Complaint Review: Ameridebt Inc. - Gaithersburg Maryland

There's a Washington Post story today about AmeriDebt's founder, Andris Pukke. You can find it at . The founder of the defunct credit-counseling firm AmeriDebt Inc. yesterday agreed to pay up to $35 million to settle two lawsuits accusing him of misleading debt-burdened consumers into paying high fees to support his lavish lifestyle. Under the settlement, virtually all of Andris Pukke's assets, including his multimillion-dollar homes in Miami Beach and Southern California, would be sold, with the proceeds going to a fund that could be used to help repay about 300,000 AmeriDebt customers. The settlement, which still has to win court approval, was signed just one day before the former executive was scheduled to go on trial in U.S. District Court in Greenbelt. The trial would have combined two lawsuits -- one by the Federal Trade Commission and the other a related national class action case brought by former clients of AmeriDebt and another firm owned by Pukke. Justice at last!

FTC Moves to Freeze Assets AmeriDebt Founder Transferred Money to Offshore Trusts, Agency Says By Caroline E. Mayer Washington Post Staff Writer Saturday, April 16, 2005; Page E01 The founder of AmeriDebt Inc., the now bankrupt Maryland credit-counseling firm, took $70 million from its operations between 1999 and 2003 and spent lavishly on his wife, girlfriend and himself, including paying $179,000 to an interior decorator, $13,500 to a yachting company and $2,500 on a restaurant tab. That's what the Federal Trade Commission said in court papers as it sought to freeze the assets of Andris Pukke. A hearing on the matter was held yesterday in federal court in Greenbelt. Those assets included $18.3 million transferred to domestic and offshore trusts, and $2 million sent to an account in Latvia for his father, the agency said. In 2003, the FTC sued Pukke, his wife, the nonprofit AmeriDebt, and DebtWorks Inc., the for-profit private firm Pukke set up to process AmeriDebt customer accounts. The suit alleged that the Pukkes and their companies deceived financially struggling consumers seeking help with their debts by charging high fees -- hiding them by calling them voluntary contributions. They operated falsely as a nonprofit organization while siphoning off money through DebtWorks to make money for the Pukkes, the suit said. A recent filing in a related class-action lawsuit alleged that Pukke and his girlfriend traveled to Tahiti, Bora Bora, San Tropez, Las Vegas, Aspen, the Cayman Islands and Cabo San Lucas, that he gave her a new Mercedes, and that he spent $15,000 for a mattress and $8,000 for sheets for his Malibu mansion. He sold a Miami Beach home for $7 million, that suit said. AmeriDebt, based in Germantown, was once one of the nation's largest and most aggressively marketed debt-management firms, advertising heavily on cable TV and the Internet. Also the target of several lawsuits by state attorneys general, AmeriDebt is now bankrupt and its accounts have been taken over by a third-party firm. AmeriDebt is one of more than 50 nonprofit credit counseling firms under investigation by the Internal Revenue Service for misusing their tax-exempt status for the benefit of their operators. There is little federal regulation of the firms. The bankruptcy bill that passed Congress this week contains a provision that requires debtors to seek debt counseling before filing for bankruptcy protection. Last month, the FTC settled its lawsuits with AmeriDebt, but its case against Pukke and his wife continues, with the agency seeking $170 million in consumer refunds. "An individual profiting $70 million on a fraudulent promotion is certainly among the largest we have seen," said Joel Winston, the agency's associate director for financial practices. "The question is where did it go? We're trying to freeze whatever money and property he has, seek repatriation of the money he has put overseas and have a receiver appointed by the court to audit his affairs and determine where all of his money and assets are." John B. Williams, Pukke's attorney, did not return phone calls. Previously he has said that evidence shows that AmeriDebt benefits to all consumers far surpassed the $170 million that consumers paid the credit-counseling firm because it was able to reduce interest rates and get rid of late fees and interest charges for many of its customers. In court papers opposing the freeze, Pukke's lawyers said the FTC and the class-action plaintiffs have failed to prove consumers were injured. I hope that they put Pukke and his wife in jail for a very long time.

AmeriDebt, Inc. will shut down its debt management operation as part of a settlement of Federal Trade Commission charges that it deceived consumers into paying at least $170 million in hidden fees. The FTC charged that the company misrepresented that it was a nonprofit credit counseling organization that would teach consumers how to manage their finances for no up-front fee. The settlement requires AmeriDebt to transfer all current clients' accounts to a third party and bars the company from participating in any aspect of the credit counseling business in the future. The settlement does not include the other defendants - the FTC's case against Andris Pukke, DebtWorks, and the relief defendant, Mrs. Pukke, will continue. In a complaint filed in November 2003, the FTC charged that AmeriDebt, Inc., DebtWorks, Inc., and Andris Pukke deceived consumers with claims that AmeriDebt was a nonprofit organization that could help consumers get out of debt without an up-front fee. The FTC charged that, rather than operating for charitable purposes as advertised, AmeriDebt was funneling profits to affiliated for-profit entities, including DebtWorks and Andris Pukke. According to the FTC, AmeriDebt deceived new clients into making a "voluntary contribution" to enroll in the program. The FTC alleged that AmeriDebt kept these initial "contributions" as fees without consumers' knowledge, rather than disbursing the money to consumers' creditors as promised. The FTC's complaint also charged that, despite promises to teach them how to manage their money to avoid future debt, the defendants simply enrolled all customers in debt management plans (DMPs). In the DMP, consumers made a single monthly payment to AmeriDebt for all their unsecured debts; the payment was then to be disbursed to the consumers' creditors. The FTC charged AmeriDebt with deceptive practices and also with violating the Gramm-Leach-Bliley (GLB) Act by failing to provide consumers with required privacy notices. In addition, the complaint named Andris Pukke's wife, Pamela Pukke, as a relief defendant. In June 2004, AmeriDebt filed for bankruptcy protection in the U.S. Bankruptcy Court for the District of Maryland. At the request of the FTC and others, the bankruptcy court removed existing management and appointed a Trustee to oversee AmeriDebt. The stipulated final order bars AmeriDebt from participating in the credit counseling, debt management, or credit education business. As part of the settlement and the bankruptcy case, the company will shut down its operations by transferring all existing DMPs to a third party. The Trustee, Mark Taylor, Esq. of the law firm of Arent Fox PLLC, has already taken steps to transfer AmeriDebt's existing DMPs to a reputable credit counseling agency consistent with the terms of the order. In addition, the stipulated final order prohibits AmeriDebt from misrepresenting that it is a nonprofit organization; that it does not charge up-front fees for its services; and that it will counsel consumers about their finances. The company also is prohibited from violating the GLB Act in the future. The order requires the company to file a plan of liquidation with the bankruptcy court. In addition, the order contains a judgment of $170 million, but the FTC will collect on this amount, if at all, through the AmeriDebt bankruptcy case. Finally, the order contains standard recordkeeping requirements to assist the FTC in monitoring the defendant's compliance. For updates to the case, the FTC consumer hotline number for AmeriDebt is: 1-877-862-0886. The Commission vote authorizing staff to file the stipulated final judgment and order was 5-0. The order was filed in the U.S. District Court for the District of Maryland on March 18, 2005. Note: This stipulated final order is for settlement purposes only and does not constitute an admission by the defendant of a law violation. A stipulated final order requires approval by the court and has the force of law when signed by the judge. Copies of the stipulated final order are available from the FTC's Web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint in English or Spanish (bilingual counselors are available to take complaints), or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad. MEDIA CONTACT: Jen Schwartzman Office of Public Affairs 202-326-2674 STAFF CONTACT: Peggy Twohig Bureau of Consumer Protection 202-326-3224 (FTC File No. X040009) (Civ. No. PJM 03-3317) (http://www.ftc.gov/opa/2005/03/ameridebt.htm)

I answered an ad for a saleperson, having nothing to do with credit counseling. I was paid a base salary of $28,000.00. Bonuses and prefered treatment, such as cubicals near windows, were offered for those who made the most "sales". "Sales" where the "client" did not contribute were not counted for anything such as bonuses or "other perks". We were not held accountable if we simply trashed the files of those who would not make a "contribution" and who would, with the time it took to fill out all of the paperwork for something that netted no results. In addition, if you did not get at least 25 client a month, you were out the door, period. No matter how long you were there. Even if you made 100 sales the month before, it didn't matter, you were gone. This place was an amazing papermill, two floors (about 600 people) filled with salespeople. Most of the sales people were young and aggressive. It was normal for supervisors to "suggest" groups of employees to go out for a night of heavy drinking which many times ended in trashing the place with fighting. This was the corporate culture of AmeriDebt. I once had a nice enough customer that I was willing to do his file even without a contribution. I was pulled into the supervisors office within an hour of submitting it. She told me she "heard" I was having trouble with getting my customers to contribute and suggested that I not waste my time amd then went into stories, under the premise of being funny, about how other sales people get contributions by calling people back and giving them a guilt trip about how was it fair that everyone else paid their fair share but this person did not. I got the point. She went on to say how some sales people took it a step further when nessasary and if it was a female customer, to make her feel like a dead beat and tell her that part off credit changing habits was paying her fair share, starting with AmeriDebt, if it was a man, I was told to attack his masculinity and work it from there. For myself, I just went back to my desk and updated my resume. As far as the upper management, creepy. They had their own sealed off floor. No one was allowed in, ever. I could not even tell you what they (upper management) looked like, probably because of all the threats they got for running this rip off mill. Yes, they were a "non-profit" orginization. All of their monthly "fees" were paid to DebitWorks, later the Ballenger Group, a for-profit payment processing center, owned by the husband of AmeriDebits CEO. I think they are now no longer running as AmeriDebit. They are probably hidden else where operating under another name. However, the lesson to be learned is that most, if not all of these debt management groups are just a big rip off. The only thing they say they can do is lower you payments and consolidate your monthly payment. Big deal, better to write a couple of extra checks each month and you can often negotiate a reduced payment rate with your creditors yourself. They have a choice, take lower interest rates or lose out totally by having you file bankrupcy. It is clearly in their best interest to work with you, but either way... ...your credit will be absolutly ruined. As a credit counseling client, you will be told that a notation may be made on your credit report that is just a notation, neither positive or negitive and might go a step further to say that most creditors may look at it in a positive light because your are trying to resolve your bills. Do not believe this. Once you enter credit counseling, or negotiate a reduced settlement with your creditors, your credit is totally and completely ruined, no if's and's, or but's about it. By the way, statistically speaking, 82% of people enrolled in these plans miss a payment and get thrown out or otherwise drop out of the program within 14 months. They know this. They bank on it. All of those prior payments are then just money thrown away, from the consumer perspective. However, even just one payment into any credit counseling service and your credit is ruined anyway. My advise. Bankruptcy. That way at least you get a fresh start without a debt load and have the chance to rebuild your credit right away. Credit counseling is a bunch of crap devised by the credit card companies to keep you paying.