The Hamilton Spectator - No Fraud at Premier Fitness

Hamilton Spectator Retraction Article Reprinted

No fraud at Premier Fitness

By Natalie Alcoba

(December 23, 2004) -- Hamilton police have concluded a fraud investigation into Premier Fitness and say there is no evidence to suggest the corporation is guilty of criminal activity.

Detective Sergeant Mark Simchison, head of the major fraud branch, said police are still looking at issues with employees at individual clubs who may not have been doing their jobs.

Simchison said police conducted employee interviews, searched the premises and looked at the company's computer system.
"The bottom line was, after about a month of this investigation, (the investigators) determined that we can't find any evidence of criminal activity on the part of their administration," said Simchison.

He said police received full co-operation from the company during their investigation.

"There is no question that there is no criminality whatsoever on the part of the administration of Premier," said Premier's legal counsel, Joseph Markson.

"We're not surprised to have the Hamilton Police Service form that opinion."

A police investigation into allegations that Premier Fitness improperly withdrew money through members' preauthorized payment plans accelerated after a Spectator series published in November. The five-part series revealed hundreds of consumer complaints and dozens of legal actions against the major fitness company.

The chain has 27 Ontario locations -- including four in Hamilton and two each in Burlington, Oakville and St. Catharines -- which include Mademoiselle Fitness and Day Spa, Curzons Fitness, The Women's Club and Regency Fitness and Racquets Club brands.
The Spectator series also highlighted inadequacies with consumer protection legislation and prompted the province to pass a new law that strengthens those safeguards.

More than 700 complaints and inquiries about Premier Fitness have been lodged at the Ministry of Consumer and Business Services. Complaints recorded at the local Better Business Bureau alleged bank accounts were billed more than once by the company or that monthly billings continued after the member considered the contract over. The Spectator received more than 200 calls and e-mails from former club members as a result of its series, describing similar concerns regarding Premier's business practices.

Simchison said many consumers genuinely thought they were being incorrectly billed, but in reality had not read the fine print of their contracts.

"However, those contracts were designed in such a manner that it would be extremely frustrating to try to understand them," he said. Premier Fitness recognized that, and has dealt with the concerns of their members, said Simchison.

"Premier has invested in Hamilton for the long-term and is committed to developing and maintaining good faith relationships with its members and the greater Hamilton community," said Markson.

Some consumers did cancel contracts legitimately, but rogue employees, most of whom have been fired, failed to process the cancellations, said Simchison. He describe that as "negligence" on the part of the employee, and said criminal charges are not likely.

The police investigation also involved a close look at the company's billing system.

Simchison described the management software -- known as Aphelion -- as an "aggressive" system that carefully tracks member accounts. It is common within the fitness industry, he said.

Aphelion would compensate for missed payments by billing a member one, two, sometimes three times a month, said Simchison. In some cases, the system would wait six months or one year to bill members for outstanding dues, he added.
The monthly charges could include banking fees, which would explain why some consumers didn't recognize the amounts that showed up on their bank account slips, said Simchison.

Markson said police received approximately two dozen complaints, the majority of which are naturally explained.
"This represents a minuscule percentage of Premier's approximately 140,000 satisfied members across Ontario," said Markson.
He said the complaints are explained by consumer misunderstanding of contractual obligations, clerical errors, or in some rare cases, failure on behalf of an employee.

"Premier has been vigilant on an ongoing basis to terminate employees who been involved in theft or fraud," said Markson. "Police have simply confirmed that the billing related systems at Premier have integrity."