Watchdog bid to close erectile dysfunction firm

THE consumer watchdog has launched a legal bid to shut down erectile dysfunction treatment company Advanced Medical Institute because it is trading without telling its patients it is insolvent.

Advanced Medical Institute's founder and major shareholder, Jack Vaisman, put AMI into administration just before Christmas, the day after the Australian Competition and Consumer Commission launched legal action. But AMI has continued to sell treatment programs lasting up to 18 months without informing patients that it is insolvent and in administration, the ACCC alleges.

Tomorrow, the ACCC will ask the Federal Court for urgent injunctions effectively shutting the company down by stopping it from signing new treatment contracts after July 20.

It also wants the court to force AMI to post a notice on the home page of its website telling potential patients that ''there is a real risk that AMI will not be able to continue to supply its treatments to patients and that patients will not receive refunds claimed by them after the conclusion of its administration''.

In an application filed with the court, the ACCC alleges AMI's conduct under administrator Trent Hancock, of BDO, ''was misleading or deceptive'' and breached Australian consumer law. It claims that without an injunction ''AMI will continue to act to the real detriment of consumers''.

But the administrators believe the ACCC is curtailing their right to trade a businesses under administration.

BDO partner Laurie Fitzgerald said: ''We have been in heated dispute with the ACCC for some months and we are frustrated by their continual attacks on this business.

''It is a legal, legitimate business. Our view is they do not like it and they are doing what they can to stop it.''

AMI no longer used 18-month contracts and there was no legal requirement to advertise the insolvency on the website, Mr Fitzgerald said. Customers would not lose money because the administrators were taking liability for operations, and BDO was in advanced negotiations to sell AMI for a substantial sum, he said.

In separate Federal Court proceedings, the ACCC alleges that AMI engaged in unconscionable conduct towards patients before calling in administrators on December 22.

Appearing before the court in March, counsel for the ACCC Julian Burnside, QC, said the company had been put into administration to thwart the consumer watchdog's legal action.

''We would say, if it matters, that this looks very much like an administration of convenience, something that was called on to prevent this [case] proceeding in the normal way,'' Mr Burnside told the court.

AMI is also in trouble with the Tax Office and the Fair Work Ombudsman for failing to pay workers' superannuation and underpaying a call-centre employee. It reportedly stopped paying superannuation in October 2009, racking up a $2 million superannuation debt.