FTC looked at Whi­taker

The Washington Post - - FRONT PAGE - BY CAROL D. LEON­NIG AND ROS­ALIND S. HEL­DER­MAN

In­ves­ti­ga­tors scru­ti­nized his ties to a patent firm ac­cused of fraud.

Fed­eral in­ves­ti­ga­tors last year looked into whether Matthew G. Whi­taker, as an ad­vi­sory board mem­ber of a Mi­ami patent com­pany ac­cused of fraud by cus­tomers, played a role in try­ing to help the com­pany si­lence crit­ics by threat­en­ing le­gal ac­tion, ac­cord­ing to two peo­ple with knowl­edge of the in­quiry.

Whi­taker, named this week by Pres­i­dent Trump as act­ing at­tor­ney gen­eral, oc­ca­sion­ally served as an out­side le­gal ad­viser to the com­pany, World Patent Mar­ket­ing, writ­ing a se­ries of let­ters on its be­half, ac­cord­ing to peo­ple fa­mil­iar with his role.

But he re­buffed an Oc­to­ber 2017 sub­poena from the Fed­eral Trade Com­mis­sion seek­ing his records re­lated to the com­pany, ac­cord­ing to two peo­ple with knowl­edge of the case.

The FTC al­leged in a 2017 com­plaint that the com­pany bilked cus­tomers with fraud­u­lent prom­ises that it would help them mar­ket their in­ven­tions. The FBI has also in­ves­ti­gated World Patent Mar­ket­ing, the Wall Street Jour­nal re­ported Fri­day.

Whi­taker was not named in the FTC com­plaint. World Patent Mar­ket­ing, with­out ad­mit­ting fault, set­tled the case for more than $25 mil­lion ear­lier this year, ac­cord­ing to court doc­u­ments.

Jus­tice Depart­ment of­fi­cials de­clined to com­ment on Whi­taker’s han­dling of the FTC sub­poena.

In a state­ment, Jus­tice Depart­ment spokes­woman Kerri Ku­pec said, “Act­ing At­tor­ney Gen­eral Matt Whi­taker has said he was not aware of any fraud­u­lent ac­tiv­ity. Any sto­ries sug­gest­ing oth­er­wise are false.”

Whi­taker’s con­nec­tion to World Patent Mar­ket­ing came as a sur­prise to both se­nior Jus­tice Depart­ment and White House of­fi­cials, sev­eral of­fi­cials said.

In their in­ves­ti­ga­tion, FTC staff had sought to learn more about the role played by the com­pany’s ad­vi­sory board mem­bers, in­clud­ing Whi­taker, a for­mer U.S. at­tor­ney whose role was promi­nently high­lighted by the com­pany in news re­leases and mar­ket­ing ma­te­ri­als.

The com­pany said the board would help re­view in­ven­tors’ ideas to max­i­mize their abil­ity to get rich, ac­cord­ing to pro­mo­tional ma­te­ri­als and for­mer cus­tomers.

In truth, the board did not meet and rarely re­viewed in­ven­tors’ ideas, ac­cord­ing to court doc­u­ments.

Whi­taker, how­ever, ap­peared to act at times as an at­tor­ney for the com­pany, ac­cord­ing to peo­ple with knowl­edge of his role.

Whi­taker has told of­fi­cials he served in a lim­ited ca­pac­ity as an out­side le­gal ad­viser to the com­pany and pro­vided oc­ca­sional ad­vice when asked but that he was not part of the day-to-day op­er­a­tions, ac­cord­ing to a Jus­tice Depart­ment of­fi­cial, who spoke on the con­di­tion of anonymity due to the sen­si­tiv­ity of the case.

When the FTC sub­poe­naed Whi­taker for his records re­lated to the com­pany in Oc­to­ber 2017, he failed to pro­vide any in­for­ma­tion, telling in­ves­ti­ga­tors that he was busy at that time mov­ing from Iowa to Wash­ing­ton for a new job, ac­cord­ing to peo­ple with knowl­edge of the case.

At the time, Whi­taker was pre­par­ing to as­sume a new post: chief of staff to then-At­tor­ney Gen­eral Jeff Ses­sions.

An­other ad­vi­sory board mem­ber who also did le­gal work for the com­pany, New York-based at­tor­ney Eric Creiz­man, said he also re­ceived a sub­poena from the FTC and turned over records re­gard­ing the com­pany.

“I thought you kind of had to re­spond to sub­poe­nas,” he said.

In the end, FTC in­ves­ti­ga­tors did not ob­tain ev­i­dence or in­ter­nal com­mu­ni­ca­tions show­ing Whi­taker knew about the com­pany’s phony prom­ises to help in­vestors patent and mar­ket their ideas, ac­cord­ing to peo­ple with knowl­edge of the case.

This week, court re­ceiver Jonathan Perl­man, who over­saw de­tails of the set­tle­ment, told The Wash­ing­ton Post that he has “no rea­son to be­lieve that [ Whi­taker] knew of any of the wrong­do­ing.”

Within a few months of is­su­ing the sub­poena to Whi­taker, the FTC be­gan set­tle­ment dis­cus­sions with World Patent Mar­ket­ing and its chief ex­ec­u­tive, Scott Cooper.

On Fri­day, the Wall Street Jour­nal re­ported that the FBI had opened a crim­i­nal in­ves­ti­ga­tion into World Patent Mar­ket­ing, pub­lish­ing an email that one vic­tim of the com­pany had re­ceived from a vic­tim spe­cial­ist for the bureau.

The July 2017 email in­di­cated that the FBI was in­ves­ti­gat­ing the mat­ter at that time, along with the U.S. Postal In­spec­tion Ser­vice, and in­vited the per­son to call a hot­line to dis­cuss their ex­pe­ri­ences with the com­pany.

Spokes­men for the U.S. at­tor­ney’s of­fice in Mi­ami and the FBI’s Mi­ami Field Of­fice de­clined to com­ment.

In its probe of the com­pany, FTC in­ves­ti­ga­tors con­cluded World Patent Mar­ket­ing ac­tively “sup­pressed” com­plaints about the com­pany through “threats, in­tim­i­da­tion and gag clauses,” ac­cord­ing to a news re­lease by the agency.

They noted that Cooper used the threat of le­gal ac­tion as a cud­gel to pre­vent cus­tomers from post­ing neg­a­tive re­views on­line or com­plain­ing to the Bet­ter Busi­ness Bureau.

One cus­tomer who per­sisted with fil­ing a com­plaint with the bureau was sent an email by one of Cooper’s lawyers ac­cus­ing her of en­gag­ing in ac­tiv­ity that could sub­ject her to a “fed­eral ex­tor­tion charge,” not­ing the felony is pun­ish­able by two years in prison, ac­cord­ing to the FTC com­plaint.

Nei­ther Cooper nor his cur­rent at­tor­ney re­sponded to re­quests for com­ment.

In one Au­gust 2015 email con­tained in court fil­ings, Whi­taker threat­ened one of the com­pany’s crit­ics, em­pha­siz­ing that he was a for­mer U.S. at­tor­ney.

In re­sponse to a man who had com­plained to Cooper about the com­pany and threat­ened to file a com­plaint with the Bet­ter Busi­ness Bureau, Whi­taker warned “there could be se­ri­ous and crim­i­nal con­se­quences” if he pro­ceeded. Whi­taker noted his pre­vi­ous role as the top fed­eral pros­e­cu­tor in south­ern Iowa and in­cluded an image of his law firm’s logo.

Four days af­ter Whi­taker’s email, the com­pany filed a law­suit against the man in New York, al­leg­ing he had de­famed Cooper and at­tempted to ex­tort him. The com­pany’s suit noted that Whi­taker had in­ter­vened in the mat­ter at Cooper’s per­sonal re­quest.

The law­suit was set­tled out of court in 2016.

Alice Crites, De­vlin Bar­rett and Matt Za­po­to­sky con­tributed to this re­port.

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