California Settles with NorVergence Leasing Co.
California businesses will receive up to $2.6 million in financial
benefits under an agreement between Attorney General Bill Lockyer and
U.S. Bancorp (USB), resolving a case connected to a consumer fraud
perpetrated by NorVergence, Inc., a bankrupt New Jersey-based
telecommunications company.
"NorVergence scammed nearly 1,000 California small businesses," said
Lockyer. "And when it went under, NorVergence left its victims on the hook
to pay thousands of dollars for nonexistent service and high-priced
equipment. This agreement with U.S. Bancorp provides a much-deserved remedy
to defrauded California companies."
Under the agreement approved by the San Diego County Superior Court,
USB subsidiary Lyon Financial Services (Lyon), Inc. will forego
collecting on potential rental contract obligations totaling
approximately $2.6 million. USB is one of the finance companies that
bought rental contracts from NorVergence.
Starting in 2002 until its bankruptcy in July 2004, NorVergence
defrauded small businesses across the country in marketing and selling
telecommunications services and equipment. NorVergence promised
victims multi-year savings of up to 30 percent on their phone,
cellular and Internet bills.
The savings would be produced, NorVergence told customers, by a
"Matrix" black box installed on businesses' premises that would allow
customers to integrate their telecommunications systems. The Matrix
services cost businesses between $500 and $2,000 a month under rental
contracts that typically lasted five-years. For fast cash, NorVergence
sold the contracts at a discount to about 40 finance companies,
including USB.
Contrary to NorVergence's representations, there was nothing special
about the Matrix black box. It was nothing more than standard routing
equipment that had no value without a connection to phone carriers'
networks. NorVergence had no means to guarantee the long-term savings
it promised because it had no long-term contracts with carriers.
NorVergence's victims totaled an estimated 11,000 nationwide,
including about 1,000 in California.
When NorVergence filed for bankruptcy, USB and other finance companies
that bought the rental contracts demanded that businesses continue
making payments under their five-year agreements, even though the
businesses were not receiving the promised services.
The contracts purported to require customers to pay in full even if
they received no services. Additionally, customers often found it
difficult to challenge charges because the contracts allowed the
finance companies to pursue collection lawsuits in venues far from
customers' locations. USB's venue of choice was its home state of
Minnesota, an extremely inconvenient forum for California businesses.
Under the settlement, customers will have the opportunity to bring
their contract current through January 31, 2005, and will have the
option of making such payments in installments. In return, USB will
forgive the balance of the contract obligations. If all California
customers accept, USB will forgive about $2.6 million in payments.
USB will mail to eligible customers a notice advising them of the
opportunity to participate in the settlement, with instructions on how
to participate.
As part of the settlement, USB has agreed to not enforce the provision
of the rental contracts that purportedly allows USB to choose the
venue to resolve disputes.
Copyright 2003-2005 ConsumerAffairs.Com Inc.
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Lisa Minter (lisa_minter2001@yahoo.com)