A Confusing Maze

The company names allegedly involved in this scheme are Ameridebt, Inc., Debtworks, Inc., Ballenger Group, Inc., Ballenger Group Holdings, Inc., Debticated, Inc. (also known as Debticated Consumer Counseling, Inc.), Infinity Resources, Inc., F&M Mortgage, Inc., and Fidelity and Trust Mortgage, Inc. Several of the names actually stand for the same business, however. Though Ameridebt and Debticated still exist, the others have evidently changed names numerous times. Debtworks was “taken over” by Ballenger Group, and then by Ballenger Group Holdings. Infinity Resources became F&M Mortgage, and then Fidelity and Trust Mortgage. Allegedly, the ownership of all the businesses is substantially the same, and has never changed, however. Of all of these businesses, Debticated is the only one that even claims to be a non-profit organization.

The action alleges that this maze of corporate entities is the brainchild of two brothers, Andris, and Eriks Pukke, and several others. The companies are accused of: (1) falsely representing that they provide debt management services, (2) falsely representing that they provide credit counseling, (3) failing to disclose their limitations in negotiating debt management programs for consumers, (4) failing to disclose the true nature of their relationship with credit card issuers, and (5) fraudulently offering loan applications for debt consolidation.

Hidden Profits in the Debt Management Business

Matthew Crawford allegedly contacted Ameridebt to seek credit counseling on how to handle some of his debts. Mr. Crawford was given materials that led him to believe that the companies were non-profit organizations. He was informed that there would be a “voluntary” contribution, but was not told how much it would be. When he remitted his first payment, Ameridebt took it as the voluntary contribution. When he asked for a refund of his money, the company refused to issue it.

The action explains how the companies work: Salepeople for the companies are allegedly referred to as “producers,” and are evaluated in large part on how many consumers they have signed up—and are allegedly paid part of their earnings as commissions. Though the companies advertise that they charge no advance fees, the action alleges that the practice of taking the first payment as a “voluntary contribution,” constitutes nothing more than taking a fee. The action goes on to allege that the average up-front fee is $327. Since the fee is exactly the same amount as all other monthly payments, the action alleges that Ameridebt easily hides it so that most consumers are never aware they paid it.

Ameridebt and Debticated also allegedly charge a monthly fee of $7 per creditor they pay, with a minimum of $20 and a maximum of $70. Since most debt management plans last anywhere from three to five years, these fees amount to another $1,000 to $2,000 in fees, which are also characterized as “voluntary contributions.” Even though the companies take these fees, all accounts are allegedly handed over to for-profit Ballenger Group Holdings for processing. Ameridebt and Debticated allegedly pay Ballenger Group Holdings $50-$100 for each account, along with all monthly fees. Andris Pukke allegedly owns 49% of Ballenger, the other 51% owned by other corporate officers, who borrowed the money from Pukke to complete the purchase of their share of the company.

The action alleges that the creditors on whose behalf Ameridebt and Debticated collect payments actually pay the companies on a monthly basis. This commission is called a “fair share” payment, and is designed to cover the collector’s costs of setting up the consumer account and forwarding payment’s to the creditor. Ameridebt and Debticated allegedly collect millions of dollars per year in “fair share” payments.

Fraudulent Loan Scheme

Finally, the action alleges a long-time scheme of the brothers in the loan application business. In September 1996, Andris Pukke allegedly pled guilty to the federal felony of defrauding customers by falsely promising “debt consolidation loans” to consumers. That same month, he and his wife formed Ameridebt, Inc. After three years of probation, his company Infinity Resources was sued by the Washington, D.C., prosecutor for committing basically the same type of loan fraud. Infinity Resources was allegedly engaged in the sham of charging customers thousands of dollars to apply for a debt consolidation loan after implying that the customer would get the loan through Ameridebt. According to the Washington, D.C. action, the overwhelming majority of customers lost their fees, only 2% actually getting loans. The Pukkes ultimately settled the action, paying back $2 million. The settlement forbade Infinity from charging large application fees for such loans. The present action alleges that the Pukkes have now modified their arrangement so that Ameridebt and Debticated now charge the fees, rather than having the lender (Infinity, a/k/a F&M, or Fidelity and Trust).