The operator of a Florida-based group of buying clubs has agreed to pay $9 million to settle charges of deceptive promotions.
Triad Discount Buying Inc, its owner Ira Smolev and the related companies had been sued by the attorneys general of Florida and Missouri for deceiving consumers into purchasing club memberships and then billing their credit or debit cards without authorization.
The settlement calls for Triad companies to pay $8.3 million in consumer restitution and $750,000 in investigative costs, according to the Fort Lauderdale Sun-Sentinel.
These schemes, some of which were run with partner companies, netted $294 million and hooked 2 million people in just a couple of years, Florida Assistant Attorney General Jody E. Collins said in March. The promotions were also being investigated by 24 other states and the Federal Trade Commission.
The Florida suit, filed in January, alleged that Triad Discount Buying Service Inc. partnered with 200 outside direct marketing companies, or “vendors,” to fraudulently generate buying-club memberships. Triad provided the vendors with scripts for upselling customers who purchased products into accepting a “free trial offer” to join the clubs, according to court documents.
Four companies named as defendants–Triad Discount Buying Service Inc., Member Service of America LLC, Orchid Associates LLC and Premier Membership Services LLC–entered Chapter 11 bankruptcy late last year. Total liabilities for the four firms, all of which are run by Smolev, totaled $72 million, with assets amounting to $47 million, according to documents on file with the U.S. Bankruptcy Court for the Southern District of Florida.
The lawsuit put Smolev back in the news in a familiar role–as a defendant. He has at least two mail-fraud convictions on his record, and has faced numerous civil and administrative actions dating back to the 1970s.
In 1984, Smolev pleaded guilty in two separate mail-fraud cases. In the first, he copped a plea to one count each of mail fraud, conspiracy and interstate transportation of property taken by fraud. He was accused in that case of marketing cosmetics by mail that had been donated by manufacturers for use by the Association for the Help of Retarded Children.
In another other case, he pleaded guilty in U.S. District Court in Trenton, NJ, to one count of conspiracy to commit mail fraud. This case was a result of false claims for mail order products such as the Tilt-Top Table and Bavarian Beer Stein. In 1982, Smolev signed a consent decree agreeing to tone down claims in advertising for some of the same products.
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