The failure of a small business is an unfortunate but common circumstance. According to Entrepreneur, approximately 70% of all new ventures fail within 10 years.
The North Dakota Attorney General’s office claims that one defunct photography business in Bismarck was not a failure but a fraud. It has filed a lawsuit against the business, its owner and one of its employees.
The attorney general’s position
After the photography business abruptly closed its doors in October 2021, the Attorney General’s Office launched an investigation in response to complaints from consumers. It filed a lawsuit claiming that the investigation found substantial evidence of fraud.
The suit alleges that the owner of the business took advance payments from customers with the knowledge that the business was failing and that he would therefore probably not be able to deliver on his promises. It claimed that he applied for government assistance under false pretenses.
The business owner’s position
The business owner claims that he had grown the business for approximately a decade before circumstances beyond his control plunged him into financial difficulty. He says that he had tried to obtain financing that he hoped would sustain the business, but when it did not come through, he had no choice but to close his doors. A statement from his attorney states that the business owner cooperated with the Attorney General’s Office in its investigation in the hopes of helping the clients that he had had to disappoint.
The business owner claims that what the Attorney General alleges to be fraud is actually a business failure like the many that happen every year. He claims that many other businesses are in similar situations without having to face lawsuits from the state government.
The fraud allegation is a civil manner. There are no criminal charges filed against the business owner but, depending on the outcome of the case, he could be liable for millions of dollars in damages to customers.