Current Events in March 2004

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    Pennsylvania Nursing Home Owner Sentenced to Prison

    Patients Denied Basic Dental Care and Therapies

    A Pennsylvania nursing home owner has been sentenced to four to twelve years in prison for stealing millions of dollars from New York taxpayers by fraudulently billing for services never provided to New York State Medicaid patients residing at his facility and for improperly obtaining payments from New York for services Pennsylvania was already reimbursing.

    David Arnold, of Athens, Pennsylvania, and his corporation, Heritage Nursing Home, Inc., were convicted after a two-week bench trial this past January of one count of Grand Larceny in the First Degree and three counts of Grand Larceny in the Second Degree.

    Appearing before Acting Albany County Court Judge Stephen Sirkin, Arnold was sentenced to 4 to 12 years in prison on the charge of Grand Larceny in the First Degree and concurrent terms of three to nine years on each count of Grand Larceny in the Second Degree. He was also ordered to make $1 million in restitution to the Medicaid program.

    Heritage Nursing Home, Inc., was sentenced to an unconditional discharge and fined $10,000.

    We have a special responsibility to protect our more defenseless citizens from the greed of unscrupulous nursing home owners who callously fail to deliver needed health services, said New York Attorney General Eliot Spitzer. The sentence imposed today sends a clear message: nursing home owners who abandon and neglect their patients for personal gain will go to jail.

    An overwhelming majority of the Heritage residents are New York patients. The evidence at trial established that, from 1991 through 2000, Arnold and Heritage Nursing Home failed to deliver needed services to hundreds of New York Medicaid recipients who resided in the home. These services included basic dental treatment and occupational and speech therapies for which Arnold and the Home billed the New York State Medicaid program millions of dollars.

    Evidence introduced at trial established that patients were jeopardized by Arnolds conduct. The evidence showed that:

    • hundreds of patients never saw a dentist during their time at Heritage, even though New York paid Heritage to deliver routine dental care to patients.
    • patients with swallowing problems were fed with a turkey-baster-like syringe because it was quicker than feeding them with a spoon.
    • numerous patients with swallowing problems that went untreated developed serious conditions, including aspiration pneumonia, which may have been preventable had Heritage delivered the speech therapy that New York paid the Home to deliver.
    • other patients developed contractures, a stiffening of joints and muscles that is properly addressed with occupational therapy. These contractures became so severe that residents lost the ability to feed and dress themselves because they could not move their hands.
    • between 1991 and 1997, no speech or occupational therapists were on staff at Heritage or on contract. Between 1991 and 2000, there was no dentist providing any routine examinations or care at the Home.

    The case is part of the Attorney Generals statewide Nursing Home Initiative, which continues to examine the responsibility of nursing home owners and executives for conditions leading to poor patient care and abuse. The Initiative includes the investigation of out-of-state nursing homes that provide care to New York residents.

    Pennsylvania Nursing Home Owner Sentenced to Prison...

    Credit Counseling Riddled With Fast-Buck Promoters, Congress Finds

    Debtors seeking help receive little or no counseling, report finds

    Some nonprofit credit counselors are essentially call centers with sales staff pushing consumers into debt management plans with hidden high fees, a Congressionl report charges.

    Debtors seeking help receive little or no counseling. And millions of dollars that debtors pay in fees end up going toward executive salaries or are funneled to for-profit affiliates that provide processing.

    Some of the newer nonprofits, which advertise extensively on television, have been designed to enroll as many debtors as possible into plans that charge exorbitant fees that are funneled to affiliated for-profit companies, the report alleges.

    "This is abusive, a violation of federal statutes," Sen. Norm Coleman (R-Minn.) said."I want to clean up the industry right away." Coleman is chairman of the U.S. Senate's Permanent Subcommittee on Investigations, which has been holding hearings on the credit counseling industry.

    The subcommittee was told that the Internal Revenue Service is considering revoking the nonprofit status of some credit counseling agencies and referring cases to the Justice Department for criminal prosecution.

    Commissioner Mark W. Everson said the IRS hopes that with its audits of credit counselors as well as anticipated criminal prosecutions and sanctions "word will get out and people will ... clean up their act."

    One of the companies singled out for scathing criticism was AmeriDebt Inc., of Germantown, Md. Andris Pukke, whose Maryland company once provided processing services for AmeriDebt, invoked the Fifth Amendment, declining to testify. AmeriDebt was founded by Pukke's wife.

    Also absent was John Puccio, founder and president of Massachusetts-based Cambridge Credit Counseling Corp. He reportedly suffered a stroke Tuesday. A Cambridge Credit spokesman said the subcommittee's "bias" contributed to Puccio's illness.

    Cambridge's executive pay has raised eyebrows. Puccio allegedly received $624,000 in 2002. By comparison, a director of a traditional credit counseling agency in Minnesota testified that he earned $60,000.

    Credit counseling agencies were developed decades ago to help consumers avoid filing for bankruptcy. They were granted nonprofit status because they provided education to debtors and often operated largely with volunteers. The nonprofits charged limited or no fees for their face-to-face counseling.

    In serious cases, consumers were enrolled in debt management plans. Under such plans, the agency negotiated lower interest rates for the debtor and a waiver of late fees in return for the debtor making monthly payments.

    Creditors supported the nonprofits by giving them a percentage of the debt they recovered from clients in debt management plans.

    But the industry began to change in the 1990s. Hundreds of nonprofits sprung up offering their services over the phone and Internet, promoting debt plans. The new entrants "have developed a business model which is based on generating revenue rather than providing counseling to indebted consumers," said Coleman.

    It's estimated that 9 million Americans contact credit-counseling agencies annually; industry officials estimate that 2 million consumers are on active credit-repair programs at any one time.

    Many of the 1,215 credit-counseling agencies that have applied to the Internal Revenue Service for tax-exempt status since 1994 are "little more than telemarketing call centers," said Sen. Carl Levin (D-Mich.), the subcommittee's senior Democrat.

    The Senate report charged that it found "alarming abuses" in some of the companies it studied, including AmeriDebt, Cambridge Credit Counseling and Baltimore-based Amerix.

    The report alleges, for example, that DebtWorks has provided processing services to 11 nonprofit credit-counseling organizations that managed $2.5 billion in consumer debt. Most of the groups were organized by AmeriDebt employees or by Andris Pukke's friends, the report charges.

    The subcommittee said Amerix provides processing services to five credit-counseling agencies and had gross revenue of $386.5 million between 1998 and 2002.

    Although it does not own any of the five agencies, Amerix exerts its control over them through service agreements, which require each agency to enroll 30 percent of their callers into a debt-consolidation plan, the report alleges.

    It added that Amerix set up credit-counseling agencies through existing nonprofit colleges and universities, effectively sidestepping any IRS review of these new organizations. Amerix told investigators it approached colleges because they could educate consumers about finances, but the subcommittee said it could not find any such classes.

    Credit Counseling Riddled With Fast-Buck Promoters, Congress Finds...

    Feds Charge QVC over Weight-Loss Claims

    The Federal Trade Commission has charged QVC, Inc., the countrys largest home shopping channel, with violating an earlier FTC order by making false or unsubstantiated claims. The suit seeks civil penalties and consumer refunds.

    The charges involve For Women Only and Lite Bites weight-loss products, Bee-Alive royal jelly dietary supplements and a purported cellulite treatment, Lipofactor Cellulite Target Lotion.

    QVC, a multi-billion dollar company based in West Chester, Pennsylvania, sells a wide variety of consumer products through live, 24-hour television programming and through its Web site,

    QVCs claims for these products are not only unsubstantiated, but for some, scientifically impossible, said Howard Beales, Director of the FTCs Bureau of Consumer Protection. No pill or drink can cause anyone to lose 125 pounds. QVC didnt keep its promise to use sound science and solid evidence to back up the claims it makes for the health products it sells.

    In 2000, QVC settled FTC allegations that the company made unsubstantiated claims that Cold-Eeze zinc lozenges prevented colds and alleviated allergy symptoms. The resulting FTC consent order requires QVC to have competent and reliable scientific evidence substantiating any claim that a dietary supplement can or will cure, treat, or prevent any disease, or have any effect on the structure or function of the human body.

    According to the latest complaint, QVC sold the weight loss, cellulite treatment and royal jelly products through live broadcasts in which a product representative talked with the QVC host about the purported benefits of the featured product. The spokespersons frequently described how well the product had worked for them, as well as others.

    The programs also featured on-air conversations with consumers who called in and often provided personal testimonials about the products. Throughout the program, the QVC host and product representative urged consumers to buy the products by calling a toll-free number displayed on the screen.

    The complaint alleges that QVC violated the 2000 FTC order by making false claims that For Women Only Zero Fat pills prevent absorption of dietary fat. The complaint also alleges that QVC violated the FTC Order by making unsubstantiated advertising claims that:

    • For Women Only weight control products cause substantial weight loss, for example, 50, 60, 100 pounds or more, and enable users to maintain their weight loss for a substantial period of time;
    • For Women Only Zero Fat pills (with chitosan, herbs, and other ingredients) prevent fat absorption;
    • For Women Only Zero Carb pills (with chromium, vanadium, glucosol, gymena sylvestre leaf, and other ingredients) prevent sugar and carbohydrates from being stored as fat;
    • Lite Bites products (including Fat Fighting Bars and Fat Fighting System Shakes, containing chromium picolinate, garcinia cambogia, L-carnitine, herbs, vitamins, fiber, and other ingredients) enable users to lose substantial weight, including, for example, 52, 80, 110, 125 pounds or more, and enable users to maintain their weight loss for a substantial period of time; and
    • Bee-Alive dietary supplements containing royal jelly (a substance secreted from the salivary glands of nurse bees and fed to newly laid larvae) significantly reduce fatigue in users with chronic or severe fatigue; and significantly increase energy, strength, or stamina in users who recently have had surgery or suffer from various illnesses or conditions, such as fibromyalgia, Lupus, and Epstein Barr virus.

    Violations of FTC orders carry a penalty of up to $11,000 per violation.

    Federal Trade Commission charged QVC, Inc., with violating an earlier FTC order by making false or unsubstantiated claims. The suit seeks civil penalties a...

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      Murray Recalls Lawn Tractors

      March 23, 2004
      Murray Inc. is recalling nearly 100,000 Murray lawn tractors with remote-mounted fuel tanks The fuel tank can develop cracks allowing fuel to leak, posing a fire hazard.

      These 40- and 42-inch-cut lawn tractors come with a 1.4 gallon remote fuel tank. They come in red and black or all black. The model number can be found on a nameplate located under the seat. The following model numbers are included in recall:


      The units were sold at lawn equipment retailers, including Home Depot, Central Tractor and the U.S. Army Air Force Exchange Services (AAFES) nationwide from January 1997 through October 2002 for between $859 and $1,259.

      Consumers should stop using their lawn tractor immediately and contact a Murray Service Center with the model number to have a free replacement fuel tank installed on their mower.

      For more information, consumers should call Murray or visit their Web site at

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

      Murray Recalls Lawn Tractors...

      Murray Recalls Lawn Equipment

      March 23, 2004
      Murray is recalling about 8,000 lawn mowers, lawn tractors and garden tractors. Plastic components can crack if they are struck by an object thrown from the blade. Objects can be ejected from the mower unexpectedly and could hit those nearby.

      The recall includes certain 20-, 21-, and 22-inch walk-behind lawn mowers; certain 30-inch mid-engine riding lawn mowers; certain 38-, 40-, 42-, and 46-inch lawn tractors; and certain 46-inch garden tractors. They are red, black or gray. Murray is written on the body of the mowers.

      The model number can be found on the units nameplate located under the seat of the lawn tractors and at the rear of the mower housing on the walk-behind mowers. The following model numbers are included in recall:

      3090 29X92
      3870 02X92
      4050 00X8
      4256 20X92
      4250 01X8
      4250 14X92
      4250 15X92
      4610 04X92
      4653 06X8
      2010 10X18
      2011 2X92
      2189 50X92
      2226 5X8
      2233 10X8
      2241 10X8
      2251 13X92
      2261 11X92

      The machines were sold at Wal-Mart, Home Depot, and Northern Tool nationwide from November 2003 through February 2004. The walk-behind mowers sold for between $99 and $368. The riding mowers sold for between $758 and $1,748.

      Consumers should stop using the recalled lawn equipment immediately and contact a Murray Service Center with the model number and date of manufacture (found on the nameplate) for a free repair.

      Consumer Contact: For more information, consumers should call Murray toll free at (800) 316-1073 between 8 a.m. and 5 p.m. CT Monday through Friday, or visit their Web site at

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

      Murray Recalls Lawn Equipment...

      Medicare Wheelchair Rules Faulted

      Medicares coverage rules for wheelchairs and other mobility devices force over 140,000 Americans into unnecessary isolation and lead to higher health care costs, according to a study released today by the Medicare Rights Center, a national consumer group.

      The administrations interpretation of the Medicare law imprisons people in their homes, causing unnecessary pain and suffering, said Robert M. Hayes, an attorney who is president of the Medicare Rights Center. It is wrong and it is illegal.

      Forcing Isolation: Medicare In the Home Coverage Standard for Wheelchairs, recommends that the Centers for Medicare and Medicaid Services (CMS) change its interpretation of the Medicare law that currently denies coverage of mobility devices, such as power wheelchairs, for use outside of ones home.

      Under current policy, the administration will pay 80 percent of the cost of a power wheelchair for a person with Medicare who needs it to move from a bedroom to a kitchen, but not for a person who requires such assistance to leave home for medical care, shopping or even employment, the report found.

      Changes in technology, medicine and law require coverage of equipment that allows a person with disabilities to participate in community activities, Mr. Hayes said.

      The consumer group also recommends that CMS require case-by-case assessments and evaluations by specially trained professionals to guard against unnecessary expenses and ensure that people receive the proper equipment for their needs. Currently, doctors prescribe mobility devices and certify their medical necessity, but there is no requirement that they have training in rehabilitative medicine.

      In December, the administration further tightened Medicare coverage of wheelchairs which has prompted widespread criticism from an array of consumer groups.

      Mr. Hayes said he was hopeful that the President would support the studys key recommendations. Although CMS will not modernize its interpretation without White House approval, he said, President Bushs father was a strong supporter of the Americans with Disabilities Act. This President has said that he is too.

      The ADA, common sense, and common decency cry out to change a policy that sentences people with disabilities to needless isolation.

      The Medicare Rights Centers study Forcing Isolation: Medicare In the Home Coverage Standard for Wheelchairs, is available online.

      Medicare Wheelchair Rules Faulted...

      Seniors Warned About Phony Rx Discount Card Scams

      Medicare officials warn that scam artists in a number of states are targeting Medicare beneficiaries with "fraudulent ... schemes" related to the new prescription drug discount card program.

      The discount card program, which will begin in May, was created as part of the new Medicare law to help beneficiaries save about 10% to 25% on their prescription drug costs until the program's prescription drug benefit takes effect in 2006. Medicare plans to announce which companies will be authorized to offer the prescription drug discount cards in the next few weeks, and it will begin advertising the program in May.

      Eleven states have reported instances of individuals making phone calls or door-to-door solicitations of seniors, ostensibly to register them for the new program. The individuals allegedly offer to enroll beneficiaries in exchange for their bank information, social security number or credit card number.

      States reporting such scams include Alabama, Georgia, Idaho, Maryland, Nebraska, New York, Oklahoma, Pennsylvania, Rhode Island, Virginia and Washington.

      Officials of the Centers for Medicare and Medicaid Services warned that seniors should be on guard against such solicitations and emphasized that Medicare contacts its beneficiaries only by mail.

      Seniors Warned About Phony Rx Discount Card Scams...

      GM Recalls 4 Million Pickups

      General Motors is recalling about 4 million 2000-2004 model-year full-size pickups worldwide to replace tailgate support cables that may corrode and fracture.

      The models involved are certain 2000-2004 Chevrolet Silverado's and GMC Sierra's built between October 1999 and October 2003. Also, some 2002-04 Chevrolet Avalanche and Cadillac Escalade EXT trucks built between March 2001 and October 2003 are being recalled.

      If the cables are corroded, they may fracture when loads are applied to the tailgate. If both cables were to fracture, the tailgate would open an additional ten-degrees, rest on the top surface of the rear bumper, and remain supported by the bumper. The tailgate would drop to a lower position only if the owner had previously removed the rear bumper.

      There have been reports of 134 minor injuries related to this condition but no crashes or fatalities.

      "While working in the back of my 2001 Chevrolet Silverado I stepped from the bed onto the tailgate. Both support straps on the tailgate broke and I fell onto the crank of my landscape trailer," Dale of Walton, KS, said in a complaint to

      "I found that I severely bruised my ribs and whatever other muscles are in the area. I have incurred doctor and hospital charges as well as 2 days off work for myself and one day for my wife," he said.

      The recall comes a month after NHTSA announced it was investigating the breaking tailgates. NHTSA spokeswoman Liz Neblett said Thursday that the government will continue to monitor the problem.

      GM isn't recalling two vehicles that were part of NHTSA's investigation: the 1999 GMC Sierra and the 1999 Chevrolet Silverado.

      GM spokesman Jim Schell said the 1999 vehicles have the same cables but their tailgates haven't been breaking at a rate high enough to warrant a recall.

      Of the total, about 3.7 million of the vehicles are in the U.S., approximately 325,000 are in Canada, and about 93,000 are in Mexico. The remaining vehicles are outside these countries.

      In these models, GM will replace the existing galvanized, braided steel support cables with stainless steel support cables. These replacements will be performed at no cost to the customers.

      Due to the large number of vehicles involved in this recall, the replacement cables will not be available immediately, so the notification and repair process will occur in phases. However, in the meantime, GM will advise owners to avoid applying direct loads to the tailgate until the cables can be inspected and, if necessary, replaced. During the third quarter of this year, GM will begin notifying the first round of owners of the vehicles involved in this recall. They will be instructed to contact their Chevrolet, GMC, or Cadillac dealers to arrange for service. GM will continue this cadence of notification and replacement throughout the year until all vehicles receive the stainless steel support cables. If an owner experiences a fracture of the tailgate support cables, the customer should contact the dealer to arrange for service as soon as possible.

      GM Recalls 4 Million Pickups...

      Spitzer Spoils Bank of America's Party

      $675 Million Settlement in Mutual Funds Trading Case

      Shareholders of Bank of America and FleetBoston approved the banks' merger, the final approval in creating a banking powerhouse with nearly $1 trillion in assets. The merger, valued at $47 billion, is expected to be complete in early April.

      But the merger is being completed under a cloud, as Bank of America and FleetBoston agreed to pay $675 million to settle New York state charges that linked them to illegal trading practices in the mutual fund industry.

      New York Attorney General Eliot Spitzer said the settlement is the largest yet in the widening mutual fund industry investigation, and includes corrective measures designed to set a new standard for accountability by the directors of mutual fund companies.

      The agreement was negotiated jointly by Spitzer's office and the Securities and Exchange Commission.

      "This agreement marks a new phase in the effort to clean up the mutual fund industry," Spitzer said. "After focusing on the harmful effects of market timing and the problem of excessive fees, we are now taking steps to ensure that mutual fund boards of directors will be more accountable for their actions."

      Under a specific provision of the agreement, eight members of the Board of Directors of Nations Funds, BOA' s mutual fund complex, will resign or otherwise leave the board in the course of the next year for their role in approving a controversial measure that enabled a hedge fund to conduct company-sanctioned market timing of BOA funds.

      In May 2002, the Nations Fund board approved a 2 percent redemption fee on sales of its international funds held for less than 90 days. This measure was implemented to discourage market timing. At the same time, however, the approved measure exempted a mutual fund timer from the redemption fee. The exempted hedge fund subsequently conducted extensive timing of two of the funds in question.

      "These directors clearly failed to protect the interest of investors," Spitzer said. "They acknowledged the problem of market timing, but then allowed a favored client to engage in that harmful practice. The departure of these board members should sound an alarm for all those who serve in similar capacities."

      In addition to requiring the board members to retire or resign, the agreement also includes a provision that restricts BOA's ongoing involvement in the securities clearing business.

      The agreement provides for payments of $250 million in restitution and $125 million in penalties by BOA. Fleet will pay $70 million in restitution and $70 million in penalties.

      In a separate agreement with Spitzer's office, BOA and Fleet agreed to reduce the fees they charge investors by $160 million over a five-year period.

      The BOA/Fleet settlement is the fourth since the mutual fund industry investigation began last September. Settling firms have paid $1.65 billion to date, eclipsing the value of last year's $1.4 billion settlement with investment banks. Settlement monies in the mutual fund investigation go to a special fund for restitution for consumers.

      Spitzer Spoils Bank of America's Party...

      Sears Settles Wheel Alignment Case

      Thousands of New Jersey consumer to get refunds

      Sears Roebuck and Co. will pay more than $625,000, including approximately $125,000 in restitution to thousands of New Jersey consumers, to settle allegations that it ran auto centers that defrauded customers in connection with the sale of four-wheel alignment services.

      The settlement was announced by New Jersey Attorney General Peter C. Harvey and Division of Consumer Affairs Director Reni Erdos.

      The settlement agreement comes more than a year after the State filed suit against Sears alleging that the companys auto centers throughout New Jersey repeatedly violated the States Consumer Fraud Act by charging for four-wheel alignments on vehicles which did not allow for rear-wheel adjustments.

      Many of the vehicles in question, the State alleged, were designed to undergo only two-wheel thrust angle alignments which involve adjustments to only the front wheels.

      It's hardly the first time such accustions have been made. A 1999 class-action suit in Illinois claimed Sears defrauded customers nationwide of $400 million by charging for wheel balancing it did not perform. The suit charges that up to 30 million customers were defrauded between 1989 and 1994.

      Sears settled a similar case in Florida recently by admitting no wrongdoing while paying $580,000 to the state and offering free wheel balancing to customers.

      During the period at issue, Sears Roebuck owned and operated the nationwide chain of auto facilities under the names Sears Auto Centers and National Tire and Battery (NTB). At that time, there were 24 Sears Auto Centers and two NTB facilities in New Jersey. Sears continues to own and operate the Sears Auto Centers, but no longer owns and operates the NTB facilities.

      Through its practices, Sears charged consumers for a service they did not and could not receive, Attorney General Harvey said. The agreement requires Sears to refund to New Jerseyans its ill-gotten gains.

      Sears will pay New Jersey $500,000 to cover future Consumer Affairs initiatives. Sears will also pay the States costs an amount to be determined in connection with its investigation and litigation of the case against Sears.

      Also as part of the agreement, Sears will pay $125,440 to 12,544 consumers in restitution, representing a $10 payment to the known consumers who, between Jan. 1, 1997 and Oct. 1, 2000, purchased a four-wheel alignment from Sears and who the State alleged should have been charged for a two-wheel thrust angle alignment. The $10 payments represent the price difference between the four-wheel alignment and the two-wheel thrust angle alignment.

      Most people lack the technical expertise necessary to know what kind of services can and cannot be performed on their vehicles, Director Erdos said. As a result, consumers brought their vehicles to a place they trusted. Unfortunately, we allege, Sears used that trust against consumers.

      The Division of Consumer Affairs has provided Sears with a list of the 12,544 affected consumers along with their addresses. Sears will make restitution payments directly to those consumers by April 2, 2004.

      In addition, Sears will pay $10 to additional affected consumers who, within one year of the agreement, come forward with proof (in the form of a receipt or invoice) that they purchased four-wheel alignments from Sears between Jan. 1, 1997 and Oct. 1, 2000 for their vehicle where adjustments to the rear wheels were not possible or where rear adjustments were possible only with the addition of aftermarket kits/parts that were not installed by Sears at the time the alignment was performed. Such consumers should contact the Division of Consumer Affairs Consumer Service Center at 1-800-242-5846 or 973-504-6200 (if calling from outside the State of New Jersey).

      Sears Settles Wheel Alignment Case...

      Focus Factor, V-Factor Promoters to Pay $1 Million for False Claims

      Company made unsubstantiated claims for its dietary supplements

      Marketers of Focus Factor and "V-Factor" should have no trouble focusing on this: they've agreed to pay $1 million as part of a settlement with federal investigators who charged them with making unsubstantiated claims for their products.

      Focus Factor is a dietary supplement that supposedly improves concentration, while V-Factor claims to enhance sexual performance.

      But in a federal court complaint, the Federal Trade Commission charged that promoters of the supplements did not have adequate scientific evidence to back up their claims.

      In one complaint, the FTC charges Vital Basics, Inc. of Portland, Maine, and its principals, Robert Graham and Michael Shane, with not having adequate substantiation to back up claims they made about the efficacy of Focus Factor and the safety of V-Factor Natural Pack. They were ordered not to engage in similar acts in the future and to pay $1 million.

      In another complaint, the FTC charged Creative Health Institute, Inc. of Corinth, Texas, and its principal, Dr. Kyl Smith, with making unsubstantiated claims about Focus Factors ability to improve users focus, memory, mood, and concentration. They have agreed to a similar consent order and will pay $60,000.

      Focus Factor is a dietary supplement that contains, among other things, vitamins, minerals, botanicals, and amino acids. Dr. Smith developed Focus Factor, and advertised and sold it through Creative Health Institute from at least 1997 to 2000.

      Since 2000, the defendants advertised and sold Focus Factor. They allegedly marketed Focus Factor as improving the focus, memory, and concentration of healthy adults; alleviating stress and combating the fatigue, irritability, and mood swings that healthy adults experience; making children and teenagers feel more alert, focused, and mentally sharp; improving students ability to concentrate and their academic performance; improving senior citizens memory, mental clarity, and energy; improving adults ability to absorb information in books and to recall facts, figures, and names; and as having the desired effects in as little as one to 10 days. The Commissions two complaints challenge these claims as unsubstantiated.

      V-Factor is a dietary supplement that contains, among other things, yohimbine and L-argenine. The VBI respondents allegedly marketed V-Factor as a male sexual performance enhancer. The FTC alleges that the VBI respondents did not have substantiation for their claim that V-Factor is safe for virtually all men, and that they misrepresented that a clinical study proved that V-Factor is safe and effective at improving sexual response and function.

      The Commissions complaints further allege that the defendants failed to disclose that certain endorsers who appeared in Focus Factor advertising had material connections with the product.

      In addition, the FTC alleges that Vital Basics represented that consumer endorsements were made without compensation, and failed to disclose that consumer endorsements were solicited with a promise of a free 6-month supply of Focus Factor to those individuals whose testimonials were used in advertising; and that Vital Basics misrepresented that certain radio infomercials were independent radio programs, not paid commercial advertising.

      Focus Factor, V-Factor Promoters to Pay $1 Million for False Claims...

      "Peel Away the Pounds" Promoters Fined $1 Million

      Marketers of the widely-advertised "Peel Away the Pounds" patch have agreed to pay more than $1 million to settle Federal Trade Commission charges that they made false and unsubstantiated weight loss claims.

      The FTC complaint alleges that the defendants falsely claimed that the seaweed-based skin patch causes as much as three to five pounds of weight loss per week.

      "No non-prescription product will cause meaningful weight loss without diet or exercise," said Howard Beales, Director of the FTC's Bureau of Consumer Protection. "Claims that patches, creams, and wraps can cause substantial weight loss are a red flag' for falsity. Marketers should not make those claims; the media should not run them; and consumers should not buy them."

      According to the FTC complaint, the defendants advertised Peel Away the Pounds in an infomercial that aired from June 2002 to January 2003, on several websites and in a print ad. The ads claimed that Peel Away was a remarkable new way to shed excess pounds without strenuous exercise and without being hungry. The ads contained statements such as:

      "Simply follow our system: Place Pound A Patch on your upper body. Then carry on with your everyday lifestyle. Every three days peel off the patch and watch as you take off the pounds. Replace with a new patch and drop more pounds. It's that easy."

      Throughout the infomercial, individuals who purportedly used the Peel Away patch gave glowing testimonials that attributed their purported success in losing weight to wearing the patch. The infomercial also featured defendant Jesse Starkman, a chemist, who allegedly described the patch's purported ability to deliver its ingredients into the bloodstream and to increase metabolism, suppress appetite, and reduce fat cell production.

      The FTC's complaint names patch manufacturer Advanced Patch Technologies, Inc. (APT) and its principal, Salomon Btesh; marketers PAP Systems, LLC, Buckhead Marketing & Distribution LLC (BMD), and their principals, Ralf Leszinski and Nancy Duitch; and expert endorser, Jesse Starkman.

      The FTC complaint also names two "relief defendants" APT principal Bernard Silverfarb, and BMD affiliate Buckhead Marketing Group, LLC. Relief defendants are individuals or entities that did not participate in the alleged deceptive practices, but financially benefitted as a result. The APT defendants are based in Opa Locka, Florida; BMD is based in Los Angeles, California; PAP and BMG are based in Atlanta, Georgia; and Starkman resides in Weston, Florida.


      Consumer Groups Challenge Regional Motor Vehicle Recalls

      Some recalls are limited to cold-weather states, for example

      The Center for Auto Safety and Public Citizen filed a lawsuit today that challenges the National Highway Traffic Safety Administrations (NHTSA) policy of allowing vehicle manufacturers to limit certain recalls of defective vehicles to select states.

      "Regional recalls make no sense, particularly in a mobile society where people often drive from one region to the next," said Public Citizen President Joan Claybrook. "If a vehicle has a defect that makes it unsafe, the defect needs to be fixed on all similar vehicles."

      The complaint, filed in the U.S. District Court for the District of Columbia, charges that regional recalls violate the National Traffic and Motor Vehicle Safety Act, because the Act requires that all owners of defective motor vehicles receive notice and a free remedy; that NHTSAs policy of permitting regional recalls has been applied arbitrarily; and in any event, that NHTSA illegally implemented the policy by failing to provide notice and solicit public comment before allowing the regional recalls.

      As required by federal law, when either NHTSA or a manufacturer discovers a defect in a class of cars, the manufacturer notifies owners of affected vehicles nationwide that they are entitled to a free repair or replacement.

      However, since at least the mid-1980s, NHTSA has been quietly allowing manufacturers to conduct regional recalls by providing notice and a guaranteed free repair only to those owners whose cars are registered in selected states, usually covering less than half of the country.

      Over the past 10 years, there have been nearly 40 regional recalls, with two announced in the past year. Manufacturers conduct regional recalls when a particular defect is more likely to manifest itself when exposed to regional weather conditions, like snow or heat.

      For example, in 1999, Ford recalled Windstar minivans to correct a fuel tank defect that caused cracks in hot weather. These cracks could leak fuel and vapor, creating a serious fire hazard. With NHTSAs blessing, Ford conducted a recall in 11 states, the 10 southernmost counties in California, and Clark County in Nevada. This left consumers in some of the hottest parts of the country including Californias Death Valley, Tennessee, and New Mexico without a guaranteed free repair.

      Similarly, numerous recalls arising from defects attributed to corrosion caused by road salt have included Washington, D.C., and Maryland, but not Virginia, so commuters who drive from Virginia to Washington, D.C., every day for work are not guaranteed the same notice and free repair that their neighbors will get.

      Added Clarence Ditlow, director of the Center for Auto Safety, "NHTSAs actions suggest that it doesnt snow in Buffalo and its not hot in Death Valley. For years, NHTSA required manufacturers to conduct nationwide recalls. But the agency eventually gave in to automakers. Geographic recalls reduce auto company recall costs at the expense of public safety."

      Consumer Groups Challenge Regional Motor Vehicle Recalls...

      Char-Broil Gas Grills Recalled

      March 10, 2004
      Char-Broil is recalling several models of its gas cooking grills. If moisture gets inside the grills' temperature gauge, the glass cover on the gauge can break, posing a risk of injury to people nearby.

      Char-Broil is aware of at least 30 reports of the gauges breaking, including 12 incidents of consumers who reported minor injuries.

      The products involved in this recall are outdoor gas barbeque grills. The recall includes three types of grills: The Commercial Series, Professional Series and Stainless Steel Series. The specific component involved in the recall is the temperature gauge mounted on the grill lid. The Commercial Series models are constructed from both painted metal and Stainless Steel. The Professional Series and Stainless Steel Series models are Stainless Steel construction.

      • The Commercial Series gas grills have model numbers 4632210, 4632215, 463221503 and 463231503. These grills are sold with three main burners, with or without a side burner, and either a metal front panel or a cabinet with doors.
      • The Professional Series gas grills have model numbers 4632235, 4632236, 4632240 and 4632241. These grills are sold as LP or natural gas, three or four main burners, with or without a side burner, and a cabinet with doors.
      • The Stainless Steel Series by Char-Broil gas grill has model number 4632220. This grill is sold with three main burners and an open Stainless Steel Cart.
      The grill model number is located on a label on the back panel of the storage cart. Char-Broil grills with model numbers other than those identified above are not included in this recall.

      The grills were sold at hardware, home improvement, appliance stores and specialty dealers nationwide. The Commercial Series grills sold from January 2002 through November 2003 for between $450 and $500; the Professional Series grills sold from February 2002 through November 2003 for between $800 and $1,000; and the Stainless Steel Series grills sold from January 2002 through May 2003 for $700.

      Contact Char-Broil to receive a free replacement temperature gauge. Consumers should not use the grill until the replacement gauge has been installed.

      Consumer Contact: Call the Char-Broil Grill Service Center toll-free at (866) 239-6769 anytime.

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

      Char-Broil Gas Grills Recalled...

      Fed Clears Bank of America-FleetBoston Merger

      Merger will create the third-largest U.S. bank

      The Federal Reserve has given its blessing to the merger of Bank of America and FleetBoston Financial, clearing the last regulatory hurdle to the merger which will create the third-largest U.S. bank.

      Shareholders must now approve the merger, which is expected to be completed by early next month.

      The new institution, to be called Bank of America Corp., will have 5,700 branches and holdings of nearly $1 trillion in assets, trailing only Citigroup and the new entity being created by the merger of Bank One and J.P. Morgan Chase.

      The Fed found no evidence the merger would hamper competition. It's creating anxiety in Boston, though. The onetime financial center would lose its last major hometown bank in the $47 billion deal.

      Bay State consumers may find reasons to cheer the change. Bank of America generally gets good marks for customer service. It offers free online banking and bill-paying. Fleet, on the other hand, gets demerits for its credit card practices and customer service.

      At public hearings held by the Fed in January in Boston and San Francisco, witnesses expressed concerns about predatory lending, possible closing of rural bank branches and the trend toward big banks getting bigger.

      The banks maintain that the merger will benefit consumers by giving them an expanded choice of ATMs, branches and banking products.

      Bank of America got its start in California 100 years ago. Among other things, it financed the Golden Gate Bridge. It was bought by NationsBank, which adopted its name and moved it to North Carolina in 1998.

      FleetBoston is the product of a lengthy series of mergers. It has been known at various times as First National Bank of Boston, Baystate Corp. and Bank of Boston. It became FleetBoston Fiinancial following a 1999 merger with Fleet Bank of Rhode Island.

      The Federal Reserve has approved the merger of Bank of America and FleetBoston Financial, creating the third-largest U.S. bank. Now shareholders must appro...

      Feds Probe Sudden Acceleration Surge in Toyota Camry

      Sudden Acceleration Surge in Camry Alleged

      Federal safety officials are investigating reports that the Toyota Camry and other models may have a defect that causes sudden acceleration surges.

      The National Highway Traffic Safety Administration (NHTSA) says it has received reports of 30 crashes that injured at least five people, when some Toyota Camry, Camry Solara and Lexus ES300 vehicles suddenly and unexpectedly surged forward.

      "One of the noted injuries was serious: it occurred when a pedestrian was struck by a vehicle which allegedly surged forward unexpectedly," the National Highway Traffic Safety Administration (NHTSA) said in a statement released on the Internet.

      An estimated 1,010,000 vehicles from the the 2002 and 2003 model years could be affected, according to NHTSA.

      Feds Probe Sudden Acceleration Surge in Toyota Camry...

      PayPal Settles With New York

      Agrees to Better Disclose Account Holders' Rights

      New York Attorney General Eliot Spitzer has reached agreement with PayPal - the nation's largest online payment service - to better disclose the rights of account holders when an affiliated merchant fails to deliver merchandise.

      Spitzer may not be PayPal's only headache. In its annual report, PayPal's parent, eBay Inc., disclosed that federal and state investigators are examining whether PayPal violated consumer-protection laws.

      An investigation by Spitzer's office revealed that PayPal's "User Agreement" misrepresented to account holders certain terms and conditions, including a statement that it afforded to its account holders "the rights and privileges expected of a credit card transaction."

      In practice, consumers were often denied these rights both by PayPal and by the credit issuers American Express and Discover.

      "Protecting consumers' rights in online transactions is the best way to establish and maintain confidence in electronic commerce," Spitzer said. "As with any new industry, it is essential that consumers making e-payments receive full disclosure of their rights and liabilities."

      This is the third agreement obtained by Spitzer's office to address complaints that consumers were denied billing credits, or "chargebacks," when goods ordered through PayPal, and funded with American Express or Discover cards, were not received as promised. Late last year, Spitzer's office obtained agreements with American Express and Discover, both of which are issuing "chargeback" credits to consumers who did not receive goods ordered through a PayPal merchant.

      The agreements, taken together, close a loophole that, if left uncorrected, would have effectively exempted credit card purchases made through "e-payment" systems from the protections of the federal Fair Credit Billing Act and similar state laws. PayPal is by far the largest such system in the nation, with more than 25 million account holders.

      The issue of card holder protection in transactions done through online payment systems, such as PayPal, is a product of the Internet age and the burgeoning web traffic of sites such as eBay. Small merchants and individuals now can easily and safely send and receive payments through such payment systems, which in turn have relationships with credit card issuers.

      The Attorney General's agreements have been the first to offer guidance on the obligations of e-payment systems and credit issuers when affiliated merchants do not live up to their promises.

      Under the agreement, PayPal must clearly describe in its User Agreement account holder rights, including any conditions or limitations to those rights, and reversal or refund policies. The company will pay New York State $150,000 as penalties and costs of investigation.

      Besides Spitzer's probe, federal and state investigators are looking into PayPal's practice of freezing customer accounts while it investigates suspicious transactions, a practice that has generated complaints to consumer-protection authorities, the online auctioneer said in its annual report.

      "As a result of customer complaints, PayPal has ... received inquiries regarding its restriction and disclosure practices from the Federal Trade Commission and the attorneys general of a number of states," the report said.

      PayPal handled more than $12.2 billion in transactions in 2003 and has 40 million customer accounts, according to the annual report. The rate of fraudulent PayPal transactions is less than one-half of one percent, eBay has said.

      PayPal Settles With New York; Agrees to Better Disclose Account Holders' Rights...

      Dallas to Equip Ford Police Cars with Fire Suppressant

      Says Officer Safety Will Not Be Left to "Sheer Luck"

      Dallas officials say they will install fire suppressant technology on the City's Ford Crown Victoria police cars and seek reimbursement from the Ford Motor Company, saying they will not leave the safety of police officers to chance.

      "Dallas' Ford police cars have been involved in a number of high-speed rear crashes both before and after the tragic death of Officer Patrick Metzler in October 2002. An accident on Feb. 8, which involved six people, resulted in a massive gasoline spill that had to be mopped out of gutters by fire fighters," said City Attorney Madeleine Johnson.

      "Any rear-end crash to a Ford police car holds the potential to create a fireball that could burn police officers and bystanders to death," she said. "Call it sheer luck - or a miracle, if you will - but that night there was no spark to ignite the fuel. The next accident could be different. We cannot leave the safety of Dallas police and its citizens to luck."

      Dallas will begin retrofitting 775 active duty Ford Crown Victorias and retired police vehicles used by civilian employees by the end of the month, she said. The work should take about 30 days and cost the city about $271,000, or about $350 per car.

      Dallas will buy a fire suppression product that uses a plastic panel filled with six pounds of fire suppression powder, which completely covers the rear of the fuel tank, between the tank and the rear axle. In a rear crash, the axle or other components would shatter the panel, releasing a cloud of powder which would mix with any fumes from gasoline leaking from the tank. The powder makes it impossible for any fumes to ignite.

      The technology is similar to that used by the military and in racing cars to prevent fires in the event of crashes.

      The city will ask Ford to reimburse the money as a necessary safety retrofit, Johnson said.

      "We continue to believe that Ford has a duty as the nation's primary supplier of police cars to manufacture them in such a way as to make them safe for routine police work, a large part of which puts them on roadways where they are targets for high speed vehicles," Johnson said.

      Ford's attempt to shore up fuel tank protection by shielding certain components that could be puncture sources in crashes does not offer enough protection, Johnson added. Two Dallas police cars involved in high-speed, rear-end crashes resulting in fire or gasoline spills since the death of Officer Metzler in Oct. 2002, were equipped with Ford shields, she noted.

      An analysis of the most recent crash on Feb. 8, showed two leak sources: around a valve at the top of the tank, and a puncture at the bottom of the tank that allowed the tank to drain completely. Firefighters had to use absorption equipment to mop the gutters of fuel.

      The analysis further showed that the puncture was caused by a bracket that covers one of the straps holding the fuel tank in place. The puncture occurred in an area of the tank not protected by Ford's retrofitted shield system.

      Last July, the City of Dallas ran its own safety tests of the Ford Crown Victoria, concluding Ford's second attempt at making the cars safer - a trunk lining to keep police equipment from puncturing the tank - created a whole new danger: the potential of massively splitting the fuel tank.

      Ford roundly criticized the methodology used in these tests, claiming its own testing showed the trunk liner and other safety improvements prevented punctures up to 75 mph. However, later deposition testimony in ongoing lawsuits revealed that Ford never actually performed fuel system integrity crash tests on the trunk liner.

      The City of Dallas is among dozens of cities and counties suing Ford over the safety of Crown Victoria police cars. An investigation in December by the Detroit Free Press found that 30 people, including 18 police officers, had died in fiery rear-impact crashes in the Crown Victoria.

      Since 1999, there have been at least four Dallas Police Department Ford Crown Victorias involved in high speed rear crashes, including the one that took the life of Officer Metzler on Oct. 23, 2002.

      Dallas to Equip Ford Police Cars with Fire Suppressant...

      Court OKs Class Action Against H&R Block

      A Pennsylvania appeals court has ruled that lawsuits accusing H&R Block Inc. of charging unnecessary fees for filing tax forms electronically can be treated as class actions and don't have to be arbitrated.

      Erin McNulty and Brian Erzar sued block, claiming the company charged clients millions of dollars in unnecessary e-filing fees. The plaintiffs alleged that Block did not adequately indicate that customers could avoid the fees by filing traditional paper returns.

      Block's lawyers argued that a provision in a separate contract that the clients signed with Household Bank requires any claims to be settled through arbitration, not a class action. The agreement with Household Bank was for refund anticipation loans related to the clients' tax returns.

      But in the court's opinion, Pennsylvania Superior Court Judge Richard Klein held that an e-filing fee was a separate and distinct transaction from the application for the loan and wasn't covered by the arbitration clause.

      "The trial court found that charging a fee to push the 'send' button (basically the equivalent of putting a stamp on an envelope) was too attenuated to the loan application process and so was exempt from the arbitration case," Klein wrote.

      "We believe the court's decision runs counter to the weight of state and federal law, and are considering an appeal of the decision to the Pennsylvania Supreme Court," Block said in a statement.

      The case now returns to the Lackawanna County, Pa., Court of Common Pleas for trial.

      Block has faced consumer class actions and criticism dating to the mid-1990s for how it hss marketed its high-interest refund anticipation loans.

      The company settled a Texas lawsuit in June that called for it to distribute $26 million in cash, as well as tax preparation and software coupons, to 700,000 tax service customers. In April, a federal judge in Chicago rejected Block's proposed settlement in a similar class-action suit. That suit is pending.

      A Pennsylvania appeals court has ruled that lawsuits accusing H&R Block Inc. of charging unnecessary fees for filing tax forms electronically can be treate...