The Building Inspector of America, Inc. (TBIA), a Wakefield, Massachusetts company, and its president, Ralph Tisei, have agreed to settle federal charges against them for failing to disclose to potential purchasers the litigation and bankruptcy history of their company and two of its officers. The 1993 complaint charged that the defendants -- The Building Inspector of America, Lawrence Finklestone, Beverly Tisei, and Ralph Tisei -- made unsubstantiated claims to potential purchasers about the earnings they could expect, among other violations of the FTC’s Franchise Rule. As part of today's settlement, Ralph Tisei has agreed to pay a $20,000 civil penalty and would be prohibited from future Franchise Rule violations.
The Building Inspector of America, Inc. offered franchises for home-inspection services. (In October 1995, defendant Lawrence Finklestone agreed to pay a $5,000 civil penalty to settle charges against him, and in February 1996, Beverly Tisei agreed to pay a $10,000 civil penalty to settle charges against her).
The FTC’s Franchise Rule, designed to assist franchisees in evaluating a business investment, requires franchisors to provide each potential franchisee with a complete and accurate disclosure document describing the financial status of the company, the experience and background of the franchisors, their litigation history, the nature of the business, the terms of the proposed franchise relationship, and other key information. The rule also requires franchisors to have a reasonable basis for any earnings claims they make, and to provide prospective purchasers with a document containing substantiation for those claims. In an April 1993 complaint, filed in federal district court and detailing the allegations in this case, the FTC charged the defendants with failing to disclose to potential franchisees the litigation history concerning fraud or misrepresentation and the bankruptcy history of each executive officer. The complaint also alleges that defendants made claims about the earnings that franchise buyers could expect, without having adequate support for the claims.
The proposed consent judgment that Ralph Tisei has signed to settle the charges against him, and which requires the court’s approval to become binding, would require him to pay a $20,000 civil penalty, and would prohibit both Tisei and TBIA from violating the FTC’s Franchise Rule. The settlement would permit the FTC to reopen the matter should Tisei be found to have misrepresented his financial condition.
In addition, the settlement includes various reporting requirements necessary to assist the FTC in monitoring the defendants' compliance.
The Commission vote to authorize filing of the settlement was 5-0. The proposed consent judgment was filed in U.S. District Court for the District of Massachusetts, in Boston, on April 30, 1996, by the Department of Justice at the request of the FTC.
NOTE: This consent judgment is for settlement purposes only and does not constitute an admission by the defendants of a law violation. Consent judgments have the force of law when signed by the judge.
Two free FTC brochures -- titled “Franchise and Business Opportunities” and “A Consumer Guide to Buying a Franchise” -- explain the FTC’s Franchise Rule in more detail and offers advice to those considering investing in such a business. Copies of the brochures, as well as the consent judgment and other documents associated with this case, are available from the FTC’s Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710 FTC news releases and other materials also are available on the Internet at the FTC’s World Wide Web site at: http://www.ftc.gov
(Civil Action No. 93-10838-NG)
(FTC File No. X940061)