Pinnacle responds to Illinois lawsuit

CHICAGO—Summer-model company Pinnacle Security has 30 days to respond to a lawsuit filed Oct. 27 by Illinois Attorney General Lisa Madigan that says Pinnacle “used deceptive sales tactics, often leaving unsuspecting customers locked into two separate sales contracts for security services and paying unnecessary fees.”

The suit seeks civil penalties of $50,000, an additional $50,000 for each violation committed with the intent to defraud, and $10,000 for each violation committed against a senior citizen. Madigan's office received 27 complaints.

Pinnacle general counsel Lance Lenhof said Pinnacle takes the allegations “very seriously.” It is Pinnacle's “objective is to cooperate fully with the investigation and do everything we can to remedy the situation.”

Right now Pinnacle is investigating “who the customers [who filed complaints] are … we are anxious to determine if some of the complaints have already been remedied or if we need to take additional action.”

Further, Lenhof and Pinnacle COO Steve Hafen said the company recognizes that it needs to do a better job managing its sales force and has, over the past several months, taken a number of steps to ensure that there are fewer problems in 2010.

“We've invested several hundred thousand dollars already on compliance-related resources, systems and initiatives,” Hafen said.

Pinnacle has expanded its compliance department, hiring seven additional employees. It's beefed up its licensing department and hired a new director of licensing, Rich Goates.  Pinnacle is also in the process of hiring a deputy general counsel who will report to Lenhof and “spearhead our compliance initiatives.”

They've “developed and recently deployed a proprietary compliance database,” too, which “will be great for us, it will enable us to capture and deal with any and all issues,” Hafen said. “It is a system where any employee, (manager, co-worker, technician) can report any problems or suspected problems in the field.”

Hafen said that Pinnacle has “invested in other departments [such as] our customer on-boarding department, by implementing additional policies and systems that allow us to better monitor and control the actions of our independent contractors.”

Finally, Hafen said, the company has expanded its training programs to include “comprehensive assessments,” which he said will “better educate individuals who sell and install for us.” The training now includes more emphasis “on our code of conduct as well as the regulatory environment, licensing and permits.”

The Illinois attorney general's office receives more than 33,000 complaints annually. In 2008, it followed up on 72 complaints with lawsuits, according to Natalie Bauer, a spokeswoman. Bauer did not respond to questions about whether the 27 complaints had been settled or not. She did say that “every complaint that comes into the office goes through a mediation process … where both sides are contacted and they try to reach a settlement.”

In a follow-up email asking about the status of the 27 complaints, Bauer responded, “All of the complaints we have received during the relevant time period were sent to be mediated.”

Pinnacle has grown rapidly since its inception in 2001. In 2009, it sold approximately 100,000 accounts and hired approximately 1,700 salespeople. That is up from roughly 1,000 sales reps and 64,000 accounts in 2008.

Hafen points out that despite problems with “rogue summer salespeople,” Pinnacle's “complaint to customer ratio is less than half a percent.”

“That's not to say that any problems are acceptable,” he said, but rather that Pinnacle has many satisfied customers. Hafen is eager to talk about Pinnacle's customer service department saying, “we answer 80 percent of our calls within 60 seconds and technical support answers 80 percent of calls within 120 seconds.” Asked about goals for 2010, Hafen said “new account growth is not our top priority. Rather, our key objective is to ensure the satisfaction of our growing customer base, which we believe will differentiate us from other companies in the industry.”