They’re left with hefty lawsuits instead of promised savings

By Gloria Irwin
Beacon Journal business writer

The idea of big savings on monthly phone service by renting a piece of equipment called a Matrix box was too good to resist for a Carroll County car dealership.

``The lure was that our bill was lower, plus it would never go up,’’ Michael Guess, the owner of Guess Motors Inc. just outside Carrollton, said of the pitch from a NorVergence salesman.

The promise of hefty savings -- ``$600 to $800 a month is what they said they could cut the phone bill,’’ Guess said -- pulled in about 11,000 small businesses nationwide.

They signed five-year leases for an electronic router that NorVergence, a New Jersey reseller of phone services, said was necessary for operating its telecommunications program.

In return, NorVergence customers were supposed to get high-speed Internet, unlimited local and long-distance calling and unlimited cell phone use over T1 lines.

NorVergence sold the leases those small businesses signed to 26 lenders, including Preferred Capital of Brecksville.

And even though NorVergence wasn’t able to deliver the service it promised and has since filed for bankruptcy, Preferred Capital wants its money for the leases.

Since September, Preferred Capital has filed more than 200 lawsuits in Summit County Common Pleas Court -- and is still filing suits on a daily basis.

Preferred attorney Jason Hickman with the Roderick Linton law firm in Akron said he could not discuss the matter and would not say how many total suits will be filed against former NorVergence customers.

Mark Sibila, controller for Preferred Capital, wouldn’t say, either.

``The company has no comment on pending legal matters,’’ he said.

Preferred is suing Guess Motors for more than $63,000 because the dealership hasn’t made a lease payment since July 20.

In June, Guess said, he sent a certified letter to NorVergence demanding repairs or a release from the lease.

Because of faulty phone service, the dealership was virtually closed down, Guess said.

The NorVergence service ``did work for a little bit’’ after it was installed, Guess said, but then problems began.

At one point, customers couldn’t call in, and the dealership’s salespeople couldn’t call out, Guess said.

Guess mailed NorVergence a certified letter demanding repairs within seven days or release from his contract. By coincidence, NorVergence filed for bankruptcy a week later.

NorVergence left its customers to fend for themselves.

``I had no phone service, and I had to go back to my other way of getting long-distance and phone lines,’’ Guess said.

He estimated he spent $3,000 having his previous phone service restored.

Now he’s facing Preferred’s lawsuit. He’s hired an attorney in Carroll County and one in Akron.

``They’re saying they leased us equipment, not necessarily phone service,’’ he said of the NorVergence deal. Even though the equipment didn’t function properly, Guess acknowledged, that may not stop Preferred Capital from collecting on the lease.

``It’s a bad deal all the way around,’’ Guess said. ``We’re on the losing end of this.’’

That’s likely the case, said attorney Terry Zimmerman with the law firm of Hardesty, Kaffen & Zimmerman in Akron.

State and federal consumer protection laws don’t apply to transactions involving businesses, he said. Additionally, even if the product is faulty, that isn’t likely to stop collection on the lease of the product.

Attorneys general in New Jersey, Florida, Texas, Illinois and Missouri have been investigating complaints about NorVergence, which was formed in 1996 by Thomas N. Salzano. A brother, Peter Salzano, is a principal officer.

In 1998, Thomas Salzano was fined $1.2 million by the Federal Communications Commission and 20 attorneys general. His previous company, Minimum Rate Pricing Inc., was accused of slamming, or changing customers’ long-distance carriers without their consent.

The Summit County filings against former NorVergence customers mostly involve out-of-state companies. Many seek judgments of less than $20,000.

Because the amounts are small, defendants may decide to settle the suits.

Hank Parke, executive director of the Somerset County Chamber of Commerce, said his organization hasn’t decided yet what to do about the suit Preferred Capital brought for $14,623.

``What happened is totally wrong,’’ he said of the NorVergence deal, but the chamber may pay up.

``You question sometimes whether you tie up more money in legal expenses,’’ he said.