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Former Peak Fitness owner banned from business

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RALEIGH, NC (NEWS RELEASE) -- Jeff Stec, former owner of more than 20 Peak Fitness locations across North Carolina, is banned from the health club business for 12 years for repeatedly violating a state law that requires health clubs to maintain sufficient bonds, Attorney General Roy Cooper announced Tuesday.

"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."

North Carolina law requires health clubs that sell pre-paid memberships to purchase an appropriate bond and file it with the Attorney General's Office. If the club shuts down, the bond can be used to pay refunds to members.

Under terms of a consent judgment approved this week by North Carolina Superior Court Judge Robert H. Hobgood, Jeffrey R. Stec and his former Peak Fitness associates are banned from working in the health club business in North Carolina for 12 years. If Stec violates the ban, he will have to pay a $2 million penalty to the state.

At one time, Stec owned or operated Peak Fitness health clubs in Apex, Asheville, Cary, Chapel Hill, Charlotte, Clayton, Clemmons, Concord, Cornelius, Durham, Fuquay-Varina, Harrisburg, Garner, Knightdale, Lincolnton, Raleigh, Statesville, Wilmington, and Winston-Salem. Since 2006, Cooper’s office has received more than 700 complaints regarding Peak-related health clubs.

Cooper's Consumer Protection Division first began investigating Stec and his health clubs in 2006 and filed a lawsuit against Stec in 2007 alleging that he failed to get proper bonds and committed other unfair and deceptive practices when operating the Peak health clubs. To resolve that lawsuit, Stec agreed, via a January 2009 consent judgment, to get proper bonds and make other changes to Peak Fitness’ business practices.

Later in 2009, Peak Fitness filed for Chapter 11 bankruptcy and its bonding company cancelled all of the clubs' bonds. Around that time, Cooper’s office received sworn statements from Stec regarding health club bonds that significantly understated the outstanding liabilities of several Peak health clubs. Cooper's office filed another lawsuit against Stec in May of 2009, alleging he violated North Carolina's health club statute, and the prior Consent Judgment, by failing to maintain proper bonds. Today's Consent Judgment resolves the second lawsuit against Stec and bans him from the health club business.

"We've been able to recover more than $1.3 million 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."

Cooper encourages consumers to check out a health club thoroughly before signing any contract. If you have problems with your health club or want to check up on one before joining, contact the Attorney General’s Consumer Protection Division at www.ncdoj.gov or toll-free at (877) 5-NO-SCAM.

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