RALEIGH, N.C. (Legal Newsline) - North Carolina Attorney General Roy Cooper announced an order on Tuesday against a former owner of more than 20 Peak Fitness locations, banning him from the health club business for 12 years.
Jeff Stec allegedly repeatedly violated a state law requiring health clubs to maintain sufficient bonds. North Carolina law requires health clubs that sell pre-paid memberships to buy an appropriate bond and file it with Cooper's office. The bond can be used for the payment of refunds if the club shuts down.
"Consumers who've paid for a gym membership deserve a refund if their health club expires before their membership does," Cooper said. "That's exactly why these bonds are required and why we keep pressing to make sure health clubs have them."
Under the terms of a consent judgment, Stec and his former associates with Peak Fitness are banned from working in the industry in the state for 12 years. Violation of the ban would require Stec to pay the state a $2 million penalty.
Stec at one time operated or owned Peak Fitness health clubs in Winston Salem, Wilmington, Statesville, Raleigh, Lincolnton, Knightdale, Garner, Harrisburg, Fuquay-Varina, Durham, Cornelius, Concord, Clemmons, Clayton, Charlotte, Chapel Hill, Cary, Asheville and Apex.
Cooper's office has received more than 700 complaints connected to Peak-related health clubs since 2006. Cooper's Consumer Protection Division filed a lawsuit against Stec in 2007, alleging that he commited unfair and deceptive practices while operating the health clubs and failed to get proper bonds. Under the terms of a January 2009 consent judgment, Stec agreed to make changes to Peak Fitness' business practices and get proper bonds.
Later in 2009, Peak Fitness filed for Chapter 11 Bankruptcy. At that time, the bonding company cancelled all of the clubs' bonds and Stec sent sworn statements to Cooper's office regarding health club bonds that significantly understated the outstanding liabilities of multiple Peak clubs. In May 2009, Cooper's office filed a second lawsuit against Stec, alleging violations of the consent judgment and the state's health club statute by failing to maintain proper bonds. Tuesday's judgment resolves the second lawsuit against Stec.
"We've been able to recover more than 1.3 million dollars for hundreds of North Carolinians who were members of health clubs, gyms or dating clubs that shut their doors," Cooper said. "If your health club closes down unexpectedly, let us know about it."