Florida Telemarketer Offering GSA Work Files for Bankruptcy

Florida Telemarketer Offering GSA Work Files for Bankruptcy

Source: Wall Street Journal, Bankruptcy Beat, Written by Katy Stech, April 17, 2015

A Florida telemarketing firm that the state’s consumer watchdog has called a scam filed for bankruptcy protection.

Facing a lawsuit over allegedly deceptive practices, Federal Verification Co., which promised to help small businesses win lucrative U.S. government contracts, filed for bankruptcy on Monday to try to stop an upcoming trial.

In November, Florida Attorney General Pam Bondi sued Federal Verification for allegedly charging high upfront fees to customers who were “given false hope of a [General Services Administration] contract,” according to the 19-page lawsuit. Her office has received more than 200 complaints about Federal Verification and dozens of related businesses since 2012, the lawsuit said.

“Customers report being deceived and scammed,” the lawsuit said. “Many customers express great frustration with the failure of Federal Verification to timely and accurately prepare their application as promised, and to submit it to the GSA after several months to more than two years since paying hefty fees.”

Federal Verification and its president, James Dale Sprecher, have denied wrongdoing. The company plans to use the bankruptcy process to figure out how to settle their disputes with people who’ve filed complaints and remain in business, said lawyer Michael Markham, who put the firm into chapter 11 protection in U.S. Bankruptcy Court in Tampa.

Many firms do specialize in getting small companies into the government contracting industry. During the most recent fiscal year, federal, state, and local governments spent nearly $33 billion on products and work that flowed through the GSA office, but the process for getting that work can be tough to navigate.

Ms. Bondi’s office linked Federal Verification to more than 60 business names, including GSA Application Services and Government Awards Consulting, and to more than 50 websites. Some websites used logos that were “likely to be confused with the federal government websites,” the lawsuit said.

According to the lawsuit, some Federal Verification telemarketers told prospective customers that they were working directly for GSA or the U.S. government and that the average GSA contract winner earns $2 million or more in a year.

Some Federal Verification telemarketers also said that “almost all” of its clients get GSA contracts, regardless of what they sell, the lawsuit said.

The company’s moves allegedly violate the Florida Deceptive and Unfair Trade Practices Act, Ms. Bondi’s office said. With the lawsuit, it’s calling for Federal Verification to pay a penalty of $10,000 per case—or $15,000 if that case involves a senior citizen.

The company’s bankruptcy filing momentarily halted a trial in state court set for April 23. But after Ms. Bondi’s office argued that the lawsuit involves “a matter of public safety and health,” Judge K. Rodney May ruled at a hearing on Thursday that the trial could go on.

Write to Katy Stech at katy.stech@wsj.com. Follow her on Twitter at @KatyStech



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