Current Events in July 2009

Various states this week began notifying consumers that money is now available from the $150 million settlement negotiated with subprime lender Countrywide Financial last year. The company is now part of Bank of America.

Bank of America said today that letters are being mailed to borrowers who may be eligible for the foreclosure relief program included in an agreement with state Attorneys General announced last October. Up to $150 million is allocated nationally to provide assistance for certain borrowers who experienced a foreclosure, short sale or deed-in-lieu of foreclosure on their mortgage originated by Countrywide. Participating states may have additional eligibility criteria.

The funds are part of a settlement Attorneys General negotiated as a result of questionable lending practices exercised by employees of Countrywide, including predatory lending.

"Countrywide took advantage of families trying to achieve the American dream," said Michigan Attorney General Mike Cox. "Through this settlement, families across Michigan will receive a helping hand."

In order to be eligible for the settlement, borrowers had to receive a Countrywide Financial loan between January 2004 and December 2007. The borrower's home had to be foreclosed on between January 2004 and December 2008. Those eligible received sub-prime loans or pay option loans (e.g. adjustable rate mortgages) and later lost their homes. Eligible borrowers will receive a letter from their state attorney general, claim forms, and postage-paid return envelopes.

Forty states are participating in the program and have been allocated funds. Borrowers will be notified by letter from their state if they are eligible to receive a settlement payment. Payment amounts will vary.

Eligible borrowers have until October 22, 2009 to return the claim form to Countrywide Financial's settlement administrator. It is expected that the eligible borrowers will receive payment from Countrywide in early 2010.

Florida remains one of the nation's hardest hit foreclosure regions, making it ripe for so-called foreclosure rescue operations that take advantage of distressed homeowners.

In a crackdown on such operations, Florida Attorney General Bill McCollum has filed a lawsuit against four related South Florida companies that allegedly charge up-front fees for loan modification services to homeowners facing foreclosure.

FHA All Day.Com and owner Jason Vitulano, as well as three other affiliated companies, purportedly collect up to $1 million in up-front fees on a monthly basis. The companies were allegedly soliciting hundreds of consumers nationwide via the internet and though telemarketing robo-calls which illegally used President Obama's voice.

An investigation conducted by members of the Attorney General's Economic Crimes Division, working as part of the Attorney General's Mortgage Fraud Task Force, found evidence that Vitulano and his companies were charging up-front fees as high as $5,000 for foreclosure-related loan modification services. Vitulano also allegedly claimed to have an attorney on staff available to assist homeowners, but investigators believe no attorneys are currently working on any of the loan modification files.

Consumers who complained to the Attorney General's Office also reported that the companies have not performed the promised services and that they were unable to contact the companies or get refunds. The Attorney General's Office has received over 300 complaints about Vitulano and his related companies.

The Attorney General's lawsuit seeks a permanent injunction prohibiting the defendants from charging up-front fees, restitution on behalf of all victimized consumers, civil penalties of $15,000 for each violation of the Foreclosure Fraud Prevention Act, and reimbursement for fees and costs related to the investigation. The companies are currently located in Deerfield Beach, Florida, but were previously located in Boca Raton and Delray Beach, Florida.

Polaris Industries is recalling about 4,700 2009-model ATVs. The valve assembly can fail in freezing temperatures, causing oil to leak into the exhaust system. This could pose a fire and burn hazard to the rider.

The firm has received six reports of the valve assembly failing in freezing temperatures, resulting in three small fires. Minor fire damage to air boxes, ignition coils and the seat were reported.

This recall involves the Polaris ATVs with model year 2009. The ATVs were sold under market names Sportsman ESP XP 850 and Sportsman XP 850 ATVs. The model and serial number identification decal is located on the left side of the machine on the frame rail below the front fender. The following models are being recalled:

Polaris dealers nationwide sold the ATVs from September 2008 through June 2009 for about $9000.

Consumers should immediately stop using the ATV in sub-freezing temperatures and contact their local Polaris dealer to schedule a free repair. Registered owners have received direct mail notification of this recall if they are likely to experience consistently sub-freezing temperatures.

For additional information, contact Polaris toll-free at (888) 704-5290 between 8 a.m. and 5 p.m. CT Monday through Friday, or visit the firms Web site at www.polarisindustries.com.

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

July 22, 2009
An investigation by the states of Massachusetts and New York found Boston-based Emerson College unfairly steered students to borrow from certain lenders that gave inducements to Emerson's financial aid staff.

In many instances, these lenders failed to provide Emerson's students with competitive loan terms, the investigation found.

The settlement is the first student lending resolution to directly reimburse students for the extra costs they incurred by following their school's misleading lending advice. Under the terms of the settlement, Emerson will pay $775,859 to students who took Stafford loans from either Citizens Bank or JP Morgan Chase & Company during academic years 2004-2005, 2005-2006, or 2006-2007.

The probe determined that between 2004 and 2007, Emerson designated Citizens Bank and Chase as "preferred" lenders and led students to borrow from these lenders even though Citizens and Chase provided more expensive Stafford loans than other lenders. Over 4,000 present and former undergraduate and graduate students will receive payments ranging from $50 to $839.

"Our investigation into the student loan industry has revealed some troubling practices that increased the cost of borrowing for students," said Massachusetts Attorney General Coakley. "Our office will continue to hold accountable schools that exploit students' trust by needlessly steering students into expensive loans. We are very pleased that Emerson cooperated with our investigation and that it is the first Massachusetts school to enter into a settlement that compensates borrowers."

"When we began our investigation into Emerson College, a list of the activities that were carried out by their financial aid office and former director could have served as a list of exactly what a school should not do," said New York Attorney General Andrew Cuomo. "Their financial aid office put personal preferences for expense-paid trips and free giveaways over the best financial interests of their students. The director of financial aid was even getting paid thousands of dollars from one of the lenders the college was recommending to students. With this agreement, Emerson has changed its practices to better serve its students, and I am pleased to resolve this investigation."

In addition to paying restitution, Emerson has agreed to conduct reforms aimed at preventing conflicts of interest, bringing transparency to the student loan process, and preserving students' ability to use the lender of their choice. Among other things, the conduct reforms require Emerson to put the financial interests of its students first when choosing to recommend a lender and prohibit Emerson's financial aid employees from accepting anything of value from lending institutions, joining lender advisory boards, or entering into joint ventures or consulting agreements with lenders.

As part of its investigation, the two states took testimony from Emerson's financial aid employees and reviewed emails, contracts, and other documents. The Attorney General's investigation found that:

Emerson failed to prevent the gifts, gratuities, free and discounted services that Emerson and its financial aid staff received from influencing Emerson's decision making process in choosing its "preferred" lenders.

Emerson made inaccurate statements to students regarding the advantages of using its "preferred" Stafford lenders.

Emerson created a Stafford loan process that made it difficult for students to choose lenders that Emerson did not recommend as "preferred," failed to provide students with information as to how to select a non-preferred Stafford lender, and actively discouraged students from using non-preferred lenders.

In certain years, Emerson assigned students who did not designate a "preferred" lender to Citizens Bank, even though Citizens offered a more expensive loan than Emerson's other "preferred" Stafford lender at that time.

Between 2001 and 2003, Emerson purported to operate a financial aid hotline that was actually staffed and operated by national lending giant Sallie Mae. At the time Sallie Mae operated the "Emerson" hotline, Sallie Mae was dictating the loan terms and repayment benefits that Citizens and Chase offered to Emerson borrowers and purchasing the loans that Citizens and Chase made to Emerson borrowers.

The investigation also confirmed previously public information that Emerson employee Daniel Pinch received consulting fees from "preferred lender" Collegiate Funding Services and that Emerson received revenue sharing payments from its "preferred lender" EFP.

Emerson's Vice President for Communications Andy Tiedemann said the college's acceptance of the agreements "does not constitute an admission by Emerson of any fact or noncompliance with any state or federal law, rule, or regulation." He noted that the college cooperated fully in the investigations and has implemented all of the program changes that the Attorneys General have recommended, including adoption of a strict code of conduct governing the activities of its student financial aid staff.

A Texas company selling acai berry supplements has agreed to end a number of consumer abuses, following an investigation by Texas Attorney General Greg Abbott.

Under the settlement, FXsupplements.com, based in Arlington, Texas, agreed to stop shipping unauthorized orders to customers, refrain from making false health claims, and clearly disclose its terms of service to future purchasers. The online vendor also agreed to provide refunds to customers that it overcharged for its products.

Distributor Austin Hilton widely advertised the "acai berry" supplement as reducing the risk of heart attack, Alzheimer's disease and cancers. His advertising materials also claimed the product could limit premature aging.

Web advertisements indicated that the Acai Berry Maxx product was "naturally potent in antioxidants" and could flush up to 30 pounds of waste and toxins from the body. Hilton's claims are not backed by sound scientific studies, and they have not been approved by the U.S. Food and Drug Administration.

When customers clicked on the FXsupplements.com or acaiberrymaxx.com advertising links, they were informed that they would have four minutes to place their orders before the free trial of the Acai Berry Maxx product expired. Customers who completed orders were asked to pay a $5.95 shipping and handling fee. To make the required payment, purchasers had to provide their credit or debit card numbers.

The attorney general's investigation found that this transaction led customers to a "terms and conditions" page that failed to clearly disclose several problematic provisions. By accepting the "free" 15-day supply valued at $65, Abbott said customers unwittingly entered into a "negative option" plan with the company. Under this scheme, FXsupplements.com would automatically "renew" orders after the 14-day trial period expired without customers' express authorization to continue. The renewal forced customers to pay $80 for one-month supplies of Acai Berry Maxx, even after customers demanded cancellation.

According to state investigators, the negative option language embedded within the "terms and conditions" violated state law. Under the Texas Deceptive Trade Practices Act, terms providing for ongoing contractual obligations must be disclosed clearly and conspicuously on the contract.

Investigators also discovered that FXsupplements failed to promptly ship orders. As a result, customers did not receive their free products until the free-trial had nearly expired. This gave customers little time to try the products without obligation and decide whether to order additional products. Meanwhile, Hilton and his companies automatically put customers onto a revolving shipment of prepaid products after the trial period ended without customers' knowledge or consent.

While Hilton touted Acai Berry Maxx as a remedy or cure for diseases, FXsupplements' "terms and conditions" contained fine-print language acknowledging that the products were not intended to diagnose, treat, cure or prevent any disorders and diseases. Importantly, the FDA has not approved Acai Berry Maxx as a drug with the curative properties claimed by Hilton.

Hilton and the defendant companies, which also includes Hilton HG, Ltd., agreed to numerous corrective measures and penalties, including customer restitution and Web page modifications. The agreed final judgment prohibits Hilton and FXsupplements from relying upon false advertising or deceptive schemes to sell the products. Under the agreement, material information cannot be obscured within the purchase agreements' "terms and conditions."

If the defendants employ the "negative option" billing plan in the future, they must clearly disclose the steps customers can take to discontinue their contract. Additionally, customers who are wrongly charged for unwanted products must receive prompt refunds. Hilton and his companies must also provide reliable telephone customer service in order for customers to contact the company.

Consumers often make the mistake of paying a firm that says it can stop bill collectors from harassing them. It's usually a waste of money. They would be better off calling their state attorney general, who in most cases will take on these bullies for free.

In West Virginia, a woman authorized an Ohio collection agency to charge $5,000.00 to her credit card because the company was threatening to have her daughter arrested at work. The same collection agency told another consumer that his daughter would be "arrested for fraud of the federal government" unless she made an immediate payment of $5,000.00 toward a student loan.

Such strong-arm collection tactics are effective, but much like holding a gun to someone's head, they are illegal.

It is precisely this type of conduct that West Virginia Attorney General Darrell McGraw says he seeks to stop by filing a lawsuit against the company that allegedly made these threats to several West Virginians, National Enterprise Systems, Inc. ("NES") of Solon, Ohio.

McGraw's complaint alleged a wide range of other unlawful conduct, including adding unlawful collection fees to tuition owed by students to West Virginia colleges and universities. The suit asks the court to order NES to cease its abusive practices, to pay civil penalties to the state, and to award restitution to consumers who were victimized.

The firm, it turns out, targets consumers nationwide. Rachael, or Norwalk, California, says she received harassing phone calls at work, where she is not permitted to accept personal phone calls.

"Dispite my many request for this company not to call me, they continue to do so," she told ConsumerAffairs.com. "When I explaine to them that I can't have these phone calls, they are always rude and aggressive."

"Failure to pay a debt is not a crime and companies that make such false threats have violated both state and federal debt collection law.," McGraw said. "My office will not tolerate abuse and harassment of consumers who may be in debt through no fault of their own. The Legislature has authorized my office to enforce the laws that prohibit such conduct, and we intend to do so, particularly when the unlawful conduct is as extreme as has been alleged against National Enterprise Systems."

Last month JP Morgan Chase targeted its low-interest credit card holders with a big hike in minimum monthly payments, setting off howls of protests. This month Chase appears to have launched a campaign to close some accounts altogether.

David, of Gilbert, Arizona, said his Chase account was closed and he only found out when he tried to use the card.

"I tried to charge $25 to the card and it was denied. When I called Chase they said it was due to my credit report," he told ConsumerAffairs.com.

Tavis, of Alexandria, Virginia received a letter saying Chase is closing her account. She said she was told it was due to high balances and low available credit.

"This was a WAMU account that I've had for over three years," she told ConsumerAffairs.com. It was never late and I always paid over the minimum."

In fact, many of the complaints to ConsumerAffairs.com about Chase closing credit accounts appear to come from former Washington Mutual customers, who became Chase cardholders when Chase acquired WAMU.

Many consumers also are upset about the way they find out their credit card accounts have been closed. They say they learn about Chase's action when they try to use the card and it doesn't work.

"I don't have a letter, I don't have a packet that indicates that they have the right to shut off our accounts without our knowledge," said Susan, of Santa Clara, California. "They are okay with us being embarrassed by our cards being declined in stores or wherever we shop."

Denise, of Broadway Heights, Ohio, thinks her account closing has something to do with the fact that it's a former WAMU account, and sees a pattern with other complaints.

"They said they sent a letter over a week ago and I have not received it as of yet," she said. "I always paid my card off in full every month. Never left an outstanding balance. Also, customer service said the same thing about a credit agency report on me. I was also a customer of WAMU."

In fact, all credit card companies are taking action - some more aggressive than others--to reduce their portfolios. Customers that have the slightest credit blemish are being weeded out, or hit with a large interest rate increase. Even cardholders with good credit are being lumped in with more questionable customers.

Credit card companies say they are only protecting themselves. With rising default rates, they must prepare for the worst. Left unsaid is the fact that new credit card reforms take effect in February, which will restrict their ability to use these tactics--so they're getting as much revenue as they can while the getting is good.

Some pharmacists have reported that patients have changed the way they take medications because of the downturn in the economy, according to a recent survey by the American Pharmacists Association. This includes skipping doses and splitting tablets in an effort to save money.

Regarding the practice of splitting tablets, the Food and Drug Administration (FDA), the American Medical Association, and other medical organizations advise against it unless it's specified in the drug's labeling.

Tablet splitting often involves buying higher strength tablets and then breaking the tablets in half or quarter doses as a way to lower drug costs. For instance, a 30 mg tablet may cost the same amount as the 15 mg tablet. So a patient may try to save money by buying the 30 mg tablets and splitting them all in half. This might seem like a smart money-saving strategy, but the practice can be risky.

Mansoor Khan, Ph.D., director of the Division of Product Quality Research in FDA's Office of Pharmaceutical Science, tells ConsumerAffairs.com that splitting "could affect the quality of the drugs." He points out that some medications have a special coding and that splitting the tablet could affect the distribution of the medication it contains.

There are other reasons why splitting tablets is risky:

• You might get confused about the correct dose. There have been cases when people have purchased higher strength tablets intending to split them, but then they forgot to split them. Instead, they took the whole tablet. This led to accidentally taking too much medicine.

• Some tablets are hard to split. Some tablets are too small to split, may have an unusual shape that makes them hard to split, or may crumble more easily when split. Also, some people may not be able to split tablets correctly. These factors make it difficult to accurately split a tablet.

• Not all pills are safe to split. Patients may mistakenly think that any pill can be split. But some pills, such as capsules and time-released drugs, should always be taken whole. For example, some tablets are coated with a substance that helps to release the medicine slowly. Splitting these tablets destroys the coating, which means you might absorb the medicine too fast or not at all.

If you still want to split a tablet, the FDA has approved drugs where that is part of the manufacturer's drug application. "If the tablet is approved for splitting," says Khan, "the information will be provided in the drug's professional prescribing information."

He adds that FDA does not encourage the practice of tablet splitting unless it's specified in the drug's professional prescribing information. "If a patient is considering splitting a tablet, FDA recommends that the patient get advice directly from his or her doctor or pharmacist to determine whether it is appropriate or not for a particular drug," Khan concluded.

Haier America Trading LLC has agreed to pay a civil penalty of $587,500 to settle allegations that it failed to inform the Consumer Product Safety Commission (CPSC) of a defect and fire hazard in the company's Oscillating Tower Fan, model FTM140GG.

The penalty settlement, which has been provisionally accepted by the Commission, resolves CPSC staff allegations that New York City-based appliance manufacturer knowingly failed to report immediately -- as required by federal law -- that the fan posed a risk of fire. Repeated bending of the fan's wires during oscillation caused the wires to break, resulting in a fire hazard.

From May 2004 to October 2004, Haier America received as many as 14 reports of incidents involving the fans, including some fires and one report of injuries. During that time, it conducted testing and other analysis.

Haier America finally reported to CPSC in December 2004, only after CPSC asked the company to report. In November 2005, Haier America and CPSC announced a recall of the fans.

Federal law requires manufacturers, distributors, and retailers to report to CPSC immediately (within 24 hours) after obtaining information reasonably supporting the conclusion that a product contains a defect which could create a substantial product hazard, creates an unreasonable risk of serious injury or death, or violates any consumer product safety rule or any other rule, regulation, standard, or ban enforced by the CPSC.

"Prompt reporting in this case could have prevented fires and injuries," said CPSC Chairman Inez Tenenbaum. "Companies have a responsibility to immediately let us know of potential hazards, and we will hold them to their duty."

Fans aren't the only Haier America appliances with problems.

Darcee of Aptos, California, tells Consumeraffairs.com that a few days after her new (full size) Haier fridge was installed she noticed a small puddle near the base. She says the tray under the freezer was full with a sheet of ice.

When she called for repair, she was told by the repairman (verbally and in writing) that the problem was that the tube that should drain condensation had been "foamed up" with insulation during manufacturing. She says the service tech also warned that she was likely to have other problems because of the defect.

Darcee says customer service at Haier said "someone" would "get back to us" regarding a replacement. She says she's still waiting.

Mike from Columbus, Indiana, says a Haier dishwasher he bought stopped working less than 3 months after he bought it. He tells Consumeraffairs.com that when he called the company he was told that there were no service people in his area -- that he should return dishwasher to Menards where he bought it and exchange it.

Menards gave Mike a refund on the spot, but he says he spent another $220.00 for a better brand, asking what is the use of a warranty if the company does not have service techs in the area.

In agreeing to the Oscillating Tower Fan settlement, Haier America denies CPSC's allegations.

Taxpayers have shoveled billions of dollars in bailout funds to banks since last October in hopes of preventing a credit system collapse and, someday, getting the money back. But how do we know that some of that money isn't slipping through the cracks?

We don't know, says Neil Barofsky, who is the Special Inspector General for the Troubled Asset Relief Program. In a report, Barofsky said he has made plenty of proposals for better oversight of the money, but so far, he says, the proposals have been routinely ignored.

Barofsky singled out the Treasury Department for much of his criticism. He has asked Treasury to require TARP funds recipients to track exactly how they are spending the money. As of now, no such requirement has been imposed.

He says his suggestion of a "firewall," to prevent insiders from taking advantage of their knowledge, has also been ignored.

"Although Treasury has taken some steps towards improving transparency in TARP programs, it has repeatedly failed to adopt recommendations that SIGTARP believes are essential to providing basic transparency and fulfill Treasury's stated commitment to implement TARP 'with the highest degree of accountability and transparency possible,' " Barofsky said in his report.

Barofsky repeated much of his complaints in prepared testimony Tuesday morning before a House Oversight panel.

Congress insisted on establishing a Special Inspector General when it approved the first $700 billion bailout last fall--a sum that, at the time, seemed quite large. Since then, Barofsky's office has launched 35 criminal and civil investigations into a range of allegations from accounting and securities fraud to insider trading and public corruption.

Barofsky said some of the investigations have already led to charges against some accused of fraud in the administration of the government's bailout program.

In advance of his testimony, Baroksky said the U.S. taxpayers have now spent--or have committed to spend--more than $23 trillion to prop up institutions and individuals caught up in the worst of the recession.

A Treasury Department official calls Barofsky's figures "inflated," noting they contain funding that has already been repaid. In fact, in one instance, Treasury officials say the government earned $4 million in interest.

Barofsky's main complaint seems to be what he sees as a lack of transparency in the administration of the TARP funds. He said banks have all said they intend to use TARP funds to shore up their balance sheets, but there is no requirement for banks to show what they have done with the funds.

It's often said that the Internet is where information just wants to be free. That may be, but it's also where -- just as in print and on the air -- commercial information had better be factual. Fraud is fraud, even on the Internet, as New York Attorney General Andrew Cuomo has reminded the cyberworld.

Cuomo is slicing $300,000 out of the hide of Lifestyle Lift for posting phony reviews on Internet sites. The case is thought to be the first of its kind involving the growing problem of "astroturfing" -- and it is causing consternation throughout the "reputation management" business, which uses tricks and deception to counter legitimate consumer reviews.

In the New York case, Lifestyle Lift employees published positive reviews and comments about the company to trick Web-browsing consumers into believing that satisfied customers were posting their own stories.

Actual reviews from consumers are much less laudatory. "J" of Elkridge, Md. told ConsumerAffairs.com in a recent complaint that she was told by a Lifestyle Lift doctor that her facelift would be a "minor one-hour procedure" involving "two small incisions." In fact, it turned into much more than that, she said.

"I was given approximately 15-20 shots in my face ... and was horrified to realize I was being cut from the front of each ear to the back. I later learned that what I was given was an SMAS...an entire lower facelift without anesthesia!" J said. "I had NO IDEA that I would have my earlobes cut off my face and sewn back on. I had no idea that I would suffer with extreme pain and numbness for up to nine months later. I didn't know that there was a possibility that I would suffer with numbness on both sides of my face and itching that becomes unbearable, one and a half years after the procedure.

J also said she was shown a video presentation which included supposed news reports from Fox, NBC and other news outlets extolling the virtues of the procedure.

A health-oriented site, RealSelf.com, carries negative comments from doctors as well as consumers.

"The advertisements show pictures of patients who have achieved excellent results. From the patients I have seen who have had LSL procedures, these results are not at all typical," said Brent Moelleken, MD, a plastic surgeon in Bevely Hills, Calif.

"When a facelift is performed with minimal undermining (as with a LSL), the skin does not advance properly. You haven't reached the tissues to pull on them. Instead, you are pulling on adjacent tissues, and the force to the target tissues (i.e. loose skin of the jowl area) is reduced. Surgically speaking, you're not there yet," Moelleken said.

In 2008, Lifestyle Lift sued RealSelf.com alleging trademark infringement. The suit ended in a confidential settlement. A similar suit against infomercialscams.com -- no longer active on the Internet -- was dismissed by a Detroit court.

Among the more disgruntled consumers who have complained to ConsumerAffairs.com is Brian of Chicago. He had the Lifestyle Lift procedure performed in 2003 and said it left a visible scar that he has not been able to hide with sideburns, as his Lifestyle doctor, Robert Schaeffer, originally suggested.

"During my follow-up visit Dr Schaeffer suggested I wear large earrings!," said Brian who, as his name suggests, is a man. He rejected the notion.

FTC probe

Cuomo said the tactics constitute deceptive commercial practices, false advertising, and fraudulent and illegal conduct under New York and federal consumer protection law. While Cuomo's action is the first on the state level, the Federal Trade Commission (FTC) has also been investigating the use of word-of-mouth marketing online and may issue new or revised rules on the practice.

For more than 30 years, the FTC has regulated the use of endorsements and testimonials in advertising. While phony reviews are not traditional paid advertisements, they may be targeted by prosecutors if any goods, services or money changes hands in enticing customers, employees and paid agents to create marketing content they know to be false.

Those who are compensated to promote or review a product using these techniques are not exempt from the laws of governing truthful advertising, said Richard Cleland, assistant director, division of advertising practices at the FTC, in a statement.

Cuomo's action won support from legitimate marketing industry organizations. The Direct Marketing Association said Cuomo's action was supported by ethical business best-practices. According to the association's guidelines, Testimonials and endorsements should be used only if they are: Authorized by the person quoted; Genuine and related to the experience of the person giving them both at the time made and at the time of the promotion and; Not taken out of context so as to distort the endorser's opinion or experience with the product.

Other marketing gurus agreed. "Having a company force its workers to anonymously blog about its products, regardless of whether they use them or like them, and attack others is pathetic," said Edward Barrera, editor of ADOTAS, a newsletter focused on Internet advertising.

But at Webmasterworld.com, an anything-goes forum where shady practices such as "search engine optimization" are discussed and debated, the reaction was more mixed.

"I think the overall message here is that reputation management needs to be an at-arms-length transaction with an unconnected third party rather than an in-house campaign," said one posted. "Yes, absolutely, and bank robbers need to wear masks," shot back another.

Lifestyle Lift Company president Gordon Quick said in a statement that Cuomo's complaints "stem from a period prior to the present management team's leadership" and that all existing Web content meets acceptable business standards. The company also characterized some of the reviews as "representative of patient testimonials and comments rather than actual verbatim comments."

"Reputation management"

Besides posting phony rave reviews, reputation management companies often promise businesses that they can remove or somehow modify negative comments on third-party sites.

SERM Internet, LLC, advertises that it can "remove" negative comments appearing on ConsumerAffairs.com. "Removing complaints involves search engine marketing and optimization," the company's Web site claims.

Another company, Reputation Armor, claims that it can remove complaints appearing on RipOffReport.com from Google, Yahoo and other search engines. The company says its "average fee" is $995-$2500.

The "removal" process usually consists of producing large numbers of pages designed to crowd out legitimate reviews form the search engine indexes -- similar to the Lifestyle techniques Cuomo objected to.

Lifestyle Lift, which has more than 40 locations across the U.S., engaged in a concerted effort to bombard Internet message boards with positive stories about themselves, Cuomo said. Lifestyle Lifts president believed that negative Internet postings had significantly hurt the companys reputation and thought the success of the company hinged on controlling messages posted online.

Company employees were directed to create accounts with various Internet message boards and pose as satisfied customers of Lifestyle Lift. Employees also attacked legitimate message board posters who criticized Lifestyle Lift and tried to get those posts removed from message boards.

Internal emails uncovered in Cuomos investigation show that Lifestyle Lift employees were given specific instructions to engage in this illegal activity.

One e-mail to employees said: Friday is going to be a slow day - I need you to devote the day to doing more postings on the web as a satisfied client. Another internal email directed a Lifestyle Lift employee to Put your wig and skirt on and tell them about the great experience you had.

In addition to posting on various Internet message board services, Lifestyle Lift also registered and created stand-alone Web sites, such as MyFaceliftStory.com, designed to appear as if they were created by independent and satisfied customers of Lifestyle Lift. The sites offered positive narratives about the Lifestyle Lift experience.

Some of these sites purported to offer forums for users to add their own comments about Lifestyle Lift. In reality, however, Lifestyle Lift either provided all the user comments themselves, or closely monitored and edited third-party comments to skew the discussion in favor of Lifestyle Lift.

According to the Attorney Generals settlement, Lifestyle Lift employees will no longer pose as consumers when publishing on the Internet. The company will not promote Lifestyle Lifts services on the Internet without clearly and conspicuously disclosing that they are responsible for the content. The company will also pay $300,000 in penalties and costs to New York State.

In a 50-page opinion, a federal judge has certified a class action consumer suit that charges Babies "R" Us and several high-end manufacturers illegally conspired to fix prices by squeezing out Internet competitors who had been undercutting the retail giant.

It's one of the few class actions to be certified after recent decisions by the Supreme Court and an appeal courts set more rigorous standards for certifying class actions in price-fixing cases. The case is a companion to an antitrust case filed by BabyAge and BabyClub, two Internet retailers who said their efforts to gain a foothold in the market were squashed by the alleged conspiracy between Babies "R" Us and manufacturers including Britax, Perego, Medela, Maclaren, Kids Line and Baby Bjorn.

The manufacturers allegedly implemented new policies targeting Internet retailers in response to pressure from Babies "R" Us and its parent company, Toys "R" Us.

Plaintiffs attorney Elizabeth Fegan said consumers who bought more than $500 million in strollers, high chairs, car seats, breast pumps and other baby products were overcharged by Babies "R" Us between 2001 and 2006 because of the alleged minimum pricing agreements.

Attorneys for the companies argued that the plaintiffs could not prove their allegations through but U.S. District Court Judge Anita Brody said the plaintiffs have already begun to collect evidence that supports their contention.

"The evidence indicates that BRU pressured the manufacturers to prevent internet discounting, they responded by curtailing specific retailers or implementing distribution policies targeting internet retailers, and this response benefitted BRU but harmed the manufacturers," Brody wrote.

A marketing professor quotedf by The Wall Street Journal said that consumers may have paid as much as $100 million more for the baby products than they would have without the alleged price-fixing agreements. Greg Gundlach of the University of North Florida said he based his estimated on U.S. Justice Department studies.

The court is expected to set a trial date in 2010.

July 20, 2009
Honda is recalling 2001 Civic and Accord models. The driver's airbag could produce excessive internal pressure, possibly causing the inflator to rupture. If this happens, metal fragments could pass through the air bag cushion material, possibly injuring vehicle occupants.

Dealers will replace the airbag inflator free of charge.

For more information, owners may contact Honda at 1-800-999-1009.

Consumers may contact the National Highway Traffic Safety Administration (NHTSA) at 1-888-327-4236 (TTY: 1-800-424-9153) or at www.safercar.gov.

The Ambassador's Group, which is affiliated with the controversial student-travel organization People to People, is facing a securities class action brought on behalf of its stockholders.

The complaint alleges that Ambassador's directors issued misleading and overly optimistic statements about the company's financial future. Among other things, the suit alleges that the directors failed to disclose a drop in travel participants and that fewer people who signed up for informational sessions went on to actually book trips. As a result of these deceptions, the stock was allegedly sold at artificially inflated prices.

Indeed, on October 22, 2007, when the directors announced financial results for the third quarter of that year, they conceded that the company's net enrolled participants for 2008 were 26,200, a sharp drop from the 37,300 that had signed up for the same period in 2007. The directors also admitted that this decrease would negatively impact [Ambassador's] 2008 earnings. After the announcement, Ambassador's Group stock fell 44%, to around $21 per share.

The complaint alleges violations of the Securities Exchange Act of 1934, the statute that regulates secondary trading of securities markets.

People to People, an organization that purportedly provides scholarships and travel opportunities to students, has spent the past several years embroiled in scandal.

People to People is known for sending travel invitations to long-dead children, upsetting parents and raising questions about the organization's recruiting and selection process. In 2006, Eugene and Margaret Beil received a letter inviting their daughter Katherine to join the group's trip to Europe. A nice gesture, except that Katherine died 14 years earlier, at 18 days of age. Just in case that wasn't egregious enough, in 2007 the organization invited Katherine on a trip to China during the summer of 2008. Katherine's mother Margaret said that the repeated promotions just re-open the whole death all over again.

Prison term

People to People further burnished its reputation in March 2007, when its former financial director was sentenced to 20 months in prison for stealing $148,144 from the organization. In a plea agreement, David E. Schlotzhauer conceded that, between 2001 and 2003, he embezzled money from People to People's checking account and used its credit card for personal expenses.

Perhaps most infamously, the company faced a wrongful death lawsuit after Tyler Hill, a 16-year old with diabetes and serious migraine headaches, died on People to People's excursion to Tokyo. Tyler's parents had worried about sending him on the trip in the first place, but were comforted by People to People's 24-hour medical response team and the organization's repeated assurances that Tyler would be in good hands.

Hill, an athletic history buff who had dominated his Type 1 diabetes from an early age, left the U.S. standing at 6'2 and 215 pounds. Two weeks later, he was braindead in a Tokyo hospital bead, his organs rotting and his eyes lifeless. His devastated parents decided to release him from life support. Although Hill wanted to be an organ donor, only his corneas were in good enough condition to be harvested.

Only later did the Hills learn the full details of their son's death. Tyler had become sick no less than three times before he was finally taken to a hospital. People to People refused Tyler's request to be taken to a hospital after he suffered altitude sickness during a hike up Mount Fuji. Only after he became unconscious did the leadership cave and give him the medical attention he desperately needed, court documents indicated.

The Hills and People to People settled the wrongful death action last month. The terms of the settlement are confidential and were not disclosed.

Not much change

The steady stream of scandal and litigation doesn't seem to have shamed People to People into cleaning up its act. ConsumerAffairs.com still receives a regular stream of complaints from consumers who say they have been misled by the organization. Many consumers pay People to People thousands of dollars to send their children on a trip, only to have their children's names removed from the travel list.

Colleen of Riverhead, NY, writes that, We paid over $2,000 and assumed final payment could be made closer to the trip. We attended all of the delegation meetings including a service project. Approximately two weeks ago, the delegation leader called to tell me my daughter was taken off the roster.

In a strikingly similar account, Susan of Mooreshead, NJ, writes, Placed 400.00 deposit on trip, intending to charge the full payment balance on my credit card closer to departure date (8 months later). Days before I went to place the full payment, I was told that my daughter was no longer on the trip and that I was entitled to no refund (although I was originally told verbally by the company that I would be able to obtain a full refund minus a fee of less than 100.00).

Invitations for non-existent children don't seem to have abated, either. Roberta of Brockton, MA, writes, I received an invite for my daughter to participate in a 'one time only opportunity' to travel to Japan this summer. I don't have a daughter, nor a son. Where are these people getting these names and why are they allowed to continue this marketing ploy?

People to People's website touts it as the worlds most recognized and respected educational travel provider and claims the organization was originally founded by President Dwight Eisenhower, though his name does not appear in any of the original incorporation documents.

As is customary for securities suit, the action was brought on behalf of the nominal company against its board of directors. The action covers anyone who purchased Ambassador's stock between February 8, 2007 and October 23, 2007.

Ambassador's, headquartered in Spokane, Washington, prides itself as a socially conscious education company, according to its website. In addition to People to People, the organization runs World Adventures Unlimited, another program that purportedly helps students travel abroad; and BookRags, a research site that provides study guides and other research tools.

More about People to People

A large shipment of that dangerous drywall from China apparently ended up in Mississippi. Mississippi Attorney General Jim Hood says his office has received multiple complaints and said he wants to alert more residents of his state to the problem.

"Our office has received several complaints on Chinese drywall," said Hood. "We are investigating these complaints, and encourage other consumers who may be victims to call us. We have been working with the federal government, other states, and other Mississippi agencies to collect more information on this issue."

In recent months, the U.S. Consumer Product Safety Commission has received numerous reports from people in 19 states and the District of Columbia involving problems they blame on imported drywall.

"Most drywall used by American homebuilders is made in the United States, but shortages in recent years spurred imports from China," said Hood. "Hurricane Katrina may have lead some homebuilders to used the imported drywall. Some signs of such drywall may include a rotten egg smell, or constant electrical problems."

The problem with the imported drywall first surfaced in Florida, another state hard hit by hurricanes in recent years, requiring extensive rebuilding. An investigation showed the drywall may be emitting sulfuric odors, potentially exposing homeowners to respiratory health problems. The emissions can also corrode air conditioning coils and wiring, posing a potential risk of electrical fire.

Although a number of drywall manufacturers may be implicated, the most commonly-cited is Knauf Plasterboard Tianjin Co., Ltd. (KPT), a China-based producer. The company regularly prints its name on the back of its drywall, making it the most easily identifiable potential culprit.

"Anyone who believes they have imported drywall in their home should notify both the Mississippi Department of Health and our office," Hood said.

When marketers promise free gas as sales promotions, it might be wise to view their promises with a bit of skepticism. New York Attorney General Andrew M. Cuomo is suing a Florida-based marketing company for employing a deceptive promotion involving free gasoline cards that actually was a rebate scheme with nearly impossible conditions.

Cuomos Office is suing Tidewater Marketing Global Consultants, Inc., headquartered in Clearwater, Florida, and President Crystal M. Clark for repeatedly deceiving consumers through a promotional free gas gift card program in order to generate business for several New York-based companies.

The Attorney Generals office began investigating the company earlier this year after Cuomo put a stop to similar deceptive promotions being run by Tidewater at a Skaneateles auto dealership. The Attorney Generals lawsuit seeks to bar Tidewater from operating in New York State, restitution for wronged consumers, and penalties and costs to the state.

This company chose to disregard important consumer protections that exist in New York and instead engage in a deliberately deceptive scheme, Cuomo said. Consumers who thought they were taking part in a free promotion instead ended up shelling out hundreds of dollars in order to get their free gas.

Since at least February of 2008, Tidewater Marketing, which also does business as Free Gas Central, Freegasredemption.com, FreeBeeGas.com, and FreeBieGas.com, touted itself as a redemption center for various marketing programs, including vacation packages, rebate offers and -- most notably -- gas gift card programs on behalf of various businesses across the country. These businesses -- primarily car dealerships -- offered gasoline certificates to customers as marketing tools, supposedly allowing the customer to redeem the certificate for free gasoline gift cards.

In reality, many consumers never received the cards despite repeated inquiries to the company. Cuomo said the rebate program also had unreasonable conditions that were nearly impossible to meet.

For example, for a consumer to fully redeem a $500 gasoline redemption certificate through Tidewater, a consumer would have to spend at least $2,000 at a local gas station over the course of 20 months in order to fully redeem a $500 gasoline redemption certificate through Tidewater (the redemption would be in the form of 20 $25 gas gift cards).

In West Virginia this month, Attorney General Darrell McGraw has taken action against two car dealers, winning their agreement to make good on promises of free gas they made to consumers. Both had placed requirements on the consumers to get the free gas.

"It is unlawful to advise consumers that they will receive a free gift and tie any other requirements to the receipt of the gift," McGraw said. "All the hoops consumers had to jump through to get their free gas were stated in the fine print a clear violation of the West Virginia Consumer Credit and Protection Act.

A class action lawsuit alleging that DirecTV imposes early "termination fees" of up to $480 on customers who cancel the service--often charging the customer's bank account or credit card directly without their permission--has been cleared to proceed by a California Superior Court judge.

The complaint, filed in Los Angeles Superior Court in September 2008 by Los Angeles resident Kathy Grenier, claims that when Grenier cancelled her DirecTV contract due to a malfunctioning receiver, she was hit with a $240 termination fee, withdrawn directly from her checking account. Grenier's suit was later consolidated with another suit brought by fellow California residents Amy Imburgia and Marlene Mecca.

That suit, Imburgia, et. al, v. DirecTV, Inc., alleges that DirecTV failed to disclose that it had mandatory contract "terms of service," and that cancelling the service ahead of time would incur termination fees. DirecTV, much like cell phone companies, would also use instances of replacing equipment or making changes to the service to automatically extend the customer's contract. The suit alleges that the practices were not disclosed to customers beforehand.

"This is a major step forward in our mission to obtain justice for California consumers cheated by DirecTV," said Consumer Watchdog founder Harvey Rosenfield, who, along with Litigation Director Pamela Pressley, is one of the attorneys in the case.

"California consumers who continue to have their bank accounts plundered without their consent by DIRECTV deserve their day in court, and the court's recent ruling will allow the plaintiffs to move forward with uncovering and exposing the extent of DirecTV's deceptive practices," said Ms. Pressley.

According to Consumer Watchdog, DirecTV had requested that the California case be stayed while federal cases against DirecTV, filed in both California and other states, were considered. Under the tactic of preemption, companies will often prefer to fight battles on the federal level in order to block stronger state laws from taking effect.

July 15, 2009
Brookstone Pharmaceuticals is recalling all lots of Concentrated Acetaminophen Drops (NDC#42192-504-16) in 16 ounce (473 ml) bulk containers.

This 16oz container is comparable to the size generally used to package regular strength acetaminophen liquid preparations. This aspect of the product coupled with the absence of an integrated dosage delivery device is a contributing factor to possible dosing errors, especially inadvertent overdosing. Brookstone has distributed 344 bottles nationally and has donated 5301 bottles to charity for international distribution.

Over dosage of acetaminophen may result in liver toxicity, kidney damage, and blood disorders. FDA is aware of several medication error reports that document life-threatening or fatal adverse events in children less than three years of age, due to confusion associated with the concentrated versus regular strength acetaminophen liquid. Also, in a recent FDA advisory panel, it was recommended that one of the two strengths of acetaminophen should be removed from the market due to possible confusion which could result in overdosing.

Brookstones concentrated acetaminophen contains acetaminophen 80 mg/0.8 mL. Regular strength acetaminophen elixir contains 160 mg/5 ml. The firm is recalling its product to the consumer level as a cautionary measure to minimize any confusion and potential risk to patients from dosing errors.

Brookstone Pharmaceuticals has notified customers that it has voluntarily stopped manufacturing and shipping Concentrated Acetaminophen Drops in bulk containers and has also advised customers (wholesalers and hospitals) to quarantine and hold the product for return to Brookstone Pharmaceuticals for a full refund. Customers with questions about the recall may contact Brookstone Pharmaceuticals, LLC at 1-800-541-4802, option 2. Brookstone has not received any adverse events associated with this product but due to recent advisory panel concerns, Brookstone has taken voluntary action.

Customers who have this product in their possession should stop using it immediately. Any adverse events that may be related to the use of this product should be reported to the FDA's MedWatch Program by phone at 1-800-FDA-1088 or by fax at 1-800-FDA-0178 or by mail at MedWatch, HF-2, FDA, 5600 Fishers Lane, Rockville, MD 20852-9787.

Chicago politicians used to live and die by the graveyard vote, but the dead no longer get much respect in the Land of Lincoln.

Hundreds of grieving and outraged families are being represented in class action lawsuits against an Illinois cemetery accused of illegally interring remains and altering grave sites in the name of profit.

Employees of the Burr Oak Cemetery in Chicago allegedly stacked and disposed of bodies in an attempt to create space at the graveyard in order to maximize their income. They also allegedly desecrated and destroyed bodies in order to resell the plots on which they were buried.

Between 200 and 300 grave sites are believed to have been disturbed. Additional remains were found on Friday, prompting Cook County Sheriff Tom Dart to declare the entire cemetery a crime scene. Dart predicted that the crime scene is going to continue to grow, adding that, we do not have an end in sight.

The alleged ringleader of the scheme, Carolyn Towns, previously served as the cemetery's manager. Neighbors and friends expressed the requisite shock and disbelief that she could be involved in such a heinous plot.

At least six lawsuits have been filed since the gruesome discovery.

A representative action, filed by Kevin Majors and Edward Strickland, charges Burr Oak with breach of contract, fraud, and breach of contract. At least one suit alleges intentional infliction of emotional distress, a relatively rare cause of action.

To prevail on this allegation, a plaintiff must show that the defendant's conduct was either intentional or reckless, and that it was extreme and outrageous. The plaintiff must also show severe emotional distress, and a causal link between such distress and the defendant's conduct. Intentional infliction of emotional distress is generally a difficult allegation to prove; in this case, however, Burr Oak's purported actions are so egregious that the plaintiffs likely have at least a fighting chance.

The sheer size of the cemetery presents investigators with a daunting challenge. The graveyard spans 150 acres and includes over 100,000 grave sites. Dart said that examining the entire property is like trying to read hieroglyphics.

Towns's financial history indicates that she was having financial trouble. She has filed for bankruptcy twice since 2001, and has several tax liens against her. Those close to her told local media outlets that her husband has held several jobs in the past few years.

Towns and three other employees are being held at the Cook County jail, each charged with one felony count of dismembering a body.

African-American landmark

Burr Oak was the Midwest's first African-American cemetery, and is the final resting place of Emmett Till, whose murder in 1955 helped accelerate the civil rights movement. Even Till's memory wasn't spared from the scheme; his original casket, which was supposed to be preserved for a memorial, was found rusted out in a cemetery shack.

Other notables at Burr Oak include musicians Willie Dixon, Dinah Washington, and Otis Spann; and Negro Leagues Baseball players Jimmie Crutchfield and John Donaldson, according to Graveyards.com.

The incident is the latest reminder that scandal and greed can affect even the most sacred contracts. In 2002, over 200 bodies were found at a Georgia crematorium, shocking families who thought the bodies had long ago been cremated. In 2006, six funeral homes in Brooklyn were found to be illegally harvesting organs from bodies stored at the facilities.

Because the crime scene in Chicago is rapidly expanding, family members will have to wait until at least Thursday to enter the cemetery grounds. Those with questions can contact the Cook County sheriff at 800-942-1950.