Attorney General Hardy Myers today settled a 2005 civil racketeering lawsuit against two California companies for allegedly tricking 2,776 Oregon businesses, churches and synagogues into endorsing negotiable checks that the companies claimed were actually contracts for Internet "yellow page" listings.
Named in the stipulated general judgment filed today in Polk County Circuit Court are Yellow Pages, Inc. (YPI), doing business as www.YellowPagesInc.com, a Nevada corporation operating out of Anaheim, California; Electronic Directories Company, LLC, an Anaheim, California limited liability company; and their president John M. Wurth of Anaheim. Another business, collection agent Continental Recovery Service of Simi Valley, California was earlier alleged to be part of the racketeering enterprise but was not a named defendant. The defendants admit no law violation.
The judgment was filed as part of a year-long, multi-state investigation and prosecution by Oregon and Attorneys General from 27 other states and the Orange County District Attorney's Office. The other states today filed similar Consent Judgments or Assurances of Voluntary Compliance. Oregon's was the only civil racketeering lawsuit.
"Unlike legitimate advertisements and solicitations focusing on the benefits of a product or service, these companies used solicitations designed to gain sales through trickery and deceit, "Myers said. "The defendants solicited Oregon small business owners, churches and synagogues with misleading checks that appeared to be small refunds from their local yellow pages directory but when endorsed and cashed turned out to be fine print contracts for a new $179 Internet listing."
The Oregon Department of Justice alleged in the 2005 civil racketeering lawsuit that the defendants, from November 2003 through December 2004, mailed thousands of negotiable checks in a misleading solicitation to Oregon.
"Protecting legitimate Oregon businesses and non-profit and religious organizations from fraudulent enterprises is an important part of the Department of Justice legal mandate," Myers said. "In this case, the civil racketeering laws provided us the tools to sue this unscrupulous enterprise resulting in a judgment that permanently stops the unlawful activities and gets restitution for complainants."
Investigators found that the mailing piece was designed to imply a relationship with the recipient's commonly-used yellow page directory and the checks, ranging from $3.47 to $3.49, appeared to represent a refund of little consequence to resolve a small outstanding debt. The rest of the package allegedly did little to disclose the true nature of the mailing's purpose. Hence, victims thought they were dealing with their regular yellow pages directory rather than signing up for the new listing.
The complaint alleged that Oregon businesses and non-profits, who cashed the checks then received invoices for Internet listings. The invoices contained the phone number of the defendants' collection agent commonly known as Continental Recovery Service.
If the invoice for the Internet listing was not paid, Continental continued collection efforts. Nationwide, the defendants collected millions from victims. In Oregon, the enterprise invoiced victims for more than $496,000 and netted more than $131,000.
Under the stipulated judgment, victims who paid the YPI invoice and filed complaints before today with the Oregon Department of Justice, other federal agencies, any Better Business Bureau or a third party collection agency shall receive refunds less the amount of the check cashed. The defendants also must cancel the complainants' contracts.Victims filing new complaints must do so in 60 days in order to receive refunds less the amount of the checks cashed.
As part of the settlement, the defendants have instructed their collection agent to cease all collection activity arising out of the misleading program and the defendants are permanently enjoined from using any solicitations using any form of checks, which when cashed appear to obligate the customer. The companies also are limited in their ability to enforce automatic renewals against prior customers and any renewal of contracts obtained under this promotion must be done by a customer "opting into the contract."
The defendants will pay $30,000 into the Oregon Department of Justice Consumer Protection and Education Revolving Account.
Those wanting more information about this case and consumer protection in Oregon may call the Attorney General's consumer hotline at (503) 378-4320 (Salem area only), (503) 229-5576 (Portland area only) or toll-free at 1-877-877-9392. Justice is online at www.doj.state.or.us.
Jan Margosian, (503) 947-4333 (media line only) firstname.lastname@example.org