A U.S. District Court in New Jersey has voided 1,600 contracts with a telephone-services outfit, in what a government lawyer says should be a warning to finance companies still trying to collect on rental agreements they bought from the firm.

National City Commercial Capital Corp., a Cincinnati unit of the Cleveland banking company, and Brecskville's Preferred Capital Inc. are among more than 40 companies that bought telephone-equipment leases from NorVergence Inc. of Newark, N.J.

The federal court in New Jersey erased more than $47 million that customers had owed NorVergence for services not received since the company's bankruptcy filing last summer. Judge Dickinson R. Debevoise also ordered $181.7 million in restitution.

The three-judge panel in the Circuit Court of St. Louis County has denied Popular Leasing motion for reconsideration of the court's previous order regarding joinder of NorVergence. The court is giving Popular Leasing 60 days (I believe from July 21 or 22) to bring NorVergence into the suits in St. Louis County. This means Popular Leasing must go to the bankruptcy court in NJ and seek relief from the automatic stay. It's good news for the defendants, but the court still did not indicate what it will do if NorVergence cannot be joined.

Norvergence Judgment Eliminates $47 Million In Consumer Debt Owed for Worthless Telecom Services

Company Promised Savings to Small Businesses and Non-Profits Through Convergence of Voice, Internet, and Cellular Phone Services

The Federal District Court in Newark, New Jersey, today entered a final default judgment against NorVergence, Inc., that will immediately result in the cancellation of 1,600 contracts with the company valued at more than $47 million. The judgment is the result of a November 2004 Federal Trade Commission complaint charging NorVergence with defrauding consumers through misleading claims that it would provide them with dramatic savings on their monthly telephone, cellular, and Internet bills.

The court found that consumers signed a set of applications and agreements with a total price equal to the promised monthly payments over five years. Most of the total payments were allocated to rental agreements for a “Matrix” or “Matrix Soho” device that supposedly would provide the promised costs savings. In reality, the Matrix was just a standard integrated access device (IAD), commonly used to connect telephone equipment to a long-distance provider's lines. The Matrix Soho was essentially a firewall. READ MORE HERE

A year ago Thomas N. Salzano stood at the helm of NorVergence, a
multimillion-dollar telecommunications company on the brink of a
spectacular flameout.

Three weeks ago, Salzano scuffled with police after he was
unceremoniously booted from his Kenilworth office that housed Charity
Snack, his latest venture, for non-payment of rent.

On the surface, the companies couldn't have less in common:
NorVergence was a reseller of phone service with hundreds of millions of dollars of leases; Charity Snack raised money for breast cancer by putting cardboard boxes in nail salons.

But the similarities were striking.

This Monday may see a major ruling that may not only affect all NorVergence leases, but the leasing industry itself. The lessees believe a ruling will release them from all debts when NorVergence filed bankruptcy, their telephone service was cut, and therefore they need not make any more “Equipment Rental Agreement” payments.

A hearing is to be held on this Monday, July 18, 2005, at 10:00 a.m., before Judge Dickinson R. Debevoise, where the Federal Trade Commission is asking for forgiveness of $181,721,914 as the liquidated damages of NorVergence leasing contracts, as the FTC is claiming that the leases and therefore the leasing companies are party to the judgment.

The June 8, 2005 notice: “...that plaintiff Federal Trade Commission will move this Court to enter a default judgment and order for permanent injunction, rescission and monetary relief...” as brought by FTC senior attorney Randy Brook.  Entire Story