North Carolina Department of Justice
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Cooper wants telecom scam to stop ripping off small businesses

Release date: 11/3/2004

FTC also takes action against NorVergence

Raleigh: A company that deceived small businesses and other consumers into purchasing telecommunications contracts and then failed to deliver services must be stopped, Attorney General Roy Cooper said today.

“NorVergence convinced small businesses, churches and non-profits across our state that it could give them a good deal on phone service,” said Cooper. “But the deal quickly turned sour as NorVergence left consumers without service and locked into paying on long-term contracts.”

In a complaint filed today in Wake County Superior Court, Cooper accused NorVergence, Inc. of Newark, New Jersey of making unfair and deceptive representations to consumers in order to get them to sign agreements and make payments for telecommunications services. Cooper has asked the court to bar NorVergence from seeking to collect money from past North Carolina customers and to permanently block the company and its employees from doing business in North Carolina. In addition, the suit seeks cancellation of all contracts, refunds for consumers, and civil penalties. The Federal Trade Commission also filed suit against NorVergence today.

According to Cooper’s complaint, NorVergence marketed telecommunications services to small businesses, non-profit organizations and churches. The company offered local, long distance, wireless, and high-speed Internet services and falsely claimed that it was affiliated with recognized telecommunications companies.

As alleged in the complaint, NorVergence told small businesses that it could provide them dramatic savings and free minutes by installing its revolutionary “black box” at the business to route telecommunications. Businesses had to sign a rental agreement for the black box, obligating them to make monthly payments of $200 to $2,300 for five years for a total of $12,000 to more than $138,000 per business. NorVergence then sold these rental agreements to various finance companies. In reality, the “black box” is a standard router used to connect telephone equipment to a long distance provider’s lines. It is widely available, retails for $500 to $1,500 and is not related to wireless services or to lower long distance rates.

According to the 34 small businesses and other customers who filed complaints with Cooper about NorVergence, the company told them that they would continue to get free unlimited calls for five years as long as they paid the monthly rental fee and their local telephone bill, even if anything happened to NorVergence. However, NorVergence did not have a commitment from any telecommunications carrier to provide services to these customers if NorVergence folded. Once the company had sold a number of rental agreements, it ceased operations. Customers no longer got the telecommunications services they had paid for, but certain finance companies that had purchased the agreements have continued to try to collect monthly payments. Cooper is investigating the role of these finance companies in the scam.

Other North Carolina businesses and consumers that may have done business with NorVergence are encouraged to file a complaint with the Attorney General’s Office by calling 1-877-5-NO-SCAM.