North Carolina Superior Court judge Robert Hobgood has banned Jeffrey Stec, the former owner of 38 Peak Fitness centers, from the health club business for 12 years after he violated a state law requiring fitness facilities selling prepaid memberships to be properly bonded. Stec faces a $2 million fine if he is found to be working in the health club industry anywhere in North Carolina.
According to The Charlotte Observer, Peak Fitness declared bankruptcy in 2009 and closed some two dozen clubs across the state. The gyms weren't carrying proper bonds, leaving customers vulnerable to losses, said North Carolina attorney general Roy Cooper, whose office has received more than 700 complaints about Peak. Bonds are meant to protect health club members by refunding them if a given facility shuts its doors.
The attorney general's consumer protection division began investigating Stec and Peak Fitness in 2006, reports the Winston-Salem Journal, and it filed a lawsuit against Stec in 2007 alleging failure to obtain proper bonds and other "unfair and deceptive practices" while operating Peak clubs. Stec agreed, via a January 2009 consent judgment, to get proper bonds and make other changes, but when the company filed for bankruptcy in 2009, its bonding company canceled the bonds. The attorney general's office also received sworn statements from Stec regarding health club bonds that significantly understated the outstanding liabilities of several Peak facilities.
"Consumers who've paid for a gym membership deserve a refund if their health club expires before their membership does," Cooper told the Journal. "That's exactly why these bonds are required and why we keep pressing to make sure health clubs have them."
