World Gym's Demise Leaves Mystery: Who Is Owed Money, And How Much?

January 13, 1991|By Erik Nelson | Erik Nelson,Staff writer

Now that the owner and organizers of the failed World Gym health club in Ellicott City have been ordered to pay restitution to 491 would-be members, a Columbia attorney must figure out just how much money is owed and to whom.

"I have received calls already from people whosaid they never filed a claim because they never thought there wouldbe any money left," said Barry Silber, the attorney appointed by Circuit Judge James B. Dudley to sort out restitution disputes.

Dudley ruled Tuesday that Baltimore-area businessman Philip Porter; his company, World Gym & Family Fitness Center Inc.; Fitness Management Inc., which Porter hired to set up the center and sell memberships; and Fitness Management's owners, Anthony Ferraro, Scott Rybak and Craig Witz, were responsible for repayment of membership fees "far in excess of $50,000."

The state attorney general's Consumer Protection Division sued the two companies and their owners for selling memberships in the health club beyond the $50,000 for which the club was bonded. The club was scheduled to open by December 1988 in Normandy Shopping Center.

"There was no testimony or evidence clearly establishing exactly how much each member paid toward the membership. Some members paid in full, others made deposits with monthly payments and others made deposits with the balance being due upon opening," Dudley wrote.

Steven Sakamoto-Wengel, an assistant attorney general who took over after a non-jury trial last spring, said records indicated about $135,000 remained to be repaid to consumers.

The $50,000 surety bond posted by World Gym was distributed proportionately in partial payments to 379 health club members, but the remaining 112 members' claims lacked proper documentation and are disputed by the defendants, Sakamoto-Wengel said.

Now that Dudley has rendered his decision, Sakamoto-Wengel said, the state has to sit down with the defendants to determine "how many claims they're willing to agree to and which ones they're going to insist upon challenging."

"If there's any question as to who owes what, then I will hold a hearing," Silber said.

Dudley ruled that Porter and the three Fitness Management owners were "jointly and severally liable," which means that "each of the defendants is responsible for the whole amount, so we can collect against each and any of the defendants," Sakamoto-Wengel said.

Because Porter has filed for Chapter 7 bankruptcy, the Consumer Protection Division has filed a complaint seeking to make him responsible for the World Gym debt.

"If you can show that the debt arose fraudulently, then the court could rule that the debt is not discharged by thebankruptcy," Sakamoto-Wengel said.

Sakamoto-Wengel admitted that Dudley's decision was only half the battle, but pointed out that partof Dudley's ruling forces the defendants to pay Silber's $100-an-hour fee, so disputed claims will add to their costs.

Although Dudleyruled the owners of World Gym and Fitness Management were liable forthe unbonded fees, he deemed inappropriate a $1,000-per-membership civil penalty because it would jeopardize the chance of collecting restitution.

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