Catalogue Firm Will Offer Refunds, Pay $60,000 in Penalties
A catalogue company offering huge membership bonuses and 90% rebates on merchandise agreed Wednesday to offer refunds to unhappy subscribers and to pay $60,000 in civil penalties under a settlement aimed at halting what state officials described as an illegal pyramid operation.
Tradevest Inc. also agreed to substantially overhaul its sales program and to place investors’ funds in protected trust accounts, under the judgment authorized by Los Angeles Superior Court Commissioner Joe D. Olson.
The settlement, in which Tradevest does not admit any wrongdoing, ends a $1-million consumer protection suit filed last month against the catalogue sales company by the California attorney general and state Department of Corporations.
Continues Operations
Under the agreement, Tradevest will be permitted to continue operations and purchasers can expect fair protection of their investments, but the company will no longer make claims that members can expect $580,000 bonuses, said Herschel Elkins, senior assistant attorney general.
“All the things that we saw as major problems we believe we’ve taken care of with this judgment,” Elkins said. He said the state has been “inundated” with phone calls from worried Tradevest subscribers since the suit was filed.
Tradevest Inc., a Florida-based marketing firm that does business in several states, offers people who pay a $789 membership fee the chance to purchase a wide variety of catalogue merchandise ranging from airline tickets to television sets.
A portion of the proceeds from the purchases are invested, and members are promised rebates of 90% of what they paid over a 20-year period.
Trust Account
The settlement requires that the purchase proceeds be placed in a trust account with a specific pay-back schedule similar to an insurance annuity.
It also prohibits Tradevest from requiring members to pay an additional $35 to recruit new subscribers or promising members substantial cash pay-backs without pointing out that inflation may heavily diminish the value of their deferred rebates over a 20-year period.
Michael Abrams, Tradevest’s attorney, said it is not clear whether the company violated any laws, “but it’s much simpler to stipulate to something like this and then commence business under a new program.”
Abrams said he does not know how many subscribers Tradevest has but said he is confident that the company will be able to continue to operate under the new guidelines.
The $60,000 assessed against the company includes $30,000 in civil penalties and $30,000 in legal costs.
