Four Additional Settlements Reached For Norvergence Customers

Attorney General Spitzer today announced settlements four additional financial institutions in connection with widespread telecommunications fraud involving NorVergence, Inc., a bankrupt New Jersey-based telecommunications company.

Under the terms of the newly announced agreements, BB&T Leasing Company, Interchange Bank, R-G Crown Bank (d/b/a Crown Bank Leasing), and National Penn Leasing Company, will forgive $2.8 million (90% of the balances on outstanding leases) in payments due from 111 New York customers, who signed long-term contracts with NorVergence.

"I would like to commend these financial institutions for offering relief to those small business owners who were duped by NorVergence’s false promise of savings," said Spitzer. "Unfortunately, other leasing companies are still trying to collect from consumers based on these fraudulent contracts. Those financial institutions that fail to offer proper financial relief to NorVergence customers should know that my office is prepared to explore further legal options."

Nine other financial institutions previously reached agreements with the Attorney General’s office regarding leases they acquired from NorVergence. Including today’s latest settlements, a total of 711 NorVergence customers from New York have received over $16 million in relief.

The chart below outlines the terms of the new settlements:

Leasing Company
Relief Percentage
Total Dollars Forgiven
NY Customer Leases
Interchange Bank
90%
$159,097
8
BB&T Leasing Corporation
90%
$1,990,558
67
National Penn Leasing Company
90%
$197,063
7

R-G Crown Bank Leasing Company
d/b/a Crown Bank Leasing

90%
$507,477
29

 

Under the settlement agreements, the financial institutions also forgive any late fees, penalties and property insurance charges imposed after termination of contracted services, and credit any payments made after service was terminated. The financial institutions will issue refunds to customers where payments exceeded amounts due under the settlements and will terminate all litigation and withdraw any adverse credit reports against former NorVergence customers who elect to participate in the settlements. The financial institutions will also offer the same settlement terms to customers who have already settled on less favorable terms.

Currently 12 other financial institutions may face legal action by the Attorney General’s office in connection with fraudulent NorVergence telecommunications agreements.

Notices regarding potential legal actions have also been previously sent by the Attorney General to Thomas Salzano and Peter Salzano, as officers of NorVergence, which was declared bankrupt in July 2004.

NorVergence began aggressively marketing its telecommunications products in 2002, promising potential customers savings of up to 60 percent. It attributed these savings to its use of a proprietary device referred to as a "Matrix box." The company claimed this technological innovation provided customers with wireless, toll-free telephone service and high-speed internet connection, all for a fixed monthly fee. The equipment accomplished none of these functions. Instead, it was a commonly used device in the industry that permits both voice and data transmission over a high-speed service line.

NorVergence's sales force was trained to apply deceptive and high pressure sales tactics in recruiting prospective customers, who consisted largely of small businesses, not-for-profits and religious institutions. Nationally, the company secured approximately 11,000 customers; with approximately 1,000 in New York.

The company's customers typically signed five-year contracts, which the company then sold at a discount to third-party financial institutions. The financial institutions, in turn, billed customers under the original contract terms. These multi-year commitments purported to obligate customers to pay as much as $340,000 for the Matrix box, even though the market value of the device was no more than $1,500.

When a federal bankruptcy court declared NorVergence bankrupt last summer, customers were left without telecommunications services and had to purchase alternative service on a per call basis. Yet the financial institutions continued to bill customers, and in some instances sued to collect on the agreements.

Consumers wishing to file a complaint pertaining to a NorVergence telecommunications contract may contact the Attorney General's toll-free consumer helpline (800) 771-7755, or visit his website at www.ag.ny.gov.

This matter is being handled by Assistant Attorneys General Joy Feigenbaum, Keith Gordon, and Shahla Ali under the direction of Thomas Conway, Chief of the Consumer Frauds and Protection Bureau, and Terryl Brown Clemons, Assistant Deputy Attorney General for the Division of Public Advocacy.

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