Couple Seized in Credit-Repair Scam
The owners of a firm peddling a new and potentially dangerous method for repairing poor credit records have been arrested on charges of criminal violations of state credit services laws.
John P. Ruggeri, 35, and his wife, Nancy G. Ruggeri, 33--owners of Ft. Bragg-based Credit One--were arrested for selling thousands of kits showing desperate consumers how to obtain credit by illegally changing their Social Security numbers.
The defendants were on their way to Los Angeles County Jail on Tuesday after being arrested in Ft. Bragg last week on a warrant issued by Los Angeles Municipal Judge Leland Harris. They are being held in lieu of $100,000 bail.
Besides the criminal charges, the Ruggeris face civil actions by the Federal Trade Commission, the state Department of Community Affairs and the Minnesota attorney general.
The Ruggeris were unavailable for comment, and their attorney, Lair Franklin, said he could not comment because he had not seen the charges.
Ruggeri, a veteran of the credit-repair industry, was president of First Credit Services in 1984 when the FTC took action against it for alleged deceptive business practices. Ruggeri was never charged, and the action against First Credit Services ended with a consent decree in which the firm neither admitted nor denied wrongdoing.
Los Angeles Deputy City Atty. Ruth Qwan said the Ruggeris are charged with one criminal count of false advertising and five criminal counts of violating the state credit services law. She said the couple face fines of $1,000 and six months in jail on each count.
According to law enforcement officials, the Ruggeris charged 20,000 people between $45 and $56 for kits that showed them how to “clean up” their poor credit histories by illegally changing their Social Security numbers. The kits instructed buyers to apply to the Internal Revenue Service for an employee identification number, and to substitute it for their Social Security number. Both numbers have nine digits.
The kits also instructed people to change their address in order to trick credit bureaus such as TRW, which identify consumers by their Social Security number and address.
The bogus credit-clearing method, known as “credit file segregation,” attracted attention about a month ago when the IRS announced that people who had doctored their Social Security numbers on tax forms could face criminal fraud charges and could also lose out on Social Security benefits.
According to Qwan, the Ruggeris solicited people who had recently sought bankruptcy protection. They purchased the lists from outside vendors.
“What makes this so despicable is that they were taking advantage of people in dire straits in an extremely bad recession in California,” said Jim Conran, director of the state Department of Community Development. The department is seeking $300,000 in civil penalties from Credit One for alleged unlawful business practices and false and misleading advertising.
Minnesota authorities have linked Credit One to Blaine, Minn.-based Credit American, and is suing both firms for alleged violations of that state’s credit services laws. A representative of Credit America could not be reached.
