Attorney General John Suthers Announces Settlement with Leasing Companies in Telecommunicaiton Equipment Controversy

DENVER – Attorney General John Suthers announced today a multi-state settlement with Lyon Financial Services d/b/a U.S. Bancorp Business Equipment Finance Group (USB), and Wells Fargo Financial Leasing, Inc. (WFFL) in connection with a widespread telecommunications fraud involving NorVergence, Inc., a bankrupt New Jersey-based telephone equipment and service company.

In the settlement, USB, and WFFL will refund or not collect over $15.2 million in rental payments from consumers. Twenty states as well as the District of Columbia participated.

“The NorVergence bankruptcy created financial problems for several thousand businesses nationally, most of which were small businesses,” said Attorney General Suthers. “This settlement will put over half a million dollars back in the hands of Colorado small business owners.”

NorVergence marketed a Matrix box that purported to integrate and provide local telephone, long-distance telephone, wireless, and Internet services at a reduced rate to small businesses. NorVergence deceptively pitched the Matrix box and claimed it would provide telephone and Internet services while reducing service bills by 30%. However, an investigation conducted by the Attorney General’s Office revealed that NorVergence misrepresented the cost savings consumers could realize.

After NorVergence sold the consumers the Matrix box, it required customers to commit to leases for the equipment. Approximately 40 different finance companies hold these leases, including USB, and WFFL. NorVergence has between
7,500 – 10,000 customers nationwide. In Colorado, WFFL holds leases from ten companies and USB holds leases from two companies.

In July 2004, NorVergence was forced into bankruptcy, leaving many customers without service. Under their leasing agreements, however, the customers were still responsible for the five-year rental agreement payments regardless of whether NorVergence ever provided the equipment and services.

Under the terms of the settlement, USB and WFFL will forego collection of approximately 85% of the lease payments due under the leases as of July 2004. USB has agreed to forego 85% of the lease payments as of July 15, 2004 and WFFL will not collect on 86% of all lease payments due as of July 31, 2004.

In Colorado, USB will forgive approximately $131,000 in lease payments and WFFL will forego approximately $385,000 in lease payments. To get out of their leases, WFFL consumers will pay approximately $63,000 and USB’s consumers approximately $30,000.

Consumers who are covered by these leases will receive a notice in the mail regarding the opportunity to participate in this settlement. To accept the settlement offer, consumers must follow instructions contained in the notice and execute a Settlement and Mutual Release by the date indicated in the notice.

Connect

Find Colorado State Attorney General on TwitterFind Colorado State Attorney General on FacebookColorado State Attorney General RSS feed