In late 2003, boy-band magnate Lou Pearlman launched what amounted to an elaborate public relations campaign to clear his name. Tired of the drubbing he was taking at the hands of the Florida attorney general's office and in the press over his association with Trans Continental Talent aka Web Style Network, Wilhelmina Scouting Network, or Options Talent Group he sued his former associates for $100 million, claiming that the people who persuaded him to take control of the controversial company misled him during negotiations.
Local media took the bait. The Orlando Sentinel ran several stories on Pearlman's departure, including a front-page article titled, "Pearlman Severs Ties With Scouting Agency." And that was supposed to be the end of the matter. Unfortunately for a group of six investors, the ghost of Trans Continental Talent has reappeared.
Cortes Randell, Terri Bears-Nix, Scott Vaughn and Susan McDaniel all former employees of Trans Continental Talent or its other iterations are now managing two new, separate endeavors: the Virginia-based United Savings Club Inc. and the Orlando-based Franchise It Now Inc. Though the two companies are only months old, they already have dissatisfied customers.
"I went into this business with great excitement," says Ciaran Lyons, a franchisee from Bethlehem, Pa. "But now I'm afraid this whole thing was set up so that they could take our money and be done with us."
THE FINE PRINT
United Savings Club offers discounts on things like gasoline, groceries, health care and travel in the form of rebate vouchers. They sell the vouchers to franchisees, who in turn resell them to customers for a profit. The catch is the strict structure under which the vouchers can be redeemed; you've got to read the fine print to reap your savings, and the process can take a long time.
Franchise It Now Inc., run by Bears, Vaughn and McDaniel, is the Orlando-based broker for United Savings. The company signs up franchisees to purchase vouchers at wholesale cost. Franchisees must sign a contract and pay $5,000 to buy the vouchers. After signing their contracts, franchisees at their own expense fly to Florida to attend a training session at the Citrus Club in downtown Orlando.
Ideally, franchisees would make a healthy profit reselling vouchers. Sell enough vouchers, franchisees say they were told, and you can support your own small business.
The trouble is, franchisees say they aren't getting what they paid for. "We all paid $5,000 to these people, but they haven't sent us what we've paid for," says Jay Mehta, a franchisee from Michigan who attended a training session at the Citrus Club on July 8 and 9. "It's been over 30 days since our training session in Orlando. We were supposed to have our inventory no later than 10 days after we signed."
When franchisees started asking questions about the company they'd spent $5,000 with, they didn't like what they learned. They discovered that Cortes Randell, listed as United Savings' president and chairman of the board of directors in Federal Trade Communication filings, went to prison twice for fraud in the '60s and '70s.
"Even if we do get `the vouchers`, how do we know they are worth anything?" Metah asks. "If I sell these vouchers to the public and they don't get what they paid for, I'm the one they will be coming to for answers, not `United Savings`." Metah says he hasn't tested the coupons to see if they work because he hasn't received any to test.
Franchisee Michael Wager, also from Michigan, says he was offered a unique opportunity by Randell after the complaints began.
"I told Cortes Randell that I didn't want to do business with him anymore," says Wagner. "I told him I wanted my money back." That's when things got strange.
Wagner says Randell tried to work out a private deal with him unbeknownst to the other franchisees. "He told me that he thought I was special and that he liked me, and because of that, he was going to refund my money. But he made me promise not to tell the other franchisees."
Next, Wagner says Randell promised to pay him back incrementally over 10 months in return for Wagner signing an agreement promising not to talk to anyone about the deal and not to contest the $5,000 franchisee payment with his credit card company. Wagner refused to sign.
"I think Randell probably thinks I'm stupid, but I'm not," he says. "At this point, he still owes me $1,800 worth of vouchers. I told him I wanted that money up front before I would sign. He responded by telling me that his co-workers thought he was crazy for offering to pay me back in the first place."
`Contacted by phone and e-mail for this story, Randell would not comment on the deal with Wagner, or any of the other franchisees dissatisfied with United Savings.`
At the same time, Lyons contacted Randell demanding his money back.
"After I researched him on the web and saw that he was in prison twice for fraud, I told him I didn't want anything to do with his company," says Lyons. "Especially because a lot of the people in charge `of these companies` used to run other companies that got thousands of complaints from customers."
Lyons says that Randell initially refused to refund his money. Further, says Lyons, Randell told him that if he contacted the police or the media he would be guilty of a felony.
"I told him that I didn't want to get into a huge mess with the media or the other franchisees, and that getting my money back would resolve the situation," says Lyons. "He threatened me by telling me if I contacted the media or police, I was committing a felony."
Franchisees contacted for this story say they grew more concerned when they realized that, according to company literature, refunds would not be granted under any circumstances.
"I knew I was signing away certain legal rights when I signed this contract, but I was so taken with the whole idea of starting my own business that I signed anyway. I regret that now," says Wagner.
Lyons says he received a "bizarre" phone call from Randell on the morning of Aug. 12 offering him a similar deal as Wagner.
"He called me and said that he received a message from God to compromise," says Lyons. "Then he asked me if I knew of anyone who wanted to buy my franchise from me. Then he offered me a job to work for another company he wanted to start. Eventually, he offered to pay my money back in increments. The whole thing is phony, I'm not agreeing to any of it."
Lyons, a native of Ireland, says negotiations to get his money back got nasty and that Randell even threatened to have him deported.
One franchisee, Florida resident Dee Bradley, had only positive things to say about the company. Bradley used to work for Franchise It Now before she decided to quit her job and buy into the franchise.
"They told us there were going to be delays in receiving our inventory from the beginning," she says. "They've always fixed any problems I've had immediately. In fact, I have all my inventory, and even a little more."
Bradley says Randell asked her to contact Orlando Weekly.
THE NAME GAME
Both Wagner and Lyons say that when they arrived at the Citrus Club for training on July 8 or 9, there was no mention of United Savings or Franchise It Now on any signs. Wagner says the receptionist directed him to a conference room labeled under the name "CNL."
Carolyn Gosselin, the chief communications officer for CNL Financial Group Inc., says CNL did not hold any meetings at the Citrus Club on July 8 or 9. Gosselin had never heard of either United Savings or Franchise It Now.
Scott Vaughn, president of Franchise It Now, says the company borrowed the conference room from a member of the Citrus Club affiliated with CNL.
Quietly affiliating themselves with bigger, legitimate companies was a tactic of Trans Continental Talent. According to a Dateline report aired on April 18, 2003, Trans Continental Talent allied themselves with companies including Guess, BCBG and Warner Bros. Many of the companies told Dateline that they were not associated with Trans Continental Talent, and three of them wrote letters demanding that the company stop using their names.
All companies offering franchises for sale are required by the Federal Trade Communications to supply potential franchisees with information about the operation in the form of a Uniform Franchise Offering Circular. On the front of the 77-page manual is a warning to potential franchisees to check all contracts with a lawyer or accountant.
Part of the circular requires that all officers of a company list their titles and work histories. United Savings' FTC document was revised after some franchisees signed their contracts, according to Franchise It Now CEO Terri Bears-Nix. Franchisees say they were misled about the people running the companies.
In the first draft of the document issued May 5, Randell's name was not on the list of officers. On the second draft issued on June 8 after several franchisees had already purchased their ownership Randell is listed as the president and chairman of the board of directors. At least three franchisees contacted for this story say they received the original draft. Bears says the FTC does not require that a revised version of the UFOC be supplied to the franchisees once they've signed.
The UFOC is required to disclose the criminal backgrounds of company officers and affiliates within the last 10 years. Randell's name was not on that particular list because his convictions are more than 10 years old.
Vaughn says United Savings followed the rules. "The FTC is very strict about the information in the UFOC, and all the information is thoroughly checked and approved by attorneys."
Once he started reading the fine print about how United Savings works, Wagner says he had a change of heart about the business he was getting into.
"That's when I started to feel worried about scamming people by selling these things," he says.
Bradley, the franchisee who contacted the Weekly at Randell's urging, says this is not unusual in the franchise business. "They want you to work hard if you're going to get such a huge discount," she says. "That's just the business of rebates. Most businesses offering rebate programs require you to jump through a bunch of hoops to get your money."
Three franchisees say they have already contested the $5,000 purchases with their banks and credit cards, temporarily suspending payment.
But Lyons worries his time may be up. "I was given 60 days to contest this payment with my bank. I contested on day 52. That leaves me 8 days for the bank to investigate for fraud and return my money. Hopefully I'm not too late," he says.
In an unsigned e-mail to the Weekly, United Savings states that it has done everything in its power to supply its franchisees with their vouchers, and that the complaints were a result of confusion on behalf of the franchisees.
Meanwhile, Det. Tom McQuade of the Orlando Police Department's Economic Crime Unit says OPD is ready to launch an investigation into United Savings.