For many, graduating may be a time to face several unpleasant responsibilities: a job, a mortgage and a lot of debt. The thousands of people struggling to pay off their loans may just look to one of the many organizations promising help.
They might even turn to AmeriDebt, a non-profit organization that specializes in debt counseling. The company head, 1991 graduate Andris Pukke, was accused of illegally using his company as a guise for tricking at least 300,000 people nationwide into donating more than $172 million.
In Nov. 2003, the Federal Trade Commission sued Pukke for taking the company’s clients’ money for personal profit. The case has recently been settled for $35 million Pukke has to pay back to his clients through a court-appointed receiver, said Lucy Morris, a staff attorney for the FTC.
The case decision is in the process of being approved by a Maryland court, but Pukke continually denies any wrongdoing.
“Mr. Pukke continues to believe that these allegations are completely unfounded and that consumers were neither misled nor injured by Mr. Pukke or his credit counseling business,” said lawyer Geoffrey Irwin. “This settlement allows Mr. Pukke to avoid the vagaries of trial. He can put these allegations behind him and move on with his life.”
Following his graduation from the university, Pukke founded two organizations: an apparent nonprofit debt group in 1996 called AmeriDebt, Inc., and a corporation called DebtWorks, Inc. in 1999.
AmeriDebt was considered non-profit and was established to benefit people unable to pay for debt management services. The company had a very large television advertising scheme and was initially very successful. In phone scripts, workers told clients they would provide options about debt education.
But Morris said AmeriDebt was not the non-profit group it appeared to be.
“First they advertised this was a free service, but they got a ‘volunteer donation’ from every person they were associated with,” Morris said. “They thought they were giving their money to a non-profit, but he made more than 50 million dollars in three years.”
The FTC mainly investigates organizations if there is a large amount of complaints filed. Morris said after they inspect a company they try to prosecute “those who make the most money.”
According to the court settlement, AmeriDebt filed as a non-profit with the IRS falsely.
“It operates for the economic benefits of for-profit companies,” the settlement document said.
It stated Pukke violated five areas of the Federal Trade Commission Act.
“The gist of the settlement order is right now there is a receiver in place … an independent firm will take over his assets, if they collect any more than $35 million, the amount over goes to the bankruptcy estate and then will probably go the IRS,” Morris said.
Morris said there were other former university students, some also from the class of 1991, who were given jobs with AmeriDebt and DebtWorks who may also be involved in the suit.
The Associated Press contributed to this report. Contact reporter Bryan Mann at bmanndbk@gmail.com.