DOB: Candy King of America - Consent Order

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IN THE MATTER OF:

CANDY KING OF AMERICA, INC.

    ("Candy King")

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CONSENT ORDER

DOCKET NO. CF-2005-823-B


PRELIMINARY STATEMENT

WHEREAS, the Banking Commissioner (“Commissioner”) is charged with the administration of Chapter 672c of the Connecticut General Statutes, the Connecticut Business Opportunity Investment Act (“Act”);

WHEREAS, the Commissioner, through the Securities and Business Investments Division (“Division”) of the Department of Banking, conducted an investigation pursuant to Section 36b-71(a) of the Act into the activities of Candy King to determine whether it had violated, was violating or was about to violate any provisions of the Act (“Investigation”);

WHEREAS, as a result of the Investigation, the Division alleges that Candy King:  (1) sold an unregistered business opportunity on at least three occasions to Connecticut purchaser-investors in violation of Section 36b-67(1) of the Act; (2) failed to provide the required disclosure document to Connecticut purchaser-investors in connection with the sale of a business opportunity in violation of Section 36b-63 of the Act; (3) used the “Kraft” trademark in advertising its business opportunity without required authorization in violation of Section 36b-67(3) of the Act; and (4) made two materially false statements in its application for registration filed with the Commissioner in violation of Section 36b-80 of the Act;

WHEREAS, on September 16, 2005, the Commissioner, acting pursuant to Section 36b-72 of the Act, issued an Order to Cease and Desist (“Order”), Notice of Intent to Fine (“Fine Notice”) and Notice of Right to Hearing against Candy King (collectively “Notice”), which Notice is incorporated by reference herein;

WHEREAS, the Fine Notice stated that the Commissioner intended to impose a fine against Candy King; that a hearing would be held on November 1, 2005, on the matters alleged in the Fine Notice (“Fine Hearing”); and that if Candy King failed to appear at the hearing, the Commissioner may order that a maximum fine of Ninety Thousand Dollars ($90,000) be imposed upon Candy King;

WHEREAS, on September 22, 2005, the Notice was received by Candy King;

WHEREAS, on September 27, 2005, counsel for Candy King requested a hearing on the matters alleged in the Order (“Hearing”);

WHEREAS, the designated Hearing Officer granted various motions to continue the Hearing and the Fine Hearing;

WHEREAS, the Hearing and Fine Hearing are currently scheduled for April 25, 2006;

WHEREAS, Candy King has represented that it has made only six sales of unregistered business opportunities in Connecticut for a total value of approximately $115,000;

WHEREAS, Candy King represents that it will offer rescission to all Connecticut purchaser investors who have purchased the unregistered business opportunity from Candy King;

WHEREAS, Candy King represents that it has already offered rescission in the amount of $13,000 to one Connecticut purchaser-investor;

WHEREAS, Candy King represents that it relied on the expertise of counsel in the drafting and implementing of disclosure documents, contracts and filings for business opportunities in Connecticut;

WHEREAS, Candy King did provide to Connecticut purchaser-investors disclosure documents that it represents were drafted by counsel for the purpose of selling business opportunities in Connecticut;

WHEREAS, Candy King represents that it had entered into a licensing agreement with Kraft Foods Global, Inc., and had authorization to use certain of its trademarks;

WHEREAS, Section 36b-72(d) of the Act provides, in relevant part, that “[a]ny time after the issuance of an order provided for in subsection (a) or (b) of this section, the commissioner may accept an agreement by any person charged with violating any provision of . . . [the Act] to enter into a written consent order in lieu of an adjudicative hearing”;

WHEREAS, Section 4-177(c) of the Connecticut General Statutes provides, in relevant part, that “[u]nless precluded by law, a contested case may be resolved by . . . consent order”;

WHEREAS, Candy King and the Commissioner now desire to resolve the foregoing matter without the need for administrative proceedings, agree that the Notice may be used in construing the terms of this Consent Order and agree to the language in this Consent Order.


CONSENT TO WAIVER OF PROCEDURAL RIGHTS

WHEREAS, Candy King, through its execution of this Consent Order, voluntarily waives the following rights:

1.
To be afforded an opportunity for a hearing within the meaning of Sections 36b-72(a) and 36b-72(b) of the Act, and Section 4-177(a) of the Connecticut General Statutes;
 
2.
To present evidence and argument and to otherwise avail itself of Sections 36b-72(a) and 36b-72(b) of the Act, and Section 4-177c(a) of the Connecticut General Statutes;
 
3.
To present its position in a hearing in which it is represented by counsel;
 
4.
To have a written record of the hearing made and a written decision issued by a hearing officer; and
 
5.
To seek judicial review of, or otherwise challenge or contest the matters described herein, including the validity of this Consent Order.
 

ACKNOWLEDGEMENT OF THE COMMISSIONER'S ALLEGATIONS

WHEREAS, Candy King, through its execution of this Consent Order, acknowledges the following allegations of the Commissioner, without admitting or denying them:

1.
The entry of this Consent Order is necessary or appropriate in the public interest or for the protection of investors and consistent with the purposes fairly intended by the policy and provisions of the Act;
 
2.
Candy King sold unregistered business opportunities in violation of Section 36b-67(1) of the Act, which constitutes a basis for an order to cease and desist pursuant to Section 36b-72(a) of the Act, and an order imposing fine pursuant to Section 36b-72(b) of the Act;
 
3.
Candy King failed to provide the required disclosure document to prospective purchaser-investors in violation of Section 36b-63 of the Act, which constitutes a basis for an order to cease and desist pursuant to Section 36b-72(a) of the Act, and an order imposing fine pursuant to Section 36b-72(b) of the Act;
 
4.
Candy King used a registered trademark without the required authorization in violation of Section 36b-67(3) of the Act, which constitutes a basis for an order to cease and desist pursuant to Section 36b-72(a) of the Act, and an order imposing fine pursuant to Section 36b-72(b) of the Act;
 
5.
Candy King made two materially false statements in a document filed with the Commissioner in violation of Section 36b-80, which constitutes a basis for an order to cease and desist pursuant to Section 36b-72(a) of the Act, and an order imposing fine pursuant to Section 36b-72(b) of the Act;

WHEREAS, if the above allegations were proven, the Commissioner would have the authority to enter findings after granting Candy King an opportunity for a hearing;

WHEREAS, Candy King acknowledges the possible consequences of an administrative hearing and voluntarily agrees to consent to the entry of the sanctions described below.


CONSENT TO ENTRY OF SANCTIONS

WHEREAS, Candy King, through its execution of this Consent Order, consents to the Commissioner’s entry of a Consent Order imposing on it the following sanctions:

1.
The Order to Cease and Desist set forth in the Notice shall become permanent;
 
2.
No later than the date this Consent Order is issued by the Commissioner, Candy King shall remit to the Department of Banking, by certified or cashier’s check made payable to “Treasurer, State of Connecticut”, the sum of Twenty-five Thousand Dollars ($25,000) as an administrative fine;
 
3.
No later than ten (10) days after the date this Consent Order is issued by the Commissioner, Candy King shall offer all Connecticut purchaser-investors the opportunity to rescind their business opportunity contracts and receive from Candy King all sums paid to Candy King, the aggregate amount of which is approximately $100,000 (“Rescission Offers”).  Such Rescission Offers shall be in writing in the form attached hereto as Exhibit A and sent by certified mail, return receipt requested;
 
4.
No later than five (5) days after the date of mailing Rescission Offers, Candy King shall submit to the Division Director evidence of compliance with paragraph 3 of this Consent to Entry of Sanctions;
 
5.
No later than thirty (30) days after the date of mailing Rescission Offers, Candy King shall submit to the Division Director copies of return receipts or evidence of non-delivery of Rescission Offers; 
 
6.
No later than forty-five (45) days after the date of delivery of each Rescission Offer as evidenced by the return receipt, Candy King shall:  (a) provide to the Division Director a copy of any written statement received by Candy King either accepting or rejecting the Rescission Offer, and (b) for each Rescission Offer accepted, refund the amounts paid to Candy King for unregistered business opportunities, by certified or cashier’s check, made payable to the Connecticut purchaser-investor, and submit written evidence of such payments, including copies of checks, to the Division Director;
 
7.
For each Rescission Offer for which evidence of non-delivery has been submitted to the Division Director, Candy King shall exercise its best efforts to ascertain the Connecticut purchaser-investor’s current address.  If Candy King obtains knowledge of such address within one (1) year of the date this Consent Order is issued by the Commissioner, Candy King shall promptly resend a Rescission Offer to such address in the manner and form set forth in paragraph 3 of this Consent to Entry of Sanctions, and comply with the requirements prescribed by paragraphs 4 through 6 of this Consent to Entry of Sanctions;
 
8.
For a period of five (5) years commencing on the date this Consent Order is issued by the Commissioner, Candy King is barred from offering or selling any “business opportunity” as defined in Section 36b-61(6) of the Act, in this state within the meaning of Section 36b-75 of the Act;
 
9.
Notwithstanding paragraph 8 of this Consent to Entry of Sanctions, three (3) years from the date this Consent Order is issued by the Commissioner, Candy King may apply to register its business opportunity under the Act, provided that, in considering such application, the Commissioner maintains sole discretion to (a) register such business opportunity, with or without restrictions or conditions; or (b) deny such registration under Section 36b-68 of the Act.  Until full expiration of the fifth year from the date of issuance of this Consent Order, the Commissioner may deny such registration without making the findings required by Section 36b-68(a) of the Act or complying with the requirements of Section 36b-68(c) of the Act;
 
10.
No later than the date this Consent Order is issued by the Commissioner, Candy King shall implement procedures designed to ensure compliance with applicable federal and state business opportunity registration and disclosure requirements;
 
11.
For a period of three (3) years commencing on the date this Consent Order is issued by the Commissioner, Candy King shall retain counsel familiar with the regulation of business opportunities to ensure compliance of its activities with business opportunity laws and regulations, including, but not limited to, the Act;
 

AND WHEREAS, Candy King specifically assures the Commissioner that none of the violations alleged in the Notice shall occur in the future.


CONSENT ORDER

NOW THEREFORE, the Commissioner enters the following:

1.
The Sanctions set forth above be and are hereby entered;
 
2.
Entry of this Consent Order by the Commissioner is without prejudice to the right of the Commissioner to take enforcement action against Candy King based upon a violation of this Consent Order or the matters underlying its entry, if the Commissioner determines that compliance with the terms herein is not being observed or if any representations made by Candy King and reflected herein are subsequently discovered to be untrue; and
 
3.
This Consent Order shall become final when issued.

Issued at Hartford, Connecticut
this 26th day of April 2006.                    ________/s/_________
                                                        John P. Burke
                                                        Banking Commissioner

CONSENT TO ENTRY OF ORDER

I, Stanley L. Gladstone, state on behalf of Candy King of America, Inc., that I have read the foregoing Consent Order; that I know and fully understand its contents; that I am authorized to execute this Consent Order on behalf of Candy King of America, Inc.; that Candy King of America, Inc., agrees freely and without threat or coercion of any kind to comply with the terms and conditions stated herein; and that Candy King of America, Inc., voluntarily consents to the issuance of this Consent Order, expressly waiving any right to a hearing on the matters described herein.

                                                    ________/s/_________
                                                    Stanley L. Gladstone
                                                    President
                                                    Candy King of America, Inc.

State of:  Florida

County of:  Broward

On this the 12 day of April 2006, before me, _______________, the undersigned officer, personally appeared Stanley L. Gladstone, who acknowledged himself to be the President of Candy King of America, Inc., a corporation, and that he, as such President, being authorized to do so, executed the foregoing instrument for the purposes therein contained, by signing the name of the corporation by himself as President.

In witness whereof I hereunto set my hand.


                                                    ________/s/_________
                                                    Notary Public
                                                    Date Commission Expires:  April 7, 2008  


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