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Flag company accused of scamming vets should repay $3.6 million, Tennessee officials say

The American flag. (U.S. Air Force Photo/Master Sgt. Scott T. Sturkol)
October 03, 2021

Justin Scott started a handmade wooden flag company in his basement six years ago. Business soon skyrocketed, catapulting the company to online fame with hundreds of flags produced every day, according to the attorney general’s office in Tennessee.

But Scott couldn’t keep up.

Now the attorney general says Scott should pay $3.6 million in restitution to thousands of customers who never received a flag or a refund. The request was made in a motion for summary judgment filed last week in Davidson County Circuit Court, which seeks a ruling that Scott and and his business — The Rustic Flag Company — engaged in deceptive and unfair business practices.

The Tennessee Attorney General’s Office had filed a civil complaint against Scott and The Rustic Flag Company in May 2020.

“They had a good product that was in high demand,” Attorney General Herbert H. Slatery III said in a news release announcing the case. “But The Rustic Flag Company did not deliver on what it promised customers and violated state law.”

More than a year into the case, the state now says there is enough evidence for a ruling against Scott and his company.

copy of the motion shared by WSMV shows that by the state’s count, at least 23,645 customers — many of them reportedly veterans — never received their orders. But Scott disputed that number in a statement to McClatchy News on Wednesday.

He said the figures were pulled from the e-commerce site Shopify, which The Rustic Flag Company used to take orders until the relationship was “terminated.” Scott said they continued to ship orders for months after he stopped using Shopify.

“Those orders that we worked hard to ship were never fulfilled in the Shopify system because we weren’t able to do so,” he told McClatchy News. “We do owe product/money to people and own the responsibility for that. However, the number that’s being sought has no factual backing.

“We want to figure out the actual number and agree to pay that however we are able,” Scott added. “We aren’t resisting a plan to refund anyone because we feel that obligation is ours.”

Falling behind on orders, ‘financial chaos’

Scott and his wife Donna founded The Rustic Flag Company in 2015 in Trenton, Tennessee. According to court filings, it started out small, namely filling orders for family and friends. But advertising on Facebook created a boom in sales, and Scott bought a warehouse in 2017 to accommodate the company’s growth.

Custom and pre-designed flags sold for anywhere from $95 to $4,000, depending on the order. At its peak, the attorney general’s office said, the company produced up to 240 flags a day.

According to the state’s complaint, Scott started extending the amount of time customers were guaranteed to receive their order — from three to five weeks at the beginning of 2017 to up to 16 weeks by the end of 2018.

Scott reportedly began to fall behind on orders around February 2018. But the attorney general’s office said he continued accepting orders for another nine months — all while customers received nothing from the company explaining the delay.

The delays resulted in the Tennessee Division of Consumer Affairs fielding more than 1,100 complaints from customers who didn’t receive their flags. More than 2,100 complaints were also filed with the Better Business Bureau, according to court filings.

Investigators soon discovered record-keeping for The Rustic Flag Company was “scant,” the complaint states. On top of that, Scott was accused of using money from the business for personal expenses.

The attorney general’s office said his “personal spending habits” were a “major contributor to (the company’s) financial chaos.”

The misuse of funds included a $300,000 loan from Shopify in 2017 — $215,000 of which went toward paying off Scott’s home loan, the complaint states. He was also accused of using the company’s money to pay for a Mustang, Corvette, Escalade, Ford F-150 and two four-wheelers as well as landscaping at his house.

At least $40,000 from The Rustic Flag Company was additionally spent on opening a second business for tactical gear, which later failed, the attorney general’s office said.


© 2021 The Charlotte Observer

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