FTC Settles AmeriDebt Lawsuit Over Debt Management Scam

The Federal Trade Commission announced today that the agency returned approximately $12.7 million to consumers last week from a settlement with Andris Pukke and his companies, AmeriDebt, Inc. and DebtWorks, Inc. This consumer redress concludes the largest credit counseling/debt management fraud case brought by the FTC. In addition, more than $7 million will be returned to consumers as a result of class-action settlements with the defendants and related credit counseling agencies.

Using the defendants’ records, about 287,000 AmeriDebt consumers have been mailed redress checks. The FTC and individual consumers alleged that AmeriDebt, DebtWorks, and related credit counseling agencies engaged in deceptive practices in promoting and offering credit counseling and debt management plans (DMPs).

Per the FTC’s website, consumers who qualified for redress, a total of about 460,000 consumers, obtained a DMP from one of 11 credit counseling agencies serviced by DebtWorks between January 31, 1998 and October 7, 2004. The agencies were AmeriDebt, Inc., Debticated Consumer Counseling, Inc., A Better Way Credit Counseling, Inc., Credicure, Inc., Mason Credit Counseling, Inc., Nexum Credit Counseling, Inc., Neway, Inc., The Credit Network, Inc., Visual Credit Counseling, Inc., Preactive, Inc., and Debtscape, Inc.

Consumers Union wants protection for gift cards when stores go belly-up

Consumers Union, the publishers of Consumer Reports, has filed a petition with the Federal Trade Commission asking it to enact rules to protect shoppers from gift cards that lose their value when stores declare bankruptcy.

The consumer advocacy group says the practice of selling gift cards without putting those funds into a trust is deceptive.

The case of Sharper Image declaring its gift cards were temporarily worthless following it filing Chapter 11 bankruptcy earlier this year.

It is asking the FTC to mandate corporate stores to establish a trust fund that ensures gift cards hold their value in the chance the store declares bankruptcy. It also wants stores to be forced to honor gift cards until the day they close.

Bankruptcy courts treat gift cards as loans to the company, not as cash. Therefore, once a company files bankruptcy, it cannot accept the cards. Merchants must appeal to the bankruptcy court to allow it to take the cards.

Bear Stearns, EMC Mortgage settle FTC charges

Bear Stearns Cos. and EMC Mortgage Co. (a B.S. subsidiary) have agreed to settle Federal Trade Commission corruption charges in servicing home mortgage loans.

The companies will pay $28 million to pay off these charges.

In a statement, the FTC said, “The companies allegedly misrepresented the amounts borrowers owed, charged unauthorized fees (late, property inspection, loan modification) and engaged in unlawful and abusive collection practices.”

Bear Stearns and EMC have also agreed, in addition to paying out the cash, to stop these practices it allegedly used, and also adopt a data integrity policy to ensure a borrower’s loan information is accurate.

Mortgage fraud indictment nets 19

Authorities in one Ohio county have indicted 19 people on mortgage fraud charges.

A Summit County grand jury handed down a 109-count indictment with more than 200 felony charges earlier this week. Charges range from patterned corrupt activity to money laundering, according to NewsNet5.com.

Four mortgage companies were the focus of a 3-year investigation. The grand jury found guilt and corrupt activity in nearly every phase of the buying process: buyers, sellers, appraisers and mortgage brokers have all been indicted.

The entire group is in the process of turning themselves into police, getting arrested, or in the case of two of the 19, already in prison.

Officials in Summit County also said this investigation only involved 16 properties and it is investigating more than 200 at the time, for more mortgage fraud charges.

Lawyer Scott Salomon Accused of Organized Fraud, Arrested

South Florida lawyer Scott Salomon has been arrested and charged with organized fraud, NBC 6’s Jeff Burnside reports. Law enforcement sources told NBC 6 that in his initial arraignment Salomon would not be likely to bond and that he is likely to remain in jail until his trial.

The NBC 6 investigation uncovered dozens of allegations that Salomon demanded large up-front fees and did little or nothing after that, leaving many of his clients’ lives in ruins. There were associated costs, according to the clients, including hiring other lawyers to clean up the mess, and emotional costs in many cases, especially in child custody and child protective cases. A group of clients believes Salomon botched their cases by missing meetings, not returning calls, making paperwork errors and even failing to show up for court, NBC 6’s Jeff Burnside reported.

NBC 6 has uncovered 70 angry clients in nine states and one Canadian province, from every corner of Florida, including Orlando, Miami, Tampa and West Palm Beach. NBC 6 documented clients paying Salomon up to $65,000 each, and the investigation found a total approaching $1 million.

SunTrust May Buy Back Auction-Rate Securities

SunTrust Banks said Monday it is in talks with regulators that could result in the bank’s buying back about $500 million in auction-rate securities from investors, the Atlanta Journal-Constitution reports.

SunTrust said any potential losses would be offset by two recent moves: earnings from the sale of a commercial vehicle fleet management company and an expected $69 million tax benefit from the charitable contribution of 3.6 million shares of Coca-Cola stock. The announcement was made in a filing with the Securities and Exchange Commission in advance of an investor conference Wednesday.

SunTrust was a much smaller player in the auction-rate securities game than the other banks, which are now facing huge financial blows. Wachovia, for example, has agreed to buy back $8.5 billion in securities and pay $50 million in fines, and UBS has agreed to buy back up to $18.6 billion and pay $150 million in fines.

Nuclear power company faces deceptive ad claims

Vermont’s Attorney General has been asked to investigate a claim that a state nuclear power company’s advertising campaign is deceptive.

AG William Sorrell received a six-page letter from Vermont Public Interest Research Group regarding Vermont Yankee’s slogan.

Vermont Yankee is a nuclear power facility and claims its energy is “safe, clean and reliable” but the public watchdog believes that claim, and others made by the power company are deceptive, if not false.

The power facility also claims to produce “zero greenhouse gas emissions” – which is questionable, at best – and also says it contribute’s to Vermont’s state-controlled clean-energy fund. The watchdog says it must contribute to that fund through an arrangement with Vermont. In that agreement, Vermont Yankee was allowed to store more highly radioactive material at its site in Vernon, Vt.

Nuclear facilities in Vermont are unlike any others in the U.S. in that each must apply to state legislature for relicensing. A public advertising campaign is one major way these companies can sway public opinion.

Entergy Nuclear, the company which owns the facility, is in the process of
applying for its license renewal, which expires in 2012.

The Attorney General’s office said it would take the claims seriously, but added that claims against nuclear energy’s actual “green” value would be a matter for public debate.

The Attorney General should remember he is a public official, too, and that if a citizen’s group like VPIR raises concern, obviously the debate needs some rectification.

As the energy crisis continues to ravage the budgets of households nationwide, energy companies are bombarding consumers with claims of how clean each one of their energies is.

Broker Arrested for Auction Rate Securities Fraud

A former Credit Suisse broker was arrested Thursday over auction rate securities fraud.

Reuters reports that F.B.I. officials said the former broker, Julian Tzolov, a native of Bulgaria, was arrested at John F. Kennedy International Airport. Mr. Tzolov and a former colleague, Eric Butler, were charged with conspiracy, securities fraud and wire fraud in an indictment unsealed Wednesday in Federal District Court in Brooklyn.

The New York Times reports that prosecutors accused the two men of misleading customers into believing that auction-rate securities in their accounts were backed by federally guaranteed student loans and were a safe and liquid alternative to bank deposits or money market funds. In a separate civil complaint, the Securities and Exchange Commission said the two men made unauthorized purchases of more than $1 billion in auction-rate securities for corporate customers’ accounts from November 2004 to August 2007.

Whistleblowers lead to recovery of $9.3 billion

Leads from whistle-blowers led to the recovery of more than $9.3 billion in money health care providers took from states and the federal government.

Justice Department records revealed these findings and were reported by Associated Press. Private citizens that monitor fraud on the part of healthcare providers were placed under the employment of the Justice Dept. in the 1990s. The feds credit these whistle-blowers with more than 90 percent of the claims of fraud.

According to the report, the whistle-blowers start the process of claiming fraud by filing a sealed lawsuit in a federal court. The Justice Dept. investigates the claim and if it proves true, and could lead elsewhere, it takes the lead of the prosecution.

Whistle-blowers received about $1 billion of the $9.3 billion they’ve helped recover.

Obviously, the staggering amount of money recovered from fraud cases highlights the fact that practically no one is free of potential fraud, and all claims must be investigated.

The amount of money became so large because these rules put in place to monitor healthcare fraud were expanded to include pharmaceutical companies. In 2002, the average case netted $10 million. That total spiked five-fold when pharmaceutical companies came under that same scrutiny.

Hy Cite Settles California Consumer Charges Over False Advertising of Royal Prestige Cookware

Hy Cite Corporation has agreed to pay about $1 million to settle charges brought by California Attorney General Edmund G. Brown Jr. and the Los Angeles Department of Consumer Affairs, alleging that the company used discriminatory business practices and false advertising in the sales of its high-priced Royal Prestige cookware to California consumers, Consumer Affairs reports. This is the Attorney General’s second settlement agreement with Hy Cite Corporation for similar consumer fraud tactics.

“Hy Cite’s sales approach has been to scare people into buying high-priced pots and pans by telling customers that the cookware in their own home was unsafe,” said Attorney General Brown. “We won’t tolerate this type of predatory consumer marketing in California. This settlement will put an end to Hy Cite’s bogus chemical tests and predatory lending terms and ensure that the company treats its customers fairly and honestly.”

Hy Cite Corporation sells high-priced cookware targeting Latino consumers and neighborhoods through in-home demonstrations. Hy Cite’s salespeople allegedly lied their way into people’s homes by telling consumers that they had won a prize or by asking them to participate in opinion polls. Once in consumers’ homes, the salespeople often used high-pressure sales tactics and deception to convince consumers to buy the expensive cookware. Hy Cite representatives would routinely perform bogus “tests” on the victim’s cookware, heating a mixture of baking soda and water in non-stick or aluminum pans, creating a bad-tasting paste through the resulting chemical reaction, Brown said in a statement. The representatives claimed that toxic chemicals were transferred into the family’s food, making the consumer’s existing cookware unsafe for their families.

In many cases, consumers were convinced to finance their purchases through the company’s financing plan, but were allegedly misled to believe that the percentage rate was lower than the 20% or more financing rate they were charged. Many people who were scared into buying the products were unable to afford them, fell behind on their payments, and faced collection calls and damage to their credit rating, Brown said.