School Fundraiser Discount Card is a Fraud According to Krispy Kreme.

INDIANAPOLIS, June 18, 2009 -- Donut baron the Krispy Kreme filed suit today in response to a nationwide fraud scheme centered on a discount card program offered to schools.

Krispy Kreme Donut Corporation has accused Indiana's Landmark Media Group, Inc. and John D. Keller of defrauding schools around the nation by offering a bogus discount card purporting to offer discounts from numerous companies when in fact none of the organizations have agreed to participate.

The card is known as the "Fun and Food Card."

Discount cards are a longstanding and popular tool for fundraising for schools ands non-profit organizations. The premise is these organizations sells cards that offer the purchaser various discounts or bonuses. There is generally an expiration date and/or certain limitations placed on the offer. The entity providing the cards to the fundraising groups contacts local businesses to see if they would like to participate in offering discounts, and for franchised businesses, the agreement is only accepted by the local, participating franchise. After obtaining agreements with the local businesses, the entity providing the discount cards sells the cards to the fundraising groups who then in turn sell the cards to the general public.

The scheme came to Krispy Kreme's attention when a coach at Kekoughan High School in Hampton, VA received an email from the defendants on or about September 11, 2008 with information about the fundraiser discount card. The email said the card had "some distinguishing features that make our offer unique and far superior. [The card] includes 24 national vendors, is good nationwide and usable over and over for the life of the card. Although there are 'discount cards' galore, this one is unique in that the vendors are national and the discounts are exceptional, but it the terms of the program that are the real distinguishing factor. The card sells for $10, of which you profit $5." The email then explained that the school could return any cards that did not sell and provided a complete vendor list which identified Krispy Kreme as a participant.

The discount offered for Krispy Kreme was "Free dozen Original Glazed with the purchase of dozen at regular price." Krispy Kreme never agreed to participate.

Kekoughan High School bought $1,500 worth of the cards which bore the trademarks of Krispy Kreme and other companies and sold them to the public at $10 a piece. The school then started to receive complaints from purchasers of the cards who tried to use them with the vendors represented as participants and were rejected.

Some of the other company's represented as participates include: Arby's, Applebee's, Domino's Pizza, TGI Fridays, and Duncan Donuts.

After conducting an investigation, Krispy Kreme learned the Fun and Food Card has also been sold in Florida, Georgia, South Carolina, and Washington.

The complaint filed with the U.S. District Court has claims based on trademark infringement, false designation of origin, passing off, false advertising, counterfeiting, and common law fraud.

The trademarks KRISPY KREME, KRISPY KREME DONUTS and ORIGINAL GLAZED are federally registered trademarks. When a court finds a defendant intentionally counterfeited a registered trademark, the court must under the Lanham Act, enter judgment for three times the greater of the counterfeiters' profits or the plaintiff's damages together with a reasonable attorney’s fee unless the Plaintiff elects for statutory damages up to $1,000,000 per counterfeit mark per type of goods or services.

Manufacturing and selling counterfeit merchandise is criminally punishable under state and federal law in addition to civil liability. In this instance, if the allegations are true the defendants could possibly be prosecuted for federal wire fraud in addition to counterfeiting because an instrument of interstate commerce was used in perpetrating a fraud.

Krispy Kreme was founded by Vernon Carver Rudolph in 1937 in Winston-Salem. Currently, Krispy Kreme sells approximately 7.5 million donuts every day in 15 countries around the world.

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