Internet phone provider Vonage has settled an array of consumer complaints here and in other states, Washington AG Rob McKenna reports:
OLYMPIA – Attorneys general in 32 states are calling on Vonage to change its marketing practices. The company, one of the nation’s largest providers of Internet-based phone service, will refund eligible customers and pay $3 million to the states to resolve concerns about its billing and cancellation policies.
“Vonage customers who complained about hang-ups such as unexpected fees or difficulties cancelling the service may be eligible for refunds under this settlement,” Washington Attorney General Rob McKenna said.
Attorneys general conducted a 16-month investigation into Vonage’s services in response to consumer complaints. The company denied any wrongdoing but agreed to provide refunds and adhere to certain limitations on its marketing practices, as laid out in today’s settlement. Washington filed its version of the agreement today in Thurston County Superior Court.
Senior Counsel Paula Selis, an assistant attorney general who heads up the Consumer Protection High-Tech Unit in Washington state, said more than 400 Washington consumers have complained about Vonage’s services.
Selis said some consumers complained that their trial periods were shortened because they had to wait for equipment to arrive or for their old phone number to be moved to their new Vonage account. Others who responded to “free” trial services weren’t aware they would be charged an activation fee, shipping and handling, taxes and other fees. Some elderly consumers complained they weren’t aware they needed high-speed Internet service in order to use Vonage.
“Today’s agreement seeks to prevent future problems by compelling Vonage to revise how it discloses ‘free’ trials and money-back guarantees,” Selis said.
Vonage formerly paid incentives to customer service representatives for retaining or “saving” customers who called to cancel. As a result, consumers reported that cancellation was extremely difficult and sometimes impossible. The settlement puts strict limitations on this practice and requires recording and verification of these telephone calls.
Consumers who filed certain unresolved complaints about Vonage with the Attorney General’s Office since January 2004 are eligible for a refund. Qualifying consumers who file new complaints by March 16, 2010, will also receive refunds. Complaints can be filed online at www.atg.wa.gov or consumers may request a form by mail by calling 1-800-551-4636 between 8 a.m. and 3 p.m. weekdays.
Eligible consumers include those who:
· Attempted to qualify for the money-back guarantee but were prevented from cancelling and getting their money back due to Vonage’s practices.
· Alleged they weren’t informed of any limitations on minutes, coverage areas, international usage or calls to cell phones and therefore accrued costs.
· Attempted to cancel service but continued to be billed.
· Claimed they paid shipping fees and other costs that weren’t disclosed.
· Alleged they weren’t informed they needed high-speed Internet and therefore attempted to cancel.
· Didn’t receive discounted or promotional services or equipment they were offered.
· Qualified for a rebate they didn’t receive.
· Alleged they were charged for services they didn’t order.
In addition, Vonage will pay $3 million to the states to cover attorneys’ fees and legal costs or to supplement consumer education programs. Washington’s share is $45,000.

Press release from Washington AG Rob McKenna:
VANCOUVER, Wash. –The Attorney General’s announced today that it is suing RGH Marketing, Inc., and the general manager of Interstate Auto Liquidators, as part of an ongoing crackdown on deceptive practices by some dealers and marketers.
“Deceptive advertising by some auto dealers and marketers has accelerated in the down economy,” Attorney General Rob McKenna said.
McKenna said that’s unfair for auto businesses that are playing by the rules and for consumers.
“Whether some dealers are intentionally detouring around the law or ignorant of it doesn’t matter in the end – they can still be sued. The increased sales revenue isn’t worth so much when you have to pay attorneys’ fees and penalties.”
Since 2007, the Attorney General’s Office has accused five marketing businesses and two Washington dealerships of false advertising. That tally includes the latest lawsuit, filed this week in Clark County Superior Court. It accuses RGH Marketing, of Happy Valley, Ore., and Robert G. Hubbard, Jr., of violating the violating Washington’s Consumer Protection Act, Promotional Advertising of Prizes Act and Dealers’ Licenses Act.
Hubbard lives in Oregon and is the general manager of Interstate Auto Liquidators, based in Vancouver, Wash. RGH Marketing claims on its Web site that it is a wholesale division of Whitney’s Auto Group, whose members include Whitney’s Chevrolet in Montesano, Aberdeen Honda, Whitney’s Value Ford in Elma, Interstate Auto Liquidators in Kelso, and Stormy’s Used Cars in Elma.
“We believe that RGH Marketing promoted off-site sales at locations throughout Washington, making it appear these were special bank-ordered events,” Assistant Attorney General Mary Lobdell explained. “In fact, we believe the cars were from the Whitney’s Group dealers’ regular inventory or were picked up at auto auctions.”
The state’s complaint accuses the defendants of using terms such as “Pre-Auction Auto Sale,” “Repos,” and “Bank Asset Sale.” Ads also included statements such as “$0 Down Delivers!” when RGH knew or should have known that the dealer can’t prove these statements are true.
In 2006, the Oregon Department of Justice sent a notice to Hubbard, doing business as U.S. Marketing Direct, along with RGH Marketing and other individuals. The agency alleged their direct mail advertisements for “pre-auction liquidation” sales events violated the law. The flyers advertised events by Nationwide Fleet Liquidators. Oregon DOJ said the sales were conducted by Kirby Car Company and Newberg Dodge Chrysler Jeep and, despite advertising claims, the vehicles were offered at retail prices.

Washington AG Rob McKenna has come down hard–verbally, at least– on a magazine subscription sales company. I’ve been politely shutting the door on these people for years. Here’s the press release:

Door-to-door solicitor is back in the Northwest
SEATTLE — If a young person knocks on your door and says they’re selling magazines for a charity, wait before reaching for your pocketbook. The Washington Attorney General’s Office, which issued a warning about Fresh Start Opportunities in March, says solicitors have returned to Washington state.
Fresh Start Opportunities claims to be a “job business training company” that sends young adults door to door to give them a “fresh start” on life. The organization has ignored repeated inquiries from the Secretary of State’s Office concerning its failure to register as a charity, as well as consumer complaints received by the Attorney General’s Office and the Better Business Bureau.
“After paying generous amounts for subscriptions, consumers throughout the country never received the magazines and have no idea how their money was spent,” said Attorney General Rob McKenna.
The AGO has received complaints from consumers who paid $50 to $784 for subscriptions. A common theme among the complainants is that they were touched by the solicitors’ stories. They said solicitors claimed to be earning money for college, working toward a better job, receiving points for a free trip, or contributing proceeds to help homeless youth. Consumers paid for subscriptions by check.
The Attorney General’s Office has received complaints from consumers nationwide because the company lists a downtown Seattle address on its Web site. But it’s just a mail-forwarding service. A business scans the letters then sends the files by e-mail to the addressee, believed to be located in another state. So no one from Fresh Start Opportunities ever has to step inside to pick up the mail, such as refund requests.
The Web site also lists a toll-free phone number. When called, an automatic message says the number is “temporarily unavailable.”
A 19-year-old man working for Fresh Start Opportunities was arrested last fall in connection with an Edmonds robbery and was a suspect in burglaries in Sammamish and Tumwater.
A state search engine listing registered charities is available here.

This is a pretty long tale from the AG’s office, but you might enjoy reading all the way to the end to make sure you don’t miss the part about Oxycontin dealing and having to redeem your gas voucher in Minnesota…Can you say “public relations disaster?”

OLYMPIA – Gas vouchers were a hot promotional tool last year, used to lure potential customers to dealerships, furniture stores and seminars. But as gas prices rose, so did the number of con-sumers fuming about these so-called free fill-ups. A Vancouver, Wash., car dealer must now reimburse customers who responded to one such promotion that the Washington Attorney General’s Office says was deceptive.
In an effort to boost car sales, Curt Warner Chevrolet, Inc., mailed a “Scratch and Win” promotion to Vancouver residents over April 3-6, 2008. Consumers scratched the card to reveal a number that determined their prize. The big bounty was $25,000 cash but odds were such that recipients were nearly guaranteed to win a $40 gas voucher.
“It was a free gas offer that stunk,” Assistant Attorney General Mary Lobdell said.
In all, 211 people presented the mailers to the dealership to collect their prize but obtaining the $40 in free gas proved more difficult than they expected.
“We tell consumers to read the fine print but salespeople need to do the same,” Lobdell contin-ued. “Businesses can be held liable for deceptive advertising campaigns, even those created or managed by other companies.”
Curt Warner Chevrolet was already on probation after signing a 2007 agreement with the Attor-ney General’s Office to resolve concerns about its advertisements and promotions. Back then, the company paid $22,000 in attorneys’ costs and promised to comply with certain marketing rules. The Attorney General’s Office alleged the “Scratch and Win” promotion was misleading and violated the 2007 agreement.
Consumers who attempted to redeem the winning card at the dealership received a certificate to participate in a rebate program. They had to pay $5 to enroll then purchase at least $100 of gas per month. Only after mailing those receipts would they receive a gas gift card for $25. Consum-ers had to continue buying gas and submitting receipts to receive additional gas gift cards.
At one point, Curt Warner Chevrolet ran out of certificates and attempted to substitute a vacation that required a $50 deposit. When a Vancouver man objected, the dealership promised to mail him a $100 gas voucher. When it didn’t arrive by the promised date, he filed a complaint with the Attorney General’s Office.
The dealership eventually sent a certificate for enrollment in the rebate program, along with an apology note. But the consumer’s problems didn’t end there. After buying gas and following the strict redemption rules, the customer received a $25 gas gift card that was rejected by a local fuel station. He was told the card could only be used at Speedway and Superamerica gas stations in a handful of states – the closest in Minnesota.
Under a new agreement to be filed in Thurston County Superior Court, Curt Warner Chevrolet will pay up to $8,440 in restitution to consumers who responded to its “Scratch and Win” promotion. Eligible consumers will receive a $40 card that can be used to buy gas from a nationally recog-nized brand with multiple stations in the Vancouver area.
A Florida business, Tidewater Marketing Global Consultants, Inc., was behind the rebate pro-gram. The company was sued by Florida Attorney General’s Office in February 2009 and agreed to a state takeover. Consumers who visit www.freebiegas.com, one of the many Web sites where Tidewater previously advertised its rebate program, are now redirected to a page with information about how to file a claim. Company president Crystal Clark separately pled guilty to drug charges in connection with selling Oxycontin.
The Washington Attorney General’s Office posted a warning on its All Consuming blog about gas vouchers offered by Tidewater and an Arizona-based company named BBZ Resource Manage-ment, which filed for bankruptcy. Since November 2008, angry consumers nationwide have posted more than 220 comments on the blog.
REFUNDS
Consumers are eligible if they 1) Received the “Scratch and Win” promotion and presented a winning number to Curt Warner Chevrolet during the company’s April 3-6, 2008, marketing cam-paign and 2) Didn’t receive $40 worth of gas.
Curt Warner Chevrolet will contact eligible consumers by mail and notify them of their right to receive a $40 gas card. Any free gas that a consumer may have already received as part of the original voucher program will be deducted from their refund. Consumers will have at least 60 days to respond to the offer.
Consumers who have questions about the settlement can contact the Attorney General’s Con-sumer Resource Center at 1-800-551-4636 (in-state only) or 206-464-6684 between 10 a.m. and 3 p.m. weekdays.

Many or most of the scams that operate by phone, email and website are international in scope. Operators in one country find “customers” in another country, and prosecutors in the customer country throw up their hands and say there’s nothing they can do because the perpetrators are outside their jurisdiction.

In that dismal context, it’s heartening to learn that Washington AG Rob McKenna is continuing to work with authorities in Australia to enforce the laws of both countries. Here’s a press release from his office:

SEATTLE – Working with the Washington Attorney General’s Office, Australian authorities recently announced they’ve shut down an Internet health scam that fleeced more than 60,000 consumers worldwide.

The Australian Competition and Consumer Commission obtained an order against Leanne Rita Vassallo and Aaron David Smith, both of Cecil Hills, a suburb of Sydney, New South Wales, concerning false, misleading and deceptive conduct.

The Washington Attorney General’s Office, which is separately pursuing civil charges against the defendants, brought the case to the ACCC’s attention.

Attorney General Rob McKenna thanked the ACCC for its assistance. He said this is the first time the Washington Attorney General’s Consumer Protection Division has reached across international seas to cooperate with foreign officials, but it likely won’t be the last.

“Web-world scams won’t save you from real-world laws,” McKenna warned.

Vassallo and Smith were alleged to have sold eBooks for a wide range of health conditions including acne, asthma, multiple sclerosis, fibromyalgia, menopause and prostate cancer.

In the federal court in Sydney, Justice Peter Graham described the pair as “purveyors of quack medical advice and quack medicine.” He noted they had received more than $1 million in sales.

The defendants are permanently barred from making similar representations in the future.

The state’s case is still pending. The Attorney General’s Office is seeking civil penalties and restitution, in addition to injunctive relief.

DOCUMENTS

ACCC news release

ACCC permanent injunction order – Aug. 25, 2009

ACCC judgment – Aug. 20, 2009

Federal Court of Australia

Washington AGO news release – Aug. 4, 2009

Washington AGO complaint

Sample Web Site Screenshot: Staph Infection

Here’s a story you might keep in mind the next time somebody says they don’t trust the government to handle health care. Okay–Not trusting the government is what I do for a living. But large corporations don’t necessarily do such a good job of taking care of us either.

Press release from AG Rob McKenna:

Attorney General Rob McKenna today announced two major national settlements with pharmaceutical giant, Pfizer Inc.

In the first settlement, McKenna joined with other states and the federal government to reach agreement with Pfizer Inc. to settle civil and criminal allegations that Pfizer and its subsidiaries paid kickbacks and engaged in off-label marketing campaigns that improperly promoted numerous drugs that Pfizer manufactures.   ”Off-label” refers to uses that have not been approved by the U.S. Food and Drug Administration (FDA).

“This historic settlement is the largest health care fraud settlement to date,” McKenna said. “It sends a message that states and the federal government take this kind of behavior very seriously – and allows us to recover millions for our state and federal health care plans, just when we need it the most.”

Pfizer will pay the states and the federal government a total of $1 billion in civil damages and penalties to compensate Medicaid, Medicare and various federal healthcare programs for harm suffered as a result of its conduct.

In addition, a Pfizer subsidiary, Pharmacia & Upjohn Company, Inc., has agreed to plead guilty to a felony violation of the Food, Drug, and Cosmetic Act (FDCA) and to pay a criminal fine and forfeiture of $1.3 billion.

Washington’s share is roughly $9 million. AAG Dawn Cortez, director of Washington’s Medicaid Fraud Control Unit, facilitated the settlement for the state of Washington.

In the second settlement, 43 Attorneys General, including McKenna, reached a $33 million dollar agreement with Pfizer Inc. related to the drug company’s alleged improper marketing of the antipsychotic drug, Geodon.

In a consumer protection complaint soon to be filed in court along with the settlement agreement, McKenna alleges Pfizer engaged in unfair and deceptive practices when it marketed Geodon for off-label uses. Pfizer has agreed to change how it markets Geodon and has agreed not to promote “off-label” uses.

“This case is consistent with the related case in that it demonstrates once again, that drug companies will be held accountable and we will not tolerate “off-label” marketing,” McKenna said.

Geodon is the brand name for the prescription drug ziprasidone. The drug has been approved by the FDA for treatment of schizophrenia in adults and for manic or mixed episodes of bipolar disorder in adults.  The state of Washington will receive $880,000 as a result of this settlement.

The Attorneys General from Delaware and Maryland led the Executive Committee States’ negotiation of the settlement of Pfizer’s marketing and promotional practices.

The Executive Committee States for this settlement include Arizona, Colorado, Delaware, District of Columbia, Florida, Kentucky, Maryland, Massachusetts, North Carolina, Ohio, and Pennsylvania. The participating states in the settlement are: Alabama, Arkansas, Arizona, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Hawaii, Idaho, Illinois, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, Tennessee, Texas, Vermont, Washington, West Virginia, and Wisconsin.

Assistant Attorney General Robert Lipson handled the second case for Attorney General McKenna’s Consumer Protection Division.