Current Events in March 2001

March 26, 2001

Video Computer Store abruptly filed for bankruptcy after Pennsylvania Attorney General Mike Fisher sued the Bucks County, PA, company for allegedly selling thousands of computer systems nationwide while failing to deliver some or all of the products ordered.

The official company name is Computer Personalities Systems, Inc. It filed for bankruptcy under Chapter 11 on March 23, 2001 in Philadelphia, PA and has been assigned Bankruptcy No. 01-14231-DWS. Claims should be filed with the U.S. Bankruptcy Court at 900 Market Street, 4th Floor, Philadelphia, PA 19107.

The filing means that consumers who have ordered computers and not yet received them, or those wishing to return computers, must file claims with the court. It is not longer possible for consumers to return unwanted or defective merchandise without filing with the court.

In the Attorney General's action, the defendants are also accused of failing to honor their advertised warranty, guarantee, cancellation, refund and rebate claims. The suit seeks full restitution for consumers, civil penalties and a permanent ban from engaging in fraudulent and deceptive business practices. Approximately 140 Pennsylvania consumers filed complaints with Fisher's Bureau of Consumer Protection.

"This company's alleged pattern of outright fraud and deception is one of the worst that my office has handled," Fisher said. "Consumers paid for computer systems that they did not receive or received piecemeal months after their initial order. We contend that the promises this outfit made were not kept, and when consumers canceled their orders they were denied refunds."

Fisher said the suit was filed against Computer Personalities Systems Inc., 4970 Durham Road, Gardenville, Bucks County, doing business as Video Computer Store, 6310 Easton Road, Pipersville, Bucks County. Also named as a defendant was Computer Personalities Systems President George Capell. The defendants are accused of violating Pennsylvania's Consumer Protection Law, Fictitious Names Act, the Federal Trade Commission Mail Order Rule and Federal Warranty Act rules.

According to investigators, the defendants in 1999 and 2000 advertised their computer systems on the Internet and through nationally broadcast "infomercials." The ads offered the sale of computer packages, which included the computer unit, monitor, mouse, printer, scanner and web or video camera.

Many consumers did not receive products within the time period required under federal law, nor did they receive the required delay notice that informs buyers that they may cancel their orders and obtain a refund. Consumers who did receive delay notices said they were not provided a toll-free number to cancel their orders as required by federal law. In many cases, consumers who canceled their orders were denied refunds.

"We allege that the defendants continued to sell computer systems even after it became clear that the defendants were unable or unwilling to fulfill orders," Fisher said.

According to the lawsuit, the defendants are also accused of:

• Starting the 30-day return policy before the entire order was delivered.
• Failing to give consumers the proper information and documents to return items.
• Misrepresenting and failing to honor rebate, warranty and guarantee offers.
• Falsely advertising its "In-Home Warranty" services.
• Failing to clearly identify the exact items and upgraded products that are under warranty by the seller and/or manufacturer.
• Failing to register Video Computer Store as a fictitious name with the Pennsylvania Department of State.

• Permanently bar the defendants from engaging in deceptive and fraudulent conduct.
• Require the defendants to pay full restitution to consumers.
• Require the defendants to pay a $1,000 civil penalty per violation and $3,000 for each violation involving a person age 60 or older.

Consumers who wish to file a complaint in the case are urged to call Fisher's Bureau of Consumer Protection at 1-800-441-2555 or file electronically at the following web address: www.attorneygeneral.gov.

The suit was filed in Commonwealth Court by Deputy Attorney General Gregory T. Babbitt of Fisher's Bureau of Consumer Protection Office in Philadelphia.

PHILADELPHIA, March 13, 2001 -- Class action suits have been filed in Pennsylvania and New Jersey against Kia Motors America, Inc., of Irvine, California, alleging brake defects in the company's 1998, 1999 and 2000 Sephia models.

The lead plaintiffs are Philadelphia resident Shamell Samuel-Bassett and Plainfield, NJ resident Regina Little. More than 166,000 Sephia automobiles have been sold in the United States between 1997 and 2000.

According to documents filed in the Court of Common Pleas of Philadelphia County and in the Superior Court of New Jersey, Union County, Kia Motors has known for several years that the brake system in the Sephia model is defective. In the past three years, more than 300 complaints have been filed with the National Highway Transportation Safety Administration (NHTSA) for this defect.

The consumer law firms of Kimmel & Silverman, P.C.; Francis & Mailman, P.C.; and Donovan Miller, LLC

The problem, which results in premature wear of the front brake rotors, causes the brakes to grind and the vehicle to vibrate, and requires continuous replacement of the brake pads and rotors. In 1996 and 1997, Kia issued Technical Service Bulletins (TSB's) pertaining to this problem in subsequent Sephia models.

Since purchasing her 2000 Sephia model in October 1999, Pennsylvania lead plaintiff Shamell Samuel-Bassett has taken her car to Kia authorized dealers on five separate occasions, complaining of vehicle vibration, excessive grinding and increased stopping distance. As a result of her complaints, the vehicle's rotors and pads were repaired four times, all within the vehicle's first 17,000 miles. On average, replacement of brake rotors occurs at approximately 50,000 miles if parts are not defective.

Despite constant repairs, Ms. Samuel-Bassett continues to experience brake problems. She was recently involved in an automobile accident, hitting a vehicle after the brakes failed to properly stop the car.

"I should feel confident in my car, but I don't," says Ms. Samuel-Bassett. "My eight-year old son is always talking about the constant noise and vibrations when I hit the brakes. It's especially frustrating that Kia knows they have a problem and they are doing nothing to fix it." New Jersey lead plaintiff Regina Little purchased her 1999 Kia Sephia in March, 1999. Ms. Little has also repeatedly returned her car to authorized Kia dealerships, complaining of the same brake concerns: an inability to stop the vehicle, continuous vibrations and rotor defects. Despite Ms. Little's numerous complaints, and the dealers' replacement of brake and rotors, the problem still exists. Court papers indicate that employees from three separate authorized Kia dealerships informed Ms. Little that Kia Motors America is well aware of the problem, but will not correct it.

"I am very fearful for my safety," says Ms. Little. "Every three months, my brakes start to grind. When that happens, I have to push the brakes hard to get the car to stop. I don't have the money to keep repairing the problem. I am hoping that this class action suit will force Kia to admit to the general public that this problem does exist."

According to co-counsel Craig Thor Kimmel of Kimmel and Silverman, P.C, "This problem puts the safety of Kia drivers and passengers, as well as all of us who share the road with Sephia drivers, at substantial risk. You have a car that is inexpensive to purchase and a manufacturer that claims in advertising to have the best warranty in the business. It is no wonder people are buying the car. However, with the brake defect so widespread and Kia's refusal to fix the problem, we believe that consumers are not getting what they are paying for with the Kia Sephia."

"Consumers have been complaining of this problem for the last five years," said co-counsel James A. Francis of the firm of Francis and Mailman. "The frequent replacements go well beyond the normal wear and tear of the braking system. Normally, drivers rely on the predictability of brakes for their safety. This is not the case with Sephia drivers."

Owners and lessees of 1998, 1999, and 2000 Kia Sephia models who would like more information on this class action can log onto www.lemonlaw.com, contact Craig Thor Kimmel at 1-800-Lemon-Law (800-536-6652).

WASHINGTON, March 12, 2001 -- Burger King Corp. and Alcone Marketing Group are recalling about 400,000 "Rattling, Paddling Riverboat" toddler toys because of a potential choking hazard to young children. The toys were distributed in Burger King Kid's Meals. Metal pins with plastic caps that attach the paddle wheel to the riverboat toy can come out and pose a choking hazard.

Burger King Corp. has received 10 reports that the pin on the toy came out. One child was found with the pin in her mouth. Her father removed it and no injuries have been reported.

The recall is being conducted in cooperation with the U.S. Consumer Product Safety Commission (CPSC).

Alcone Marketing Group imported the toys for Burger King. The "Rattling, Paddling Riverboat" toys are red plastic boats about 2 to 3 inches in diameter. The captain figure squeaks when it is pushed down. When the boat is moved across the floor, beads in the boat's paddle wheel make a rattle sound. The following words are imprinted on the bottom of the boat, "Sassy, MFG FOR BURGER KING CORP, MADE IN CHINA." The packaging says "Toddler Toys For Kids Under Three Years Old."

Burger King restaurants nationwide distributed the riverboat toys inside Kid's Meals in January and February 2001.

Parents should immediately take the toy away from children and call (800) 661-9173 for instructions on returning the toy for a free, replacement toy. Information also is available at Burger King's web site at www.burgerking.com.

March 9, 2001
In an agreement with 31 states and the District of Columbia, Reader's Digest Assn., Inc. will pay more than $6 million to settle charges by 31 states that its sweepstakes promotions were misleading to consumers.

About $4 million of the settlement will go to 7,500 "high-activity" customers who spent more than $2,500 annually in 19998, 1999 or 2000, according to California Attorney General Bill Lockyer. The company will also pay $2 million in attorneys' fees and investigation costs.

Reader's Digest publishes the world's most widely-read magazine. It claims a readership of more than 100 million readers per month for its 48 editions in 19 languages.

It's the fifth in a series of settlements with major sweepstakes houses since 1999, when the state attorneys general held public hearings on sweepstakes competitions. Other companies that have settled include American Express Publishing Corp., Publishers Clearing House, Time Inc. (now AOL Time Warner) and US Sales Corp.

Reader's Digest sends out million of sweepstakes entries each year, offering subscriptions to its various magazines, books and tapes. Lockyer said that under the settlement, Reader's Digest has agreed not to exaggerate a contestant's chances of winning and not to suggest that a contestant is "about to become a winner."

"Consumers will be able to clearly see that buying products will not improve their chances of winning," Lockyer said.

Federal and many state laws require that sweepstakes must treat all entrants equally -- and that entrants may not be required to purchase anything or be present at a specific place and time.

Or, as New Jersey Attorney General John J. Farmer Jr. put it: "You don't have to pay to play."

Last year, a Reader's Digest spokesman said that about 47% of new subscriptions for its magazines resulted from sweepstakes promotions, down from 89% the previous year.

In a statement, Reader's Digest said it has reduced its reliance on sweepstakes but conceded it could see "short-term declines in response rates."

"Reader's Digest has established a reputation for integrity and earned the trust of millions of customers over the past 78 years by delivering quality products and excellent service," Michael Brizel, the company's General Counsel, said.

States covered in the settlement are:

• Alabama
• Alaska
• Arkansas
• California
• District of Columbia
• Georgia
• Hawaii
• Idaho
• Illinois
• Indiana
• Kansas
• Louisiana
• Mississippi
• Nebraska
• Nevada
• New Hampshire
• New Jersey
• New Mexico
• New York
• North Carolina
• North Dakota
• Ohio
• Oklahoma
• Rhode Island
• South Carolina
• South Dakota
• Tennessee
• Utah
• Virginia
• Washington
• Wyoming

March 9, 2001
A federal district court has ordered a temporary halt to a California-based telemarketing scheme that purportedly sold work-at-home medical billing opportunities. Medicor LLC and its manager, Andrew Rubin, promised consumers that they could earn up to $1,500 per week using their home computers to process medical bills for physicians in the consumers' community.

The Federal Trade Commission alleges that the defendants misrepresented their medical billing work-at-home opportunities by touting false earnings claims, misrepresenting the assistance that they would arrange for consumers to get medical billing work and that refunds were readily available. At the Commission's request, the court froze the defendants' assets, and appointed a temporary receiver pending a hearing on the Commission's motion for a preliminary injunction.

The FTC filed its complaint in the U.S. District Court in the Central District of California against Medicor and Rubin as part of "Project Homework" - a law enforcement action targeting work-at-home scams that typically victimize stay-at-home parents, the physically disabled, non-English speakers, and people who cannot secure employment outside the home. Companies that promote these schemes promise consumers that they can reasonably expect to earn substantial income by working from home performing various tasks, such as assembling crafts, stuffing envelopes, or performing medical billing services for physicians.

The defendants promoted and sold medical billing work-at-home opportunities to consumers throughout the United States via newspaper ads and an Internet web site, www.medicorllc.com. According to the FTC, Medicor, based in Van Nuys, California, advertised in the "help wanted" section of various local newspapers touting the high earnings consumers could make using Medicor's medical billing software. A typical ad stated:

"EARN $$$ HELPING DOCTORS process claims from home. $20 - $40/ hour potential. Computer & modem required. We train. (888) 736-9051 Ext. 895."

When consumers responded to the ad, the telemarketers falsely represented that stay-at-home parents or others who wish to work from their homes could make from $20 to $40 per hour processing claims for doctors, or as much as $40,000 per year.

To further induce consumers to purchase Medicor's billing software, the defendants' telemarketers would falsely represent that they would arrange for doctors whose claims the consumers would be processing. In an attempt to convince consumers that Medicor was a legitimate company, the defendants would sometimes refer potential customers to their web site, which offered testimonials from purportedly successful Medicor billers. The defendants charged from $325 to $495 for their business opportunity. When consumers complained that Medicor's business opportunity had been misrepresented, the defendants would often refuse to refund the purchase price. At this point, most consumers were told for the first time that company policy was not to give a refund if the software package was opened.

The FTC complaint alleges that the defendants misrepresented how much consumers who purchased the medical billing opportunity would earn; that they would arrange for consumers to receive medical billing work from physicians; and that consumers would readily obtain refunds upon request. According to the FTC, consumers, in fact, did not earn the promised income, Medicor did not arrange for consumers to receive medical billing services from physicians, and consumers could not readily obtain refunds.