Credit official's assets frozen

Pukke, AmeriDebt founder, told to return offshore funds to U.S.

April 21, 2005|By Eileen Ambrose | Eileen Ambrose,SUN STAFF

A federal judge froze the assets of AmeriDebt's founder yesterday, saying there is a possibility that Andris Pukke would transfer, conceal or spend money that could be returned to consumers if regulators prevail in their case against him.

U.S. District Judge Peter J. Messitte in Greenbelt also ordered Pukke and his for-profit company, DebtWorks Inc., to make a full accounting of their assets and return funds in offshore accounts to the United States within 10 days. The judge appointed a receiver to preserve the assets.

The request for the asset freeze and receiver was made by the Federal Trade Commission, which is suing Pukke and DebtWorks in an attempt to collect $172 million in fees paid by AmeriDebt customers.

"This certainly greatly improves the likelihood that there will be a significant amount of money that consumers will receive at the end of the day, assuming we prevail in the litigation," said Joel Winston, associate director of the FTC's division of financial practices.

The FTC maintains that Pukke was behind the creation in 1996 of AmeriDebt, a Maryland-based nonprofit that rapidly grew into one of the nation's largest credit-counseling agencies through heavy advertising. Pukke later formed DebtWorks, which was paid millions of dollars to process AmeriDebt accounts.

As consumer complaints about high, hidden fees at AmeriDebt increased, four states and the FTC filed separate lawsuits against the nonprofit in 2003.

AmeriDebt filed for bankruptcy court protection last year and is being liquidated. Its remaining client accounts were transferred to another credit-counseling agency last week.

The Internal Revenue Service told AmeriDebt last fall that it intended to revoke the nonprofit's tax-exempt status and had filed a claim for back taxes against it.

The FTC required AmeriDebt to shut down last month and said it would seek $170 million in restitution from the credit counselor.

Pukke has invoked his Fifth Amendment right and refused to testify during his dealings with the FTC. His attorney said Pukke has about $10 million and that the IRS is staking a claim to much of that.

"We anticipate this unwarranted examination will demonstrate that the government and the small army of plaintiffs' lawyers are fighting over very limited resources," said lawyer John B. Williams. "Bear in mind that there has been no finding of liability and that we will demonstrate that Andris Pukke saved consumers millions of dollars."

In the case against Pukke, the FTC said DebtWorks' revenues totaled nearly $119 million from 1999 to 2002 and that Pukke and his wife received more than $70 million from the company during that time.

Pamela Pukke, who filed for divorce in 2003, is named as a relief defendant, someone who might not have committed fraud but benefited from it.

In asking that Pukke's assets be frozen, the FTC said he had transferred money from DebtWorks to friends and family members.

According to the FTC, those transfers included $2 million into an account in Latvia for his father; $200,000 last year to his girlfriend, who also charged $215,000 on DebtWorks' credit card within a year and a half; and $250,000 last year to his wife, who charged $150,000 on DebtWorks' credit card.

Pukke also spent $178,990 on an interior decorator and $180,000 in construction expenses for his residence, according to the FTC.

A separate class action lawsuit filed on behalf of consumers accused Pukke of wasting company money on trips with his girlfriend to Tahiti, San Tropez and Bora Bora, among other places.

The FTC said that once Pukke learned of its investigation of AmeriDebt and DebtWorks in 2002, he began to pour money into trusts in the United States and in the Caribbean and South Pacific to keep it out of the reach of the government and creditors. Last summer, the value of the trusts had reached $18.3 million, the FTC said.

In a related matter, the Ballenger Group said yesterday that it is no longer involved in the credit-counseling industry. The Frederick company purchased assets of DebtWorks in 2003 and continued to process accounts for AmeriDebt and other credit-counseling agencies. Later that year, Ballenger settled FTC charges that it had misrepresented AmeriDebt's fees and agreed to pay $750,000 to consumers.

In a statement yesterday, Chief Operating Officer Ed Lynch said the company decided to leave the credit-counseling industry partly because of the bankruptcy of its largest client.

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