- The Washington Times - Monday, January 9, 2006


The founder of Germantown credit-counseling firm AmeriDebt yesterday agreed to pay $35 million to settle suits filed by regulators and former customers involving $172 million in reportedly hidden fees that the company collected from financially strapped debtors.

The money that Andris Pukke pays would go to a fund that would be used to reimburse the roughly 300,000 customers the Federal Trade Commission (FTC) said AmeriDebt Inc. deceived.

Mr. Pukke, who made a fortune off businesses that catered to customers in debt, also is barred from working in credit counseling, debt management or telemarketing as part of the settlement.

The settlement came a day before a federal court in Greenbelt was set to hear the FTC’s lawsuit against Mr. Pukke and a class-action lawsuit filed against him by former AmeriDebt customers. The payment covers both cases, according to the FTC.

The agreement is subject to approval by the federal judge, as well as by the court that is hearing Mr. Pukke’s personal bankruptcy filing.

Mr. Pukke must contribute almost all his personal assets, including two mansions, to come up with the $35 million, according to the FTC.

A court-appointed receiver is searching for Mr. Pukke’s assets to pay the fund. As of June, the receiver had located about $16 million, said Lucy Morris, the lead FTC attorney on the case.

Mr. Pukke does not admit any wrongdoing in the settlement, and his attorney said Mr. Pukke still vigorously denies the FTC charges.

“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,” Geoffrey Irwin said. “This settlement allows Mr. Pukke to avoid the vagaries of trial. He can put these allegations behind him and move on with his life.”

The FTC filed its lawsuit against AmeriDebt and Mr. Pukke in 2003 as part of a push by federal regulators to crack down on aggressive nonprofit credit-counseling companies accused of cheating customers who sought help with paying their bills.

Some firms were accused of using their tax-exempt status to shield hidden for-profit activities and dupe customers who felt more comfortable working with a nonprofit agency.

“AmeriDebt was among the largest, if not the largest, credit-counseling agency at one time,” Ms. Morris said. “This is a huge case and a huge judgment.”

AmeriDebt promised to help customers reduce their monthly payments by consolidating their loans and helping customers get lower interest rates. It also told customers they could get counseling on how to manage debt.

But the FTC said that the first payment customers made, often several hundred dollars they thought would go toward paying down their debt, instead was classified by AmeriDebt as a “contribution” that went to the company. Customers also were pushed to make monthly contributions to AmeriDebt.

The FTC said AmeriDebt did not properly disclose those fees to customers and that many were confused about where their money was going. Customers were enrolled in debt-management plans but never were given the credit counseling that AmeriDebt said it would provide.

Regulators said much of the fees that AmeriDebt collected went to a for-profit sister company controlled by Mr. Pukke called DebtWorks.

The FTC said Mr. Pukke used much of the money to fund a lavish lifestyle, with homes in Maryland, Florida and California.

AmeriDebt filed for bankruptcy in 2004. The company’s remaining clients have been shifted to another credit-counseling firm.

Mr. Pukke filed for bankruptcy in July, but a federal judge froze his assets after the FTC claimed he was shifting money to offshore accounts to protect them from regulators. Yesterday’s settlement requires Mr. Pukke to cooperate with the receiver. He is allowed to use about $425,000 to pay for his lawyers and living expenses.

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