Pay phone franchisor sued for damages

More than 100 investors are suing the Mississauga-based outfit for $15 million for alleged breach of contract, negligent or fraudulent misrepresentation, and damages. Some investors lost as much as $100,000 in the scheme.

The Toronto Star
December 23, 1999

Pay phone franchisor sued for damages
More than 100 investors seek $15 million
Dana Flavelle

Christopher Pancras thought he was buying himself a nice small business when he invested $11,000 of his hard-earned savings in a pay telephone business.

In its newspaper ads, Universal Payphone Systems Inc. had promised investors they could earn up to $250,000 a year on an investment as low as $10,000.

Six months later, the Mississauga resident is still waiting for Universal to get the two phones he purchased in working order. Meanwhile, the company has stopped returning his calls.

“I don’t know what to do. Where can I complain? I want to recover my money,” Pancras said in a telephone interview this week.

He’s not alone.

More than 100 investors are suing the Mississauga-based outfit for $15 million for alleged breach of contract, negligent or fraudulent misrepresentation, and damages. Some investors lost as much as $100,000 in the scheme.

Universal Payphones is also in hot water on other fronts.

The federal consumer watchdog, the Competition Bureau, has ordered the company to stop running what it calls misleading ads.

Bell Canada has filed a complaint in the Federal Court of Canada trial division alleging trademark infringement over the use of Bell material in Universal’s promotional videos.

And Adin Group Inc., the Toronto-based company Universal contracted to install the phones, is chasing Universal for unpaid bills.

Universal Payphones did not return The Star’s calls yesterday.

The Star tried to reach the company and its president, George Kats, also known as George Katsoulakis, at all three of Universal’s known locations, in Mississauga, Montreal and New York.

Both the Competition bureau and the investors’ lawsuit allege Universal misled them about the type of pay phones they were buying, the income potential of the business and the company’s membership in so-called independent consumer protection agencies.

Universal has until the first week of January to file a statement in its defence. In the meantime, the investors have obtained a court order freezing the company’s bank accounts and ordering it to pay $1.28 million into the court to cover its guarantees, according to the investors’ lawyer, Michael Webster, of the Toronto law firm Telford Siegel Webster.

In a written contract investors signed with Kats, Universal guarantees investors will recover 100 per cent of their costs within 14 months or be reimbursed for the difference.

Investors, like Ernie Levy of Toronto, are still waiting.

Levy and a group of friends sank $90,000 into the scheme to buy 34 telephones after conducting what he thought was a thorough background check on the company. Universal supplied references who gave “glowing” reports, Levy said, and urged investors to call the Better Business Bureau, which gave it a clean slate.

Levy said he learned later the CBBB isn’t affiliated with any legitimate consumer watchdog agencies and in fact appears to be an arm of Universal.

The Better Business Bureau of Metropolitan Toronto said Universal has been warned to stop using the official BBB logo.

Universal Payphones’ Kats has already run afoul of the Metro Toronto BBB through a previous venture he operated under the name Universal Vending Inc., said Peter Lalonde, president of the Toronto chapter.

Universal Vending is the first-ever national member of the BBB to be ejected, Lalonde said, after it failed to respond to investors’ complaints about its toilet seat cover dispenser business.

Investors in the pay phone scheme allege in their lawsuit they were led to believe they were buying the same kind of Nortel phones Bell Canada uses as pay phones. In fact, the phones are made by Ernest Telecom and weren’t designed for use as pay phones, they allege.

Don Hartwick, who runs Adin Group, says Universal owes his company $12,000 for unpaid installations.

Hartwick adds that several investors have hired his firm directly to get their phones up and running. The phones all require a minor modification, he said. In addition, some were incorrectly installed by a previous firm, he said.


Brought to you by WikidFranchise.org

Risks: Fraud, lies, misrepresentations & half truths, Competition Bureau, Outright scam, Potemkin village, Canada, 19991223 Pay phone

Unless otherwise stated, the content of this page is licensed under Creative Commons Attribution-ShareAlike 3.0 License