State Alleges Consumer Fraud in Sales of “Business Opportunities.”
Attorney General Tom Miller has filed a lawsuit alleging deceptive practices by Profit Alliance, Inc., an eastern Iowa company that engages in nationwide sales of a business opportunity in which the purchaser is to provide tax and expense recovery services primarily to small business clients.
“We allege that Profit Alliance uses numerous deceptions to get business opportunity purchasers to pay about $10,000 – and sometimes much more – for a purported business that in fact does not work as represented and does not generate the revenue claimed,” Miller said.
Miller said the company operates as “Profit Alliance Recovery Consultants” and claims to offer a “turn-key” business to “representatives.” Representatives supposedly would obtain small-business clients, help them recover or save significant amounts of taxes or other expenses, and share in the recoveries.
“The deceptions that we are alleging are many and varied, relating to almost every important aspect of the business opportunity being sold,” Miller said. “They relate to the prospects for running the business successfully, the support that will be provided, and even the credentials and background of the individuals behind Profit Alliance,” he said.
“This suit ultimately alleges that the defendants were engaged in a nationwide fraud that extracted tens of thousands of dollars from good-faith purchasers who simply wanted a chance to own their own business and make it work,” Miller said.
In addition to Profit Alliance, the lawsuit named two individuals alleged to control the company’s operations: Johnathan C. Ahlf (also known as John Ahlf) and Kristen N. Lain, who also goes by Kristen Ahlf and is married to defendant Johnathan Ahlf. Kristen Lain (Ahlf) is alleged to be the president and CEO of Profit Alliance. Johnathan Ahlf is alleged to exercise behind-the-scenes control of the operation. Profit Alliance itself is alleged to be the successor to United Business Solutions, Inc., also known as UBS, a similar operation that Johnathan Ahlf controlled before it went out of business in 2004. [[2005?]].
The consumer fraud lawsuit was filed Monday, June 23, in Muscatine County District Court in Muscatine, where the individual defendants live. Miller said the lawsuit alleged violations of both the Iowa Consumer Fraud Act, which prohibits unfair and deceptive practices, and the Iowa Business Opportunity Promotions Law, which requires sellers of business opportunities to make important disclosures to prospective purchasers.
District Court Judge Patrick J. Madden issued an immediate temporary injunction June 23 that prohibits the defendants from violating the Consumer Fraud Act and orders them to make the disclosures required by the Business Opportunity Law. The court also ordered the defendants to produce information while the suit is pending that will permit the Attorney General to assess whether the defendants are abiding by the injunction.
The suit asked the Court to issue the immediate temporary injunction ordered by Judge Madden. The suit also asked the court to issue a permanent injunction, order the defendants to make refunds, and order the defendants to pay up to $40,000 for each violation of the Consumer Fraud Act.
A principal web site for the company is www.profitallianceinc.com/biz .
Miller encouraged anyone considering a “business-opportunity” purchase with Profit Alliance to review the lawsuit, investigator’s affidavit, and judge’s temporary injunction for much more information.
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More details and background:
The suit alleges that the Consumer Protection Division has received complaints from five consumers, whose combined losses total more than $40,000. The Attorney General knows of a number of additional victims, some of whom are believed to have lost as much as $29,000 individually, according to the papers filed with the lawsuit.
The lawsuit alleges numerous instances of false advertising or false statements or representations by the defendants, including:
- The claim that “you can earn ... a six-figure income,” and that the company’s “top earners” make “$875,000 per year.”
- The claim that Profit Alliance has “a staff of 37 CPAs and over 200 auditors, attorneys and business experts. . .,” when in fact no such CPAs, auditors, or attorneys are part of its “staff.”
- A web-site photo of an elegant commercial building labeled “Corporate Offices” and “Home of Board of Directors and Tax and Expense Review Department” when in fact the photo appears to be a stock photo for sale and the building never was a Profit Alliance building.
- The claim that CNN, Bill O’Reilly and Rush Limbaugh “endorse us.”
- The claim that Kristen Lain (Ahlf) was an Executive Administrator for a United Way Charities office in an Iowa city for more than two years (when in fact she was an office assistant placed through a temp agency for four months).
- The claim that Lain earned two college degrees in business (when in fact she is listed as receiving “no degree” from the community college she attended).
- The claim that Johnathan Ahlf was Vice President of Marketing at “NFG Broker” in Davenport, Iowa.
- The claim that Johnathan Ahlf obtained a masters degree from Hamilton University (the subject of a 60 Minutes II report entitled “Diplomas For Sale”).
The allegations of the lawsuit also include specific background information on the defendants which, the Attorney General says, should have been disclosed to business opportunity purchasers, including: the 2004 revocation of Johnathan Ahlf’s Iowa insurance license; the 2004 bankruptcy filed by Johnathan Ahlf doing business as United Business Solutions; cease and desist orders against Johnathan Ahlf and/or UBS issued by business opportunity regulatory authorities in Wisconsin (6/06), Maryland (10/06) and Washington (10/07); and various lawsuits against one or more of the Defendants filed in Muscatine County.
Tips for Consumers considering purchasing a “business opportunity”:
Miller urged anyone considering purchasing a business opportunity to go slowly and exercise the greatest of care:
- Research the background of the operation and the sellers of the “business opportunity.”
- Check to see what information the seller is required by law to disclose, and review the disclosures carefully.
- Check with the Attorney General’s Office and the Better Business Bureau for complaints against the operation and any related businesses.
- Insist on a list of references, contact them, and make sure that they have no motivation to slant the truth.
- Be especially wary if the seller is headquartered in another state, as that may compound the difficulties involved in seeking relief if problems arise.
- Check the Federal Trade Commission web site for much more detailed information about business opportunity scams: http://www.consumer.ftc.gov/features/feature-0019-business-opportunity-scams.