TELECOM Digest OnLine - Sorted: Michigan Attorney General Mike Cox Announces Settlements

Michigan Attorney General Mike Cox Announces Settlements

Jack Decker (jack-yahoogroups@withheld_on_request)
Fri, 27 May 2005 11:43:19 -0400

Michigan Attorney General Mike Cox Announces Settlements With Finance
Companies Over NorVergence Telecommunications Fraud Claims

LANSING, Mich., May 26 /PRNewswire/ -- Attorney General Mike Cox
announced today that he and the Attorneys General from 19 other states
and the District of Columbia have reached settlements with three
financing companies in connection with a widespread telecommunications
fraud involving NorVergence, Inc., a bankrupt New Jersey-based
telephone equipment and service company.

In the settlements, CIT Group/Equipment Financing, Inc. (CIT), Lyon
Financial Services d/b/a U.S. Bancorp Business Equipment Finance Group
(USB), and Wells Fargo Financial Leasing, Inc. (WFFL) will
collectively refund or not collect more than $24 million in rental
payments from consumers according to the following formula:

CIT: $8.83 million not collected, 496 contracts affected, 10 states.
USB: $7.9 million not collected, 366 contracts affected, 18 states.
WFFL: $7.3 million not collected, 261 contracts affected, 20 states.

"Many Michigan small business owners were victimized by NorVergence's
bogus promises, and then suffered again when financing companies tried
to collect for services that were not being received," said Cox. "I
am pleased that CIT, USB, and WFFL have agreed to forgive the bulk of
the outstanding balances on their NorVergence contracts. These
settlements will offer resolution to affected small businesses that
were struggling to meet dead-end obligations, including some that were
sued for payment in courts in Minnesota and Iowa."

CIT, USB, and WFFL are three of approximately 40 financing companies
involved with the financing of telecommunication services through the
rental of data routers that NorVergence called the Matrix box.
NorVergence enticed small business customers to enter into rental
agreements for a Matrix box that purported to provide telecommunications
services by false claims of dramatic savings. While the rental
agreements were typically for three to five years with payments of
$500 - $2,000 per month, the market price of the Matrix box was no
more than $1,500. After securing contracts with businesses,
NorVergence sold the rental agreements to different finance companies,
including CIT, USB, and WFFL.

When NorVergence was forced into bankruptcy in June 2004, its
customers were left without service but the finance companies,
including CIT, USB, and WFFL, maintained that customers were still
responsible for the five-year rental agreement payments. Customers
who did not pay faced being sued or threatened with suits by USB and
WFFL in the states in which they have their corporate headquarters, in
most cases, a distant and inconvenient forum for the NorVergence

All consumers who signed agreements with NorVergence that were bought
by CIT, USB, or WFFL or signed NorVergence agreements directly with
CIT, USB, or WFFL, will receive a notice in the mail regarding the
opportunity to participate in the settlement. To accept the
settlement offer, consumers must follow instructions contained in the
notice. Also, any consumer that previously settled with the three
companies regarding NorVergence service can opt to receive the same or
substantially the same terms of this settlement, if they choose.

During 2003 and 2004, the Consumer Protection Division collected more
than $600 million on behalf of Michigan. In 2004, the Division
stopped more than $400 million in utility rate increases and responded
to more than 102,000 consumer complaints.

A copy of the settlements with CIT, USB, and WFFL can be viewed at the
Attorney General's Web site: under the
Consumer Protection link.

SOURCE Michigan Attorney General
Web Site:

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