaranteed to go bad. The scandal is that Apple actively discourages you from trying to fix your own phone, lobbies against legislation that would make it easy for you to restore your phone to peak condition. If you’re mad about this, you’re not crazy—you have every right to be.
iPhone Class Action – The iPhone Class
The class action was brought on behalf of the named Plaintiff and a proposed class of all consumers who reside in the United States and owned either iPhone 6, iPhone 6S, iPhone SE or iPhone 7 models purchased in the United States and upgraded to iOS 10.2.1, or a later version, prior to the date of the iPhone class action complaint (filed December 22, 2017).
If you own an iPhone 6, iPhone 6S, iPhone SE or iPhone 7 which was upgraded to iOS 10.2.1, or a later version, and have questions about your potential legal rights, please fill out the form on the right or send an e-mail to [email protected].
Dec 24, 2017 | Consumer Protection, Employment & Technology Archive
Apple iPhone Slowdown – Apple Inc. Sued by iPhone Owners
The Mercury News reported (“Two iPhone owners sue Apple over iPhone slowdown admission, seek class-action status”) that
Two iPhone owners based in Los Angeles sued Apple . . . a day after the Silicon Valley technology giant admitted it slows down older iPhones to prevent unexpected battery-related shutdowns.
Plaintiffs . . . filed the lawsuit in the Central District Court of California.
[The Plaintiffs] argue Apple installed a new feature to throttle old iPhones without the owners’ permission. They also allege it intentionally interfered with the phones to damage them, which became a “substantial factor in causing (iPhone owners) to replace iPhones, buy new batteries, or loss of usage of their iPhone.”
. . .
[The Plaintiffs] filed the lawsuit after Apple acknowledged . . . for the first time that [Apple] installed a feature last year for iPhone 6, [iPhone] 6S and [iPhone] SE models that have a degraded and aged battery, to prevent unexpected shutdowns. However, the feature lessened the computing power of the iPhones to stop overuse of battery power.
“Our goal is to deliver the best experience for customers, which includes overall performance and prolonging the life of their devices,” Apple said in a statement to multiple media outlets. “Last year we released a feature for iPhone 6, iPhone 6s and iPhone SE to smooth out the instantaneous peaks only when needed to prevent the device from unexpectedly shutting down during these conditions. We’ve now extended that feature to iPhone 7 with iOS 11.2, and plan to add support for other products in the future.”
The statement drew widespread reactions on social media. It also fanned speculation by some about whether Apple slows down old iPhones to pressure users to upgrade to a newer model.
[The Plaintiffs] allege Apple breached implied contracts with them and other iPhone owners by “purposefully slowing down older iPhone models when new models come out and by failing to properly disclose that” when they bought their iPhones.
The Plaintiffs, according to the story, “. . . argued that Apple never asked them for permission to install this feature and did not give them the option to choose or bargain a way to turn off the feature.”
Image: Pixabay, Attapon Thaphaengphan (attapontom), CC0 1.0 Universal
Apple iPhone Slowdown– Class Action Lawsuit Alleges Deceptive Trade Practices & False Advertising
On December 22, 2017, a class action lawsuit was filed in United States District Court, Southern District of New York, against Apple Inc. According to the class action complaint, the lawsuit was brought
[o]n behalf of owners of all versions of the iPhone 6 and/or iPhone 7 who were harmed when their devices’ software was updated to any of the following: iOS 10.2.1 (released on January 23, 2017); iOS 10.3 (released on March 27, 2017); iOS 10.3.1 (released on April 3, 2017); iOS 10.3.2 (released on May 15, 207); iOS 10.3.3 (released on July 19, 2017) . . . iOS 11.0.1 (released on September 26, 2017); iOS 11.0.2 (released on October 3, 2017); iOS 11.0.3 (released on October 11, 2017); iOS 11.1 (released on October 31, 2017); iOS 11.1.1 (released on November 9, 2017); iOS 11.1.2 (released on November 16, 2017); iOS 11.2 (released on December 2, 2017); and iOS 11.2.1 (released on December 13, 2017) . . .. [Emphasis added]
The class action complaint also alleges that
Defendant Apple Inc. . . . engaged in deceptive trade practices and false advertising in violation . . . when it represented that the iOS 10 and iOS 11 [u]pdates were compatible with and support iPhone 6s and iPhone 7s. Specifically, Apple failed to warn iPhone 6 and iPhone 7 owners that the iOS 10 and iOS 11 [u]pdates could significantly and negatively interfere with their phones’ performance. To the contrary, Apple specifically touted the increased phone performance that would result from the iOS 10 and iOS 11 updates. Apple has since admitted[,] however that, through the iOS 10 and iOS 11 [u]pdates, Apple deliberately prevents chips in iPhone 6s and iPhone 7s from reaching their full processing power. In other words, instead of enhancing the performance of iPhone 6s and iPhone 7s as Apple represented, the iOS 10 and iOS 11 [u]pdates were designed to limit the devices’ performance in certain circumstances.
Having updated their phones, Plaintiffs and owners of iPhone 6s and iPhone 7s must either continue using devices that experience significant lag time that interferes with their ordinary use, or purchase a new phone for hundreds of dollars. [Emphasis added]
Apple iPhone Slowdown – Apple Admits Slowing Down iPhone Devices
Newstalk.com reported (“Apple facing class action lawsuits after admitting to slowing down old iPhones”) that class actions allege that Apple “deceived customers by slowing down older phones.” Newstalk.com reported that
[e]arlier this week, the company admitted slowing down outdated iPhone devices with low-capacity batteries, saying it is a way of protecting the devices’ components.
The first lawsuit was filed in California and requests that Apple stop reducing the processor speed of affected devices and pay compensation to affected customers.
The Chicago Sun Times reported another case in which citizens in Ohio, Indiana, and North Carolina are suing Apple on behalf of customers who own iPhone 5, [iPhone] 6 and [iPhone] 7 devices.
The complainants allege that Apple was “deceptive, immoral, and unethical” because the technology was designed to “purposefully slow down or ‘throttle down’ the performance speeds” of the iPhones.
Apple iPhone Slowdown – Apple Admits Slowing Older Model iPhones With Low-Capacity Batteries
Newstalk.com reported (“Apple admits slowing down old iPhone models with flagging batteries”) that Apple admitted old iPhones were slowed down with low-capacity devices to protect the components of the devices. Newstalk.com reported that
Apple has . . . admitted that the slowing of the [iPhone’s] central processing unit (CPU) does take place, although not to force consumers to upgrade their devices.
The act of slowing down a computer processor is called “downclocking” or “underclocking”.
Following a study by a Reddit user who claimed that Apple’s tech automatically slowed phones when the battery has a diminished charge capacity, the company said this was due to a need to protect electronic components.
In a statement, Apple said that, as they age, lithium-ion batteries used in its phones become less able to provide the top levels of electrical current needed.
The problems with peak current draws especially occur when batteries are cold or low on charge – “which can result in the device unexpectedly shutting down to protect its electronic components”, Apple said.
iPhone users had complained about their devices turning off abruptly even when they had a significant amount of charge left.
Apple iPhone Slowdown – Apple Admits to Intentionally Slowing Down CPU Frequencies of Older iPhone Models
Complex.com reported (“Apple Hit With Class Action Lawsuit for Purposely Slowing Down Older iPhone Models”) that “Apple may have made a misstep by admitting to intentionally slowing down CPU frequencies on older iPhone models, because some legal trouble is soon headed their way.” Complex.com reported that two individuals alleged in a class action lawsuit that
Apple’s policy of slowing down older iPhone models purposely targets the consumers’ wallets and disrupts the customer experience. [The Plaintiffs] also are claiming that Apple’s tactic of slowing down performance speeds of the iPhone in order to conserve battery life was never requested or agreed upon by customers, not to mention an obvious tactic to coerce people into forking over cash for an upgrade.
The discovery about Apple’s purposeful speed switching was first brought to light via a Reddit post, where a user shared screenshots of the performance speeds before and after getting a battery replacement (once a new battery was installed, the speed went back to factory settings.)
Apple iPhone Slowdown – The Reddit Post
Complex.com reported that
[a] recent Reddit post posited that Apple was intentionally slowing down iPhones with low-capacity batteries. And that same post concluded that most iPhone users whose phones have slowed probably attribute it to iOS updates.
A number of people (including the original poster) confirmed that when they did replace their batteries their phone performance and CPU clock speeds returned to normal. As pointed out by The Verge, this is relevant (especially if you have an outdated iPhone) because users whose phones slow down are probably tempted to pony up their dough for an unnecessarily expensive upgrade.
The Reddit post can be viewed by clicking Apple iPhone Slowdown Reddit post.
The Verge story referenced by Complex.com can be viewed by clicking “Apple confirms iPhones with older batteries will take hits in performance.”
Apple iPhone Slowdown – Is Your iPhone Slowing Down?
CNN Tech posted a story (“What to do if you think Apple’s slowing down your phone”), which contains information about, among other things, why Apple is slowing down phones and whether your iPhone is affected.
Apple iPhone Slowdown – iPhone 6 & iPhone 7 Owners
If you own, or owned, an iPhone 6 or iPhone 7 updated to iOS 10.2.1 (released January 23, 2017); iOS 10.3 (released March 27, 2017); iOS 10.3.1 (released April 3, 2017); iOS 10.3.2 (released May 15, 207); iOS 10.3.3 (released July 19, 2017); iOS 11.0.1 (released September 26, 2017); iOS 11.0.2 ( released October 3, 2017); iOS 11.0.3 (released October 11, 2017); iOS 11.1 (released October 31, 2017); iOS 11.1.1 (released November 9, 2017); iOS 11.1.2 (released November 16, 2017); iOS 11.2 (released December 2, 2017) and iOS 11.2.1 (released December 13, 2017) and have questions about the iPhone-related class action lawsuits or wish to discuss your potential legal rights, please fill out the form on the right above or send an e-mail to [email protected].
Dec 24, 2017 | Consumer Protection, Employment & Technology Archive
Consumers Making Hotel Room Reservations Allegedly Led to Believe They Were Dealing Directly with Hotels
Consumers Not Adequately Notified They Would Be Charged Immediately When Reservations Booked, Instead of After Arrival at Hotel
The Federal Trade Commission announced that Utah-based third-party hotel room reservation resellers have settled FTC charges that hotel room reservation resellers misled consumers through ads, webpages, and call centers which led consumers to mistakenly believe they were reserving hotel rooms directly from the hotel, and failed to adequately tell consumers that their credit cards would be charged immediately, rather than after they arrived at the hotel.
Hotel Room Reservation Reseller Defendants Barred from Further Deceptive Conduct
The FTC’s proposed order settling the FTC’s complaint will prevent the Defendants from further deceptive conduct in the future and specifies changes the Defendants must make to ensure consumers have the information they need to make informed hotel room reservation decisions.
The Hotel Room Reservation Reseller Defendants
According to the FTC, Reservation Counter, LLC and its two parent companies, Partner Fusion, Inc. and TravelPASS Group, LLC, sell hotel room reservations, or bookings, to consumers nationwide. The entities get hotel room inventory primarily through other online travel agencies (e.g., Expedia, Priceline, and Orbitz) and then market the rooms themselves.
Further, most of the Defendants’ hotel room reservation bookings result from search engine ads, which appear in response to consumers’ online searches for hotels. When consumers click on the link in one of the Defendants’ ads, they are sent to webpages owned by Reservation Counter and its parent companies which feature information about the hotel searched. Consumers can book hotel rooms online or by calling the phone number listed in the companies’ ads and webpages and speaking with sales agents at call centers controlled by the Defendants.
The FTC’s Complaint Against the Hotel Room Reservation Resellers for Permanent Injunction & Other Equitable Relief
According to the FTC’s complaint, the ads, webpages, and call centers create the impression that consumers are booking rooms directly with the advertised hotel, when, in fact, consumers are booking hotel rooms through the Defendants, not the hotel. According to the complaint, consumers who book through the Defendants may not be eligible to receive reward points or other hotel loyalty program benefits, and hotel policies, such as cancellation and refund policies, may not be the same as when booking directly from the hotel.
When booking hotel rooms through the Defendants, consumers must provide credit card or other payment information. In many instances, consumers are charged immediately for the cost of the hotel room, plus applicable fees and taxes, rather than after arriving at the hotel. According to the complaint, consumers are not adequately informed that they will be charged immediately.
The FTC’s Proposed Order Settling the Charges Against the Hotel Room Reservation Resellers
The FTC’s proposed order settling the charges prohibits Reservation Counter and its parent companies from making misrepresentations about their affiliation with hotels. The proposed order expressly prohibits the companies from using a hotel name or logo in any search engine ad, URL, website, webpage, or any other type of advertising in a misleading way. It also bars them from placing their telephone number directly near a hotel name, logo, or address in a manner that misrepresents that callers would be contacting the hotel directly.
In addition, the FTC’s proposed order requires the Defendants to disclose material information, including the total cost of a hotel room and when they will charge a consumer’s payment card. The order also requires the companies to disclose that callers to any of their hotel reservation call centers have reached an independent, third-party travel agency and to monitor their call centers to prevent misrepresentations.
According to the FTC’s complaint, filed in United States District Court, District of Utah, Central Division:
Defendants Reservation Counter, TravelPASS, and Partner Fusion have operated as a common enterprise while engaging in the [alleged] deceptive acts and practices . . .. These [D]efendants have conducted the business practices . . . as interrelated companies that have common control, officers, business functions, employees, and office locations. Each of these [D]efendants is jointly and severally liable for the acts and practices alleged below.
Defendants sell hotel room reservations, or bookings, to consumers. They obtain hotel room inventory primarily through affiliate network programs sponsored by first-tier online travel agencies . . . such as Expedia, Priceline, and Orbitz, but they advertise and market the available hotel rooms through their own advertisements, websites, and call centers.
Defendants advertise through online search engine marketing, using search engines such as Google, Yahoo, and Bing. A substantial majority of Defendants’ search engine advertisements are designed around a specific hotel brand name and a specific city. About 95 percent of Defendants’ bookings are made through search engine marketing.
When a consumer clicks a link in one of Defendants’ search engine ads, the consumer is directed to websites owned and controlled by Defendants, including ReservationCounter.com, ReservationDesk.com, and Reservation-Desk.com.
By following the link provided in Defendants’ advertisements, consumers can book hotel rooms online, using desktop, laptop, notebook, and tablet computers, and smartphone mobile devices.
Consumers also can book hotel rooms by calling the telephone number listed in Defendants’ advertisements and websites. Consumers using smartphone mobile devices can “click-to-call” a sales agent merely by clicking a link in the search results ad. Defendants have handled sales calls (and customer service calls) through their own call centers, located in several countries in Central America, since July 2012.
The phone number listed in Defendants’ search engine advertising acts as a customer identifier that allows the sales agent to access the caller’s online session. Thus, at the time the agent answers the call, the agent knows the specific hotel searched or last visited by the consumer.
At the time of booking, Defendants send the reservation and payment information, through Internet transmission, to the applicable [online travel agency], which processes the payment and transmits the reservation information to the booked hotel.
Defendants charge consumers for the amount paid to the hotel as well as amounts they and the [online travel agency] retain as fees for their services. Consumers also are charged a “tax recovery fee” to cover the anticipated taxes for the hotel room reservation.
During most or all times material to [the FTC’s] [c]omplaint, Defendants processed most hotel bookings using a business model in which the customer prepays the cost of the hotel room immediately at the time of the booking and not after the customer arrives at the hotel. In contrast, for guests booking rooms directly with a hotel, many hotels frequently require credit card or other payment information at the time the reservation is made in order to hold the reservation, but do not actually charge the consumer for payment of the hotel room, plus applicable fees and taxes, until after the consumer has arrived at the hotel.
Defendants’ hotel [room] reservation advertising and marketing practices . . . create the impression that consumers are booking hotel rooms directly through the advertised hotel, and thus, that reservations made through Defendants are subject to the same terms and policies as those applicable to consumers who book hotel rooms directly with the hotel. However, consumers who are members of the advertised hotel’s loyalty or reward program are not eligible to receive reward points or other program benefits when they book hotel rooms through Defendants, and the available hotel policies, such as payment or cancellation policies, are not necessarily the same as those for consumers who book their reservations directly through the hotel. Also, some special rates may not be available to consumers who book hotel rooms through Defendants, such as rates for weddings, conferences, or other special events where the hotel offers a discount rate for a specific block of rooms.
An Example of a Hotel Room Reservation Reseller Search Engine Advertisement
The FTC’s complaint provided [t]he following . . . example of a search engine advertisement that Defendants placed during the relevant period. A consumer who typed the phrase “Hilton Birmingham Alabama” into a Yahoo search engine box would see the following search results:
The first and second listed results are paid advertisements for hotel reservation websites owned and operated by Defendants. Each advertisement conveys the impression that clicking on the advertisement will take consumers to websites owned and operated by or directly for the advertised Hilton hotel located in the Birmingham, Alabama area.
The Hilton hotel name appears prominently in the headline of each advertisement in large bold lettering:
“Hilton Birmingham Alabama – Hilton.ReservationCounter.com”
Hilton Birmingham Al – 8 Perimeter Park South, Birmingham
The hotel address and links to information about the advertised hotel, such as amenities, map and directions, and photos, are included in each advertisement.
The second line of each advertisement – “ReservationCounter.com/Hilton” and “Reservation-Desk.com/Hilton” – is the “display URL.” In the above examples, Defendants added the venue-specific detail “Hilton” to the display URL. Although these display URLs include reference to Defendants’ URL, the ad conveys the impression that the reference to “Reservation Counter” or “Reservation-Desk” refers to the centralized booking center operated by or for the Hilton hotel chain.
Hotel Room Reservation Reseller Online Hotel & Call Center Reservation Practices
The FTC’s complaint also details the online hotel and call center reservation practices of the hotel room reservation reseller defendants, as well as the Defendants’ violations of the FTC Act for “deceptive representation that Defendants are the advertised hotel” and “deceptive failure to disclose material information regarding prepayment charges.”
Click FTC’s Proposed Order for the details of the FTC’s Proposed Order settling charges against the hotel room reservation reseller Defendants.
Dec 23, 2017 | Consumer Protection, Employment & Technology Archive
Fiat Chrysler Recalls More than a Million Ram Pickup Trucks Which Can Shift Out of Park
Ram Pickup Trucks Affected by the Recall
Fiat Chrysler reported the following vehicles affected by the Ram pickup truck recall:
-Certain 2010-2017 Ram 2500 and Ram 3500 pickups.
-2011-2017 Ram 3500, Ram 4500 and Ram 5500 chassis cabs.
-2016-2017 Ram 3500 chassis cabs with a Gross Vehicle Weight Rating (GVWR) of less than 10,000 lbs.
-Certain 2009-2017 Ram 1500 pickups.
-The majority of the affected vehicles are heavy-duty trucks.
-Excluded from the recall, according to Fiat Chrysler, are all 2017 model-year trucks built after Dec. 31, 2016.
FCA US LLC is voluntarily recalling an estimated 1.48 million trucks in the U.S. to help prevent occupants from inadvertently moving the vehicles’ gear-shifters out of the “park” position. [Emphasis added]
The recall is limited to vehicles equipped with shifters mounted on their steering columns. Those with rotary-dial shifters or floor-mounted shifters are unaffected. [Emphasis in original]
An FCA US review of field data led to the discovery that Brake Transmission Shift Interlock (BTSI) may not function properly if subject to specific high-temperature conditions for prolonged periods. The conditions are consistent with those that occur when there is protracted brake-pedal application while a vehicle is idling in park.
If BTSI becomes disabled, a vehicle’s shifter may be moved out of park without brake-pedal application, or the presence of a key in the ignition. In such circumstances, a vehicle may exhibit inadvertent movement – if its parking brake has not been set, as recommended in FCA US owners’ manuals.
The Company is aware of seven potentially related injuries and a small number of potentially related accidents. [Emphasis added]
“FCA US will restore BTSI function in the vehicles subject to this recall,” advises Tom McCarthy, Head of Safety Compliance and Product Analysis. “Nevertheless, as always, we urge customers to use their parking brakes, as recommended, and to ensure that child occupants are not left unattended.” [Emphasis in original]
Fiat Chrysler’s Ram pickup truck advisory also stated that vehicles are being recalled in Canada, Mexico, and certain markets outside of the NAFTA region. Customers affected by the recall will be advised when they may schedule service, and customers can call FCA US at (866) 220-6747.
See also FC North America Statement_Column Shifter Brake Transmission Shift Interlock (BTSI) and USA Today’s Fiat Chrysler Ram pickup truck recall story.
Dec 22, 2017 | Shareholder & Investor Protection
SEC Charges & Asset Freeze Against Group of Unregistered Funds & Their Owner Who Allegedly Bilked Thousands of Retail Investors in a $1.2 Billion Ponzi Scheme
Robert H. Shapiro & Woodbridge Group of Companies LLC Defrauded More than 8,400 Investors in Unregistered Woodbridge Funds – SEC Complaint Alleges
According to the SEC’s press release, the SEC complaint alleges that
Woodbridge advertised its primary business as issuing loans to supposed third-party commercial property owners paying Woodbridge 11-15 percent annual interest for “hard money,” short-term financing. In return, Woodbridge allegedly promised to pay investors 5-10 percent interest annually. Woodbridge and Shapiro allegedly sought to avoid investors cashing out at the end of their terms and boasted in marketing materials that “clients keep coming back to [Woodbridge] because time and experience have proven results. Over 90% national renewal rate!” While Woodbridge claimed it made high-interest loans to third parties, the SEC’s complaint alleges that the vast majority of the borrowers were Shapiro-owned companies that had no income and never made interest payments on the loans. [Emphasis added]
The SEC complaint alleges that Shapiro and Woodbridge used investors’ money to pay other investors, and paid $64.5 million in commissions to sales agents who pitched the investments as “low risk” and “conservative.” Shapiro, of Sherman Oaks, California, is alleged to have diverted at least $21 million for his own benefit, including to charter planes, pay country club fees, and buy luxury vehicles and jewelry. According to the complaint, the scheme collapsed in typical Ponzi fashion in early December as Woodbridge stopped paying investors and filed for Chapter 11 bankruptcy protection.
The SEC’s press release stated that the action was filed “to prevent further dissipation of investor assets after obtaining court orders in September and November in subpoena enforcement actions that forced the unregistered [Woodbridge Group of] companies to open their books.”
Woodbridge Ponzi Scheme – Woodbridge Business Model a Sham
The SEC’s press release also stated that the “complaint alleges that Woodbridge’s business model was a sham,”; “[t]he only way Woodbridge was able to pay investors their dividends and interest payments was through the constant infusion of new investor money”; “Shapiro used a web of layered companies to conceal his ownership interest in the purported third-party borrowers”; and “Shapiro used the scheme to line his pockets with millions of investor dollars.” [Emphasis added]
SEC v. Robert H. Shapiro, Woodbridge Group of Companies, LLC, d/b/a Woodbridge Wealth, RS Protection Trust, WMF Management, LLC, Woodbridge Structured Funding, LLC, et al
Woodbridge Ponzi Schem: Web of More than 275 Limited Liability Companies Used to Conduct the Massive Ponzi Scheme
According to the SEC complaint:
Beginning in July 20 12 through December 4, 20 17, Defendant Robert H. Shapiro (“Shapiro“) used his web of more than 275 Limited Liability Companies to conduct a massive Ponzi scheme raising more than $ 1.22 billion from over 8,400 unsuspecting investors nationwide through fraudulent unregistered securities offerings. Shapiro promised investors they would be repaid from the high rates of interest Shapiro‘s companies were earning on loans the companies were purportedly making to third-party borrowers. However, nearly all the purported third-party borrowers were actually limited liability companies owned and controlled by Shapiro, which had no revenue, no bank accounts, and never paid any interest under the loans. [Emphasis added]
Despite receiving over one billion dollars in investor funds, Shapiro and his companies only generated approximately $13.7 million in interest income from truly unaffiliated third-party borrowers. Without real revenue to pay the monies due to investors, Shapiro resorted to fraud, using new investor money to pay the returns owed to existing investors. Meanwhile Shapiro and his family lived in the lap of luxury and spent exorbitant amounts of investor money in alarming fashion, on items such as luxury automobiles, jewelry, country club memberships, fine wine, and chartering private planes. [Emphasis added]
By December 20 17, the fraudulent scheme collapsed. Shapiro and his companies became unable to timely meet their obligation to pay investors their monthly dividends and interest payments. Fundraising from investors was halted, and on December 4, 20 17, Shapiro caused most of his companies to file Chapter 11 bankruptcy. The effect of Shapiro and his companies’ actions will leave investors with substantial losses, as they are owed at least $961 million in principal. At least 2,600 of these investors unknowingly placed their retirement savings into Shapiro’s Ponzi scheme. [Emphasis added]
Woodbridge Ponzi Scheme Entities – Essential to Shapiro’s Fraudulent Business Operation
The SEC’s complaint alleges that the following entities were essential to Shapiro’s fraudulent business operation:
Woodbridge Group of Companies, LLC (d/b/a Woodbridge Wealth); RS Protection Trust; WMF Management, LLC; Woodbridge Structured Funding, LLC (a/k/a Woodbridge Structured Funding of Florida, LLC); Woodbridge Mortgage Investment Fund 1, LLC; Woodbridge Mortgage Investment Fund 2, LLC; Woodbridge Mortgage Investment Fund 3, LLC; Woodbridge Mortgage Investment Fund 3A, LLC; Woodbridge Mortgage Investment Fund 4, LLC; Woodbridge Commercial Bridge Loan Fund 1, LLC; Woodbridge Commercial Bridge Loan Fund 2, LLC; 144 Woodbridge–Affiliated Property Limited Liability Companies & 131 Woodbridge-Affiliated Holding Limited Liability Companies
Woodbridge Ponzi Scheme: Misrepresentations & Omissions to Investors & Ponzi Scheme Payments
The SEC complaint stated:
Shapiro, as the sole person in control of the Corporate Defendants, not only mad material misrepresentations and omissions to investors, but also signed falsified documents, controlled the company’s bank accounts, made Ponzi payments to investors, paid significant sales commissions to unregistered sales agents, and misappropriated investor funds for his own personal enjoyment and the enjoyment of his family.
At Shapiro ‘s direction, Woodbridge’s network of hundreds of in-house and external sales agents raised in excess of $1.22 billion dollars, falsely selling Woodbridge‘s investments as “safe” and “secure“. Shapiro and Woodbridge directed that investor funds be deposited into [various] accounts . . . (with Shapiro as the sole authorized signer) and almost immediately commingled the funds into Woodbridge‘s operating account.
Shapiro and Woodbridge used at least $328 million to repay principal and interest to investors and spent at least another $ 172 million on operating expenses, including $64.5 million on sales agent commissions and $44 million on payroll. Shapiro also spent at least $21 million of investor funds on extravagant personal expenditures.
Woodbridge Ponzi Scheme: Shapiro Properties Had No Revenue Source or Bank Accounts
The SEC complaint stated that
Shapiro selected which properties would be purchased with the investors’ commingled funds. Shapiro would create a Shapiro Property LLC to hold title to the property, making RS Trust and Shapiro the ultimate beneficial owners of the properties. The Shapiro Property LLCs, which had no revenue source or bank accounts, then issued promissory notes to one of the Fund entities promising to pay monthly interest, with the principal usually due in one year. Despite the Shapiro Property LLCs having no ability to pay monthly interest, Shapiro and Woodbridge created investment products which sought to market these Shapiro Property LLC’s promissory notes as “low risk” and “simpler” investments.
Because . . . entities were not receiving any interest payments on the Shapiro Property LLC promissory notes, Shapiro instead used new investor funds to pay the interest and dividends owed to previous investors. These interest payments created the illusion that Shapiro and Woodbridge were successfully loaning investor funds as promised to legitimate third–party borrowers who had an ability to pay monthly interest. This allowed Woodbridge and Shapiro to continually induce new investors to participate in their investment products and induce existing investors to rollover their investment into a new note upon maturity, thus delaying Shapiro‘s and Woodbridge’s need to come up with cash to repay the principal balance.
Woodbridge Ponzi Scheme: Relief Defendants
The SEC’s complaint named the following as Relief Defendants:
Jeri Shapiro (Shapiro’s wife), Woodbridge Realty of Colorado, LLC d/b/a Woodbridge Realty Unlimited; Woodbridge Luxury Homes of California, Inc. d/b/a Mercer Vine, Inc.; Riverdale Funding, LLC; Schwartz Media Buying Company, LLC; and WFS Holding Co. LLC, all of which, according to the SEC complaint, received proceeds of the fraud without any legitimate entitlement to the funds.
Woodbridge Investors
If you invested in the Woodbridge Group of Companies, LLC; Woodbridge Structured Funding, LLC; RS Protection Trust or WMF Management, LLC and wish to speak privately with a securities attorney, please fill out the form on the right or send an e-mail to [email protected].
