By MARTHA McKAY
STAFF WRITER

Running a phone company into bankruptcy is nothing new for Thomas N. Salzano.

Before his ill-fated venture, Newark-based NorVergence, folded last month, Salzano headed up a different phone company.

In the early 1990s, after running a freight consulting business, Salzano founded Minimum Rate Pricing Inc. in Bloomfield, a reseller of residential long-distance phone service that eventually hired hundreds of people but ran afoul of federal regulators in 1998 when
customers complained that MRP illegally switched their long-distance, a technique known as slamming.

A settlement was reached, and MRP agreed to pay a $1.2 million fine to the Federal Communications Commission. But over the next few months, MRP's business imploded.

The company, which bought its long-distance service wholesale from WorldCom (now MCI), racked up $67 million in debt, according to court papers, and filed for Chapter 11 bankruptcy protection, along with some related companies, in February 1999.

"It was out of control," recalled Brian Engle, a turnaround specialist brought in by the creditors. "They weren't looking at their costs; the philosophy was, more
revenue will solve the problem."

Thomas and Peter Salzano Prohibited from Making Future Misrepresentations

With Cook County Superior Court Justice Matthew F. Kennelly presiding, and in what may be the first IFC Credit Corporation-NorVergence lease jury trial, a precedent may be set in a win by Gregory Adamski, Managing Partner and Samantha R. Engel, Attorney, Adamski & Conti, Chicago, Illinois. The jury heard the case for four days and took only 2 1/2 hours (over the lunch hour) to agree with the presentation that United Business & Industrial Federal Credit Union was "induced by fraud to sign the 5 NorVergence contracts without knowledge of, or reasonable opportunity to learn of, the character or essential terms of the contracts." The legal term for this defense is called "fraud in the factum" or "essential fraud."

In a 10 page document, Judge Montgomery of Dallas County, Texas detailed a web of fraud and deceit on the part of IFC Leasing for the now infamous lease agreements between thousands of telecom subscribers and Norvergence.

In the 'Findings of fact and Conclusions of Law' document (see it here) the findings are clear; Norvergence was deliberately perpetrating fraud customers, and IFC knew about it. IFC even went so far as to stop buying leases from Norvergence, because of the high rate of defaults and customer complaints. But the lease deals continued, however, after Norvergence re-worded the contract with IFC so they would have less liability in the case of default.

By April of 2004, it states, IFC knew Norvergence was making promises of savings to their customers, with no intentions of fulfilling them. Representatives of IFC were reading confirmations to new customers, promising them the 'Norvergence Savings' with full knowledge that this savings would not be provided.

It is a breath of fresh air to read a factual document that shows logically and with no 'spin' what was really going on behind the scenes. No longer a theory, now the proof exists. The leasing companies (or at least IFC) had full knowledge what was going on, but only focused on the almighty dollar. Deny it if you wish guys, but at least try to learn from your mistakes.

Charles Triglianos. Jr.
Editor and Chief,
Fight the Scam