The president of a small New Hampshire Internet company last week said she is considering legal action over the contents of a Federal Trade Commission press release concerning an alleged settlement over her marketing practices.
“You know how the IRS bothers citizens?” asked a furious Lynn Haberstroh, president of GreenHorse Communications Inc., Greenland, NH. “Well, the FTC bothers businesses, and they're picking on me because they know I have no money to fight them.”
According to a release dated May 13 from the FTC, GreenHorse agreed to settle charges that it had violated the FTC's Franchise Rule by promising “fabulous earnings” for investors in a Web-site development business. The release said the settlement requires GreenHorse to refund investors' money and bans it from selling its customer lists.
Haberstroh denied the allegations.
“We were never ordered to return money. We agreed to offer [a refund to a sole investor]. There's a very big difference,” she said. “The only reason I ever agreed to offer this man's money back is because I knew he didn't want it and it would save $50,000 to $75,000 to fight. Now I have to go spend $50,000 to $75,000 to go sue them for slander.”
Haberstroh said the FTC called the investor several times to remind him that he could get a refund.
The FTC's release said GreenHorse ran promotions on its Web site at www.greenhorse.net and in various New England newspapers saying that investors in a Web-site development business could earn as much as $134,992 within their first year working part time. There are currently no such claims on the site, and Haberstroh denied making them. She called the FTC's release “completely incorrect.”
The FTC, however, is sticking to its guns.
“Our position is that the release is completely accurate because it summarizes our complaint,” said Andrew Caverly, acting regional director at the FTC's Boston office.
Haberstroh said that during an apparent investigation of GreenHorse, an FTC representative called posing as a prospective investor.
“She kept trying to make me say how much money she would earn, and I refused to tell her,” Haberstroh said. “She kept arguing with me and trying to put words in my mouth.” Haberstroh said that an FTC representative later “admitted that that phone call was a complete set-up.”
“I can't comment on how we conducted our investigation, except to say that we were comfortable that we had sufficient evidence to prove the allegations in our complaint,” Caverly said. “It isn't our practice in any investigation to trick people or put words in their mouths or anything like that.”
In its statement, the FTC said GreenHorse failed to provide prospective franchisees with disclosure documents required by the Franchise Rule and substantiate earnings claims. The rule requires that a franchise seller provide a disclosure statement to assess risk. It also requires that earnings projections be accompanied by the number of franchisees that have achieved the claimed result and that the franchise seller document the claims.