Background provided by:
Lawrence Kutnicki, Partner
Kutnicki Bernstein Architects

Kutnicki Bernstein Architects, a 16 person architectural firm in SoHo, NYC, signed with Norvergence in March of 2003. Norvergence “partnered with major international companies such as Nortel and Quest” utilizing a proprietary router built by AdTran, a well known manufacturer of routers and other equipment, called the “Matrix” which would provide us with:

• a full T-1 (unlimited internet access)
• with 6 channels for 6 phone lines over the T-1
• two AT&T cell phones
• unlimited local and long distance (USA) service for both the 6 lines and 2 cell phones.

All of this equipment and service to be provided at a savings of about 30% based on the average of what we were spending at that time. The rental agreement was for 60 months. This package, with the professional looking documents and brochures, seemed reasonable as there were major companies “backing up” Norvergence and with new technologies coming on the market all the time, the cost savings seemed possible and not outlandish.

At the signing, the Norvergence representatives presented to us for the first time a lease agreement with GE Capital, a major financial company lending its reputation “backing up” the Norvergence products and services. However, the original concept was we were to sign a rental agreement with Norvergence, but at the last minute, a direct sign lease agreement, without the Norvergence logo, was substituted with GE Capital.

From April to June 2003, Norvergence sent us a check each month to cover the monthly payments to GE Capital as the Matrix and service system were not up and running. The Matrix was finally installed and operating fairly well by July 2003 with a few hours here and there of down time but we had the safety of POTS Lines from Verizon we kept just in case.

We paid:
• Norvergence $69.00 contract amount, ($84.82 with taxes etc), each month and
• GE Capital $386.91 contract amount, ($487.56 with taxes/ insurance etc.) each month.

We received a letter, undated but received the week of July19, 2004, from the Attorneys representing Norvergence notifying us of the Norvergence bankruptcy and that services will be discontinued. Then we received a letter dated July 29, 2004, from GE Capital notifying us of the Norvergence bankruptcy and the need for us to find another vendor for the services offered by the now defunct Norvergence.

We stopped paying GE Capital at the suggestion of our Attorneys. We sent the Matrix box back per GE Capital’s instructions, and they sent us a “Return Payoff Invoice” for $17, 024.04 less a "discount" of $5,490.28 plus sales tax of $994.79 for a total of $12,528.55 due by the end of October.

Per our Attorneys advice, we do not owe any payment on the GE Capital lease agreement which was for equipment rental and services because all services were terminated by the vendor due to bankruptcy and the Matrix equipment was returned.

At this time, we may want to start or join a “group suit” of ex-Norvergence customers in New York City and / or New York State with “direct sign” lease agreements with GE Capital. We have filed a complaint with New York State Attorney General, and the Federal Trade Commission.

At minimum, the leasing companies were derelict in their “due diligence duty” concerning the Norvergence company, structure, Ownership (previously fined for a similar telecommunication scam), their near useless products, services and reprehensible business practices.

We should all fight to at least have the lease agreements cancelled. With all the media and internet publicity and various state and federal governmental agencies investigating and with Citicapital apparently canceling their leases with Norvergence Customers, maybe this will all come out well for the small businesses scammed by Norvergence with the complicity of major leasing companies.