Originally Syndicated on June 12, 2024 @ 5:37 am
Financial Education Services (FES) has agreed to settle fraud allegations made by the FTC.
On August 5th, a Michigan District Court ruled for the permanent closure of FES and granted the FTC a judgment of $324 million. The FTC had initiated legal action against FES in 2022, claiming the company defrauded consumers out of over $213 million.
After FES’s unsuccessful attempt to dismiss the case last year, the company has now reached a settlement with the FTC.
The facts alleged in the Complaint will be taken as true, without further proof, in any subsequent civil litigation by or on behalf of the FTC, including in a proceeding to enforce its rights to any payment or monetary judgments.
According to the Michigan District Court’s orders issued on August 5th, the following penalties were enforced against FES co-founders Parimal Naik and Michael Toloff, along with Christopher Toloff and several associated entities, including Financial Education Services Inc., United Wealth Services Inc., VR-Tech LLC, VR-Tech Mgt LLC, Youth Financial Literacy Foundation, LK Commercial Lending LLC, Statewide Commercial Lending LLC, and CM Rent Inc. (referred to collectively as “the FES Defendants”):
- ol]:!pt-0 [&>ol]:!pb-0 [&>ul]:!pt-0 [&>ul]:!pb-0″ value=”1″>The FES Defendants are permanently prohibited from selling any credit repair products or services.
- ol]:!pt-0 [&>ol]:!pb-0 [&>ul]:!pt-0 [&>ul]:!pb-0″ value=”2″>They are also banned from advertising, marketing, promoting, or offering any pyramid scheme, Ponzi scheme, or chain marketing scheme.
- ol]:!pt-0 [&>ol]:!pb-0 [&>ul]:!pt-0 [&>ul]:!pb-0″ value=”3″>Additionally, the FES Defendants are permanently barred from running any MLM companies, making false claims regarding any business ventures offered, conducting telemarketing activities, and improperly acquiring consumer credit reports.
- ol]:!pt-0 [&>ol]:!pb-0 [&>ul]:!pt-0 [&>ul]:!pb-0″ value=”4″>The FES Defendants hold liability for a suspended judgment amounting to $324 million.
- ol]:!pt-0 [&>ol]:!pb-0 [&>ul]:!pt-0 [&>ul]:!pb-0″ value=”5″>Gerald Thompson is liable for a separate judgment of $215,000.
- ol]:!pt-0 [&>ol]:!pb-0 [&>ul]:!pt-0 [&>ul]:!pb-0″ value=”6″>Christopher Toloff is held responsible for an individual judgment of $1.7 million.
The FTC’s agreement to the suspension of part of the judgments is expressly premised upon the truthfulness, accuracy, and completeness of Settling Defendants’ sworn financial statements and related documents.
The FES Defendants are also required to adhere to 12 years of compliance reporting to the FTC. To fulfill personal financial obligations, Michael Toloff has been ordered to promptly surrender the following assets:
- ol]:!pt-0 [&>ol]:!pb-0 [&>ul]:!pt-0 [&>ul]:!pb-0″ value=”1″>$300,000 currently held in escrow;
- ol]:!pt-0 [&>ol]:!pb-0 [&>ul]:!pt-0 [&>ul]:!pb-0″ value=”2″>the remaining balances in the bank accounts of VR-Tech MGT LLC and Statewide Commercial Lending LLC;
- ol]:!pt-0 [&>ol]:!pb-0 [&>ul]:!pt-0 [&>ul]:!pb-0″ value=”3″>a 2018 Porsche Panamera valued at $55,000;
- ol]:!pt-0 [&>ol]:!pb-0 [&>ul]:!pt-0 [&>ul]:!pb-0″ value=”4″>a 2022 Lincoln Corsair valued at $40,000;
- ol]:!pt-0 [&>ol]:!pb-0 [&>ul]:!pt-0 [&>ul]:!pb-0″ value=”5″>a Bennington pontoon boat valued at $10,000;
- ol]:!pt-0 [&>ol]:!pb-0 [&>ul]:!pt-0 [&>ul]:!pb-0″ value=”6″>a property located in The Villages, Florida worth $1.2 million; and
- ol]:!pt-0 [&>ol]:!pb-0 [&>ul]:!pt-0 [&>ul]:!pb-0″ value=”7″>a property in Petoskey, Michigan valued at $350,000.
Additionally, the other FES Defendants must relinquish the following assets:
- ol]:!pt-0 [&>ol]:!pb-0 [&>ul]:!pt-0 [&>ul]:!pb-0″ value=”1″>$2 million held in escrow;
- ol]:!pt-0 [&>ol]:!pb-0 [&>ul]:!pt-0 [&>ul]:!pb-0″ value=”2″>$215,000 held in escrow (Gerald Thompson);
- ol]:!pt-0 [&>ol]:!pb-0 [&>ul]:!pt-0 [&>ul]:!pb-0″ value=”3″>$3.5 million in cash;
- ol]:!pt-0 [&>ol]:!pb-0 [&>ul]:!pt-0 [&>ul]:!pb-0″ value=”4″>a property in Fort Myers, Florida;
- ol]:!pt-0 [&>ol]:!pb-0 [&>ul]:!pt-0 [&>ul]:!pb-0″ value=”5″>a property in Naples, Florida;
- ol]:!pt-0 [&>ol]:!pb-0 [&>ul]:!pt-0 [&>ul]:!pb-0″ value=”6″>a property in Novi, Michigan;
- ol]:!pt-0 [&>ol]:!pb-0 [&>ul]:!pt-0 [&>ul]:!pb-0″ value=”7″>a 2021 Rolls Royce (Parimal Naik);
- ol]:!pt-0 [&>ol]:!pb-0 [&>ul]:!pt-0 [&>ul]:!pb-0″ value=”8″>a 2021 Lincoln Aviator SUV (Parimal Naik);
- ol]:!pt-0 [&>ol]:!pb-0 [&>ul]:!pt-0 [&>ul]:!pb-0″ value=”9″>a 2019 Mercedes Benz S560 sedan (Parimal Naik);
- ol]:!pt-0 [&>ol]:!pb-0 [&>ul]:!pt-0 [&>ul]:!pb-0″ value=”10″>a 2023 Mercedes Benz G-Wagon SUV (Parimal Naik);
- ol]:!pt-0 [&>ol]:!pb-0 [&>ul]:!pt-0 [&>ul]:!pb-0″ value=”11″>a 2019 BMW X850 XI sedan (Parimal Naik);
- ol]:!pt-0 [&>ol]:!pb-0 [&>ul]:!pt-0 [&>ul]:!pb-0″ value=”12″>any “pontoon boats” listed on a financial statement from Parimal Naik.
The cash amounts (as indicated in brackets above) may be replaced with equivalent value in lieu of asset surrender. A previously appointed FES Temporary Monitor has now transitioned into a Receivership specifically to manage the liquidation of certain assets. Commenting on the fraudulent actions of the FES Defendants, Samuel Levine, Director of the FTC’s Bureau of Consumer Protection, stated;
These companies promised to clean up people’s credit but failed to deliver.
Meanwhile, honest businesses make money selling products and services, not by recruiting, and the drive to recruit, especially when coupled with inflated income claims, is the hallmark of an illegal pyramid.
The FTC is committed to stopping deceptive credit repair tactics and shutting down illegal pyramid schemes that prey on struggling consumers.
The recruitment of individuals over actual retail sales is a key area of focus in BehindMLM’s analysis of MLM companies. This emphasis is highlighted in the Financial Education Services review published by BehindMLM in 2018.
Simply put: From a retail perspective Financial Education Services doesn’t make much sense.
Financial Education Services faced a $1 million fine from Georgia for operating a pyramid scheme.
In addition to regulatory actions, FES was also involved in a lawsuit over wrongful terminations and unpaid commissions in 2023.
In April 2024, the Michigan District Court rejected the class-action lawsuit, directing the parties to settle the matter through arbitration instead.
