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This article warns new home inspectors of home inspection company franchise frauds involving a home inspection franchise company.

Home Inspection Franchise Fraud Warning for home inspectors

Date: Fri, 30 Aug 1996 11:02:31 -0400
From: Joe Regan 
To: Daniel Friedman (by email) 
Subject: Franchise Fraud Attachments

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HOME INSPECTION FRANCHISOR, OFFICER RESOLVE FTC´S FRANCHISE RULE CHARGES

To resolve charges that a Massachusetts-based home inspection service
franchisor and its president have violated the FTC´s Franchise Rule by
making unsubstantiated earnings claims and by failing to make requisite
disclosures about the business, bankruptcy, and fraud-litigation histories
of the franchisors´ officers, Building Inspector of America, Inc. and
company president Ralph Tisei will not violate the rule in the future, and
Tisei will pay a $20,000 civil penalty, according to a proposed consent
judgment filed in the U.S. District Court for the District of
Massachusetts. (U.S. v. Building Inspector of America, Inc., DC Mass, No.
93-10838Y, 5/3/96)

According to the underlying complaint, filed in April 1993, Building
Inspector of America, Inc. (TBIA) and its officers--Lawrence Finkelstone,
Ralph L. Tisei, and Beverly A. Tisei--had promoted and sold TBIA
dealerships for home inspection services throughout the nation since 1985.

In promoting and marketing the dealerships, the defendants allegedly placed
ads and promotional pieces in newspapers and magazines circulated
nationwide. The dealerships sold for between $10,000 and $30,000.

The complaint charged that, in numerous instances, the defendants had
violated the Franchise Rule by making unsubstantiated earnings claims.

In addition, they allegedly failed to comply with either the rule´s
disclosure requirements or the alternative--the Uniform Franchise Offering
Circular.

Specifically, the complaint asserted, the defendants failed to provide
prospective franchisees with disclosures of:

[Image] TBIA´s current executive officers and their business experience;

[Image] Each executive officer´s bankruptcy history during the previous
seven fiscal years; and

[Image] Each executive officer´s litigation history concerning fraud or
misrepresentation during the previous seven fiscal years.

In October 1995, Finkelstone--the company´s director of sales and
marketing--agreed to resolve the charges as to himself by paying a $5,000
civil penalty. Beverly Finkelstone agreed to settle the allegations as to
herself by paying a civil penalty of $10,000.

Under this proposed consent judgment, Ralph Tisei will pay a $20,000 civil
penalty and, along with TBIA, agrees not to violate the rule in the future.

The Commission´s vote to authorize the Justice Department to file the
proposed settlement on its behalf was 5-0.

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                       FOR RELEASE: OCTOBER 24, 1995

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     BUILDING INSPECTION FRANCHISE SALESMAN TO PAY $5,000 CIVIL PENALTY

Lawrence Finklestone, Director of Sales & Marketing for The Building
Inspector of America, Inc., has agreed to pay a $5,000 civil penalty as
part of a settlement of federal charges against him for failing to disclose
to potential purchasers the litigation and bankruptcy history of the
franchisor and two other company officers. The complaint charges that
Finklestone and the other defendants also made unsubstantiated claims to
potential purchasers about the earnings they could expect, among other
violations of the Federal Trade Commission's Franchise Rule.

The Building Inspector of America, Inc., in operation since 1985, offers
franchises for home-inspection services. It is based in Wakefield,
Massachusetts. Finklestone resides in Framingham. The federal district
court has entered partial summary judgments against two of the other
defendants in the case, but has yet to set the injunctive requirements and
any damages or civil penalties.

The FTC's Franchise Rule, designed to assist franchisees in evaluating a
business investment, requires franchisors to provide each potential
franchisee with a complete and accurate disclosure document describing the
financial status of the company, the experience and background of the
franchisors, their litigation history, the nature of the business, the
terms of the proposed franchise relationship, and other key information.
The rule also requires franchisors to have a reasonable basis for any
earnings claims they make, and to provide prospective purchasers with a
document containing substantiation for those claims. In an April 1993
complaint, filed in federal district court and detailing the allegations in
this case, the FTC charged the defendants with failing to disclose to
potential franchisees the litigation history concerning fraud or
misrepresentation and the bankruptcy history of each executive officer. The
complaint also alleges that defendants made claims about the earnings that
franchise buyers could expect, without having adequate support for the
claims.

The proposed consent judgment that Finklestone has signed to settle the
charges against him, and which requires the court's approval to become
binding, would require him to pay the $5,000 civil penalty within five days
of the court's approval. In addition, Finklestone would be prohibited from
violating the FTC's Franchise Rule in the future. Finally, the settlement
includes various reporting requirements

   * -- including a require ment that, for seven years, Finklestone notify
     the FTC of any involvement in the sale of franchises

   * -- that would assist the FTC in monitoring his compliance.

The proposed consent judgment was filed in U.S. District Court for the
District of Massachusetts, in Boston, on Oct. 23, by the Department of
Justice at the request of the FTC. The Commission vote to authorize filing
was 5-0.

NOTE: This consent judgment is for settlement purposes only and does not
constitute an admission by the defendant of a law violation. Consent
judgments have the force of law when signed by the judge.

Two free FTC brochures -- titled "Franchises and Business Opportunities"
and "A Consumer Guide to Buying a Franchise" -- explain the FTC's Franchise
Rule in more detail and offers advice to those considering investing in
such a business. Copies of the brochures, as well as the consent judgment
and other documents associated with this case, are available from the FTC's
Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue,
N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired
202-326-2502. To find out the latest news as it is announced, call the FTC
NewsPhone recording at 202-326-2710 FTC news releases and other materials
also are available on the Internet at the FTC's World Wide Web site at:
http://www.ftc.gov

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(FTC File No. X940061)
(Civil Action No. 93-10838-NG)
(tbia-2)
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Technical Reviewers & References

Related Topics, found near the top of this page suggest articles closely related to this one.

Mark Cramer Inspection Services Mark Cramer, Tampa Florida, Mr. Cramer is a past president of ASHI, the American Society of Home Inspectors and is a Florida home inspector and home inspection educator. Mr. Cramer serves on the ASHI Home Inspection Standards. Contact Mark Cramer at: 727-595-4211 mark@BestTampaInspector.com
John Cranor is an ASHI member and a home inspector (The House Whisperer) is located in Glen Allen, VA 23060. He is also a contributor to InspectApedia.com in several technical areas such as plumbing and appliances (dryer vents). Contact Mr. Cranor at 804-747-7747 or by Email: johncranor@verizon.net
Carson, Dunlop & Associates Ltd., 120 Carlton Street Suite 407, Toronto ON M5A 4K2. (416) 964-9415 1-800-268-7070 info@carsondunlop.com. The firm provides professional home inspection services & home inspection education & publications. Alan Carson is a past president of ASHI, the American Society of Home Inspectors. Thanks to Alan Carson and Bob Dunlop, for permission for InspectAPedia to use text excerpts from The Home Reference Book & illustrations from The Illustrated Home. Carson Dunlop Associates' provides:
- Commercial Building Inspection Courses - protocol ASTM Standard E 2018-08 for Property Condition Assessments
- Home Inspection Education Courses including home study & live classes at eleven colleges & universities.
- Home Inspection Education Home Study Courses - ASHI@Home Training 10-course program.
  Special Offer: Carson Dunlop Associates offers InspectAPedia readers in the U.S.A. a 5% discount on these courses: Enter INSPECTAHITP in the order payment page "Promo/Redemption" space. InspectAPedia.com editor Daniel Friedman is a contributing author.
- The Home Reference Book, a reference & inspection report product for building owners & inspectors.
  Special Offer: For a 10% discount on any number of copies of the Home Reference Book purchased as a single order. Enter INSPECTAHRB in the order payment page "Promo/Redemption" space. InspectAPedia.com editor Daniel Friedman is a contributing author.
- The Home Reference eBook, an electronic version for PCs, the iPad, iPhone, & Android smart phones.
  Special Offer: For a 5% discount on any number of copies of the Home Reference eBook purchased as a single order. Enter inspectaehrb in the order payment page "Promo/Redemption" space.
- The Illustrated Home illustrates construction details and building components, a reference for owners & inspectors.
  Special Offer: For a 5% discount on any number of copies of the Illustrated Home purchased as a single order Enter INSPECTAILL in the order payment page "Promo/Redemption" space.
- The Horizon Software System manages business operations,scheduling, & inspection report writing using Carson Dunlop's knowledge base & color images. The Horizon system runs on always-available cloud-based software for office computers, laptops, tablets, iPad, Android, & other smartphones.
Mark Cramer Inspection Services Mark Cramer, Tampa Florida, Mr. Cramer is a past president of ASHI, the American Society of Home Inspectors and is a Florida home inspector and home inspection educator. Contact Mark Cramer at: 727-595-4211 mark@BestTampaInspector.com 11/06
Roger Hankey is principal of Hankey and Brown home inspectors, Eden Prairie, MN. Mr. Hankey is a past chairman of the ASHI Standards Committee. Mr. Hankey has served in other ASHI professional and leadership roles. Contact Roger Hankey at: 952 829-0044 - rhankey@hankeyandbrown.com. Mr. Hankey is a frequent contributor to InspectAPedia.com.

Books & Articles on Building & Environmental Inspection, Testing, Diagnosis, & Repair

Our recommended books about building & mechanical systems design, inspection, problem diagnosis, and repair, and about indoor environment and IAQ testing, diagnosis, and cleanup are at the InspectAPedia Bookstore. Also see our Book Reviews - InspectAPedia.

The Home Reference Book - the Encyclopedia of Homes, Carson Dunlop & Associates, Toronto, Ontario, 25th Ed., 2012, is a bound volume of more than 450 illustrated pages that assist home inspectors and home owners in the inspection and detection of problems on buildings. The text is intended as a reference guide to help building owners operate and maintain their home effectively. Field inspection worksheets are included at the back of the volume. Special Offer: For a 10% discount on any number of copies of the Home Reference Book purchased as a single order. Enter INSPECTAHRB in the order payment page "Promo/Redemption" space. InspectAPedia.com editor Daniel Friedman is a contributing author.

Or choose the The Home Reference eBook for PCs, Macs, Kindle, iPad, iPhone, or Android Smart Phones. Special Offer: For a 5% discount on any number of copies of the Home Reference eBook purchased as a single order. Enter INSPECTAEHRB in the order payment page "Promo/Redemption" space.

[Information about ASHI]
[ASHI's Association Info]
[ASHI Headquarters Website]
Basement Moisture Control, U.S. Department of Energy
Building Pathology, Deterioration, Diagnostics, and Intervention, Samuel Y. Harris, P.E., AIA, Esq., ISBN 0-471-33172-4, John Wiley & Sons, 2001 [General building science-DF] ISBN-10: 0471331724 ISBN-13: 978-0471331728
Building Pathology: Principles and Practice, David Watt, Wiley-Blackwell; 2 edition (March 7, 2008) ISBN-10: 1405161035 ISBN-13: 978-1405161039
Crawl Space Moisture Control, U.S. Department of Energy
Historic Preservation Technology: A Primer, Robert A. Young, Wiley (March 21, 2008) ISBN-10: 0471788368 ISBN-13: 978-0471788362
...


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