Attorney General Andrew Cuomo Obtains Refunds For Nearly 1,000 Defrauded Brooklyn Health Club Members

NEW YORK, NY (March 28, 2007) - Attorney General Andrew Cuomo today announced that a Brooklyn health club owner must refund prepaid membership fees to nearly 1,000 members after the club closed its doors without warning. The Attorney General's office obtained the Order after a lengthy prosecution in state and federal court against John Suarez, the health club owner who illegally spent members' pre-paid fees on luxury items, business expenses, entertainment and vacations before claiming bankruptcy to avoid making the repayments.

? "This was a health club that left everyone sore," said Attorney General Andrew Cuomo. "he owner cheated his customers and tried to hide behind bankruptcy laws. Our action puts health clubs across the state on notice that they must do the right thing and abide by the law." ?

The owner has been permanently barred from operating a health club for the rest of his life and will pay $172,000 in restitution.

In August 2003, less than two months after opening, the Brooklyn-based health club, CORE Health & Fitness, shut down without notice leaving 960 club members without fitness services, refunds or contact information. Each member had prepaid an annual fee of at least $157.00 dollars.

Several complaints triggered an investigation by Cuomo's office that found, among other things, that the health club owner, John Suarez, had illegally spent members' pre-paid fees on luxury items, business expenses, entertainment and trips to San Juan, Puerto Rico and Orlando, Florida. Additionally, the office also found that Suarez had failed to comply with New York State law and its requirement that a health club owner place pre-paid membership fees in an escrow account to provide a fund for consumers should the health club go out of business.?

The Attorney General's office brought an action against John Suarez who entered into a settlement agreement. Within thirty days of entering into the agreement, Suarez filed for bankruptcy seeking to release himself from the debt he had initially agreed to pay. Cuomo's office started a proceeding in the U.S. Bankruptcy Court seeking that Suarez not be allowed to hide behind the protection of bankruptcy laws. In a landmark decision, the first of its kind, the court agreed that the owner acted fraudulently and must fulfill his obligation to repay the scammed members.

Attorney General Cuomo also advised consumers to protect themselves in advance by calling the NYS Department of State to confirm whether the health club is required to post a performance bond. Performance bonds protect consumers by providing a pool of money for refunds should a health club go-out-of business.

To file a complaint, call the Attorney General's Consumer Help Line at (800) 771-7755 or visit www.ag.ny.gov.

The State Court Action was handled by Lois Booker-Williams, Assistant Attorney General-In-Charge of the Brooklyn Regional Office.? The bankruptcy proceedings and trial were handled by Assistant Attorneys General: Lois Booker-Williams, Stephen M. Nagle (co-counsel at trial), and Nancy Hershey Lord, Section Chief of the Civil Recoveries Bureau.

 

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