In The Marketplace

NorVergence began aggressively marketing its telecommunications products in 2002, falsely promising potential customers savings of up to 60%. It attributed these savings to its use of a proprietary device referred to as a “Matrix box.” The company claimed this technological innovation provided customers with wireless, toll-free inbound, local and long-distance telephone service; and high-speed Internet connection, all for a fixed monthly fee. In truth, the equipment accomplished none of these functions; rather, it is commonly used in the industry to permit both voice and data transmission through a high-speed service line. NorVergence's sales force was trained to apply deceptive and high-pressure sales tactics to prospective customers, which included small businesses, not-for-profits, and religious institutions. Nationally, the company secured approximately 11,000 customers, nearly 1000 in New York.

The company's customers typically signed 5-year contracts, which the company then sold at a discount, to third-party financial institutions including GE Capital. The financial institutions, in turn, then billed customers under the original contract terms. These multiyear commitments purported to obligate customers to pay as much as $340,000 for the matrix box, even though the market value of the devices was no more than $1500. After NorVergence filed for bankruptcy, its customers were left without telecommunications services and they had to purchase alternative service on a per call basis. The financial institutions, however, continued to bill customers for the discontinued services.