State launches consumer fraud investigation of bankrupt NorVergence

TRENTON, N.J. - The state is launching a consumer fraud investigation into bankrupt NorVergence, which left more than 11,000 small business customers burdened with huge debts and litigation.

More than two dozen banks and leasing companies have been asked for documents that detail their business deals with the telecommunications reseller, which filed for Chapter 7 bankruptcy in July.

The company left as many as 1,000 small businesses in New Jersey without service and owes its creditors an estimated $30 million.

"Our goal is to make sure business people in New Jersey get what he or she pays for," Attorney General Peter C. Harvey said.

About 20 states and federal officials are looking into the company, The Record of Bergen County reported.

A lawyer representing former NorVergence chief Peter Salzano did not return a call seeking comment.

Small business customers were promised telephone and Internet service at deep discounts when they signed lease deals with NorVergence, said attorney Michael Green, who has filed a class-action lawsuit on behalf of the customers. They also signed long-term deals to lease equipment at prices far above what devices actually cost, Green said.

One customer said he paid $374.89 a month for 60 months for a so-called Matrix box - a total of $22,493.40 - while the unit retailed for a mere $395.

"It appears to us that the product is worthless and does not do what it was presented to do," Harvey said.

NorVergence sold the leases at a discount to the financial services companies, which saw the contracts as an investment. Those companies have demanded payment from the small businesses, in some cases launching lawsuits and contacting credit agencies.

The Attorney General's Office has told the leasing companies they must halt any legal action they are taking against former NorVergence customers in New Jersey until the probe is completed.

James Cioffi, co-owner of the Boulevard Pro video and audio business in Oradell and New Milford, said the company is being sued in an Iowa court by Wells Fargo, which purchased its $60,000 five-year lease.

"It's great news," Cioffi said of the attorney general's action.