The Federal Trade Commission has filed a complaint in bankruptcy court seeking assets from the operator of a defunct money-making scam, so that those assets can be used to help pay more than $17 million that he owes consumers as a result of a court judgment against him.
The $17 million judgment the Commission is trying to recover stems from a lawsuit the Commission filed in 2004 against John Stefanchik and his company, Beringer Corporation, who deceived consumers with false promises that his program would teach them how to make large amounts of money in a short time by selling promissory notes and mortgages. (See May 21, 2007 press release http://www.ftc.gov/opa/2007/05/stefanchik.shtm) In 2007, the trial court found Stefanchik and Beringer made false claims and ordered them to pay more than $17 million in restitution to consumers. The following month the FTC filed a judgment lien on a house owned by Stefanchik and his wife. The U.S. Court of Appeals for the Ninth Circuit subsequently affirmed the trial court’s judgment.
The FTC bankruptcy court complaint announced today seeks to collect the $17 million judgment, and charges that the defendants have tried to shelter assets. The complaint alleges that Stefanchik was aware of potential legal problems as early as 2000. So in 2001, he formed Warwick Properties LLC as a “shell” to shelter their house from creditors’ claims. According to the complaint, Stefanchik made his wife, Heidi Fogg, the sole owner of Warwick and then transferred assets to Warwick, including their home, which is now valued at more than $5 million. The Commission contends that Warwick should be liable for the judgment against Stefanchik and Beringer. It seeks to recover payments and transfers that Stefanchik and Fogg made to Warwick as fraudulent transfers.
The defendants are Warwick Properties, Fogg, and Stefanchik. The Commission vote to authorize staff to file the complaint was 4-0. The complaint was filed in the U.S. Bankruptcy Court for the Western District of Washington, where Warwick’s Chapter 11 bankruptcy case is pending.
NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. A complaint is not a finding or ruling that the defendants have actually violated the law.
The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,700 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.