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Feds Weigh In Against Thermalean Promoters11/30/2004ConsumerAffairs
FTC charged 3 related dietary supplement companies, and a physician with deceiving consumers through deceptive advertising for their weight-loss and erecti...
The Federal Trade Commission has charged three related dietary supplement companies located in Norcross, Georgia, and a physician with deceiving consumers through deceptive advertising for their weight-loss and erectile dysfunction products.
The Commissions complaint alleges that the defendants made deceptive claims about the effectiveness and safety of Thermalean and Lipodrene, purported weight-loss products with ephedra, and Spontane-ES, a purported erectile dysfunction product with yohimbine.
The FTC filed charges against National Urological Group, Inc.; National Institute for Clinical Weight Loss, Inc.; Hi-Tech Pharmaceuticals, Inc.; Jared Wheat; Thomasz Holda; Stephen Smith; Michael Howell; and Dr. Terrill Mark Wright.
The case is part of the agencys ongoing effort to combat deceptive claims for dietary supplements that purport to enable obese or overweight consumers to lose substantial amounts of weight safely.
Weight Loss Claims
According to the FTCs complaint, the defendants direct mail and Internet advertisements contained false and unsubstantiated efficacy and safety claims for the weight-loss products Thermalean and Lipodrene.
The central theme of the Thermalean advertising campaign was that the product was an effective treatment for obesity, and that it combined the weight-loss benefits of three different prescription drugs. Consumers paid $80 for a two-month supply of Thermalean. The defendants promoted Lipodrene as a dietary supplement that had undergone substantial clinical testing proving that it enabled consumers to lose large amounts of weight safely. Consumers paid about $30 for a one-month supply of Lipodrene. The active ingredient in Thermalean and Lipodrene was ephedra.
The FTC has alleged that, contrary to the defendants claims, dietary supplements with ephedra do not cause substantial, long-term weight loss, and create safety risks because they increase blood pressure and stress the circulatory system.
In April 2004, the U.S. Food and Drug Administration (FDA) banned sales of dietary supplements with ephedra because they pose an unreasonable risk of illness or injury. The defendants have not advertised or sold Thermalean or Lipodrene containing ephedra since the FDA prohibited the sale of dietary supplements containing ephedra.
Erectile Dysfunction Claims
The FTCs complaint also alleges that the defendants represented that Spontane-ES, a dietary supplement with yohimbine, was effective in treating erectile dysfunction in 90 percent of users and Spontane-ES was safe. Consumers paid about $100 for a 60-count bottle of Spontane-ES.
The Commission challenged the defendants specific 90 percent efficacy claims as unsubstantiated. The FTC also alleged that their safety claim for Spontane-ES was unsubstantiated, because yohimbine creates safety risks by significantly raising blood pressure and interacting adversely with certain medications, such as beta-blockers that are used to treat heart disease.
The defendants, according to the FTC, made further deceptive claims to reinforce the efficacy and safety claims they were making for their products. The FTC also alleged that ads for Thermalean contained several deceptive claims made by Dr. Wright, who is named in the complaint.
In addition, the defendants allegedly made the false claim in ads that Warner Laboratories and the National Institute for Clinical Weight Loss were legitimate research or medical facilities engaged in the scientific or medical research and testing of their products.
The FTC complaint seeks injunctive and other equitable relief including, but not limited to, consumer redress, restitution, and disgorgement of ill-gotten gains.
FDA Opens Baycol Probe
Agency Feeling the Heat after Vioxx Withdrawal11/29/2004ConsumerAffairs
FDA Opens Baycol Probe; Agency Feeling the Heat after Vioxx Withdrawal...
The Food and Drug Administration (FDA) has launched a review of Bayer's August 2001 withdrawal of Baycol from the market, following reports that the drug company knew of serious risks associated with the drug but failed to inform the FDA promptly.
The FDA has been under growing scrutiny since a series of articles in last week's Journal of the American Medical Association (JAMA), including a report of a new study which found that Baycol's risks were far worse than had been believed at the time Bayer withdrew the statin drug, taken to lower cholesterol.
The JAMA articles linked Baycol to at least 31 deaths involving a fatal muscle disorder called rhabdomyolysis. One article, written by University of Washington medical professor Bruce Psaty alleged that Bayer was aware of the risks of Baycol within months of its launch in February 1998, more than three years before it was withdrawn.
By the time Baycol was removed from the market, the estimated number of cases of rhabdomyolysis had reached the tens of thousands, one of the JAMA articles said. As of this fall, Bayer has settled 2,861 lawsuits involving Baycol.
The company says it has paid $1.1 billion so far, without admitting liability, in out-of-court settlements of cases related to Baycol side effects. Some 7,169 cases are still pending.
An FDA official said last week that if Psaty's charges are true, the FDA would take it "extremely seriously." Steven Galson, acting director of FDA's Center for Drug Evaluation and Research, said the agency would have its criminal investigators look into the allegations.
"Right now, we don't really know whether that's true or not. We read about it in this level of detail for the first time" in the JAMA article, Galson said in a C-SPAN appearance last week.
"Bayer kept FDA fully informed about all pertinent safety information, including adverse event reports," a company statement said. "Indeed, an FDA audit of Bayer's post-marketing practices during the time Baycol was on the market demonstrated no deficiencies."
The articles follow concern about FDA's role in the recent voluntary market withdrawal of Vioxx, a COX-2 inhibitor manufactured by Merck that has been linked to increased cardiac risks.
With increasing pressure on Congress to beef up drug safety enforcement, it's increasingly likely a separate agency will be created to police drugs after they have been approved.
Sen. Edward Kennedy (D-Mass.), who is drafting drug safety legislation, predicted that reform bills would receive "bipartisan support," noting that "the FDA gold standard has been tarnished," The New York Times reported.
Missouri Sues Water "Purification" Company
Missouri Attorney General Jay Nixon is suing the owners of Hague Quality Water of the Ozarks11/29/2004ConsumerAffairs
Missouri Attorney General is suing the owners of Hague Quality Water of the Ozarks for repeatedly violating Missouris consumer protection laws in the sale ...
Missouri Attorney General Jay Nixon is suing the owners of Hague Quality Water of the Ozarks for repeatedly violating Missouris consumer protection laws in the sale of its water systems.
Nixon is seeking at least $55,000 in restitution for consumers who say representatives of Hague falsely promised them the water treatment system would improve their familys health, save water and give them other benefits. Nixons lawsuit says the misrepresentations violate Missouri law.
"This company pours out promises it knows it will not deliver," Nixon says. "We want an immediate end to this deception, and repayment for all of the families taken by the companys well-rehearsed lines."
Eleven consumers from throughout Missouri have complained to the Attorney General about problems with the defendants. Hague Quality Water has offices in Republic and Joplin, and previously had an office in Columbia.
The suit states that since at least August 2002, Hague Quality Water of the Ozarks has advertised, offered and sold water treatment systems to Missouri consumers. Hague sales representatives go to consumers homes and give presentations that usually last more than two hours.
During the presentation, they "test" the consumers tap water for various conditions including "hardness" and the presence of chlorine. Hagues sales representatives then tell the consumers their tap water is hard and contains chemicals and substances that have been proven hazardous to their health.
The consumers are told the Hague water treatment system, which costs several thousand dollars, will alleviate these problems.
According to the lawsuit, Hague sales representatives gave at least one consumer articles on how the water treatment system would improve the asthma and eczema of the consumers son. The consumer bought the water treatment system based on this information. To date, the consumers son has not experienced any improvement. Nixon says this misrepresentation violates the law.
Another of Hagues deceptive practices involves financing. Hague sales representatives routinely tell consumers they will help them obtain financing to pay for the water treatment system, and if the consumers make payments of $99 a month the system will be paid for in four or five years. The lawsuit says that some customers end up getting financing at an interest rate which does not allow them to pay off the system in four or five years, as they were promised. They do not learn this until they receive their first bill.
According to the lawsuit, Hague also fails to comply with Missouris law that gives buyers a three-day right of rescission. This law states that consumers must be told they have three days to terminate their contract after an in-home sales presentation. Many Hague customers are not told about this. Others are told they have until installation to terminate the transaction. One consumer was told Hague offered a 60-day trial period.
Consumers who tried to cancel the contract based on the time frame specified by Hague employees have been denied cancellation. They were told they were only entitled to a three-day right of rescission, regardless of what was said during the sales presentation.
Nixon is seeking a permanent injunction that bars Hague Quality Water of the Ozarks and its employees from further unlawful, unfair and deceptive acts. The Attorney General is seeking full restitution for all consumers who have been taken by the deceptive practices named in the lawsuit. Nixon also is seeking a civil penalty of $1,000 per violation and payment of court and investigative costs.
FDA Clears New MS Treatment
The Food and Drug Administration has licensed a new biologic approach to treat patients with relapsing forms of multiple sclerosis11/29/2004ConsumerAffairs
FDA Clears New MS Treatment...
The Food and Drug Administration has licensed a new biologic approach to treat patients with relapsing forms of multiple sclerosis (MS) to reduce the frequency of symptom flare-ups or exacerbations of the disease. MS is a chronic, often disabling disease of the brain and spinal cord.
Natalizumab, the new product, is a monoclonal antibody bioengineered from part of a mouse antibody to closely resemble a human antibody. It is being marketed under the tradename Tysabri. The product is given intravenously once a month in a physician's office.
According to the Multiple Sclerosis Association of America, approximately 350,000 individuals have been diagnosed with MS in the U.S., with an estimated 10,000 new cases diagnosed each year. The most common form of MS at the time of initial diagnosis is a relapsing-remitting form, in which acute symptoms or worsening of neurologic function, referred to as "relapses," "attacks," or "exacerbations," occur intermittently. The symptoms can diminish or disappear for months or years between relapses.
Although the cause of MS is unknown, it is widely considered to be an autoimmune disease in which the person's immune system attacks the brain and/or spinal cord. Tysabri appears to work by binding to these immune system cells, thus preventing them from traveling to the brain where they can cause damage.
Antibodies are proteins produced by a person's immune system to fight foreign substances, such as infections. Monoclonal antibodies, such as natalizumab, can be produced in large quantities in cell culture in a laboratory setting. They can be designed to bind to proteins on the body's normal cells. By recognizing and attaching to these proteins, monoclonal antibodies can interfere with (or alter) normal or abnormal cellular responses. In this way, monoclonal antibodies may be useful in the treatment of certain diseases such as MS.
"This innovative treatment for multiple sclerosis represents a new approach to treating MS -- exciting news for patients with this serious disease," said Dr. Lester M. Crawford, Acting FDA Commissioner. "While we eagerly await long-term results from ongoing clinical trials, we have reason to believe that Tysabri will significantly reduce relapses in MS."
The FDA said approval of Tysabri is based on positive results seen in patients after one year of treatment. The agency said the product received accelerated approval because it appears to provide substantial benefit for patients with a serious disease. As part of that approval, the manufacturer has committed to continuing its trials of this product for another year.
Tysabri was evaluated for safety and efficacy in two ongoing randomized, double-blind, placebo-controlled trials in patients with relapsing forms of MS. In the first clinical trial of the product's safety and efficacy, the drug reduced the frequency of relapses by 66 percent relative to placebo.
In a second trial, patients who had been treated with Avonex (interferon beta-1a), an approved treatment for MS, but who had experienced one or more relapses while on Avonex, were randomized to receive Tysabri or placebo. Avonex was continued throughout the study for both groups. In this trial, natalizumab reduced the frequency of relapses by 54 percent relative to placebo.
The most frequently reported serious adverse reactions were infections, including pneumonia, temporary hypersensitivity reactions (such as rash, fever, low blood pressure, and chest pain), depression, and gallstones. These serious adverse reactions were uncommon.
Common adverse reactions were generally mild and included non-serious infections such as urinary tract, lower respiratory tract, GI system, and vaginal infections, headache, depression, joint pains, and menstrual disorders.
Tysabri is marketed by Biogen Idec, Inc., of Cambridge, Massachusetts, and Elan Pharmaceuticals, Inc., of Dublin, Ireland.
Study: Nursing Home Residents Dying Of Hunger, Thirst11/29/2004ConsumerAffairs
Study: Nursing Home Residents Dying Of Hunger, Thirst...
Residents of America's nursing homes die every day, but health officials are wondering how many of those deaths could be prevented with improvements in simple, basic care. Some suggest many deaths occur because caregivers don't have the time or experience to properly look after residents.
According to an investigation by the Detroit News, many of the deaths occur because residents either don't eat enough food or drink enough liquids.
Nationwide, malnutrition and dehydration killed at least 13,890 nursing home residents between 1999 and 2002, the most recent year for which numbers are available, federal health records show. Those conditions contributed to the deaths of about 68,000 others.
While some of those deaths probably would not have been prevented even with the best of care, analysis of medical records and government inspection reports suggest many could have been, and it's leading to calls for Congressional action. Sen. Ron Wyden, D-OR, a long-term care advocate who sits on the Senate committee on aging, says there's no reason any nursing home resident should die because of diet.
"America is at ground zero in its fight against [nursing home] malnutrition," he said. "Today, we begin an effort that can improve the health and lives of hundreds of thousands of older Americans."
Wyden said it was "morally repugnant" that nursing home residents are malnourished, particularly in a country with abundant wealth and resources.
Nursing home Industry executives maintain that malnutrition and dehydration - and the deaths they cause - are almost always natural progressions of the chronic diseases that put patients in nursing homes in the first place.
"This is an active stage of dying and not necessarily something people should be alarmed with," said Reginald Carter, president and chief executive of the Health Care Association of Michigan, which represents more than 400 long-term care facilities.
But a study by the Commonwealth Fund suggests there's more to it than that. The study says at least a third of the 1.6 million nursing home residents in the United States may suffer from malnutrition or dehydration, conditions that can aggravate or cause more severe medical problems and hasten death. That suggests a more systemic problem. More importantly, the study says the problem can be corrected.
"Much of this problem could be alleviated by increasing the number of overall staff and trained professional nurses at nursing homes so they can make sure residents are getting enough to eat and drink," said Sarah Greene Burger, executive director of the National Citizens' Coalition for Nursing Home Reform and lead author of the study.
Chronic conditions such as depression and cognitive impairment, and the side effects of treatments for these conditions, are also a major factor. Residents suffering from depression, for example, are more likely to experience weight loss, the study says. Another obstacle to good nutrition is that nursing home residents commonly have a limited choice in what they eat, with their cultural and ethnic food preferences frequently ignored. Poor dental health also contributes to inadequate nutritional intake.
"Malnutrition, dehydration, and weight loss in nursing homes constitute one of the largest silent epidemics in this country," said Karen Davis, president of The Commonwealth Fund. "As this report suggests, we can address this problem by promoting changes in public policy, seeking creative solutions from providers and professionals, undertaking further research on key issues, and enforcing existing standards."
83 reports of cell phones exploding or catching fire11/26/2004ConsumerAffairsBy Truman Lewis
Burns to the face, neck, leg and hip are among the dozens of injuries reported to the CPSC. The agency says it is working with companies to create better b...
Feds Raid Ephedra Warehouse11/26/2004ConsumerAffairs
Feds Raid Ephedra Warehouse...
Apparently not all marketers have gotten the word that the government has banned ephedra in dietary supplements. The Food and Drug Administration says its taking action against a Texas firm that it says sells dietary supplements with ephedrine alkaloids, marketed as a treatment for serious diseases and conditions.
"We are once again sending a message that HHS and the FDA will not tolerate the marketing of dietary supplements that are more likely to harm health than help it," said HHS Secretary Tommy G. Thompson.
The complaint, filed by the United States Attorney for the Southern District of Texas in U.S. District Court in Houston, charges that VITERA-XT, an ephedra-containing dietary supplement marketed by Houston-based Asia MedLabs, Inc., is an adulterated food as well as an unapproved and misbranded drug, which present an unreasonable risk of illness or injury.
At FDA's request, Asia MedLabs' supply of VITERA-XT was embargoed by the Texas Department of State Health Services prior to the filing of the enforcement action.
U.S. Marshalls armed with a warrant seized more than 2.1 million VITERA-XT capsules in the possession of Asia MedLabs, Inc. located on the 9100 block of Winkler Drive in Houston, Texas. Of the total, one million were as-yet unpackaged capsules; the remainder were contained in more than 14,000 labeled bottles.
"We've issued a rule banning ephedra-containing products and we're sparing no effort to stop their manufacture and distribution. If any of these dietary supplements are still on the store shelves, I urge the retailers to stop selling them immediately," said Acting Commissioner of the Food and Drug Administration, Dr. Lester M. Crawford.
In December 2003, the FDA informed manufacturers of dietary supplements containing ephedra, including MaxLabs, Inc., located at the same address and under the same ownership as Asia MedLabs, that products would be considered adulterated under a forthcoming rule banning ephedra-containing dietary supplements. FDA's ephedra ban was published in February and took effect in April of this year.
Although the product, VITERA-XT, is labeled as a "traditional Asian herbal formulation," the government says the product is still considered a dietary supplement, based on FDA regulations, because its label included a panel with "Supplement Facts" and the dietary supplement disclaimer.
In addition, the civil complaint alleges, that VITERA-XT, contains ephedrine alkaloids, thereby making it an adulterated food. Moreover, Asia MedLabs's Internet website has made medical claims, including "treat[s]... persistent flu, fevers, and [may be used] for poison release ..., treat[s] allergies, especially, allergic rhinitis ..., treat[s] heart muscle ailments ..., [and] expands cardiac vessels to prevent the ischemic injury of myocardium and relieves the symptoms of angina pectoris." In making these medical claims the civil complaint alleges VITERA-XT is considered an unapproved new and misbranded drug.
Ephedra, also called Ma Huang, is a source of ephedrine alkaloids that, when chemically synthesized, are regulated as drugs. FDA has warned consumers against the use of dietary supplements containing ephedra since June, 1997, and banned these products after research confirmed that ephedrine alkaloids raise blood pressure and otherwise stress the circulatory system.
FDA's enforcement efforts have focused on manufacturers and major distributors of ephedra-containing dietary supplements. As a result, two firms have voluntarily destroyed more than a quarter of a million dollars worth of these dietary supplements and several others have removed ephedra products from the market.
Travel Promoters Scammed Seniors, Illinois Charges
Made false claims about free trips, state charges11/26/2004ConsumerAffairs
Travel Promoters Scammed Seniors, Illinois Charges...
Illinois Attorney General Lisa Madigan has filed suit in Cook County Circuit Court against an Indiana man and his Illinois cohort for allegedly luring consumers to flashy travel club sales presentations and then misleading them with false claims about free trips and features of a travel membership club that was anything but a bargain.
The two defendants made their way across the Midwest, renting hotel conference rooms or ballrooms to lure would-be travelers to their promotional performances. At least half of the consumers who complained were seniors who likely were planning to travel during their retirement years. All of the 23 complaints were made by couples who purchased the packages together.
Madigans consumer fraud lawsuit alleges American Travel and Management, LLC, of Dyer, Indiana, company manager Kevin B. Raines of Crown Point, Indiana, and Francine M. Bauer of McHenry, an agent of the firm, traveled from town to town setting up one-day travel club sales presentations and leaving local consumers with little more than a packet of deception and misrepresentations.
Madigans office alleges that after the defendants had left town, consumers found the free trips they had signed up for would actually cost them hundreds or thousands of dollars.
Raines and Bauer allegedly took these consumers on a trip, but it certainly was no vacation, Madigan said. Many of these couples no doubt worked hard for years to enjoy travel in their retirement, but they were deceived.
Madigans suit alleges Raines and Bauer engaged in unfair and deceptive acts in violation of the Illinois Consumer Fraud and Deceptive Business Practices Act. Among the many misrepresentations alleged in Madigans lawsuit, the defendants allegedly told prospective members that by joining the travel club, they would enjoy substantial discounts on airline tickets; receive vouchers for free condominium stays anywhere in the world; be eligible for trips to Mexico and other vacation spots; and receive a money-back guarantee if they were dissatisfied with their membership.
Madigan said that Raines and Bauer allegedly misled and deceived consumers about the free trip and travel membership club by omitting facts and making misleading statements.
For example, during the sales presentation, they allegedly failed to mention that consumers were responsible for paying certain costs for the promotional travel voucher, including, but not limited to, port fees of $99 a night, activation charges and services charges. The duo also led consumers to believe the expiration date of the promotional vouchers was five to seven years when in fact the expiration date of cruise certificates was 18 months while airfare and all-inclusive certificates expired in 36 months.
Additionally, Raines and Bauer allegedly misrepresented to consumers that a benefit of the travel club membership included time shares available anywhere in the world when in fact they were available only in Tennessee and Arkansas. They also orally misrepresented the value of the travel club as being worth nearly $3,000 when in fact it was worth $275.
Madigans lawsuit alleges that Bauer, at one point, operated as an independent sales agent, selling memberships to the Grand Getaways Vacation Club through an arrangement with a Florida corporation, Mini-Vacations, Inc. However, after Mini-Vacations severed its ties with Raines and Bauer last March, the pair began selling travel club memberships in June for Michigan-based Vacation Travel Incentives, Inc. Raines company, which is registered in Indiana, is not licensed to conduct business in Illinois.
Madigans lawsuit seeks to permanently bar the defendants from advertising or offering vacation packages to Illinois consumers. In addition, Madigans suit asks the court to impose civil penalties of $50,000 for each violation of the Consumer Fraud Act and $10,000 for each violation committed against a person aged 65 or older, and order the defendants to pay full restitution to consumers.
A Round Plate Deserves A Round Towel
Chicago inventor John Esparza calls his creation "microbuddies"11/24/2004ConsumerAffairs
Esparza, 60, has created a solution for microwaving food with square paper towels. "Microbuddies" are rounded paper towels made to perfectly fit your plate...
At last there's a solution to the agonizing problem of fitting a square paper towel onto a round microwave plate. Chicago inventor John Esparza calls his creation "microbuddies." They're round paper towels.
Esparza, 60, says the idea came to him in his kitchen, where he daily encountered the problem of square paper towels slipping off the revolving round plate in his microwave.
"I kept having to tear the corners off the paper towels myself," said Esparza, a retired railroad worker in a Chicago Sun-Times interview. "I thought, 'Why don't they make round paper towels?' "
Paper towels are a staple of microwaving. They are commonly placed on top of food to help keep in moisture and to absorb splatters and grease.
The U.S. Patent and Trademark office accepted Esparza's application this month. According to his patent application, the paper towels would be available in multiple sizes -- 11 inches for dinner plates and 8 inches for smaller plates.
They wouldn't come packaged in a roll like conventional paper towels but instead would come packed individually in a box.
Esparza doesn't yet have a deal to mass-produce and market his microbuddies, but he's optimistic something will come along soon.
John Deere Riding Mowers Recall11/24/2004ConsumerAffairs
John Deere Riding Mowers Recall...
November 24, 2004
John Deere & Co. is recalling about 4,400 GX85 and SX85 riding lawn mowers. The fuel tanks can crack and leak fuel presenting a potential for fire or burn injuries.
John Deere is aware of 37 instances of replacement of the fuel tank under warranty. There have been no reports of fires, injuries or property damage.
The recalled lawn mowers are green with yellow trim and have either GX85 or SX 85 on the side of the riding mower and a John Deere symbol on the front end and involve the following machines:
|GX85||MOGX85X145887 through 149328|
|SX85||MOSX85X125374 through 126508|
The mowers were sold by authorized John Deere dealers in the United States and Canada from November 2003 through July 2003 for between $2,000 and $2,400.
The company is directly notifying those consumers who purchased affected mowers. . Consumers should stop using their tractors immediately and contact a John Deere dealer for a free repair.
Consumer Contact: For more information, contact John Deeres Customer Communications Center at (800) 537-8233 between 8:00 a.m. and 6:00 p.m. ET, Monday through Friday and 9:00 a.m. and 3:00 p.m. ET Saturday or at the John Deere web site at www.johndeere.com.
The recall is being conducted in cooperation with the U.S. Consumer Product Safety Commission (CPSC).
Texas Charges Mortgage Company with Fraud
City Mortgage Services defrauded more than 150 Hispanic homeowners, state charges11/24/2004ConsumerAffairs
Texas Charges Mortgage Company with Fraud...
Texas Attorney General Greg Abbott has filed a lawsuit and is seeking a restraining order and asset freeze alleging that City Mortgage Services defrauded more than 150 Hispanic homeowners in Texas.
The company and its principals, Gustavo Duarte and Alfredo Mendez, allegedly pocketed thousands of dollars that should have been forwarded to the mortgage companies financing the consumers' homes.
The company, which had offices in Dallas, Houston and Austin, shut down abruptly earlier this year, leaving consumers owing their mortgage companies substantial amounts of money in missed payments and late fees.
"Brazen schemes like these will not be tolerated in Texas," said Abbott. "City Mortgage systematically victimized these Hispanic families by exploiting their dreams of home ownership. I am committed to ensuring this scam doesn't hurt any more Texas consumers."
According to the lawsuit, City Mortgage dispatched teams of door-to-door salespersons throughout Hispanic neighborhoods, touting the company's "debt-reduction service."
Sales pitches and promotional materials promised consumers City Mortgage would save them thousands of dollars by withdrawing and forwarding to their mortgage company a larger monthly amount than their regular mortgage payment, thus reducing the number of years it took to pay off the loan. City Mortgage charged families between $700 and $1,000 for the service.
Many consumers indicated that City Mortgage was often late in forwarding payments to the mortgage companies, resulting in delinquency notices and late fees. In its last few months of operation, City Mortgage failed to make payments altogether, and simply shut down and kept the consumers' money, the state charged.
Many consumers did not learn about City Mortgage's failure to pay until they received notices from their mortgage companies, informing them that they had accrued considerable debts.
Consumers can reduce their mortgage debt by dealing directly with their mortgage companies. Typically, consumers can make arrangements to pay extra amounts each month that can be applied toward paying down the principal of the loan. No middlemen are necessary, and consumers do not have to pay enrollment fees like those charged by City Mortgage.
City Mortgage has no affiliation with the CitiBank or CitiMortgage units of CitiGroup.
A Future Without Nursing Homes11/23/2004ConsumerAffairs
There is a future without nursing homes says Dr. William Thomas, a physician who has established new small group homes for elders called Green Houses....
There is a future without nursing homes says Dr. William Thomas, a physician who has established new small group homes for elders called Green Houses.
At a congressional briefing on Capitol Hill, research findings presented by an independent team from the University of Minnesota led by Dr. Rosalie Kane reported statistically significant improvements in how the elderly responded in Green Houses compared to a control group of two other traditional institutional-type nursing homes.
In a time of growing concern about the cost of caring for the elderly, the Green House model delivers this high-quality at the same or lower cost, Thomas said.
America has a choice. With the nation's nursing homes deteriorating from age and the baby boom generation moving into the later chapter of their lives, should we build many new traditional institutions or replace them with an alternative that deinstitutionalizes the frail elderly and truly celebrates elderhood? Thomas asked.
America's obsession with youth harms young and old alike, says Thomas, who argues in his new book What Are Old People For? that the 77 million aging baby boomers will change society one more time.
Creating a new old age will be the baby boomers last act on the public stage, says Thomas.
The focus of the Green House model is the quality of life experience in a living space for eight to ten elders. The preliminary findings from the ongoing study found that the seniors, the people who take care of them, and even the friends and family that come to visit were extremely satisfied with the quality of life offered by Green Houses.
The Green Houses, which look and feel like a house, respect what Dr. Thomas calls the rhythm of life and the well-being of the people who live there. This rhythm is created by, and evolves through, household decisions made jointly by the seniors and the staff trained to care for them.
At the Green House, there is no bureaucracy. Says Dr. Thomas, Bosses upon bosses upon bosses have been removed. The research indicates that this may be a solution to the critical problem of high staff turnover in traditional nursing homes.
In research at the worlds first Green Houses in Tupelo, Mississippi, which opened in May 2003, answers to open-ended questions show that elderly people thrive far more than in regular nursing homes.
Seniors who were in wheel chairs are walking, seniors who were not talking are talking, seniors who were not eating are eating, states Tupelo director Steve McAlilly. Through something as simple as enabling Green House residents to smell the bacon cooking, the small pleasures of life are restored.
Additional Green House projects are in development nationwide in Michigan, Nebraska, Georgia, Florida, and North Carolina.
More detailed findings of the research sponsored by The Commonwealth Fund are available on the projects web site at www.thegreenhouseproject.com.
Ford Will Fix Explorer Transmissions11/22/2004ConsumerAffairs
Ford Will Fix Explorer Transmissions...
November 22, 2004
Ford will notify about 740,000 owners of 2004 Explorers and Mercury Mountaineers of a potential transmission problem in the popular sport-utility vehicles.
Ford said it decided to check the transmissions because of consumer complaints about jerky shifting from park to reverse. Ford will send letters to owners asking that they take the SUVs to a dealership for free repairs.
It's not an official recall but the repair action could put a dent in Ford's claims of improved quality in the Explorer, America's best-selling SUV.
Cashback Payday Loans Banned In New York
Company has agreed to forgive loans that carried exorbitant rates and provide refunds to New Yorkers11/22/2004ConsumerAffairs
Cashback Payday Loans Banned In New York...
Cashback Payday Loans has been barred from doing business in New York and has agreed to forgive loans that carried exorbitant rates and provide refunds to New Yorkers.
Attorney General Eliot Spitzer said the Nevada company had been making payday loans at annual interest rates of up to 400 percent. The action against Las Vegas-based Cashback Payday Loans, Inc. marks the third time this year Spitzer's office has acted to halt payday loan schemes.
"Payday lending can be the modern equivalent of loan sharking and is illegal in New York," Spitzer said. "My office will continue to take aggressive action to stop payday lenders from victimizing New York consumers."
Spitzer began an investigation of Cashback's operations after receiving a complaint from a consumer who, in order to avoid default on a $500 payday loan from Cashback, became stuck in a cycle of refinancing at annual interest rates of nearly 400 percent. Within three months of receiving the $500 loan, the consumer owed Cashback more than $900 in interest.
The probe revealed that Cashback -- which advertised "payday advances" over the Internet -- extended such loans to dozens of New York consumers in violation of state usury laws.
Under the settlement agreement, the company must contact all New Yorkers with open accounts and notify them that their loans will be discharged. Further, the company must pay refunds to past customers who were charged exorbitant interest rates. It must cease issuing illegal payday loans in New York immediately, and discontinue any other lending operations.
In the past year, Spitzer's office has taken action against two other payday lending schemes: New York Catalog Sales in Watertown; and County Bank of Rehobeth Beach, Del., along with its partners, Cashnet, Inc., and Telecash Co.
The goal of each of these actions is to halt illegal lending in New York, obtain court orders discharging the debts associated with such lending, and obtain restitution for injured consumers.
Payday loans are small, short term loans that are repayable on the borrower's next payday, usually by a post-dated check or by electronically withdrawing the money from the borrower's checking account. Annual interest on such loans often exceeds the maximum rate allowed in New York, which is currently 16 percent.
Studies Allege Bayer Was Too Slow Withdrawing Baycol11/22/2004ConsumerAffairs
Studies Allege Bayer Was Too Slow Withdrawing Baycol...
November 22, 2004
New studies indicate Bayer AG was too slow to pull Baycol from the market in 2001, when some patients taking the drug developed a severe and sometimes fatal muscle disorder. In a related development, a prestigious medical journal is calling for a new independent agency to monitor drug safety.
A report in the December 1 issue of the Journal of the American Medical Association (JAMA) quotes a new study which found that Baycol's risks were far worse than had been believed at the time Bayer withdrew the drug.
Merck has been under fire recently for allegedly moving too slowly to withdraw the arthritis drug Vioxx, which has been found to raise the risk of heart attack and stroke in some patients.
In an editorial accompanying the article, JAMA's editors said it is time to recognize that the Food and Drug Administration (FDA) is unable to protect the public from dangerous drugs and to establish a new agency to fill that role.
"It is unreasonable to expect that the same agency that was responsible for approval of drug licensing and labeling would also be committed to actively seek evidence to prove itself wrong," the editors wrote.
Last week, David Graham, a senior FDA safety officer told a Senate panel that at least five dangerous drugs are on the market today because of the FDA's inability to effectively monitor drugs once they have been approved.
The study cited in the JAMA article said that today's cholesterol-lowering statin drugs are very safe but can pose risks when taken with fibrates, drugs often taken by older patients with diabetes to lower triglycerides.
Sprint Named in Fat Fingers Suit
Defendants set up numerous toll-free numbers that differ by only one digit from their competitors' numbers11/20/2004ConsumerAffairs
Sprint Named in Fat Fingers Suit...
A New York class action charges that Sprint and ASC Telecom victimized consumers through a "fat fingers" scheme. The companies allegedly set up numerous toll-free numbers that differ by only one digit from their competitors' numbers.
Thus, customers trying to call AT&T at 1-800-CALL-ATT would get Sprint if they accidentally dialed 1-800-CELL-ATT.
Sprint and ASC Telecom charge their accidental callers rates vastly greater than what the callers' intended providers would have charged them, the suit argues.
The suit alleges the practice amounts to fraud and violates New York's prohibitions on deceptive actions.
An appeals court upheld the suit's class action certification but agreed with a lower court that it should not be a nationwide class action.
New York's General Business Law "requires the deceptive transaction to have occurred in New York, leaving potential class members from outside the state, who were victimized by defendants' practices, with no viable claim under the statute," the appeals court ruled.
Feds Toughen Warning for Depo-Provero
The injectable drug is used to prevent pregnancy11/19/2004ConsumerAffairs
The FDA is adding a "black box" warning to Depo-Provera labels, warning that prolonged use may result in the loss of bone density. The injectable drug is u...
The Food and Drug Administration is adding a "black box" warning to Depo-Provera labels, warning that prolonged use may result in the loss of bone density. The injectable drug is used to prevent pregnancy.
The black box warning for Depo-Provera highlights that prolonged use of the Pfizer drug may result in significant loss of bone density, and that the loss is greater the longer the drug is administered. This bone density loss may not be completely reversible after discontinuation of the drug.
Thus the warning states that a woman should only use Depo-Provera Contraceptive Injection as a long-term birth control method (for example, longer than two years) if other birth control methods are inadequate for her.
Black box warnings are designed to highlight special problems, particularly those that are serious, and to give health care professionals a clear understanding of a potential medical complication associated with a drug. Black box warnings are supposed to provide physicians with important insights as to how to prescribe a drug that may be associated with serious side effects in a way that maximizes its benefits and minimizes its risks.
The addition of the black box warning came as a result of the drug manufacturer's and FDA's analysis of data that clarified the drug's long-term effects on bone density.
In addition to the black box warning on the labeling, the drug's manufacturer will issue a "Dear Health Care Practitioner" letter regarding the effect of long-term treatment on bone mineral density to health care professionals likely to prescribe the drug, and will incorporate the new information in the patient information sheet distributed with the drug.
FDA Vet Blows Whistle on "Broken" Agency11/19/2004ConsumerAffairs
FDA Vet Blows Whistle on Broken Agency...
Congress has taken up the probe of how an FDA-approved drug like Vioxx could turn out to be harmful to the people who take it. The trail appears to be leading to the FDA's door.
When a Senate committee began looking into the issue this week, it heard from David Graham, a long-time FDA drug reviewer. Graham told the committee that Vioxx is far from the only problem. He said five drugs currently on the market at dangerous.
He named the weight-loss drug Meridia, the anti-cholesterol drug Crestor, the acne drug Accutane, the painkiller Bextra, and the asthma treatment drug Serevent as being dangerous and said they should be immediately recalled.
This bombshell came as the committee was delving into what pharmaceutical company Merck knew about Vioxx's dangers, and when it knew it. Published reports appearing after Vioxx's recall have charged that Merck officials were told the arthritis pain killer might cause strokes and heart attacks, but covered up the data because the drug was so profitable.
Graham suggests that one company is not the problem, but that the FDA is "broken" and unable to deal seriously with questionable new drugs. He said the agency is defenseless to stop another tragedy like Vioxx.
Graham's blistering attack has already produced sharp rebuttals. Pharmaceutical companies insist their produces are safe, and FDA Deputy Director Sandra Kwedler denied her agency has fatal flaws
The head of Merck said he always believed in Vioxx, and that is wife was on the drug until the day it was recalled from the market. After hearing from several witnesses, some members of the Senate committee said an independent board should be set up to ensure the safety of medications - a job the FDA is supposed to be doing.
Unum Provident Agrees to Review Denied Disability Claims
Company Estimates Cost of Settlement With New York at $100 Million11/19/2004ConsumerAffairs
Unum Provident Agrees to Review Denied Disability Claims...
A landmark, multi-state settlement with UnumProvident will impose sweeping reforms that will protect disabled workers nationwide, New York State Attorney General Eliot Spitzer said today.
The settlement resolves issues relating to investigations into UnumProvident's claims handling practices. The investigations focused on assertions that UnumProvident had inappropriately denied claims for benefits under individual and group long-term disability insurance policies.
The settlement requires UnumProvident and its subsidiaries: (1) to reassess approximately 200,000 claims that previously had been denied; (2) to completely restructure their claim handling procedures to ensure objectivity and fairness; and (3) to pay a $15 million fine.
"This settlement sends a strong message to disability insurance companies that improper denials of disability claims will not be tolerated," said Attorney General Spitzer.
"These claim denials involved vulnerable workers those whose illnesses and injuries prevented them from continuing their employment. I am very pleased that these individuals will have their claims reviewed, and that UnumProvident will now implement the structural reforms necessary to ensure that future claims are handled appropriately."
The investigation is unrelated to the separate probes into the payment of contingent commissions, steering and bid-rigging in the insurance industry.
Numerous other actions are still pending against UnumProvident, including a class-action lawsuit which charges that the company operates "disability denial factories" and at least 2,500 individual suits filed by policyholders. A California jury returned a $31 million verdict against the company in 2003 and the state of Georgia fined it $1 million after an 18-month investigation.
The reassessment process covers the vast majority of persons whose claims for group or individual long-term disability benefits were terminated or denied after January 1, 2000. UnumProvident and its subsidiaries are required to provide notice to those individuals of their rights under the agreement.
In addition, individuals whose disability claims were denied between 1997 and 2000 can also apply to participate in the claim reassessment process. Spitzer and Serio urged these individuals to contact UnumProvident at 1-866-278-4641 and ask that their claims be reassessed.
UnumProvident officials estimate that the settlement will result in expenditures of over $100 million in restitution to policyholders and in structural reforms to improve compliance and monitoring. Some of the structural reforms must remain in place for at least two years, while others are permanent.
The review process and restitution payments will provide claimants with a more expedient method of obtaining recoveries, and simultaneously will reduce the companies' exposure to litigation judgments and other costs.
If UnumProvident fails to implement the required changes in a timely manner as stipulated by the agreement, it will be subject to penalties of $100,000 per day until compliance is achieved. In addition, failure to meet acceptable levels of accuracy in making disability claim determinations will result in a penalty of $145 million.
The investigation was conducted by the New York State Attorney General's Office, the New York State Insurance Department, state insurance regulators conducting a multi-state examination led by Massachusetts, Maine and Tennessee on behalf of all the other states, and the United States Department of Labor.
The settlement covers Unum Provident and five of its subsidiaries -- Unum Life Insurance Company of America, The Paul Revere Life Insurance Company, Provident Life and Casualty Insurance Company, Provident Life and Accident Insurance Company and First Unum Life Insurance Company.
Dynacraft Fined $1.4 Million for Failing to Report Mountain Bike Hazard
Forks can break, causing the rider to fall11/19/2004ConsumerAffairs
Dynacraft Fined $1.4 Million for Failing to Report Mountain Bike Hazard...
Dynacraft Inc. faces a $1.4 million fine for failing to promptly report a safety defect in its mountain bicycles to the U.S. Consumer Product Safety Commission (CPSC).
Between July 1999 and March 2001, Dynacraft imported nearly 250,000 mountain bicycles that were manufactured with two types of defective forks, the CPSC said.
The forks, which are part of the steering column, can break apart and separate from the front wheel, causing the rider to lose control and suffer serious injuries. Over 50,000 of these bicycles also were made with a defect that caused the pedals to come loose and fall off, resulting in a loss of control by the rider.
In January 2000, Dynacraft reported to CPSC that a limited number of Vertical XL2 bicycles were involved in incidents where the fork broke and riders suffered chipped teeth, a sprained back, or bumps and bruises to the head.
Based on this information, CPSC and the firm recalled only 19,000 bicycles in February 2000. Yet, the firm knew of additional consumers who experienced the same problem with the bicycles, but these incidents were not reported to CPSC until July 2000.
As a result, the February 2000 recall was expanded in September 2000 to include another 24,800 Vertical XL2 and Magna Electroshock model bicyles. Dynacraft reported problems with the Magna Electroshock model in August 2000, including 35 incidents and injuries (concussions, fractures, and lost teeth).
In March 2001, Dynacraft informed CPSC that about 31 riders using the Next Shockzone model mountain bikes who were injured between March 2000 and March 2001. In addition to broken bones, cuts and bruises, one rider suffered a blood clot in the brain. The recall of 38,000 Next Shockzone bicycles in April 2001 also involved defective suspension forks.
An additional 54,000 units were recalled in May 2001 after the company reported incidents and serious injuries involving the Magna Equator models, due to defects with the pedals. The largest and last recall took place in June 2002, when 132,000 Next Ultra Shock mountain bicycles were recalled due to defective Ballistic 105 forks. Dynacraft reported 21 injuries involving the Next Ultra Shock, including concussions, abrasions, chipped teeth, and chest trauma.
Federal law requires manufacturers, distributors, and retailers to report to CPSC immediately (within 24 hours) after obtaining information which reasonably supports the conclusion that a product contains a defect which could create a substantial risk of injury to the public, presents an unreasonable risk of serious injury or death, or violates a federal safety standard.
In agreeing to settle the matter, Dynacraft BSC Inc. denies that it violated the reporting requirements of the Consumer Product Safety Act.
California Insurance Corruption Probe Advances
Universal Life Settles, Agrees to Cooperate With Prosecutors11/18/2004ConsumerAffairs
California insurance corruption probe advances today when Universal Life Resources entered into a consent decree and agreed to cooperate with prosecutors....
California probe of insurance industry corruption advanced today when Universal Life Resources, a large California-based employee benefits brokerage firm, entered into a consent decree and agreed to cooperate with prosecutors, the lead attorney for the state Insurance Commissioner said.
"Now that Universal Life Resources has agreed to cooperate, the state can focus more specifically on the illegal practices of the insurance firms, with full assistance from the insiders at ULR," said John Stoia. "This is a huge breakthrough."
Stoia was hired by California Insurance Commissioner John Garamendi to assist in breaking up a longstanding pattern of hidden deals and commissions paid by the companies to companies like ULR and Marsh & McLennan, who advanced the companies' products while pretending to perform objective brokerage services for employers who hired them to assemble employee benefits.
Stoia is filing suit on behalf of the state of California and Garamendi against ULR and its chairman along with MetLife, Cigna, Prudential and UnumProvident to enjoin them from violating California insurance laws and regulations.
The consent agreement and permanent injunction excludes ULR from further prosecution or fines but requires them in writing to "fully and timely cooperate" in the state's investigation.
The agreement also requires ULR to no longer "put their own financial interests ahead of their clients' financial interests," to disclose fully their income and commission arrangements and to stop paying or receiving kickbacks and other hidden fees. ULR did not admit to guilt or liability as part of the agreement.
In the lawsuit filed in state Superior Court in San Diego, where ULR is headquartered, the Insurance Commissioner charged that the brokerage and the insurance companies participated in a scheme to steer clients to buy insurance products from the insurors and others who provided undisclosed compensation to ULR.
"Defendants use a number of euphemisms for these improper steering agreements," the complaint noted, such as "special compensation service agreements," "direct vendor marketing agreements" and "preferred broker compensation plans."
This revenue came to ULR in addition to standard fees or commissions from the companies and amounted to profit-sharing between the insurance firms and the broker at the expense of the broker's clients, the suit charges.
The suit also singles out a practice known as "low-hanging fruit," in which the insurance companies push their clients with whom they have direct contracts to ULR, in exchange for ULR steering their clients to the insurers. The result was millions of dollars in undisclosed fees for ULR and hundreds of millions of dollars in premiums to the insurance companies, even as ULR positioned itself as providing "independent and unbiased advice to their clients," the lawsuit charged.
The suit seeks to permanently stop these practices.
Stoia's firm filed the first of the now numerous cases uncovering insurance industry kickback practices, suing Marsh and McLennan, the world's largest insurance brokerage, in federal district court in New York City last August. In October, New York Atty. Gen. Eliot Spitzer initiated a major investigation into the same practices.
Stoia also filed a separate class action civil RICO case in federal court in San Diego last month against Universal Life Resources, MetLife Inc., Prudential Financial Inc., Cigna Corporation and UnumProvident.
The New York suit, also a class action civil RICO case, names Aon and its related companies and The Willis Group of companies, in addition to Marsh and McLennan.
Stoia is a partner in Lerach Coughlin Stoia Geller Rudman & Robbins LLP, a San diego firm.
Petco Settles Federal Charges
Website flaws violated privacy promises it made to its customers11/17/2004ConsumerAffairs
Petco Settles Federal Charges...
Petco, a national seller of pet food, supplies, and services, has agreed to settle Federal Trade Commission charges that security flaws in its www.PETCO.com Web site violated privacy promises it made to its customers and violated federal law.
The agency alleges that, contrary to Petcos claims, it did not take reasonable or appropriate measures to prevent commonly known attacks by hackers. The flaws allowed a hacker to access consumer records, including credit card numbers. The settlement requires that Petco implement a comprehensive information security program for its Web site.
This is the fifth FTC case challenging deceptive claims by businesses about the security they provided for consumers personal information.
Consumers have the right to expect companies to keep their promises about the security of the confidential consumer information they collect, said Lydia Parnes, Acting Director of the FTCs Bureau of Consumer Protection. The FTC will hold companies to their word.
Petco has sold pet food and supplies to consumers through its online store at www.PETCO.com since February 2001. According to the FTC, Petco made security claims on the Web site, such as:
At PETCO.com, protecting your information is our number one priority, and your personal information is strictly shielded from unauthorized access.
Entering your credit card number via our secure server is completely safe. The server encrypts all of your information; no one except you can access it.
But according to the complaint, the Web site was vulnerable to commonly known Web-based application attacks, such as Structured Query Language (SQL) injection attacks. The FTC alleges that Petco created these vulnerabilities in its Web site by failing to implement reasonable and appropriate security measures to secure and protect sensitive consumer information, including simple, readily available defenses that would have blocked such attacks.
The agency also charged that the sensitive information Petco obtained through its Web site was not maintained in an encrypted format, as it claimed. As a result, a hacker was able to penetrate the Petco Web site and access credit card numbers stored in unencrypted clear text. The FTC charged that Petcos claims were deceptive and violated the FTC Act.
The settlement prohibits Petco from misrepresenting the extent to which it maintains and protects sensitive consumer information. It also requires Petco to establish and maintain a comprehensive information security program designed to protect the security, confidentiality, and integrity of personal information collected from or about consumers.
It also requires that Petco arrange biennial audits of its security program by an independent third party certifying that Petcos security program is sufficiently effective to provide reasonable assurance that the security, confidentiality, and integrity of consumers personal information has been protected. The settlement also contains record keeping provisions to allow the FTC to monitor compliance.
California Settles with Franklin Templeton
Investors weren't told about payments to broker-dealers to recommend the company's funds11/17/2004ConsumerAffairs
California Settles with Franklin Templeton...
California Attorney General Bill Lockyer has reached an $18 million settlement with the distributor of Franklin Templeton Investments (FTI), resolving allegations that the distributor violated state securities laws by not adequately informing investors about agreements to pay broker-dealers to recommend and sell FTI mutual funds.
"Most mutual fund investors are families with modest incomes," said Lockyer. "They work hard for their money, and when they invest it they deserve to be told the whole truth so they can make informed decisions. That is what our laws against securities fraud require. Franklin Templeton violated those laws and the trust of small investors."
Along with the complaint itself, Lockyer today filed the settlement with Franklin/Templeton Distributors, Inc. (FTDI) in Sacramento County Superior Court. The court approved the settlement, which takes effect immediately. FTDI is the front-line distributor of FTI Funds, which include the Franklin, Templeton and Mutual Series mutual funds. FTDI is a wholly-owned subsidiary of Franklin Resources, Inc. (FRI), the parent company of San Mateo-based FTI. In 2003, FTI managed more than $300 billion in assets worldwide.
The settlement requires FTDI to pay $18 million. Of that total, $14 million will be disgorged back to the FTI Funds. An independent consultant, agreed to by Lockyer, will develop and implement a plan to allocate the $14 million to the various FTI funds. FTDI also will pay the state $2 million in civil penalties for violating the state Corporate Securities Law (CSL), and another $2 million to cover costs.
Aside from monetary terms, the state's settlement memorializes FTDI's agreement to implement voluntary reforms in response to Lockyer's investigation. FTDI will more fully inform investors about the "shelf space" arrangements it enters with broker-dealers to secure either sales of FTI funds or spots on lists of recommended buys.
These procedures will require FTDI to disclose both shelf space payments and the services those payments buy from broker-dealers. Additionally, FTDI will take steps to enter written shelf space agreements that detail the terms. Pursuant to a ban approved in August 2004 by the U.S. Securities and Exchange Commission, FTDI has ended its practice of directing commission payments for its portfolio transactions to broker-dealers in return for sales of FTI funds. Employees of mutual funds or broker-dealers who have knowledge of securities law violations by their companies should contact the Attorney General's Whistleblower Hotline at 800-952-5225 (for California residents) or 916-322-3360 (for out-of-state residents). -30-
Kmart Buys Sears
The $11 billion deal will create the third-largest retailer in the U.S.11/17/2004ConsumerAffairs
Kmart Buys Sears...
Kmart emerged from bankruptcy just 18 months ago and not long ago looked like a candidate for the dust bin, but Kmart has been generating strong profits in recent months while Sears continues to languish.
The startling acquisition was engineered by Kmart Chairman Edward Lampert, the largest single shareholder in Sears. He holds about 15% of Sears stock through his ESL Investments Inc.
The merger isn't the end of problems for Kmart and Sears, both struggling to combat Wal-Mart, Home Depot and other powerhouse retailers. But the combined company will have greater buying power and more outlets -- 2,350 Sears and Kmart locations and another 1,100 specialty stores.
"The merger will enable us to manage the businesses of Sears and Kmart to produce a higher return than either company could achieve on its own," Lampert said in a statement.
The combined company will be called Sears Holdings Corp. and will be based in Hoffman Estates, Ill., where Searnow s has its headquarters.
It's expected that several hundred Kmart stores will be converted to Sears stores and Kmart stores will begin carrying private-label Sears products like Kenmore appliances and Craftsman tools.
Lampert will be the chairman of Sears Holdings, while Sears CEO Alan Lacy will be vice chairman and CEO.
PBHG Agrees to Refund $120 Million to Investors
Firm's founders accused of market timing11/17/2004ConsumerAffairs
The founders of PBHG have agreed to personally pay more than $120 million in restitution to investors and accept a lifetime ban from the securities industr...
The founders of PBHG, a leading mutual fund family, have agreed to personally pay more than $120 million in restitution to investors and accept a lifetime ban from the securities industry, New York Attorney General Eliot Spitzer announced. The individuals will also pay a total of $40 million in civil penalties.
The agreement with PBHG founders Gary L. Pilgrim and Harold J. Baxter resolves allegations that the two men secretly facilitated market timing arrangements with favored clients while PBHG prospectuses sharply limited shareholders' abilities to trade in and out of the funds.
"As founders of a company that bore their names, Mr. Pilgrim and Mr. Baxter should have set an example of integrity and fair play," Spitzer said. "Instead, they were at the center of improper conduct that deceived and harmed their clients."
Coordinated investigations by state and federal regulators revealed that the defendants permitted certain hedge funds and others to market time in the PBHG family of mutual funds, in contravention of the express restrictions of the applicable prospectuses.
Entities permitted to "time" the PBHG funds included a hedge fund in which Pilgrim had a substantial interest and clients of a New York-based brokerage firm owned by a close friend of Baxter. The investigation also revealed that Pilgrim Baxter & Associates (PBA) -- the investment adviser for PBHG funds, now known as Liberty Ridge Capital - - selectively disclosed the portfolio holdings of certain PBHG funds to facilitate hedge fund market timing strategies in PBHG funds.
In June 2004, Spitzer announced a settlement with PBA under which PBA paid $40 million in disgorgement and restitution and a $50 million civil penalty. PBA further agreed to a 5-year reduction of management fees valued at $10 million and significant corrective measures including new requirements for disclosure to investors of expenses and fees, new standards for board independence, greater board and adviser accountability and a commitment to hire a senior officer to ensure that fees charged by the funds are reasonable and are negotiated at arm's length.
Under the terms of this settlement, Pilgrim and Baxter will each pay $60 million in disgorgement and restitution to investors and $20 million each in civil penalties. The total value of the settlement is $160 million. In addition, pursuant to the settlement, both Pilgrim and Baxter are barred from the securities industry for life.
To date, the investigation into the mutual funds industry has resulted in $1.17 billion in restitution to investors, $821 million in civil penalties, and $925 million in anticipated reductions in mutual fund fees over five years. To date the settlements have generated over $2.9 billion in total value.
Feds Allege Debt Negotiation Service Is a Scam
Clients paid but didn't get relief11/17/2004ConsumerAffairs
Feds Allege Debt Negotiation Service Is a Scam...
An operation billing itself as a debt negotiation company that promised to reduce consumers debt, negotiate with creditors, and stop harassment from debt collectors in exchange for various fees instead pocketed the fees and plunged consumers deeper into debt, according to the Federal Trade Commission.
The FTC charges that Better Budget Financial Services (BBFS) and its principals, John Colon, Jr. and Julie Fabrizio-Colon, have defrauded consumers out of hundreds or thousands of dollars each, causing many to be sued by their creditors and forcing others into bankruptcy.
The FTC has asked the court to award consumer redress to the victims. On November 3, 2004, the court entered a temporary restraining order halting the defendants allegedly illegal business practices, freezing their assets, and appointing a temporary receiver pending a preliminary injunction hearing.
This scam has had devastating consequences for consumers who thought they were taking the right steps to get out of debt, said Lydia Parnes, Acting Director of the FTCs Bureau of Consumer Protection.
They signed up for the defendants services in good faith and expected the company to act accordingly. Now the defendants have learned that reneging on a promise to help people settle their debt has serious consequences, too.
The FTC received substantial assistance in bringing this case from Massachusetts Attorney General Tom Reillys Consumer Protection and Antitrust Division.
According to the FTC, Massachusetts-based BBFS has advertised its services through Internet advertising and on its Web sites since at least August 2000. The defendants Web sites, www.betterbudget.net and www.termidebt.net, claim that BBFS can negotiate with consumers creditors to reduce their debt by 50 percent.
Consumers who contact the defendants are promised that the defendants will negotiate with consumers creditors for a non-refundable retainer fee, monthly administrative fees of $29.95 to $39.95, and 25 percent of any savings realized by a debt settlement. According to the FTC, consumers typically paid the defendants hundreds or even thousands of dollars in fees.
The FTCs complaint states that consumers who sign up with BBFS provide the defendants with a list of all their creditors and the total amount of their debt. The defendants then tell consumers to set up a special bank account and deposit a calculated sum into the account, which will be used to pay creditors and pay BBFS its monthly fee.
The defendants allegedly tell consumers to stop paying their creditors directly, claiming that consumers failure to pay their creditors will demonstrate a hardship condition that will enable BBFS to negotiate on their behalf. The defendants claim they will settle each creditors account once the consumer saves half the amount they owe on each debt.
According to the FTC, BBFS also tells consumers to sign power of attorney forms, claiming that the forms will enable BBFS to contact creditors on the consumers behalf and instruct debt collectors to stop calling consumers directly. The consumers are instructed not to talk to any creditors who contact them directly. Further, the defendants allegedly tell consumers that negative information may appear on their credit reports while they are working with BBFS, but that the information is temporary and that BBFS will direct consumers to a company to get assistance repairing their credit.
The FTC charges that, rather than negotiating with consumers creditors as promised, the defendants in numerous instances fail to contact creditors and debt collectors. Instead, consumers continue to be contacted by their creditors, receive repeated phone calls from debt collection agencies, and incur late fees and penalties on their credit accounts, increasing their debt and worsening their financial situation.
The FTCs complaint states that the defendants in numerous instances fail to negotiate with creditors even after consumers call to let them know they have sufficient funds set aside to pay a settlement. In many cases, consumers have been sued by their creditors, resulting in them paying substantial legal fees. According to the FTC, as a result of the defendants scam, many consumers have been forced to file for bankruptcy.
Illinois is imposing a statewide embargo on four flavors of imported Mexican candy found to contain dangerous levels of lead. Testing has shown candies to ...
Devilish Viagra Ads Pulled
FDA sharply criticized the ads11/16/2004ConsumerAffairs
"The TV ads claim that Viagra will provide a return to a previous level of sexual desire and activity," Smith wrote, adding that claim has not been proved....
Pfizer's latest TV ad campaign for Viagra is coming to an abrupt halt after sharp criticism from the Food and Drug Administration. In a letter to the drug company, FDA Regulatory Review Officer Christine Hemler Smith said the ads are misleading.
The advertisement features a man and woman on a shopping trip. As they pass a sexy lingerie shop, the man grows horns as the voice over asks "Remember when you used to be called Wild Thing?"
"The TV ads claim that Viagra will provide a return to a previous level of sexual desire and activity," Smith wrote, adding that claim has not been proved.
"The TV ads make clear that Viagra is intended for sex. The TV ads omit the indication for the drug, (namely erectile dysfunction) and fail to provide information about major side effects."
Those side effects include headache, flushing and abnormal vision, according to the FDA.
A Pfizer spokesman said the ads are being pulled immediately, but didn't say how much it had spent on the ad campaign, which has saturated the airwaves over the past few weeks. The company said it would formally respond to the FDA next week.
Meanwhile, acting FDA Commissioner Lester Crawford said the agency is taking a closer look at all drug advertisements aimed at consumers.
Florida Sues Consumer Grants USA
Enticed consumers to pay for information that is available free11/12/2004ConsumerAffairs
Florida Attorney General Charlie Crist has filed a civil complaint against Consumer Grants USA, Inc. for violations of Florida's Unfair and Deceptive Trade...
Florida Attorney General Charlie Crist has filed a civil complaint against Consumer Grants USA, Inc., and two of its corporate directors for violations of Florida's Unfair and Deceptive Trade Practices Act.
The lawsuit alleges that the company used misleading solicitations to entice consumers to pay hundreds of dollars for information that was actually available to the public for free.
Consumer Grants USA, a St. Petersburg company established less than one year ago, claims to conduct a legitimate telemarketing business designed to offer governmental grant guidebooks to consumers.
In June 2004, an investigation conducted by the Attorney General's Office and the Tampa Better Business Bureau showed that telephone solicitors for Consumer Grants USA allegedly informed consumers that they had been selected for, or "won," a guaranteed federal government grant worth between $5,000 and $25,000.
After paying a fee that ranges from $239 to $299, consumers actually received a guidebook listing government grants. Most of the information in the guidebook, available to consumers for free from public sources, listed grants that the consumers did not qualify to receive.
"Public information means that it is available to the public free of charge - not to be sold by unscrupulous telemarketers," said Crist. "These citizens were victimized and deserve to be reimbursed."
In one example, Consumer Grants USA informed consumers that they had won a grant from the Government Grant Information Guide because they had been prompt and reliable in paying their taxes to the IRS.
Consumer Grants USA allegedly instructed consumers to pay a "one-time processing fee" in order to receive a grant. Consumers were asked to give their personal banking account information so that Consumer Grants USA could withdraw the fee and then deposit the grant funds into the same bank account. After receiving the book that lists possible government grants, some of the consumers attempted to contact the company for refunds but were informed that they would have to receive three grant denials before any refunds.
This undisclosed refund policy is in violation of Florida telemarketing laws, including 501.615 and 501.059 that prohibit telemarketing companies from practicing business without a license obtained from the Department of Agriculture and Consumer Services, and that prohibit telemarketing companies from accepting funds from customers without a signed agreement. The Attorney General's complaint also alleges that the company violated the law by offering "free" gifts without disclosing financial requirements and by resisting consumer requests to cancel transactions or to obtain refunds.
The complaint was filed in Pinellas County Circuit Court and included charges against Consumer Grants USA and against James T. Lovern, President/Director, and Leo J. Corrigan, Vice President/Director. The Attorney General's complaint seeks civil penalties of $10,000 per transaction, or $15,000 per transaction involving elderly consumers, as well as injunctive relief under at least six different sections of Florida law.
AOL Abandons Broadband
Plans Launch of Best-Price Travel Service11/12/2004ConsumerAffairs
AOL Abandons Broadband...
November 12, 2004
America Online was slow to get into the arena of broadband services. It's getting out a lot faster. Meanwhile, AOL is planning a plunge into the crowded waters of online travel.
The once-dominant Internet Service Provider stopped marketing its high-speed service earlier this year. Now, it's telling its existing customers they have to find another service provider if they want to continue receiving high speed internet services.
The first AOL broadband customers to feel the impact are those in nine southern states, who will lose their service January 17, 2005. An AOL spokeswoman says affected customers who take no action will find their service has reverted to dial up speed on that date.
The affected states are Florida, Kentucky, Georgia, Louisiana, Alabama, Mississippi, Tennessee, North Carolina and South Carolina. The company has not disclosed how many broadband subscribers it still has in those states. Service to the rest of the country will be phased out, region by region, over the next year.
While abandoning broadband, AOL is planning a new travel search-engine that it says will search dozens of Web sites to find the best deals on travel.
This is hardly a new idea. Yahoo, SideStep and numerous other sites do essentially the same thing but AOL says its alliance with Kayak Software, a small Connecticut company, will give it the advantage.
Kayak, like many other best-price sites, doesn't sell tickets or make reservations -- it merely identifies what it thinks are the best deals and directs travelers to them. This could cause trouble for AOL's longtime partnership with Travelocity, which last month asked Kayak to stop listing its fares.
The established travel agencies are opposed to having their fares displayed by Kayak and similar companies. Expedia has also asked Kayak and similar sites to stop listings its offerings, calling the practice "almost parasitic."
Kayak is thought to be hoping to form direct relationships with airlines, hotels, car rental companies and other travel suppliers, which would generally prefer to deal directly with customers, rather than going through a travel agent.
Cross Country Bank Fined $450,000
Ordered to Make Restitution to Consumers11/12/2004ConsumerAffairs
Cross Country Bank and its Pennsylvania-based collection company will pay restitution to consumers with impaired credit who complained of illegal sales tac...
Cross Country Bank and its Pennsylvania-based collection company will pay restitution to consumers with impaired credit who complained of illegal sales tactics related to the marketing of the bank's pre-approved credit cards.
Pennsylvania Attorney General Jerry Pappert said the defendants must also issue refunds or credits to other qualified consumers who come forward before January 7, 2005. Along with restitution, the defendants are also required to pay a total of $450,000 in fines and costs.
Pappert encouraged consumers who suspect they are entitled to restitution to contact his Bureau of Consumer Protection at 1-800-441-2555 to obtain a complaint form. Complaint forms can also be filed electronically by visiting the Attorney General's website at http://www.attorneygeneral.gov.
Pappert said a consent petition was filed in Commonwealth Court, resolving a June 2004 lawsuit that was brought by his Bureau of Consumer Protection against Cross Country Bank Inc. of Wilmington, Delaware, and Applied Card Systems Inc. of Glen Mills, Pennsylvania.
The lawsuit accused the defendants of violating Pennsylvania's Consumer Protection Law and Fair Credit Extension Uniformity Act.
According to the lawsuit, the defendants promoted and marketed pre-approved credit cards and services to consumers with impaired credit or no credit history. The ads claimed that the credit cards carried thousands of dollars in credit.
In reality, the credit limit was much lower than promised and the credit cards were issued with application, maintenance, membership, overdue, over-the-limit, customer assistance and other fees that were inadequately explained and often times automatically deducted from the starting credit card balance.
For many, once the fees were taken out, the cards had less than $400 in available credit. Some said the extra expenses actually pushed them further into debt instead of improving their credit standing.
Pappert said those who defaulted on their accounts complained that they were subjected to abusive and illegal debt collection practices including improper legal and physical threats to coerce payments.
Others said they were exposed to multiple harassing calls to their home or workplace that included obscene, derogatory, rude and hostile language directed toward them or family members, including children.
Under the terms of the consent decree, the defendants are required to:
• Pay restitution to consumers who filed complaints about inadequately disclosed fees and charges that were deducted from their accounts after December 31, 2001. Pay restitution to those who file complaints by January 7, 2005 with proof of similar harm.
• Take steps to remove any negative entries on consumers' credit reports.
• Pay $250,000 in civil penalties.
• Cease making false, deceptive or misleading representations regarding the identity of collection employees.
• Cease making false, deceptive or misleading representations regarding its legal authority to collect on consumers' accounts.
• Cease making false, deceptive or misleading representations that consumers have consented to withdrawing funds from their bank accounts to make payments on credit cards.
• Cease providing false or deceptive quotes to consumers requesting the amount payable to bring an account current and avoid late fees.
• Cease making numerous calls on a single day to consumers in an attempt to collect on accounts.
• Cease using tactics or language considered harassing, abusive, profane and annoying.
• Cease the use of false, deceptive or misleading language in written advertisements, promotions or communications with consumers.
• Clearly and conspicuously disclose any fees, terms and conditions associated with the credit cards or services.
• Fully comply with applicable state and federal laws.
• Provide the Commonwealth with records of complaints made by consumers.
• Pay $50,000 for the Commonwealth's investigation costs and $150,000 for future public protection purposes.
Bextra Doubles Risk of Heart Attack and Stroke, Study Finds11/11/2004ConsumerAffairs
Bextra Doubles Risk of Heart Attack and Stroke, Study Finds...
November 11, 2004
A University of Pennsylvania researcher says patients taking Pfizer's Bextra may double their risk of suffering a heart attack or stroke. The company called the claim "unsubstantiated" and said a recent analysis found no cardiovascular problems among arthritis patients taking Bextra.
Bextra is one of the few alternative COX-2 pain killers for patients who had been using Merck's Vioxx, withdrawn from the market in September following studies which found the drug increased the risk of heart attack and stroke in patients who took it for more than 18 months.
Last month, Pfizer conceded that Bextra was linked to increased risk of heart attack and stroke in a study of coronary bypass patients but said the risk did not extend to other users.
The latest finding comes from Garret A. FitzGerald, of the Center for Experimental Therapeutics at the University of Pennsylvania, a prominent COX-2 researcher. He presented his findings at a meeting of the American Heart Association.
FitzGerald, who has not yet published his findings in a peer-reviewed journal, says the patients in his analysis are "the canary in the coal mine" -- an early-warning sign for the millions of patients who have not yet been harmed.
FitzGerald said his findings strongly suggest that patients at risk of heart attack and strokes should avoid COX-2 medications while lower-risk patients should take them only with great caution.
FitzGerald acknowledges limitations in his study but says the Vioxx withdrawal has put the burden of proof on the drug companies to show conclusively that the COX-2 drugs are safe.
FitzGerald's study did not include Pfizer's other COX-2 drug, Celebrex, a much bigger seller than Bextra.
FitzGerald's analysis was based on 7,771 patients; 5,930 took Bextra while 1,841 took a placebo. There were 45 heart attacks and strokes among patients taking Bextra, seven in the placebo group. That translates into an approximately 2.2 times higher risk of a heart attack or stroke for those taking Bextra.
With an estimated seven million patients having taken Bextra since its introduction in 2001, more than 150,000 patients could have experienced ill effects if FitzGerald's analysis is accurate.
Iowa Sues American Deputy Sheriffs Association
Consumers often get telephone solicitations from groups representing themselves as law enforcement charities11/11/2004ConsumerAffairs
Miller filed a lawsuit against, the American Deputy Sheriffs' Association, charging the not-for-profit corporation headquartered in LA with using deceptive...
Consumers often get telephone solicitations from groups representing themselves as law enforcement charities. Some even offer to send contributors a decal for their car, with the not-too-subtle implication that a contribution might help avoid a ticket in the future.
Iowa Attorney General Tom Miller has filed a lawsuit against one of these groups, the American Deputy Sheriffs' Association, charging the a not-for-profit corporation headquartered in Louisiana with using deceptive fund-raising practices.
"We allege they use deceptive phone solicitations to make Iowans believe that the caller actually is a local law enforcement person, and that donations are put to good use in the community of the Iowan being called," Miller said.
Nationwide, the suit says, filings with the IRS show ADSA raised $5,104,326 in 2003. Of that amount, ADSA paid $4,754,610 to its professional fund-raisers - 88% of the donations raised - and spent only $108,377, or two percent of total donations, on "program services" to support law enforcement.
Nationwide, for the period from 1998 through 2003, reports showed ADSA collected $28,023,607 in donations, and paid $25,052,918 to its professional fund-raisers - 89%. ADSA spent $1,144,181 on the worthy-cause "program services," or about four percent of total donations.
"The truth, we allege, is that the callers are paid professional fund-raisers, most likely in Wisconsin, making thousands of calls to Iowans who contribute hundreds of thousands of dollars believing their gifts will support law enforcement. And the truth is, less than one-half of one percent of Iowa donations have been used to support Iowa law enforcement," Miller said.
"Our suit says essentially that the American Deputy Sheriffs' Association and its professional fund-raisers mislead Iowa donors, exploit the public's desire to assist local law enforcement, and then divert almost all of the charitable donations to the defendants' own benefit," he added.
The consumer fraud lawsuit was filed in Polk County District Court in Des Moines. District Court Judge D.F. Staskal issued an immediate temporary injunction prohibiting the defendants from violating the Iowa Consumer Fraud Act - including making any misrepresentations in phone solicitations about the location of the caller, whether the caller is in law enforcement, whether donations will be used by local law enforcement, and so on.
Defendants named in the suit are ADSA, Inc., doing business as the American Deputy Sheriffs' Association, headquartered in Monroe, Louisiana; Michael Croft, past president of ADSA; Ashley Isaac, president of ADSA; Thomas Buchman, internal auditor of ADSA; EulaLee Warner, secretary-treasurer of ADSA; Public Awareness, Inc., a professional fund-raiser business that contracts with ADSA and is based in Eau Claire, Wisconsin; and Duane Kolve, president of Public Awareness, Inc.
The suit asked the Court to issue the immediate temporary injunction ordered by Judge Staskal, to issue a permanent injunction, and to order the defendants to pay up to $40,000 for each violation of the Consumer Fraud Act and $5,000 for each violation against older Iowans.
Miller said: "This suit ultimately alleges that the American Deputy Sheriffs' Association exists primarily to rent its worthy-sounding name to telemarketing operations such as Public Awareness, Inc., which use carefully-crafted deceptions to exploit the public's desire to assist local law enforcement. We are asking the court to prohibit the violations we allege."
When Miller announced the lawsuit in Des Moines, he was joined by several Iowa county sheriff officers and leaders of the Iowa State Sheriffs' & Deputies' Association. The suit notes that numerous Iowa sheriff departments have disassociated themselves from ADSA appeals and warned the public that donations to ADSA do not benefit their counties.
The suit alleges that the American Deputy Sheriffs' Association is known to have collected at least $987,586 from Iowans from 2001 through Sept. 2004 - but it alleges that only about $3,900 has been committed to assist local law enforcement in Iowa, or under four-tenths of one percent.
"Telemarketers calling for ADSA stress several worthy purposes, but the money isn't delivered for them in Iowa," Miller said. "Contrary to the representations made to potential donors, we allege that no Iowa family has received a death benefit for an officer killed on duty, no Iowa students have received an ADSA scholarship, and no training events have been held in Iowa."
Miller said phone solicitations stress that ADSA distributes bullet-proof vests and other equipment to officers who need it. "We allege ADSA in reality has committed only $3,900 to provide 15 bullet-proof vests in Iowa."
The Attorney General's Office has filed charitable-solicitation lawsuits previously, including against Xentel, Inc., alleging the company deceived Iowans into believing that the callers are fire fighters and that donations will support local fire fighters.
Illinois Sues Diet Patch Promoters11/11/2004ConsumerAffairs
The lawsuit charges Diet Patch, Inc., and Guadalupe Bejar, its president, with multiple violations of the Illinois Consumer Fraud and Deceptive Business Pr...
Illinois Attorney General Lisa Madigan has filed a lawsuit alleging that a Nevada corporation, operating out of Cook County, lured consumers from across the country with "magic" weight loss claims and "free trial" offers advertised on its Web site then fraudulently billed the consumers for hundreds of dollars of unwanted and ineffective weight loss products.
The lawsuit charges Diet Patch, Inc., and Guadalupe Bejar, its president, with multiple violations of the Illinois Consumer Fraud and Deceptive Business Practices Act.
Madigan alleges Bejar conducted business out of her suburban Chicago home, using a Tinley Park post office box address and the Web site www.mydietpatches.com,/to run her business.
According to the lawsuit, the company used false advertising to promote and sell its products. The complaint charges that the Diet Patch Web site made numerous unsubstantiated weight loss claims including, "An easy to use product that magically melts off ugly fat, gets rid of flab and cellulite without 'dieting,' calorie counting, or strenuous exercise" and "With The Amazing Diet Patch you don't even have to think about losing weight, the patch does all the work for you!"
"The Diet Patch advertisements, such as those posted on the Diet Patch Web site, are riddled with deceptive claims," Madigan said. "These defendants are clearly trying to take advantage of their clients' eagerness to lose weight. However, the only losses these consumers saw were to their wallets, not their waistlines."
Bejar's pop-up ads that lured consumers to her Web site found their way across the country. Consumers who complained to Madigan's office were from Illinois as well as California, Texas, Pennsylvania and other states.
Madigan's Consumer Fraud and Healthcare Bureaus have received 19 consumer complaints against Diet Patch, Inc., alleging that when consumers respond to the company's free trial offer, they unexpectedly receive and are billed for shipments of the costly weight loss product.
Specifically, the Web site offered a free seven-day supply of the Amazing Diet Patch and required consumers to pay a shipping and handling fee of $2.95. Consumers were required to provide a credit or debit card number for shipping and handling charges.
However, consumers allegedly received not only the free patches, but also an additional supply of the patches without their authorization and were charged approximately $165 to $170 for the extra shipment. According to the lawsuit, even after the unwanted supplies of patches were returned, the majority of the consumers did not receive their money back.
The lawsuit asks the court to stop the defendants from running an internet site that sells diet products in violation of Illinois' consumer protection laws by making unsubstantiated weight loss claims. In addition, it calls on the court to assess a civil penalty of $50,000 and additional penalties of $50,000 per violation found to be committed with the intent to defraud, and to order the defendants to pay restitution to the consumers.
Vermont Castings Five-Burner Barbeque Grills11/10/2004ConsumerAffairs
Vermont Castings Five-Burner Barbeque Grills...
November 10, 2004
CFM Corporation is rcalling about 12,500 five-burner Vermont Castings barbeque grills because of a gas leak and fire hazard.
The burner tubes may not fit fully into the gas valves. If a consumer pulls on the console, the metal may flex and the gas valves may disconnect from the burners, releasing gas and creating a fire risk that could cause injury and property damage.
CFM Corporation has received 38 reports involving gas leaks. No injuries or property damage have been reported.
The recalled grills have five burners and a label on the back of the cabinet with the model number on the left side. Models CF9086 and VCS5000 are equipped with a side burner. Model CF9085 is not equipped with a side burner. Grills that do not have five burners and grills sold before 2004 are not affected by this recall. All of the affected grills were listed by Canadian Standards Association.
Model VCS5000 barbeque grills were sold at Vermont Castings dealers and distributors in Canada and the U.S. from January 2004 through September 2004 for between $899 and $1249. Models CF9085 and CF9086 were sold at The Home Depot in Canada and the U.S. from January 2004 through September 2004 for between $899 and $1249.
Remedy: Home repair. Stop using the grill and immediately contact CFM Corporation toll-free at (866) 333-4833 Monday through Friday between 9 a.m. and 5 p.m. ET or visit the firms Web site at www.cfmcorp.com to schedule a free, in-home repair or to make arrangements to receive a consumer-installed safety retrofit kit. CFM Corporation has already notified known purchasers about this recall.
The recall is being conducted in cooperation with the U.S. Consumer Product Safety Commission (CPSC).
Feds Target Bogus Weight Loss Claims11/10/2004ConsumerAffairs
Feds Target Bogus Weight Loss Claims...
The Federal Trade Commission has launched a major crackdown on weight loss products heavily advertised on radio and television. Calling its effort "Operation Big Fat Lie," the agency initially targeted six companies it said were making false weight-loss claims in national advertisements.
The FTC said it intends to stop deceptive advertising and provide refunds to consumers harmed by unscrupulous weight-loss advertisers. At the same time it warned media outlets not to carry advertisements containing bogus weight-loss claims and to educate consumers to be on their guard against companies promising miraculous weight loss without diet or exercise.
Complaints in each of the six cases allege that defendants used at least one of the seven bogus weight-loss claims that are part of the FTC's "Red Flag" education campaign announced in December 2003. That ongoing Red Flag campaign provides guidance to assist media outlets in voluntarily screening out weight-loss ads that contain claims that are too good to be true.
"False and misleading advertisements are about as credible as a note from the Tooth Fairy," said Federal Trade Commission Chairman Deborah Platt Majoras. "As part of our 'no tolerance' policy, we are announcing six new cases against advertisers using bogus weight loss claims. By also working with media outlets to reject false ads and educating consumers to make informed choices, the FTC hopes to keep this national obesity epidemic from getting worse."
The cases challenge ads containing false Red Flag claims for a variety of products, including pills, powders, green tea, topical gels, and diet patches. The FTC alleges in each case that the weight-loss claims are false and that the defendants did not have adequate substantiation for the claims they made.
The challenged ads ran in nationally-known publications such as: Cosmopolitan; Woman's Own; Complete Woman; USA Weekend; Dallas Morning News; San Francisco Chronicle; Cleveland Plain Dealer; Albuquerque Journal; and in Spanish-language publications, such as TeleRevista Magazine. In each of these cases, the Commission is seeking to stop the bogus ads and to secure redress for consumers.
In addition to the cases announced today, the Commission has filed lawsuits against seven other companies since April 2004 for making similarly false Red Flag weight-loss claims.
On November 4, 2004, the Commission filed a complaint in the U.S. District Court, District of Maine, against Selfworx.com LLC, Iworx LLC, and Jeffrey V. Kral. The Scarborough, Maine-based defendants advertised two weight-loss products: geloothin - a topical gel, and Ultra LipoLean - a dietary supplement tablet described as a "fat blocker."
The complaint alleges that the defendants make false and unsubstantiated claims that geloothin, when rubbed into the skin: (1) causes substantial weight loss, including as much as 21 pounds in six weeks; (2) dissolves fat deposits in days; and (3) dissolves and removes cellulite from the body. The complaint further alleges that defendants falsely claim that clinical studies demonstrate that geloothin will reduce fat and cellulite deposits on contact.
On November 8, 2004, the FTC filed a complaint in the U.S. District Court, Southern District of Florida, against Femina, Inc., based in Pembroke Pines, Florida, and its owner, Husnain Mirza, challenging ads for three products - "1-2-3 Reduce Fat" (a three-part kit), "Siluette Patch" (a transdermal patch made from pure seaweed), and "Fat Seltzer Reduce" (a dietary supplement). The 1-2-3 Reduce Fat kit includes Xena RX, a diet pill; Reduce Gel Magic, a gel to put on the body; and a plaster corset to wrap around the body. The Xena RX pill purportedly contains green tea extract, and the Magic gel purportedly contains aloe vera and sea algae. The defendants primarily use Spanish-language ads.
The complaint alleges that the defendants make false and unsubstantiated claims: (1) that 1-2-3 Reduce Fat causes weight loss by blocking and eliminating fat; (2) that the green tea extract blocks up to 40 percent of the absorption of fat; and (3) that the aloe vera and seaweed gel eliminates inches of fat.
On November 4, 2004, the FTC filed a complaint in the U.S. District Court, Southern District of New York, against two companies - CHK Trading Co., Inc., based in New Jersey, and CHK Trading Corp., based in New York City. The Commission alleged that the corporate defendants and their principal, Chong Kim, market and sell "Hanmeilin Cellulite Cream," a topical cream which contains Chinese herbs and other all-natural ingredients. Users are told to apply the cream on the buttocks, stomach, and thighs and massage until the cream is completely absorbed. The defendants advertise their product to Spanish-speaking consumers via national advertisements in TeleRevista magazine, as well as to English-speaking and Korean-speaking consumers via their Web sites.
The complaint alleges that the defendants make false and unsubstantiated claims that rubbing Hanmeilin Cellulite Cream into the body: (1) causes permanent weight loss; (2) causes substantial weight loss, including as much as 10 to 95 pounds; and (3) eliminates fat and cellulite.
On November 3, 2004, the FTC filed a complaint in the U.S. District Court, Central District of California, against Natural Products, LLC; All Natural 4 U, LLC; and Ana M. Solkamans. The Tustin, California-based defendants sell a dietary supplement called "Bio Trim," "Body-Trim/Bio-Trim" or "Body-Trim" in capsule and powder form. Users are told to take two capsules with eight ounces of water one half-hour before their two biggest meals, or, if using the powder, users are told to take one half-teaspoon of the powder mix in eight ounces of cold juice 15 minutes before two meals.
The complaint alleges that the defendants make false and unsubstantiated claims that Bio Trim: (1) causes users to lose substantial weight, while eating unlimited amounts of food; (2) causes substantial weight loss by blocking the absorption of fat or calories; (3) works for all overweight users; and (4) is clinically proven to cause rapid and substantial weight loss without reducing calories.
On November 4, 2004, the Commission filed a complaint in the U.S. District Court, District of Connecticut, against Bronson Partners, LLC, (doing business as New England Diet Center and Bronson Day Spa), and Martin Howard. The defendants, based in Westport, Connecticut, sold Chinese Diet Tea and the Bio-Slim Patch - purported weight loss products. Users of the Chinese Diet Tea are told to drink one cup of tea after each meal to neutralize the absorption of fattening foods.
The complaint alleges that the defendants make false and unsubstantiated claims that Chinese Diet Tea: (1) causes rapid and substantial weight loss without the need to diet or exercise; (2) enables users to lose as much as six pounds per week over multiple weeks and months without the need to diet or exercise; (3) enables users to lose substantial weight while enjoying their favorite foods; (4) blocks the absorption of fat and calories; and (5) causes substantial weight loss for all users. The complaint further alleges that defendants falsely claim that Chinese Diet Tea is clinically proven to cause rapid and substantial weight loss without exercising or dieting.
On October 27, 2004, the FTC filed a complaint in U.S. District Court for the Northern District of Illinois, Eastern Division, against AVS Marketing, Inc., and William R. Heid. The defendants, based in Thomson, Illinois, sell "Himalayan Diet Breakthrough," a dietary supplement containing Nepalese Mineral Pitch - "a paste-like material" that "oozes out of the cliff face cracks in the summer season" in the Himalayas. Users are directed to take one tablet with water before lunch, dinner and bedtime.
The complaint alleges that the defendants make false and unsubstantiated claims that Himalayan Diet Breakthrough: (1) causes rapid and substantial weight loss, including as much as 37 pounds in 8 weeks, without the need to reduce caloric intake or increase exercise; (2) causes users to lose substantial weight, including as much as 37 pounds in 8 weeks, while still consuming unlimited amounts of food; (3) causes substantial weight loss, including as much as 37 pounds in 8 weeks, by preventing the formation of body fat; (4) causes substantial weight loss for all users; and (5) enables users to lose safely as much as 37 pounds in 8 weeks.
Staples Offers Electronic Rebate Redemption11/09/2004ConsumerAffairs
Staples Offers Electronic Rebate Redemption...
Staples is the latest retailer to offer electronic rebate redemption, enabling customers to file their rebates without filling out long forms, locating receipts and making a trip to the post office.
While several chains offer electronic filing and tracking of rebates, Staples says its system is simpler and more complete and will get checks to customers faster and more reliably.
Staples says that about 90 percent of its vendors have agreed to participate in the new system, which may cost them money by increasing the number of rebates they actually pay out.
It's an open secret in business circles that companies count on a relatively low rate of rebate redemption. Most manufacturers farm the processing out to companies that some consumers have complained are less than eager to pay up. (See Special Report: Rebate Madness)
To keep customers on the straight and narrow, the system will be tied into Staples' returns database.
Staples says the new program is part of its overall strategy to set itself apart with the promise of being an easier place to shop, summarized in its new slogan: "Staples, that was easy."
Costco, BJ's Wholesale Club, MicroCenter and Rite Aid are among other major retailers offering some form of electronic rebate processing.
Law Firm Fined for Debt Collection Practices
A Massachusetts law firm will pay $100,000 and revamp its business practices11/09/2004ConsumerAffairs
Law Firm Fined for Debt Collection Practices...
A Massachusetts law firm will pay $100,000 and revamp its business practices to resolve allegations that it violated state and federal debt collection laws.
The settlement, filed in Suffolk Superior Court, stems from allegations that Schreiber & Associates of Danvers, Massachusetts used a variety of unfair and deceptive practices - including harassing and embarrassing consumers, exceeding the number of permissible calls, and making unsubstantiated threats - to collect debts.
"Consumer debt is a growing problem in today's difficult economy," said Attorney General Tom Reilly. "Debt collectors too often ignore a consumer's rights. It's not okay to harass, threaten or mislead someone because they owe a debt."
Reilly said he pursued Schreiber & Associates after an investigation revealed that the company's collection practices violated state and federal debt collection laws, including the Massachusetts Consumer Protection Act, the Massachusetts Debt Collection Regulations, and the Federal Debt Collection Practices Act.
In the filing, Reilly alleges that debt collectors for the law firm used obscene language, harassed and embarrassed consumers, exceeded the number of permissible calls, disclosed debts to persons other than the debtor, made unsubstantiated threats against consumers, provided false or misleading information to consumers and failed to provide proof of the validity of debts.
Reilly said his office has received close to 250 complaints against Schreiber & Associates since 1999.
Under the terms of the settlement, Schreiber will implement new policies and procedures that go beyond the requirements of state and federal law. Among other things, Schreiber must: • designate a debt collection supervisor to ensure compliance with state and federal law;
• maintain records of all debt collection activities;
• record all telephone conversations with consumers;
• designate a mediation supervisor and implement procedures to mediate disputes with consumers with the assistance of AG Reilly's Consumer Complaint and Information Section;
• provide enhanced training to its debt collectors;
• record and confirm in writing oral payment authorizations from consumers; and
• immediately notify consumers if Schreiber learns that a debt has been paid, is not the consumer's obligation, or is otherwise illegitimate.
"This agreement raises the bar for the entire debt collection industry in Massachusetts," Reilly said. "I am pleased that Schreiber is adopting these best practices and urge other debt collection companies to follow suit."
The settlement requires Schreiber to pay $20,000 in restitution to consumers, $70,000 in penalties, and $10,000 in attorney's fees and costs for the Commonwealth's investigation. Reilly's Office will determine and distribute restitution to injured consumers and contribute any remaining funds to the Local Consumer Aid Fund.
The president and owner of Schreiber & Associates, P.C., Attorney Jeffrey A. Schreiber, is also bound individually by the provisions of the Assurance.
This investigation is part of a larger initiative aimed at protecting consumers from unfair debt collecting practices. Debt collection consistently makes Reilly's annual top-ten list for consumer complaints. It ranked seventh on last year's list.
Merck Faces Criminal Probe in Vioxx Case
Pfizer Considers Black Box Warning for Bextra11/09/2004ConsumerAffairs
Merck Faces Criminal Probe in Vioxx Case...
Merck says the U.S. Justice Department has opened a criminal investigation into the company's handling of Vioxx and the Securities and Exchange Commission has begun an informal inquiry. Pfizer, meanwhile, says it is likely to add a "black box" warning on its pain killer Bextra.
The company made the disclosure in a regulatory filing. It withdrew the popular pain killer from the market in September following studies which found the drug increased the risk of heart attack and stroke in patients who took it for more than 18 months.
Merck has been criticized for dragging its feet in withdrawing Vioxx, which brought in as much as $2.5 billion per year. Merck has insisted it acted promptly. In a statement yesterday, the company said it withdrew Vioxx just one week after learning the results of a company-sponsored clinical trial that demonstrated Vioxx's risks.
In its filing yesterday, Merck said that as of Oct. 31, it was a defendant in about 375 Vioxx personal-injury lawsuits, involving about 1,000 plaintiff groups. It said it expects more lawsuits to be filed.
The Food and Drug Administration (FDA) estimates that Vioxx may have contributed to 27,785 heart attacks and sudden cardiac deaths between 1999 and 2003. The estimate is based on the number of prescriptions issued for Vioxx between 1999 and 2003.
In its quarterly report yesterday, Pfizer said Bextra, which is similar to Vioxx, can sometimes lead to a serious skin reaction.
It a few cases, the reaction leads to Stevens Johnson syndrome, in which the immune system attacks itself to rid itself of a drug, in effect burning the patient from the inside out.
The syndrome leads to severe, painful blistering of the mucous membranes and skin. Patients often end up in the burn unit. the mortality rate is about 30 percent.
A "black box" warning is the most serious warning available for prescription drugs.
Shill Bidding Exposed in Online Auctions
Guilty pleas and civil settlements have concluded a New York investigation of phony bids in E-Bay auctions11/08/2004ConsumerAffairs
Guilty pleas and civil settlements have concluded a New York investigation of phony bids in E-Bay auctions, Attorney General Eliot Spitzer announced....
Guilty pleas and civil settlements have concluded a New York investigation of phony bids in E-Bay auctions, Attorney General Eliot Spitzer announced.
In the first case, three people pleaded guilty to criminal charges stemming from actions they took to inflate the prices of artwork and other merchandise that was sold in E-Bay auctions. In two other cases, defendants entered into civil settlements with the Attorney General's office for illegally bidding up sports memorabilia and automobiles sold in on-line auctions.
"The use of shill bids in on-line auctions illegally drives up prices and defrauds consumers," Spitzer said. "These cases and continuing efforts to monitor transactions should help maintain the integrity of on-line auctions."
In the criminal case, Jerrold Schuster, the former owner of the New Windsor Auction Gallery, pleaded guilty to Combination in Restraint of Trade, a violation of the New York antitrust law, a felony punishable by a maximum of four years in prison.
Schuster's former employees, Darek Szydlowski and Francis Komsisky, Jr., pleaded guilty to Attempted Combination in Restraint of Trade, a misdemeanor antitrust violation, which is punishable by up to one year in prison. As part of the disposition, Schuster is expected to pay $50,000 in restitution and fines.
According to the criminal charges, Schuster, Szydlowski and Komsisky cast bids in over 1,100 of each others' eBay auctions for the sole purpose of driving up the price of the merchandise that they offered for sale over a five-year period. The defendants were known by various e-Bay User IDs including "sambuca914," "gutek914," "zugnicht," and "fourlizards."
In a separate civil case, Robert Baranovich and his son, Steven Baranovich, of West Babylon, agreed to pay $10,000 in penalties and restitution to consumers harmed by their shill bidding. In a complaint filed with the Consent Order settling the case, the Attorney General alleged that the Baranoviches placed 170 phony bids in 165 of their own E-Bay auctions of sports memorabilia.
In another civil case, Richard Eggleston, Darryl Lien, and David Printy, together with a related corporation, Daryl Lien, Inc., agreed to pay more than $28,000 in penalties and restitution for their shill bidding practices. In a complaint filed with the Consent Order, the Attorney General alleged that they placed 610 bids in 106 of their own auto auctions under the user ID "Mother's Custom Automotive NY Dealer."
The Attorney General's office has identified more than 120 consumers who paid more for items as a result of shill bidding activities in the three cases. Settlements will provide compensation to these individuals. The damages are as high as several thousand dollars for some consumers.
For example, in one auction, Schuster's New Windsor Gallery "shilled up" by more than $7,300 an oil painting attributed to Hudson River School artist Ralph Blakelock (1847-1919). The high bidder paid $7,500 for the painting.
Another purported Blakelock fetched $3,000 - shilled up by more than $2,800. The Gallery shilled up its auction of an antique cloisonne vase by more than $2,500 - ultimately selling for $3,250. Yet another bidder was overcharged $2,372, for artwork he purchased in over thirty separate auctions.
In one of Daryl Lien Inc.'s online auctions, the high bidder for a 1999 Jeep Grand Cherokee overpaid by more than $3,000. In one of the Baranoviches' auctions, the purchaser of a bat signed by the 2000 New York Yankees paid $999 - a sum shilled up $175 from its previous high bid of $824.
Petition Calls for Tire Dating
Old tires are dangerous, even if they've never been used11/08/2004ConsumerAffairsBy Truman Lewis
Petition Calls for Tire Dating...
Beer bottles have them. So do tubs of margarine and cans of applesauce. But tires have neither an expiration date nor a manufacturing date. Yet old tires are dangerous too and federal safety regulators are being asked to require a date that tells consumers a tire's true age.
SRS Inc., an auto safety research firm, has petitioned the National Highway Traffic Safety Administration (NHTSA) to require easily readable creation dates on car and truck tires.
SRS President Sean Kane says that as of November of 2004, his group has documented 37 fatalities and 35 serious injuries associated with age-related tire tread separations. In many of these cases, the tires were unused spares and showed no signs of degradation.
Aged tires are often unsuspectingly put into service after having served as a spare, being stored in garages or warehouses, or simply used on a vehicle that is infrequently driven. In many instances these tires show no visible sign of deterioration, and absent any visible indicators, tires with adequate tread depth are likely to be put into service regardless of age.
The SRS petition cites a crash in San Bernardino, Calif., in July of 2003 involving a 1997 Toyota 4Runner. Three weeks after a Toyota dealer performed service on the vehicle, rotating an original spare tire onto the right rear wheel, the tread separated at highway speed, resulting in a rollover. A young mother died from head injuries in that incident.
Kane noted in a filing with NHTSA in 2003 that the British Rubber Manufacturers "strongly recommended" that used tires should not be put into service if they are over six years old and that all tires should be replaced 10 years from their date of their manufacture. It also notes that environmental conditions like exposure to sunlight and coastal climates, as well as poor storage and infrequent use accelerate the aging process.
The SRS petition asks that the agency take three interim steps to address the tire age problem:
• a Consumer Advisory alerting the public to the hazards,
• that NHTSA seek specific information from the tire and vehicle manufacturers that will help with further evaluation of the problem, and
• that NHTSA require a date of manufacture molded in both sides of the tire in a non-coded fashion.
NHTSA has 120 days to reject or accept the petition.
States Challenge Mall Gift Cards11/07/2004ConsumerAffairs
States Challenge Mall Gift Cards...
Gift certificate and gift cards have become increasingly popular gifts at holiday time, but consumers should be aware that many come with hidden fees and may have a limited life span.
Massachusetts and Connecticut are taking a chain of shopping malls to court. The states have filed suit against Simon Malls, charging the national mall chain is selling gift cards that violate state consumer protection laws.
"These 'gift cards' are riddled with additional charges that Massachusetts consumers should not have to pay," Massachsetts Attorney General Tom Reilly said. "Despite the name, these gift cards are not what they seem."
Reilly said the cards violate the Massachusetts Gift Certificate law, which requires that gift cards be redeemable at full face value for seven years.
"Simon says - but Simon Property fails to tell the truth, when it subtracts $2.50 a month from consumer gift cards six months or older," Connecticut Attorney General Richard Blumenthal said. "Simon illegally picks its customers' pockets to reactivate cards with unused balances."
"Card purchasers intend to give a gift to friends or loved ones, not to an already wealthy mall owner. State law - as well as logic and fairness - demand that gift cards retain their value just like dollars in a drawer," Blumenthal said.
In the Massachusetts lawsuit, Reilly charges that Simon Malls imposes a one-year expiration date on its cards and charges consumers numerous fees that significantly reduce the value of the card before it expires. Those charges include a $2.50 dormancy fee that Simon automatically charges after the card has been held for six months, an initial fee to purchase the card, and fees for checking the card's balance or transferring the balance to another card.
While the state gift certificate law requires gift cards to be redeemable at full face value for seven years, a Simon Gift Card with a $25 face value is worth only $12.50 after the eleventh month, and would expire - be worth nothing at all - after one year.
The lawsuit alleges that these gift cards are subject to Massachusetts law, and not immune from state enforcement under the National Bank Act because they are not a bank product, as Simon Malls contends in a recent lawsuit. Reilly also alleges that Simon Malls does not sufficiently disclose fees connected with the card before consumers purchase them.
Connecticut's suit charges Simon is illegally imposing expiration dates on gift cards and charging fees on unused balances. The suit also charges that Simon fails to properly inform customers of two additional fees: a 50-cent charge to check the card balance and a $5 fee to replace a stolen or lost card.
Simon Property Group is based in Indiana and owns and operates regional malls throughout the United States, including 14 in Massachusetts.
Florida Subpoenas Insurers11/07/2004ConsumerAffairs
Florida Subpoenas Insurers...
November 7, 2004
Florida Attorney General Charlie Crist has issued subpoenas to 11 insurance companies as part of an investigation into the business practices of the insurance industry.
The subpoenas seek documents and records that involve questionable fee arrangements and possible bid-rigging. On November 5, the Attorney General issued subpoenas to 10 insurance brokers.
The Attorney General seeks to determine the current manner in which insurers utilize contingency commission arrangements. There are indications that insurance brokers have improperly steered business to insurers that pay the brokers the highest fees rather than seeking the best deals for their customers. There are also indications that the companies may have engaged in bid-rigging.
The alleged practices could be in violation of Florida's antitrust laws, Chapter 542, Florida Statutes. Penalties allow fines of $1 million for corporate violations and $100,000 for individuals, and for three times the amount lost due to illegal activities.
"At this point we are seeking to determine whether violations of Florida law have occurred," said Crist. "Our primary interest rests with the Florida consumers. We are looking into whether members of the industry placed their wallets ahead of the interest of their clients."
The Attorney General is investigating arrangements between insurers and brokers and whether business was directed to companies that would provide brokers with higher fees. The Attorney General's Office is also working with a task force established by Florida's Chief Financial Officer.
The following insurance companies are receiving subpoenas: National Union Fire Insurance Co. of Pittsburgh, PA;
American International Specialty Lines Insurance Co.;
Continental Casualty Co.;
Lexington Insurance Co.;
Scottsdale Insurance Co.;
Federal Insurance Co.;
Ace American Insurance Co.;
Zurich American Insurance Co.;
St. Paul Fire & Marine Insurance Co.;
State Farm Florida Insurance Co.;
and Twin City Fire Insurance Co.
Florida's Attorney General is among several state Attorneys General - including New York, Massachusetts, California, Connecticut and Ohio - that have opened investigations into insurance industry practices.
Feds Sue Bogus Fuel Saver
Company used illegal spam to make deceptive claims about an "automotive fuel saver" that doesn't save fuel11/04/2004ConsumerAffairs
Feds Sue Bogus Fuel Saver...
The Federal Trade Commission has asked a U.S. district court judge to shut down an operation that used illegal spam to make deceptive claims about an "automotive fuel saver" that doesn't save fuel.
The FTC charges that the spam violates the CAN-SPAM Act and the deceptive claims violate the FTC Act. The agency will ask the court to permanently bar the law violations and order the defendants to provide redress for consumers.
An FTC complaint filed in U.S. District Court in Chicago alleges that International Research and Development Corporation manufactures and markets a "magnetic device" under the names FuelMAX and Super FuelMAX. The company claims that when the device is attached to an automobile's fuel line, it will fracture gasoline hydrocarbon chains through magnetic resonance and:
• Increase mileage by up to 27%;
• Reduce Fuel Consumption;
• Reduce Emissions;
• Provide Accelerated Combustion; and
• Burn Fuel That is Normally Exhausted as Un-burned Pollution.
In November 2001, the FTC issued a warning that these product claims and advertising were false, lacked substantiation, and likely violated the FTC Act.
Other defendants, acting as Super FuelMAX resellers, set up Web sites, including www.fuelsaverpro.com to sell the magnetic devices under the pseudonym Fuel Saver Pro. The Web sites made claims such as:
• Increase gas mileage 27%+ by helping fuel burn better;
• Reduce emissions by 43%;
• Smoother engine;
• pays for itself FAST!!!!
• Gives an extra 10% more horsepower; and
• Based on the size of your gas tank you will save from $8 for a typical 15-gallon gas tank, but larger V8 SUVs and trucks will save up to $20 per tank.
The defendant resellers used spam that made deceptive claims to drive traffic to their Web sites. According to the FTC, the spam contained the names of innocent third parties in the "from" or "reply to" fields - a practice known as spoofing - and did not contain a valid physical postal address.
The FTC alleges that the magnetic "fuel saver" doesn't save fuel, doesn't increase gas mileage, and doesn't reduce emissions. According to the complaint, the claims are false and misleading and violate the FTC Act.
The agency also alleges that by providing promotional materials with the false claims to distributors, resellers, and affiliates, the defendants have provided them with the means and instrumentalities to violate the FTC Act. The agency also alleges that the spoofing and failure to provide a valid physical postal address violate the CAN-SPAM Act.
The FTC charges that consumers throughout the country have suffered substantial monetary loss and the defendants have been unjustly enriched. It has asked the court to halt the deceptive claims, bar future violations of the CAN-SPAM Act, and order redress for consumers.
The FTC's complaint names International Research and Development Corporation of Nevada; Anthony Renda; Net Marketing Group, LLC; Micro System Technologies; Floyd J. Tassin, Jr; Marcia Tassin; Diverse Marketing Group, Inc.; Diverse Marketing Group, LLC; Mark C. Ayoub; and Epro2000, Inc. as defendants.
The Food and Drug Administration (FDA) estimates that Vioxx may have contributed to 27,785 heart attacks11/04/2004ConsumerAffairs
The Food and Drug Administration (FDA) estimates that Vioxx may have contributed to 27,785 heart attacks and sudden cardiac deaths between 1999 and 2003....
adidas Recalls Basketball Shoes11/03/2004ConsumerAffairs
adidas Recalls Basketball Shoes...
November 3, 2004
adidas America is recalling its Superstar Ultra and Pro Team Shoes. A portion of the sole of the heel can separate or tear during use, which can result in injuries.
adidas America has received two reports of injuries involving these shoes, including one sprained ankle and one strained Achilles tendon.
The adidas Pro Team and Superstar Ultra basketball shoes come in various color combinations. The recalled shoes have a six-digit article number on the inside part of the shoe tongue. A complete list of the article numbers of the shoes involved in the recall can be found at www.adidas.com/recall or by calling the firms recall hotline.
The shoes were sold at adidas stores, major athletic shoe stores, independent shoe stores nationwide, and at thestore.adidas.com. The Superstar Ultra shoes were sold between January 2004 and October 2004 for about $120. The Pro Team shoes were sold between July 2004 and October 2004 for about $80.
Consumers should immediately stop using the recalled shoes, and contact adidas America to receive a prepaid mailing label and a refund or gift certificate.
For more information, call adidas America toll-free at (877) 568-4632 anytime, or visit the adidas America Web site at www.adidas.com/recall
The recall is being conducted in cooperation with the U.S. Consumer Product Safety Commission (CPSC).
Pennsylvania Sues Living Trust Scheme
Scheme deceived seniors, state alleges11/03/2004ConsumerAffairs
Pennsylvania Attorney General Jerry Pappert has filed a civil lawsuit accusing 16 defendants of engaging in an elaborate statewide living trust sales schem...
Pennsylvania Attorney General Jerry Pappert has filed a civil lawsuit accusing 16 defendants of engaging in an elaborate statewide living trust sales scheme that deceived older Pennsylvanians into buying Revocable Living Trusts, long term annuities or charitable gift annuities that were costly, not in their best interest or unnecessary.
The alleged victims documented approximate losses that range between $1,800 and $80,000.
Along with the complaint, Pappert filed a preliminary injunction seeking to ban the defendants from engaging in the unlawful advertising, promotion or sale of estate planning products or services in Pennsylvania.
"This alleged scheme was heavily promoted and potentially hurt hundreds of senior citizens across the Commonwealth who may be unaware that they were cheated," Pappert said. "Today, I'm asking the court to ban the defendants from engaging in the illegal advertising, promotion and sale of estate planning products or services in Pennsylvania."
The seven-count complaint accuses the various defendants of violating Pennsylvania's Unfair Trade Practices and Consumer Protection Law, Solicitation of Funds for Charitable Purposes Act, Telemarketer Registration Act, as well as the Judicial Code Provisions barring the Unauthorized Practice of Law.
According to investigators, defendants Barry O. Bohmueller and Brett B. Weinstein between 2001 and 2004 promoted their estate planning services using telemarketing, newspaper ads, mass mailings, senior expos and local seminars held in restaurants, country clubs, synagogues or other facilities throughout the state.
The two attorneys used sales agents from the marketing, insurance or brokerage firms to sell the estate planning products. The sales efforts were primarily focused on consumers located in Central, Northeastern and Southeastern Pennsylvania. Those responding to the ads or promotions were typically senior citizens often 70 to 80 years old.
According to the lawsuit, the defendants encouraged consumers to meet with their "Estate Planning Advisors" or "Certified Senior Advisors" to explain "What Everyone Should Know About Estate Planning Techniques, Financial Planning Strategies" and "Estate Preservation." The promotional materials from the defendants' estate planning advisor companies led consumers to believe that they were receiving impartial estate planning advice.
The complaint claims that consumers who attended the presentations or allowed the defendants into their homes were advised to purchase a Revocable Living Trust. The trust was presented as an estate planning document that was in the consumers' best interest, regardless of their individual financial holdings. Many were sold living trust kits for approximately $1,800 whether they needed them or not. Consumers said they were unaware that the sales representatives were insurance agents who received sales commissions.
To encourage the sale of living trusts, the suit claims that the defendants used scare tactics and deceived consumers by falsely claiming that living trusts are superior to wills.
The alleged victims said they fully trusted the representatives and followed their advice because they were led to believe that they were lawyers or estate planners. Consumers said the sales agent defendants gave them Bohmueller Law Offices business cards and wrote their names at the top, implying that they are lawyers who work in Bohmueller's firm. None of the consumers met or spoke with Bohmueller, yet his name appeared on all of their completed estate planning documents.
"In reality, the individuals advising consumers about estate planning products are not unbiased legal professionals but sales or insurance agents working on commissions," Pappert said.
"These older citizens were given legal advice from non-attorneys who intentionally steered them toward purchasing living trusts as a way to find out the contents of their financial portfolios. After profiling the portfolios, the defendants deceptively convinced consumers to convert their stocks or other non-real estate investments into charitable gift annuities or long-term deferred annuities that paid the agents even higher commissions," he added.
The defendants, among other charges, are accused of knowingly providing legal advice and services that can only be lawfully performed by licensed attorneys.
Pappert said the defendants exploited the trust that many elderly consumers placed in them when they knew these older citizens could not determine what was in their best interest. In one case, an 85-year-old Delaware County man unknowingly was sold a 10-year deferred annuity with his first payment due when he turns 95.
"In my view, these actions are unconscionable. Consumers were lied to and deceived into purchasing long-term annuities based on what the defendants would make in commissions. The sales commission rate was higher if the payout period to consumers was longer. I am proceeding against these defendants with every appropriate remedy available under the law," said Pappert.
Pappert said undercover agents from his Charitable Trusts and Organizations Section posed as potential customers and presented the various defendants with a dummy portfolio. Even though the bogus investments paid generous dividends and interest, the defendants recommended that the entire portfolio be liquidated and converted to deferred annuities.
Pappert said several consumers told his office that they lost thousands of dollars in their life savings due to the failure to realize the promised returns, extra fees or costs, additional tax expenses and the inability to have access to their investments without paying huge penalties.
The Commonwealth also claims that the sales representatives for New Life Corporation were not registered and bonded as professional solicitors, in violation of the Charities Act. Additionally, defendant Weinstein is accused of violating a November 2001 agreement with the Office of Attorney General involving similar alleged illegal business practices.
Prosecutors asked the court to ban the defendants from engaging in the unlawful telemarketing, advertising, promotion or sale of estate planning products or services in Pennsylvania.
The complaint asks the court to:
• Require the defendants to pay full restitution to consumers who come forward with proof that they were harmed in the case.
• Require defendants to pay civil penalties of $1,000, $3,000 or $5,000 per violation.
• Permanently ban defendants from engaging in the illegal telemarketing, advertising, promotion or sale of estate planning products or services.
• Require defendants to pay for attorney fees, investigation costs and an accounting and audit of their commissions and income.
Actra-RX May Be Dangerous, FDA Warns
Contains Same Active Ingredient as Viagra11/02/2004ConsumerAffairs
Actra-RX May Be Dangerous, FDA Warns...
The Food and Drug Administration (FDA) today warned consumers not to purchase or consume Actra-Rx or Yilishen, two products promoted and offered for sale on Web sites as "dietary supplements" for treating erectile dysfunction and enhancing sexual performance for men.
The products contain an active prescription drug ingredient, the FDA said. The agency has also issued an Import Alert instructing FDA field personnel to stop the importation of the supplements.
A research letter published in the Journal of the American Medical Association described the results of a chemical analysis of Actra-Rx, finding that each capsule analyzed contained prescription-strength quantities of sildenafil.
Sildenafil is the active drug ingredient in Viagra, a Pfizer prescription drug product approved in the United States for the treatment of erectile dysfunction. FDA conducted its own tests of Actra-Rx and found that the product contained prescription-strength sildenafil.
An interaction between sildenafil and certain prescription drugs containing nitrates (such as nitroglycerin) or nitrates found in illicit substances (such as amyl nitrate) may cause a significant lowering of blood pressure to an unsafe level. Consumers with diabetes, high blood pressure, high cholesterol, or heart disease often take nitrates.
Because erectile dysfunction can be a common problem in individuals with these conditions, these consumers may take Actra-Rx or Yilishen and risk experiencing serious adverse effects. Anyone experiencing erectile dysfunction should seek guidance from their health care provider before purchasing a product to treat that condition.
Consumers who have taken Actra-Rx or Yilishen should stop taking it and consult with their health care providers regarding erectile dysfunction treatment. Consumers who are seeking treatment for erectile dysfunction should not take Actra-Rx or Yilishen as either can be dangerous to their health and even life-threatening.
Government Grant Scam Steams On
Pay a one-time "processing fee" and get ... well, you know11/02/2004ConsumerAffairs
Government Grant Scam Steams On...
New versions of a tired but effective scam are making the rounds. It's the "government grants" scam in which recipients of phone calls are promised government grants in return for a one-time "processing fee."
The scam occurs when an unsuspecting consumer gives out personal bank account information that enables the allegedly fraudulent company to take money - between $199 and $249 - out of a consumer's account.
"Losing hundreds of dollars can be a devastating financial blow to many consumers and seniors who live on fixed incomes," Illinois Attorney General Lisa Madigan said. "If you receive a call like this, just hang up the phone. Never, ever give out financial or bank account information to someone you don't know and trust."
Madigan said her Consumer Protection Division has received several recent complaints about unsolicited calls which offer to obtain government grants for consumers in exchange for "processing" fees that reportedly range from $199 to $249.
"I am $249.00 poorer and without no grant money or answers," said Lori of Midland TX, one of hundreds of consumers who have complained to ConsumerAffairs.com about the myriad of "free money" scams.
The scam depends on a consumer's willingness to reveal routing information found at the bottom of personal checks. This information allows the scam artist to use desktop software to create what looks like an actual check from the consumer's checking account and debit the so-called processing fees without the consumer's signature.
"He said that in order to insure that the grant money was received by me and did not get into the wrong hands he would need my bank account number," said Gena of Montgomery AL in her complaint to ConsumerAffairs.com.
Madigan also warned of a variation of the grant scheme in which consumers are told they have been awarded a government grant and need to pay a fee to collect the grant money. This also is a scam, she said.
Madigan reminded consumers that a wealth of information about government grants is readily available online or at local libraries. In addition, Madigan said grants typically are not awarded for personal use.
"Some consumers told us the caller said the grant can be used to pay off credit cards or personal loans with no questions asked. That's simply not true," Madigan said.
She added that consumers who were victimized by the scam should immediately contact their banks to request a stop payment or credit for the amount.
Houston Hospital Settles Malpractice Suit11/01/2004ConsumerAffairs
Monetary terms were not disclosed according to an agreement between the family of Carla Jeanette Gann and the hospital, said the Gann family's attorney, St...
The family of a Fort Worth, Texas, woman who died after she was given a drug against doctor's orders reached a pre-trial financial settlement with Harris Methodist HEB Hospital.
Monetary terms were not disclosed according to an agreement between the family of Carla Jeanette Gann and the hospital, said the Gann family's attorney, Steven Laird.
"This settlement will ensure that the Ganns' three young children will be cared for, for the rest of their lives," Mr. Laird said in a statement. "Although there's no way it can make up for the loss of a mother and wife, the family is glad that this case has resulted in the hospital focusing more training on policies and procedures in order to prevent a similar tragedy," he said.
On Nov. 30, 2002, Ms. Gann, 23, was admitted to Harris Methodist for kidney stone pain. She was given several narcotics for pain and scheduled for kidney stone surgery within two days.
Testimony showed that, despite doctor's orders, hospital nurses administered a central nervous system depressant almost immediately after she had received other heavy narcotics. This resulted in her central nervous system shutting down and a loss of her ability to protect her airway when she became nauseous.
When her family came to visit Mrs. Gann prior to surgery, they found her pale, non-responsive and not breathing. After alerting hospital staff, Mrs. Gann's husband, mother and stepfather were ordered into the hallway while hospital staff tried to save Mrs. Gann with mouth-to-mouth resuscitation.
Doctors told the family that Mrs. Gann had suffocated on her own vomit and showed no neurological function due to swelling of the brain. The family reluctantly agreed to take Mrs. Gann off life support and she died that evening.
Report Warns of BB Gun Dangers
BB guns annually injure as many as 21,000 Americans11/01/2004ConsumerAffairs
Although they are often thought of as toys, BB guns annually injure as many as 21,000 Americans, many of them children, according to a study in the Novembe...
Although they are often thought of as toys, BB guns annually injure as many as 21,000 Americans, many of them children, according to a study in the November issue of Pediatrics.
Nonpowder guns kill an average of four Americans yearly, and from 1990 to 2000, there were 39 such deaths -- 32 of children younger than 15, the study found.
Nationally, an estimated 21,840 injuries related to nonpowder guns were treated in emergency departments in 2000 -- most in children ages 5 to 14, according to a report prepared by the American Academy of Pediatrics' Committee on Injury, Violence and Poison Prevention.
"They're being given as toys without recognition that there may be a serious injury risk," said the report's author, Dr. Danielle Laraque, a New York pediatrician.
The report covers all nonpowder guns, also called air guns, not just the popular BB guns. Air guns have been used since the 16th century in warfare and to kill game as large as deer. Besides metal projectiles, air guns can launch gelatin balls filled with paint, such as those used in war games.
The U.S. Consumer Product Safety Commission (CPSC) estimates that there are approximately 3.2 million nonpowder guns sold yearly. Nonpowder guns are sold in many department stores, including toy stores.
According to data from the Centers for Disease Control and Prevention (CDC) and the CPSC, there were 21,840 nonpowder gunrelated injuries treated in emergency departments. Of these, 49% occurred in children 5 to 14 years of age and 33% in those 15 to 24 years of age.
Approximately 12% of injuries were to the eye; 24% were to the head and neck, 63% were to extremities; and 1% were to other body areas. With the exception of the age group of 0 to 4 years, most victims were males.
The report found a correlation between the increasing popularity of paintballs used in war games and an increase in eye injuries and noted that the visual outcome for many of these injuries is poor. Many of the injuries have occurred even with eye-protective devices, though none to players properly wearing an eye protector that meets current U.S. safety standards.
There have been no reported deaths directly related to paintballs, but the CPSC issued a warning on March 24, 2004, because of its investigation of 2 deaths caused by carbon dioxide canisters flying off paintball guns.
FDA Allows Health Claim for Olive Oil11/01/2004ConsumerAffairs
FDA Allows Health Claim for Olive Oil...
The Food and Drug Administration (FDA) will allow a qualified health claim linking olive oil to reduced risk of coronary heart disease.
The FDA said there is limited but not conclusive evidence that suggests that consumers may reduce their risk of heart disease by substituting monounsaturated fat from olive oil in place of foods high in saturated fat, while at the same time not increasing the total number of calories consumed daily.
Olive oil is one of the main components of the so-called Mediterranean diet, which is high in unsaturated fats from vegetable oil, nuts and such fish as salmon and tuna. Mortality rates dropped by more than 50 percent among elderly Europeans who stuck to such diets and led healthy lifestyles, according to research published in the Journal of the American Medical Association in September.
"With this claim, consumers can make more informed decisions about maintaining healthy dietary practices," said Dr. Lester M. Crawford, Acting FDA Commissioner. "Since coronary heart disease is the number one killer of both men and women in the U.S., it is a public health priority to make sure that consumers have accurate and useful information on reducing their risk."
A qualified health claim on a conventional food must be supported by credible scientific evidence. Based on a systematic evaluation of the available scientific data, FDA said it is allowing the claim on food labels and the labeling of olive oil and certain foods that contain olive oil.
The agency will permit a health claim along these lines:
Limited and not conclusive scientific evidence suggests that eating about 2 tablespoons (23 grams) of olive oil daily may reduce the risk of coronary heart disease due to the monounsaturated fat in olive oil. To achieve this possible benefit, olive oil is to replace a similar amount of saturated fat and not increase the total number of calories you eat in a day. One serving of this product [Name of food] contains [x] grams of olive oil."
This claim is the third qualified health claim FDA has announced for conventional food since the process for establishing such claims took effect last year. In March, the agency said "supportive but not conclusive research" shows eating 1.5 ounces of walnuts per day may reduce coronary heart disease risk. In September, it issued a similar qualified claim for the heart-healthy benefits of omega-3 fatty acids.
Merck Knew of Vioxx Dangers, Report Charges
Vioxx was a big moneymaker for Merck, generating about $2.5 billion in yearly sales11/01/2004ConsumerAffairs
Merck Knew of Vioxx's Dangers, Report Charges...
Internal Merck & Co. e-mails and documents show the company knew for years that its popular pain reliever Vioxx posed serious risks of heart attack and stroke, The Wall Street Journalreported.
When it pulled Vioxx off the market in September, Merck said it was "putting patient safety first" but the Journal says company officials had fought for years to protect the highly profitable drug and to keep news of the health risks quiet.
Vioxx was a big moneymaker for Merck, generating about $2.5 billion in yearly sales.
In early 2000, Merck research chief Edward Scolnick e-mailed Merck colleagues that the health risks "are clearly there." But the company continued to publicly reject any link between Vioxx and increased health risks.
Older and cheaper pain relievers such as aspirin and naproxen, known commercially as Aleve, block the COX-1 and COX-2 enzymes that are involved in inflammation and pain. Blocking COX-1 enzymes can upset the stomach but research indicates it may also help prevent blood clots, the leading cause of heart attacks and strokes.
Vioxx blocks only the COX-2 enzyme, thus providing powerful pain relief with no stomach upset. But clinical tests have indicated that it also fails to protect against blood clots and may even cause additional clots to form.
As far back as 1997, the Journal says Merck executives and scientists were discussing the risk. One said flatly that unless patients taking Vioxx also took aspirin, "you will get more thrombotic events," meaning blood clots. But adding aspirin would increase the risk of stomach irritation, leading to what another Merck official called "a no-win situation," the Journal said.
Merck responded that the comments were taken "out of context" and denied that it had purposely endangered its customers. In a statement, Merck said it had acted "responsibly and appropriately" in developing and marketing Vioxx.
Merck shares fell as much as 7 percent to their lowest level in more than eight years after the report.
Merck withdrew the drug September 30 after a study showed that prolonged usage could double the risk of heart attack and stroke in patients who took it for 18 months. That left about 1.3 million Americans looking for a substitute.
Researchers say the number of patients who have had heart attacks or strokes as a result of taking Vioxx could range from 30,000 to 100,000.