Maryland firm's chief tied to lavish spending spree

WASHINGTON -- The founder of AmeriDebt Inc., the now-bankrupt Maryland credit-counseling corporation, took $70 million from its operations from 1999 to 2003, and spent lavishly on his wife, his girlfriend, and himself, authorities say. The spending, they assert, included $179,000 to an interior decorator, $13,500 to a yachting company, and $2,500 on a restaurant tab.

The Federal Trade Commission reported this and other matters in court papers as it sought to freeze the assets of Andris Pukke, the AmeriDebt founder. A hearing on the matter was held Friday in US District Court in Greenbelt, Md.

Those assets included $18.3 million that had been transferred to domestic and offshore trusts, and $2 million sent to an account in Latvia for his father, the agency said.

In 2003, the FTC sued Pukke, his wife, Pamela, the nonprofit AmeriDebt, and DebtWorks Inc., the private corporation that Pukke had set up to process AmeriDebt customer accounts.

The suit alleged that the Pukkes and their companies had deceived financially struggling consumers seeking help with their debts by charging high fees -- and by hiding them by calling them voluntary contributions. They operated falsely as a nonprofit organization while siphoning off money through DebtWorks to make money for the Pukkes, the suit said.

A recent filing in a related class-action lawsuit alleged that Pukke and his girlfriend traveled to Tahiti, Bora Bora, San Tropez, Las Vegas, Aspen, the Cayman Islands and Cabo San Lucas, that he gave her a new Mercedes, and that he spent $15,000 for a mattress, and $8,000 for sheets for his Malibu mansion. He sold a Miami Beach house for $7 million, that suit said.

AmeriDebt, which is based in Germantown, Md., was once one of the largest and most aggressively marketed US debt-management firms. It advertised heavily on cable television and on the Internet. Also the target of several lawsuits by state attorneys general, AmeriDebt is now bankrupt. Its accounts have been taken over by a third-party corporation. .

AmeriDebt is one of more than 50 nonprofit credit-counseling organizations that are under investigation by the Internal Revenue Service. They are suspected of misusing their tax-exempt status for the benefit of their operators.

There is little federal regulation in the area of credit counseling. A bankruptcy bill that passed Congress last week contains a provision that requires debtors to seek debt counseling before filing for bankruptcy protection.

Last month, the Federal Trade Commission settled its lawsuits with AmeriDebt. But its case against Andris and Pamela Pukke continues; the agency is seeking $170 million in consumer refunds.

''An individual profiting $70 million on a fraudulent promotion is certainly among the largest we have seen," said Joel Winston, the agency's associate director for financial practices. ''The question is: Where did it go? We're trying to freeze whatever money and property he has, seek repatriation of the money he has put overseas, and have a receiver appointed by the court to audit his affairs and determine where all of his money and assets are."

John B. Williams, Andris Pukke's lawyer, did not return phone calls. He has said that evidence shows that AmeriDebt benefits to all consumers far surpassed the $170 million that consumers paid the credit-counseling group, because it could reduce interest rates and get rid of late fees and interest charges for many of its customers.

In court papers opposing the freeze, Pukke's lawyers said the FTC and the class-action plaintiffs have not proved that consumers had been injured.

The monetary transfers, the papers added, were made in the past, ''when Mr. Pukke was in much better financial condition.

''Mr. Pukke now has limited assets and all of his available income goes to the IRS, Mr. Pukke's wife, pursuant to court orders in a pending divorce case, and personal living expenses, which are not extravagant."

In depositions with the FTC, Pukke invoked his Fifth Amendment right, the agency said.

US District Judge Peter J. Messitte said he would rule this week on the request to freeze his assets.

According to the FTC filing, ''Mr. Pukke has dissipated assets" by transferring money to the trusts, close friends and relatives and by a ''lavish lifestyle."

The commission said that DebtWorks transferred $200,000 to Pukke's girlfriend, although she never worked at DebtWorks.

The girlfriend, who was not named in the complaint, also used a DebtWorks credit card to pay $215,000 in charges.

Pamela Pukke received $250,000 from DebtWorks, although she had not worked for the firm, the FTC said, and $150,000 through a company credit card.