ertified Merchant Services (CMS) and its receiver, Mary Dees, have been granted protection by a federal court in an order CMS and its receiver sought after learning competitors were engaging in activities harmful to the company.

The court order, filed Nov. 25, 2002, prohibits persons in the merchant processing industry from seeking to acquire or use confidential or proprietary information of CMS; using the existence of the receivership as a reason for trying to solicit CMS merchants for business or solicit CMS employees or CMS sales agents for employment; making any false, misleading or disparaging statements against CMS in an attempt to harm CMS; and doing anything that interferes with the receivership.

Any violations of the court order would constitute contempt of court, and violators could be charged with injunctive relief, restitution, fines and incarceration, a summary of the court order states.

"Some really outrageous things were going on," said Dees, receiver for CMS and President and CEO of Creditranz.com. "For instance, our merchants called to let us know they were being contacted by people saying they were with the FTC and that they needed to take over CMS' accounts."

After the Federal Trade Commission (FTC) filed a complaint in February 2002 alleging CMS participated in "unfair and deceptive practices related to the marketing of credit and debit card merchant accounts to small businesses nationwide" (The Green Sheet, "First Federal Trade Complaint against an ISO," Feb. 28, 2002, issue 02:02:02 and "CMS Appoints Permanent Receiver," May 27, 2002, issue 02:05:02), Judge Paul Brown in the U.S. District Court for the Eastern District of Texas, Sherman Division appointed a receiver team for CMS led by Garrett Vogel, a certified public accountant.

A receiver is a court-appointed individual who manages, for the benefit of its owners and creditors, the assets and affairs of a business entangled in a legal dispute until a settlement is made by the court.

The CMS receivership team - which included Dees; Fred Gumbel, former Chairman, President and CEO of Vital Processing Services; and Paul Scoggins, former U.S. Attorney - served for more than seven months and implemented a series of initiatives to improve and enhance both merchant and employee relationships, including reviewing the company's fee structures and policies, contractual agreements and operational procedures.

In September 2002, the court named Dees sole receiver for CMS. The remaining members of the team were granted release from duty at the request of CMS and the Federal Trade Commission in order to lower costs associated with a receivership program.

According to Dees, the receivership has been successful so far.

"The company has improved its customer service stats and streamlined the processing of applications," she said. "It's meeting very aggressive targets. They have a less than 1% abandonment rate. Their time to answer is excellent."

Dees said CMS and its receiver have taken the FTC case as an opportunity to analyze its business practices. The company and its management team instituted the position of Ethics and Compliance Director, held by Angela Papas.

Papas joined CMS in January 2002, with 20 years' experience in the merchant business with Paymentech, its predecessor First USA and several other financial institutions.

In the Ethics and Compliance Director role, Papas is responsible for periodic audits of all areas of CMS' business. Audits include sales practices and disclosure, rate confirmation and underwriting, contract documentation, customer service and sales call monitoring, analysis of customer service requests and resolutions, and employee ethics and compliance training.

Since there has been no resolution in the FTC case, the question of how long the receivership will continue is undetermined, Dees said. She predicted that the earliest a trial would take place is June 2003.