AmeriDebt Inc. founder Andris Pukke settled a $172 million lawsuit with the Federal Trade Commission yesterday by agreeing to turn over almost all his assets - up to $35 million - to hundreds of thousands of consumers allegedly bilked by the credit-counseling agency.
It may be months before 400,000 consumers find out how much money they will receive, if any. Two courts must approve the settlement, and Pukke's creditors - including the Internal Revenue Service - may object.
Nevertheless, the FTC said it is optimistic that consumers will get their long-awaited restitution, although it won't be as much as the agency was seeking in court.
"You would always want to get consumers all their money back, but it's often not the case," said Lucy Morris, the FTC's lead trial attorney. "I hope consumers will be happy. We stopped somebody that we believe engaged in wrongdoing."
The settlement came the day before a U.S. District Court in Greenbelt was scheduled to hear the FTC civil case and a private lawsuit against Pukke. Pukke did not admit to any wrongdoing by agreeing to the settlement.
For regulators and consumer advocates, Pukke and AmeriDebt became the face of all that was wrong with a new breed of credit counselors that emerged in the 1990s as Americans' appetite for easy credit grew.
AmeriDebt was accused of charging high, hidden fees for its counseling services, and then funneling millions to Pukke's for-profit processing company, DebtWorks. That company, lawsuits said, financed Pukke's lavish lifestyle that included million-dollar homes and vacations to exotic locales.
The FTC sued Pukke, AmeriDebt and DebtWorks in November 2003, throwing significant resources behind the lawsuit.
"It's the biggest case of its kind in the area of credit counseling and debt management," Morris said. "AmeriDebt was one of the largest credit-counseling agencies out there for a number of years. To get a judgment like this from an individual is very big."
The settlement bans Pukke for life from credit counseling, debt management and credit education activities. The deal also settles the 2003 private lawsuit that was seeking more restitution from Pukke and DebtWorks.
David J. Vendler, a lawyer representing the class of consumers, said it would be impossible to recover all the fees that consumers paid. AmeriDebt spent a fortune on advertising and labor and Pukke "went through money like water," Vendler said.
