Pinnacle settles with NY AG

Calls AG's public statements damaging and unfounded, however
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Tuesday, August 17, 2010

NEW YORK, N.Y.—The New York Attorney General’s office announced Aug. 12, in a strongly worded press release, it had reached an agreement with Pinnacle Security over deceptive sales practices used by some of its salespeople beginning in January of 2008. “Pinnacle used dirty tricks and deception to pressure New Yorkers who were simply trying to ensure the security of their homes,” AG Andrew Cuomo is quoted as saying in the release. “This settlement holds Pinnacle accountable for their actions and makes fundamental reforms to the company to prevent such fraud from happening again.”

Pinnacle COO Steve Hafen said Pinnacle willingly agreed with the settlement, and believes its current sales practices have solved the problems that led to the Attorney General’s involvement, but believes Cuomo has gone too far with his grandstanding. “We fervently dispute many items in the press release and feel comfortable we would be able to defend ourselves in a different setting,” Hafen said.

The AG’s press release, which was titled: “Attorney General Cuomo reaches agreement with security company that tricked homeowners into signing contracts,” led to a number of news stories in the mainstream media, including an August 13 Wall Street Journal article.

“Had we known that rampant, unfounded accusations would be insinuated into the language of the press release where we have little means to defend ourselves, we may have taken a different route than a settlement. The Attorney General’s office can say what they want in a press release, it’s a different thing to prove that out in court,” he continued.

That settlement, signed July 21, is substantial. It includes a $150,000 payment, and full compensation and free cancellation for any customer who signed up with Pinnacle since Jan. 2008 and who believe they’ve been a victim of deceptive sales practices.

Pinnacle has hired a third-party administrator to contact all of the 4,000 Pinnacle customers acquired in New York since January 2008 to inform them of the settlement and their right to restitution. Additionally, Pinnacle agreed to put into place a number of quality assurance procedures.

Pinnacle COO Steve Hafen noted that these quality assurance procedures have been in place at Pinnacle since early in 2009, and the complaints that spawned this case were from 2008 and early 2009. “There were around 100 complaints, which were historic, predating extensive changes we have recently made independent of the provisions of the settlement, and represented a small percentage of our customers. The majority of our growing customer base is strong and satisfied,” said Hafen.

The new compliance protocols are “clearly effective as we are not aware of any complaints in 2010,” Hafen said.

Why then, did Pinnacle agree to release customers acquired after that date? Hafen said the terms (January 2008-to-present) are typical of this type of settlement.

Hafen said Pinnacle wanted to err on the side of the customer. “[We wanted to] make sure if there were any issues, that there was a structure and process provided for the customer. We were doing this anyway, so we turned our focus to ensuring that those with a legitimate issue were the ones served by the settlement agreement.” Hafen said.

The tone of the Pinnacle press release seems to by consistent with others listed on the Attorney General’s Web site, which include, for example: “Attorney General Cuomo Launches Investigation Of Life Insurance Industry For Defrauding Military Families And Others Of Millions In Cash Payouts” and “Attorney General Cuomo Announces Expansion Of Industry-Wide Investigation Into Predatory Health Care Lending That Is Pushing Consumers Nationwide Into Debt.”

Aggressively pursuing these types of cases, (and eschewing the poetic rhetorical style of his father, former Gov. Mario Cuomo, in favor of terse declarative statements) has been a hallmark of Cuomo’s tenure as AG, according to an Aug. 15 New York Times Magazine cover story about Cuomo. The story says he’s focused “on cases that would resonate more forcefully with New York’s working class and then to build those cases into something bigger than just straightforward prosecutions or fat settlements. Upon taking office, he put out the word among his deputies that he was less interested in pursuing individual companies for wrongdoing than in finding examples of systemic abuse. He didn’t want to hold up scalps of C.E.O.’s at his press conferences; he wanted his victims intact and contrite, pledging to do business differently in the future.”

Regardless of the AG’s style, Hafen feels the press release is unfair and comes with an agenda. Noting that Cuomo is a candidate for governor, he said, “it seems clear that political expedience played a part in the timing and language of the release, damaging our company unfairly and inappropriately.”

“We have industry leading controls in place, which we continue to increase and enhance,” Hafen said. “More than 275,000 people have signed up with Pinnacle ... and the vast majority are extremely happy.”