Current Events in June 2009

A Washington state court ordered travel reservations site Expedia to pay $184 million to consumers, the largest consumer class action award in Washington state history.

The suit alleged that while Expedia paid taxes calculated using the wholesale price of hotel rooms, consumers' taxes were based on the rooms' retail price. According to the suit, the corporation kept the difference for themselves.

The suit, filed in 2005 by class action firm Hagens Berman Sobol Shapiro, claimed that Expedia breached its contractual obligations to consumers by breaking its promise to charge only enough to compensate for its own expenses. According to partner Steve Berman, who filed the suit, the company masked the price difference by labeling it as a "service fee," and included it in the same billing line as taxes, making the higher prices difficult for consumers to notice.

Expedia's Terms of Use agreement explicitly promise that the corporation only collects service fees as necessary to "cover the costs" of providing tickets and reservations for hotels, air travel, car rentals, and other travel necessities. In reality, the extra tax was simply pocketed by the company in an effort to increase its profit margin.

Berman explained that "Expedia used the service fees to sweeten the deal for the company at the direct expense of the consumer. They apparently thought no one would notice if they padded each transaction by a few dollars, money that went straight to profit."

Indeed, in her ruling, Judge Monica Benton pointed to a smoking-gun internal e-mail from December 2001, which boasted that the additional charge "will add between $2-3 million in our net profit (the bottom line) next quarter."

The court noted that "[i]n none of the myriad of declarations filed here, does Expedia show that profit, identified as markup, was considered a cost of providing travel reservation services," and that the "[p]laintiffs correctly conclude [that] 'profits, not costs are the subject matter of these service fees.'"

Under the ruling, the company must return $184,470,452 that it collected in service fees from consumers who bought tickets between Feb. 18, 2003 and Dec. 11, 2006.

Berman said that he and his firm are extremely pleased with the ruling. "Consumers deserve to know what they are paying for, and companies like Expedia have an obligation to be upfront," Berman said.

Expedia, based in Bellevue, Washington, is the largest online booking website, ahead of competitors such as Orbitz and Hotels.com. The ruling comes at an especially bad time for the company, which announced late last month that it is getting rid of fees for flighs booked on its site, in an effort to reinvigorate the dismal travel market. It is also eliminating fees charged for cancellations or change of reservations. Before the worldwide economic crisis, the site charged $25 for cancelled or changed hotel and car reservations.

Expedia has announced that it plans to appeal the court's decision.

Consumer groups are generally applauding of the Food Safety Enhancement Act of 2009, which is currently making its way through the House of Representatives. A draft of the legislation got a hearing Wednesday before an Energy and Commerce subcommittee.

The measure addresses the increasing task of the Food and Drug Administration to protect the food supply. Critics maintain the agency is under-funded and over-stretched, leading to countless food safety lapses -- including record recalls of contaminated spinach, peppers and peanut butter.

In backing the bill, Consumers Union said the measure would give FDA the funding and powers it will need to better ensure the safety of the American food supply.

Consumers Union applauds the leadership of the Committee for taking action to finally reform our broken food safety system, said Jean Halloran, Director of Food Policy Initiatives for CU. This is a much needed step to protect the safety of our nations food supply. As Congress moves forward on this legislation, we urge members to add an important provision to require testing and reporting for contaminants, the critical need for which was highlighted by the recent case of Peanut Corporation of America, which, in 12 different instances, found salmonella in its peanut butter and continued to ship deadly peanut products without being required to report known contamination.

The draft legislation would, for the first time, provide FDA with mandatory recall authority. Under current law, it can only request recalls.

It would require high-risk facilities to be inspected at least every 6-18 months. Currently, facilities are inspected once a decade on average.

It would require electronic electronic traceability systems that are able to track identified contaminated food back to its source. All food producers -- both foreign and domestic -- would be assessed a $1,000 registration fee to help pay for the increased oversight.

"For consumers, food safety is not a partisan issue, Halloran said. The Food Safety Enhancement Act discussion draft provides smart, long-overdue solutions to our food safety crisis, and it should be supported by members of Congress from both parties. We urge both parties to unite to address the problem before there is another outbreak that causes more sickness and deaths."

New powers

Some of the proposed new powers for the FDA include:

• Creation of a registry of all food facilities and importers serving Americans, which would be updated on an annual basis. Affected parties would pay fees to be included in the registry, and would be tagged with unique identification numbers for easier tracking.

• Registered facilities would pay an annual fee of $1,000 to fund FDA oversight, including inspections, recalls, and certifications for export of food to the U.S.

• The FDA's powers to "quarantine" potentially unsafe food or products from entering geographic areas would be enhanced.

• The FDA would issue regulations requiring every company in a food produce chain — including manufacturers, processors, and transporters — to maintain records for the origin and distribution of the food, and ensure the records are usable and transferable in multiple formats.

• Enhanced safety requirements for infant formula.

• New authority to subpoena records and protect whistleblowers in case of alleged violations of the law.

"The current state of our food safety system is dangerous not just for the American public, but also for the food industry itself," said Rep. Henry Waxman (D-CA), Chair of the Energy and Commerce Committee. "This bill recognizes that the hallmark of strong food safety legislation must be a shared responsibility for food safety oversight between FDA and industry. This legislation will go a long way toward restoring Americans' confidence in our food supply."

The Federal Trade Commission has filed suit to halt the illegal operations of three telemarketing boiler rooms in Montreal, Canada.

The agency alleged that the telemarketers bilked thousands of small- and medium-sized U.S. businesses and non-profits, including churches, schools, and charities, out of millions of dollars by deceiving them into paying for listings they never ordered in worthless business directories.

The FTC lawsuits, filed in federal court in Illinois, are part of a joint initiative with Canadian law enforcement authorities called Operation Mirage that is aimed at cracking down on business directory scams. The FTC charged that the three telemarketing operations targeted businesses and other organizations with schemes to mislead them into paying hundreds of dollars each for unwanted business directory listings. The court has issued temporary restraining orders in the three cases.

In their phone calls to businesses and non-profits, the telemarketers often have posed as well-known local yellow pages directories, and have told employees who answer the phone that they are calling to verify addresses and telephone numbers, the FTCs complaints stated. The telemarketers then used the verifications as the basis to claim that these organizations agreed to listings that often cost $400 or more.

The FTC alleged that the companies then sent their victims invoices that again often imply that they are well-known yellow-pages companies. Many businesses and organizations simply paid these invoices. Those that did not were harassed with threatening phone calls and letters. To hide their location, the companies have used mailing addresses around the United States, in Miami; Phoenix; Plattsburgh, New York; Port Barre, Louisiana; Russell, Illinois; Milwaukee, Wisconsin; and Jersey City, New Jersey, the FTC alleged.

The FTCs complaints alleged that the companies made three misrepresentations that violated the FTC Act. First, they led the small businesses and non-profits they targeted to believe that there was a pre-existing relationship between them. Second, they falsely claimed that those organizations had agreed to purchase directory listing services. Third, they falsely claimed that the organizations owed money for these supposed services.

In markets where home places have fallen drastically, short sales are among the few ways for homeowners to get out of their homes, short of foreclosure. In a short sale, however, the lender has to agree to accept payment that is less than for the entire loan amount. Its not something most banks are eager to do.

San Diego real estate agent Bob Hamzey has encountered his share of short sale horror stories as he has tried to sell homes whose values seemingly dropped by the day. He cheered when the Obama Administration rolled out its Foreclosures Alternative Program, which is designed to streamline the short sale process for distressed homeowners by setting service standards for banks and mortgage companies.

While the program promises to make life easier for homeowners and the realtors helping them, Hamzey claims that big banks have already found ways to circumvent the rules for their own gain and are gaming the system.

"The banks have been transferring their equity lines of credit in the middle of the short sale process to affiliate companies," said Hamzey. "These affiliates are not under the auspices of the Office of the Comptroller of the Currency or obliged to follow the rules set up under the president's new program. In essence, they are almost free to be as uncooperative as they please."

Hamzey claims that by not signing off on the short sale package, the affiliate companies may force the first mortgage to foreclose. He maintains that large banks would prefer a foreclosure to a short sale, even though they may end up losing money in either case.

"In front of the camera, bank executives smile and explain how they are cooperating with the government and working with distressed homeowners," said Hamzey. "In the back rooms, they transfer their assets to affiliate companies that practically operate free of government regulations.

Hamzey says he is on a mission to spread the word about big bank abuse of the FAP program and is asking his fellow agents to send him their personal stories of getting caught up in short sale abuse.

Hamzey said he intends to send these stories to federal regulators in an effort to encourage the Obama administration to develop a system that is fair and responsible for the people they were designed to help.

By Lisa Wade McCormick
ConsumerAffairs.com
Copyright 2009 © All Rights Reserved

June 3, 2009
Dont tell Christina W. that NUTRO hasnt received any complaints about the cat food the company recently pulled off the market. The Maryland woman and owner of five cats doesnt believe that claim, which the pet food maker continues to tout on its Web site.

Christina says she put NUTRO on official notice Tuesday that one of the flavors of cat food included in its May 21 recall -- NUTRO Max Indoor Weight Control -- made her beloved cat, Jake, seriously ill.

I called them this morning and told them first and foremost that if they didnt have a recording machine on now, they should turn it on because I was making a formal complaint, says Christina, who confirmed the dates and UPC codes on Jakes food matched the ones included in the recall.

NUTRO recalled seven flavors of its NATURAL CHOICE COMPLETE CARE and NUTRO MAX dry cat foods, saying the products contained incorrect levels of zinc and potassium. The company blamed the problem on a production error by its U.S. premix supplier, Trouw Nutrition. One of the premixes contained excessive levels of zinc and low levels of potassium, NUTRO said. The second contained low levels of potassium.

Christina has no doubts that the problems with NUTROs recalled cat food played a significant role in Jakes illness.

He has eaten Nutro food for the past two years, she says, adding her 13-year-old cat received a clean bill of health in March. We were a week into a new bag (of NUTRO) when his illness became apparent. Over the weekend, she says, Jake suddenly started having bouts of vomiting and diarrhea. He also became lethargic and dehydrated.

I rushed him to the emergency vet (on Sunday), where he was diagnosed with elevated liver enzymes." On Monday, a sonogram revealed Jake had pancreatitis.

Hes still in the hospital and in pain, and were waiting to see if his liver enzymes return to normal, Christina says. His prognosis is okay -- as long as his liver and pancreas can recover. The poor thing has an IV stuck in his leg. His little arm is shaved. Hes already had to have blood drawn several times.

"A horrible death"

Christina say its heart wrenching to see Jake in so much agony. He howls and cries and bangs his head against the top of his cage, she told us. Its a horrible thing to have a cat survive 13 years illness free (and then) to have him brought down by his own food.

Im furious, to say the least. I cant convey enough how devastating this is to our family both Jakes illness and the concerns we have that any of the four others may might also follow in his spiraling health. And if Jake dies, furious isnt even close to describing how Ill feel.

Christina isnt the only pet owner who is convinced that NUTROs recalled dry cat foods caused their pets' illnesses. Some even believe the recalled foods contributed to their cats recent deaths.

They're grieving cat owners like Shira D. of Carson, California. My cat is dead due to NUTRO Max, she wrote us, adding the UPC codes on her cat's food match the ones included in the recall.

My three-year-old healthy indoor cat, Angel, became ill on (Saturday) May 16, 2009, after beginning a new bag of NUTRO Max cat food. We took her to the vet on Monday where they had to do a blood transfusion on her.

Angels health, however, continued to deteriorate. She died a horrible death a few days later.

I will never forget the graphic images of her grasping for air, Shira says. I've never seen a perfectly healthy cat lose the ability to go to the bathroom in her litter box, lose her appetite, and lose her ability to play. She became extremely ill so suddenly after (eating from) the contaminated bag of NUTRO."

Elevated zinc levels

Test results revealed Angel had elevated levels of zinc in her tissues.

"The vet says that the infected catfood is the cause of death for Angel," Shira told us. "My vet contacted Nutro personally to notify them of those findings."

Shira also called NUTRO when Angel first became sick. "The company said it was sorry for my loss and they were willing to pay the vet fees if I could prove that they were at fault," Shira told us. "They also said that they doubted that the zinc levels would cause death in my cat and tried to assure me that it must have been something else."

It sickens me to learn that (Angels) cat food -- that was supposed to provide her nutrition -- is the cause of her premature death. All we have are the memories and doctor bills, and agony that NUTRO has caused. This must stop. I don't wish for anyone to experience a loss of this kind, she said.

Recall came too late

Neither does Thomas R. of Florida, who is certain that NUTROs Natural Choice Ocean Fish food -- one of the flavors included in the companys recalled -- recently caused his cats kidneys to shut down. Thomas made the difficult decision to euthanize his cat, Fabio.

That was devastating for my daughter, he told us. This was a two-year-old cat with no health problems. But the vet told us he had irreparable kidney damage. He had become sick and was unable to urinate.

The following day, Thomas received an e-mail from PetSmart stating NUTRO had recalled the cat food that Fabio was eating.

I would have never associated his illness with the food, he says. But after reading numerous stories of similar problems (on ConsumerAffairs.com) I now feel the food was the cause of his death. And here I was thinking I was buying a premium cat food.

A cat owner in Ohio shares Thomas concerns. Althea A. of Cincinnati is worried that NUTROs recalled cat food may have contributed to the recent death of one of her felines.

I switched my cats to NUTRO Max approximately six months ago, she told us. In recent weeks, one of my two cats had slight lethargy, but her appetite still seemed good. PetSmart sent me an email that I had purchased a recalled Nutro product and I discontinued use immediately.

But tragedy struck less than a week later. The lethargic cat passed away of a massive heart attack while at the vet's office.

Similar cases

ConsumerAffairs.com has heard from other cat owners, who told us their otherwise healthy felines suddenly became sick after eating NUTROs recalled products. They say their cats have been losing weight, vomiting, and experiencing bouts of diarrhea. Those are the same symptoms that NUTRO warned cat owners who fed their pets the recalled food to monitor.

We have been exclusively feeding our cat NUTRO Max Adult dry food for years, says Monica, of Irvine, California. Recently his hair began to fall out and he experienced severe weight loss.

Her cat, she says, had also become weak, lethargic, and had signs of kidney failure. Monica is now convinced theres a connection between her cats illness and NUTROs recalled food.

After reading about the symptoms other pet owners have witnessed, it all makes sense, says Monica, who learned her cats food was included in NUTROs recall when she received a postcard from PetCo. I immediately switched his food and I can only hope that his health will improve over time.

A New Jersey pet owner told us her cat is experiencing similar health problems. And shes confirmed that his cat food is part of NUTROs recall.

My cat has been eating Nutro Natural Choice for the past year and half, says Paula S. of West New York, New Jersey. About a month ago, he became gravely ill. He started vomiting and experiencing uncontrollable diarrhea with foul smelling bile. He also had a reduction in appetite, severe weight loss to the point that he is now severely dehydrated, and is also shedding.

Paula now worries that her cat may not recover -- and neither will her checkbook.

My cat went from weighing 12 pounds to now weighing 6 pound and that happened in a month, she says. Not only has this been a very sad experience watching my cat fade away and suffer daily, it is -- and continues to be -- very costly. And I am nervous that one day I will come home to either him already passed away or face the fact that I will have to put him under because he's not getting better.

Something should be done to compensate pet owners who have been affected with instances such as this.

No response from NUTRO

ConsumerAffairs.com contacted NUTRO on Monday about these and other concerns weve heard from cat owners. The company did not respond to our inquiry. NUTRO, however, has publicly said that cat owners with questions about the recall should contact the company at 1-800-833-5330.

Meanwhile, ConsumerAffairs.com continues to hear from dog and cat owners across the country who say their pets became sick after eating various flavors of NUTRO pet food.

We now have more than 840 complaints from pet owners who have told us their dogs and cats experienced sudden and recurring bouts of diarrhea, vomiting, and other digestive problems after eating NUTRO's food. In nearly every case, pet owners say their animals conditions improved once they stopped feeding them NUTRO products.

Some pet owners, however, suspect NUTROs food played a role in their animals deaths. NUTRO denies the consumers complaints, saying its food is 100 percent safe and meets all federal guidelines.

Never again

Back in Maryland, cat owner Christina W. echoes the sentiments weve heard from pet owners nationwide.

I will never feed NUTRO to my pets again, she says. Its not in their best interest. I also want the company to take the food off the market until its safe. And I want them to pay for every single one of my vet bills. I will be out thousands of dollars and there is no guarantee that my cat is going to live.

Read more ...

• Verbatim complaints and comments from consumers.
• Recall notice

Gasoline isn't the only fuel whose price can be fixed. In Oklahoma, state Attorney General Drew Edmondson has accused petroleum giant BP America of a 2004 scheme to artificially drive up the price of propane.

The state's suit accuses BP of "unfair and deceptive acts in attempting to manipulate and manipulating the commodities markets for propane...with the effect of increasing prices in Oklahoma."

The state accuses BP of orchestrating a successful strategy to corner the February 2004 propane market and manipulate prices for the commodity. The state alleges, by the end of that month, BP owned 88 percent of all propane in the Texas system, which is the primary source for the gas in Oklahoma.

According to the complaint, BP's actions had increased the price of propane more than 40 percent from Feb. 4 to Feb. 25. In contrast, the state of Washington, which relies on an Alaskan system for its main propane supply, saw prices decline during that same period.

Propane is a multimillion dollar industry in Oklahoma and, according to the state's complaint, energy systems designed to burn propane cannot run on other fuels.

"Oklahomans who use propane systems to heat their homes and power their businesses were held hostage by BP's scheme and had no other choice but to buy propane at the artificially higher price," Edmondson said. "Propane is heavily used by our state's agriculture community as well, and spikes in prices can have a significant impact on Oklahoma farmers."

The state's civil lawsuit, filed in Oklahoma County District Court, seeks to prohibit BP from engaging in similar conduct. The suit also seeks consumer restitution and penalties. Defendants in the suit are BP America and subsidiaries BP Corporation North America Inc., BP Products North America Inc. and BP American Production Co.

Although BP has already settled similar federal and class action suits, few if any Oklahoma consumers were included in those cases. Because of the complexities of commodities and futures law, the state is consulting with legal experts in that field regarding the lawsuit.

When you're the state with more foreclosures than any other, chances are youll have more than your fair share of foreclosure "consultants." California Attorney General Jerry Brown, seeking to protect his citizens from shady rip-offs, has issued a directive forcing foreclosure consultants to register with his office and post a $100,000 bond by July 1, 2009.

Those who fail to do so will be in violation of state law, subject to criminal penalties of up to a year in jail and fines ranging from $1,000 to $25,000 per violation.

"California is awash with con artists who prey on vulnerable families facing foreclosure," Brown said. "By forcing foreclosure consultants to submit detailed information to my office and post a $100,000 bond, this registry will help bring long-overdue transparency to this shadowy world."

In California, as well as other states, scam artists pose as legitimate foreclosure consultants, promising homeowners they will prevent foreclosure. In reality, these scam artists charge huge up-front costs, but don't provide any help. Often, they make matters worse.

Earlier this month, Brown's office prosecuted a scam artist who allegedly provided hundreds of homeowners with forged bank documents and directed them to send their mortgage payments to accounts she had created, instead of the homeowners' lender.

Additionally, Brown's office has seen a significant increase in the number of complaints from homeowners regarding foreclosure consultants.

The registry unveiled Monday will provide Californians with information about potential consultants and recourse in the event that a consultant violates the law.

All foreclosure consultants operating in California must post a $100,000 bond and register with Brown's office by July 1, 2009 and submit the following information:

• Name, address, and telephone number;

• All names, addresses, telephone numbers, websites, and e-mail addresses used or proposed to be used in connection with their business;

• Copies of all advertising;

• Copies of each different contract the consultant will use with consumers; and

• A copy of its $100,000 bond.

Foreclosure consultants who provide proper information will receive a Certificate of Registration. Brown's office, however, may refuse to issue, or revoke, a Certificate of Registration if the foreclosure consultant has made any misstatement in its registration form, has been convicted of fraud or misrepresentation, has been convicted of a violation of the state's foreclosure consultant laws, California's false advertising, unfair or deceptive practices laws or other laws dealing with mortgages.

If the company violates the law, Brown said a court may order restitution to victims out of proceeds from the $100,000 bond.

In order to obtain a Certificate of Registration by July 1, 2009, foreclosure consultants should send in their registration application and materials as soon as possible so they can be reviewed prior to July 1.

The registry was established through legislation sponsored by Speaker of the Assembly Karen Bass, AB 180, which was signed into law last year.

Facing a lawsuit, health club chain Peak Fitness agreed to stop selling prepaid gym memberships in North Carolina until the company can secure bonds for each health club. North Carolina Attorney General Roy Cooper said hard times make it more important than ever to follow the rules.

"Consumers shouldn't be left out in the cold when their health club closes," Cooper said. "These clubs must follow the law before they take upfront money from new members."

Cooper filed suit against Peak Fitness last week, obtaining a consent judgment. Under the consent judgment, Peak Fitness and its owner Jeffrey R. Stec are barred from selling prepaid gym memberships until the company gets adequate bonds for each health club. Peak Fitness can continue to operate but can only collect money from customers who pay month to month for their membership.

Cooper's office was notified in March that Peak Fitness' bonding company was canceling all of Peak Fitness' bonds as of May 12. Peak Fitness has not been able to secure replacement bonds. These bonds are required by state law to reimburse consumers if the health club closes and the company doesn't have money to refund consumers who paid in advance.

In addition, Peak Fitness is required to submit sworn statements of liability to the Attorney General's office twice a year. These statements are used to determine the amount of bond necessary. In March, Peak Fitness did not submit sworn statements for all health clubs and understated its liability by approximately $2 million in the statements that were submitted.

Earlier this year, Cooper entered into a consent judgment with Peak Fitness that made substantial changes to customer service, contracts and billings at all 28 of its health clubs across North Carolina. Peak Fitness agreed to designate a single point of contact to handle consumer complaints, clearly post contact information for Peak's billing company, give advance notice to gym members and the Attorney General's office when a health club closes or transfers memberships, and purchase and maintain appropriate bonds for each health club.

Since January's consent judgment, Peak Fitness has abruptly closed gyms in Charlotte, Garner, Knightdale, Raleigh and Winston-Salem. Also, Peak Holdings, a subsidiary of Peak Fitness, filed for Chapter 11 bankruptcy in April.

In the past five years, Cooper's office has received more than 500 complaints regarding Peak-related health clubs.