The Australian Competition and Consumer Commission has begun legal proceedings against Mr Daniel Albert and Mr Greg Zimbulis over their involvement in a series of alleged franchising scams that netted more than $3 million.
The ACCC has alleged in the Federal Court that Mr Albert, as the director of three companies, Photo Safe Australia Pty Ltd, Data Vault Services Pty Ltd and ie Networks Pty Ltd (all now in liquidation), and Mr Zimbulis, as their sales manager, operated franchising scams which offered prospective franchisees high returns which never materialised.
The ACCC also alleges that franchisees who signed up as Photo Safe or Data Vault distributors, for amounts of up to $160 000, or paid ie Networks for internet terminals realised small returns or no returns at all.
Photo Safe provided a service which saved customers photographs to a compact disc and on the internet.
Data Vault was set up to market a software product that stored computer files and emails at a secure, remote location.
ie Networks was to provide coin-operated internet access terminals and mobile download terminals in shopping centres and other popular locations.
The ACCC alleges that Mr Albert and Mr Zimbulis engaged in misleading or deceptive conduct in breach of sections 52 and 59 of the Trade Practices Act 1974 in their dealings with Photo Safe and Data Vault franchisees in relation to:
- the extent of the existing and potential markets for the Photo Safe service and the Data Vault products
- the amount which would be spent by the Photo Safe and Data Vault franchisors on marketing and advertising the products and services would receive
- the fact that major national traders, including members of the Australian Newsagent's Federation, Australia Post and Harvey Norman, had agreed to offer the Photo Safe service and the Data Vault products to the public
- the number of retail outlets the company would secure as customers for each distributor
- the expected income that would be generated by distributors who took up the offer, and
- the expected launch date for the companies.
Whilst Photo Safe did launch on the market the ACCC has alleged that there was only a relatively minor advertising campaign, with most distributors making only minimal sales or no sales at all. Data Vault was never launched on the market.
The ACCC also alleges that Mr Albert was knowingly concerned in contravening the Franchising Code of Conduct by failing to provide prospective franchisees with relevant documents and information, particularly concerning the likely profitability of the business.
The ACCC alleges that Mr Albert and Mr Zimbulis misled ie Networks distributors and contravened sections 52, 58 and 59 of the Trade Practices Act 1974 by claiming that the company:
- had deals to provide product which customers could download from the terminals
- already had the terminals operating in the market
- was a successful business, and
- was able to provide terminals paid for by distributors.
The ACCC also alleges that in reality ie Networks had no terminals to provide to distributors, no operational terminals in the market place and no contracts in place to provide material for downloading. The ACCC alleges that Mr Albert was knowingly concerned in the conduct of ie Networks which accepted the distributor's payments for non existent terminals thereby contravening section 58 of the Act.
The ACCC is seeking a range of orders against Mr Albert and Mr Zimbulis, including injunctions, declarations, findings of fact, and non-punitive orders.
The matter has been listed for a directions hearing before Justice Jacobson in the Federal Court, Sydney, on 28 April 2005.