business accused of fraud in 2 states
By Richard Leiby
CLEARWATER - The Largo-based rental-referral business of Scientologist Robert Float has been accused of fraud in two states, with charges ranging from swindling franchisees to bilking the public.
In Michigan Tuesday, county circuit court judge blocked Float's firm, Red Giant Rental Services, from selling any more unregistered franchises in that state. Michigan Attorney General Frank Kelley had charged in a lawsuit that Red Giant swindled past franchise owners by promising enormous profits on their operations through the use of Red Giant management techniques.
Meanwhile, in Illinois Wednesday, a circuit court judge found Red Giant in contempt for the third time in the past two years for failing to reimburse customers allegedly bilked by Red Giant franchise owners. The company was fined $10,000.
Float, who lives in Clearwater, headquarters his firm at 514 1st Ave. S., Largo. A Scientologist, he employs the management techniques formulated by sect founder L. Ron Hubbard. Float has frequently boasted that these techniques have earned him millions of dollars in his nationwide rental-referral firm and other businesses.
Kelley said Tuesday that any further Red Giant franchises must be registered according to a Michigan law, which is "designed to restrict unscrupulous promoters and fly-by-night operators."
"Red Giant attracted prospective franchisees by placing advertisements... in which they claimed a franchise owner could gross up to $50,000 annually," the attorney general said. "This claim is false and has misled victims into entering Red Giant's program."
"That's not true," Float responded Wednesday. "Red Giant does not promise a franchise owner anything. Each individual is responsible for his own operation. That goes for the management and training techniques, too."
He added that the "problems in Michigan have all been taken care of. We've agreed not to sell anymore illegal franchises." He said the Michigan franchise owner was fired.
Float's administrative offices have been located in Largo since October 1978. He said he has a staff of about 12 persons, some of them Scientologists.
Red Giant franchises have been prohibited from doing business in Illinois because of "misrepresentations in advertisements on rental referrals," according to Bill Oberhardt, an assistant attorney general in the state's consumer protection division.
Illinois first sued Red Giant in 1977, Oberhardt said Wednesday, for allegedly allowing its franchises to "advertise attractive homes in attractive locations at very low prices. But once a person paid a rental referral fee (generally $40 to $45), the found those homes didn't exist."
Red Giant has twice been ordered to pay back $7,470 to allegedly bilked consumers, Oberhardt said, but it never has. A Cook County Circuit Court judge Wednesday morning found the firm in contempt for the third time and levied $5,000 fines on Red Giant Rental Services and Red Giant Management Services, another Float-owned business.
Float said Wednesday his firm will pay back the money "even though we're not responsible."
Marc Goldman, assistant attorney general in Michigan's economic crime division, said Wednesday he could not estimate how many Red Giant franchise owners were allegedly miseld or how much money they lost.
"We haven't been able to review his (Float's) books and records, although we may go to court to do so," Goldman said.
Attorney General Kelley specifically complained in Ingham County Circuit Court about the way Red Giant trained its franchise recruits.
"Individuals are required to work 80 hours a week during the eight to 12 week training session before being able to purchase a franchise," he said. "The individual's income during a training sesion is reported to be $125 to $145 per week."
Tom Bylenga, an investigator with Michigan's department of corporations and securities, said the Red Giant training program amounted to "a cheap labor force" for Red Giant.
"They were kept around as long as they could get established and make some money for Red Giant in Florida," he said.
Float said the Largo offices are used for training sessions, but said franchisees are not paid at all. "They're taking classes," he said.
The Michigan attorney general's complaint says that Float's training plan calls for the firm's 25 franchise holders around the nation to train one prospective franchisee every 10 weeks.
The plan would yield 25,500 new franchise owners in the coming 24-month period," Kelley said. "And based on the Red Giant geographical allocation of franchise areas, the continental U.S. could not support 25,500 franchise owners." Float called that charge untrue, saying each franchise owner designs his own plan.