Owners of Net Kiosks Accused of Deception

News   ·   January 20, 2009

FTC Sues a Fullerton Couple, Who Say They Were Duped by Partner

By ANDREW GALVIN
The Orange County Register

The Federal Trade Commission has sued a Fullerton couple, alleging they misled investors in an Internet-kiosk business.

According to the FTC’s complaint, Charles and Elizabeth Castro and their company, Network Services Depot Inc., recruited investors to purchase stand-alone Internet-kiosk businesses. These kiosks, which allowed members of the public to access the Internet for a fee, were to be placed in locations such as hotels, bowling alleys, restaurants, casinos and convenience stores, the suit says.

In 2001, the Castros entered an arrangement with Edward Bevilacqua and companies that he operated in Escondido, the suit says. Bevilacqua was to purchase, find locations for, install and manage the Internet kiosks, while the Castros were to promote and sell the business ventures to the public, the suit says.

Investors were told that if they purchased an Internet kiosk, they would receive a portion of the revenue it generated, the suit says. By early 2004, consumers had purchased thousands of kiosk businesses, but Bevilacqua had installed fewer than 300 of them, the suit says. Some investors did receive payments, but the money came from newer investors, not from the kiosks, the suit says.

Bevilacqua agreed to settle with the FTC by forfeiting $1.5 million that was seized from his companies’ bank accounts by the FBI, the FTC said. He also consented to a total judgment of $18 million, suspended due to his inability to pay, which will become due if it is found that he misrepresented his financial situation, the FTC said.

An attorney for the Castros, Jeffrey Benice, said his clients plan to aggressively defend against the suit. The Castros, like the kiosk investors, were victims of a scheme perpetrated by Bevilacqua, Benice said.

To back up his claim, Benice provided a copy of a lawsuit that the government filed in connection with its seizure of Bevilacqua’s assets. That suit says the FBI began its investigation after Charles Castro notified the agency in March 2004 that three employees of Bevilacqua had told Castro “that Bevilacqua had made false representations … about the kiosks.”

Bevilacqua couldn’t be reached for comment. In settling the FTC’s lawsuit against him and his companies, Bevilacqua didn’t admit violating any laws.

The Castros sued Bevilacqua last month in Orange County Superior Court, alleging that he defrauded them.

Lisa Rosenthal, an attorney for the FTC, acknowledged that the Castros and Bevilacqua “pointed the finger at each other.”

“What the facts show is that they both violated the law,” Rosenthal said.

A Las Vegas federal judge Wednesday issued a temporary restraining order that freezes the assets of the Castros, their company, and two other defendants. A hearing in the case is set for Thursday, when the FTC will ask that the order be kept in place for the duration of the case, Rosenthal said.

CONTACT US: (714) 796-6045 or agalvin@ocregister.com