The owner of a company shut down in Largo is told to pay millions in what regulators call a nationwide scam.
By CHRIS TISCH
Published May 2, 2004
LARGO - The complaints rolled in by the thousands.
Across the nation, people were getting phone calls from telemarketers offering a MasterCard. Many had poor credit histories, so the prospect of receiving a credit card was enticing.
By some estimates, more than 100,000 people signed up for the card, offered by Largo-based Bay Area Business Council and related businesses. They paid a fee, usually about $200.
But days later, they received by mail a useless card with a fake magnetic strip on the back.
Federal regulators say Bay Area Business Council, or BABC, and its officers were running a nationwide scam. The Federal Trade Commission shut down the business in August 2002, then asked a federal judge to order the company to refund customers' money.
On April 14, a judge ordered BABC and its officers to pay customers more than $12.5-million.
But they may never see it. The company's owner, Peter Porcelli, has filed for bankruptcy. Though Porcelli lives in a Belleair home valued at more than $3-million, records show he was millions in debt even before the judge's ruling.
Neither Porcelli nor his attorney returned calls last week. Porcelli, 52, has achieved some degree of notoriety in the Tampa Bay area through his ownership of the Tampa Bay Smokers, a professional fast-pitch softball team.
In an affidavit filed in federal court, Porcelli denied he or his company ever did anything wrong. He blamed a telemarketing company he hired, saying employees changed his sales pitch to dupe consumers and increase sales.
But attorneys with the FTC say not only did Porcelli know he was ripping people off, he tried to dodge federal regulators by launching new companies as complaints poured in.
"The point was to change the name of the company enough to stay ahead of the regulators," said David O'Toole, an FTC attorney who worked on the case. "He didn't want complaints to bleed from one company to another."
In its heyday in 2001 and 2002, BABC was one of the most complained-about companies in the nation, officials said.
Its offices were on the second floor of the First Union bank building at 801 West Bay Drive in Largo.
BABC did very little, if any, telemarketing of its own, but contracted with a Utah-based telemarketing company called Assail Inc. BABC bought from credit bureaus and brokers the names of people who recently had been denied credit.
Then Porcelli helped write - or at least approved - telemarketing scripts that FTC officials say were thick with deceit.
While customers thought they were getting a credit card, the packages they received days later included promotions for Florida vacations and instructions on how to sign up for a debit card.
To get that card, customers had to pay another fee, sometimes $25 or more. Many of those who paid that fee never received the card. Of the 2,000 or so who did, only 18 customers actually used it.
FTC officials say there was something amiss if thousands of people signed up for a card, and few ended up using it.
Weeks later, when their bank statements arrived in the mail, people noticed that $10 had been withdrawn from their checking accounts by BABC. The same thing happened every month until they told their banks to stop allowing the withdrawals.
More than 6,000 people complained to state governments or the Better Business Bureau.
FTC officials say that, conservatively, the BABC office in Largo got 5,000 complaints per month.
Not many consumers were taken for more than a few hundred dollars. But with thousands of credit-starved people signing up for the card, the money added up quickly.
Though the FTC could show only that BABC and Porcelli raked consumers for $12-million, officials say that may be an "extremely conservative estimate," records state.
In February 2001, the FTC, the FBI and postal inspectors raided the BABC office with a search warrant and seized crates of documents.
A year later, officials in Montana told the company to stop calling residents in their state. Then North Carolina sued the company for fraudulent telemarketing and got a restraining order against it.
BABC had state and federal governments breathing down its neck. But FTC officials say Porcelli had more tricks up his sleeve.
FTC officials say Porcelli began winding up BABC's affairs in the summer of 2002.
But much of BABC's business was shifted to a company called American Leisure Card, or ALC, which also belonged to Porcelli. Some of the revenue generated by ALC was used to pay BABC's bills.
According to court records, Porcelli told an employee he had already begun thinking beyond ALC, which he expected to be riddled with consumer complaints, just like BABC. He was thinking of shutting the company down in six months and starting another.
"Porcelli predicted complaints against American Leisure Card would "cause inquiries from regulators' but "the turndown of sales will make it disappear from the radar screen to pursue,"' court documents state.
Another company called Sr. Marketing Consultants sprung up and was doing business as BABC. That company had only four employees, three of whom were Porcelli's family members.
Porcelli started another company, Bay Memberships, to bill BABC customers. That company never had a single employee, but Porcelli created it because of "detrimental press and criticism" directed at BABC because of a "complaint backlog," court records state.
Over a three-week period, the company took about $200,000 from customers' checking accounts without providing them a thing in return.
In August 2002, FTC officials shut BABC down and froze its assets.
Though the FTC's actions are a civil proceeding, the FBI got involved. FBI officials said last week that they couldn't comment on whether an ongoing criminal investigation is being conducted into BABC or its officers.
In his affidavit to the court, Porcelli blames telemarketers at Assail Inc. for fooling customers.
"Renegade salespeople are anomalies," he wrote. "Occurences occur in all businesses from Verizon to Life Insurance companies."
Porcelli said BABC sold vacations, not credit cards. He said the debit cards were simply included in the package. He suggested consumers misunderstood the sales pitch.
FTC officials called Porcelli's 33-page affidavit "rambling," "scattershot" and "a failed attempted to rewrite history."
They said his companies' practices "amounted to little more than thievery," with Porcelli "the principal architect of the scam."
But Assail did get in trouble with the FTC and, in fact, has been shut down by the government. However, even the lead FTC attorney on the Assail case, Robert Kaye, says Porcelli was in on the BABC scam.
"There is no reason to believe Mr. Porcelli was not aware of the actions that were taken in conjunction with the sale," Kaye said. "It's not surprising they're trying to blame each other. But they were all in this together."
Porcelli filed for bankruptcy on March 3, 2003. He owed more than $5-million to creditors, even before the judge's $12-million judgment.
At the time he filed for bankruptcy, he had $100 in his bank account and was collecting $1,100 in unemployment per month, records state.
The Property Appraiser's Office says his home, when compared to other recent sales, is worth almost $3.3-million, though Porcelli estimates in bankruptcy records that his home and property are worth more than $6-million.
The FTC has frozen his assets and plans to do everything it can to collect the $12-million. Another BABC officer, Bonnie A. Harris, also is named in the judgment, but she has almost no assets, said O'Toole, the FTC attorney.
"Our expectation is he's going to have to end up paying this," O'Toole said.
In bankruptcy papers, Porcelli predicts he will be making money again in the near future through his own consulting business. He plans to have an annual income of about $500,000 by the end of this year and a $1-million salary by 2006.
Whatever he does, he is banned from ever working in telemarketing again.
