More NorVergence Victims Let Off The Hook

from the banks-should-look-at-who-they-do-business-with dept

Last year, we wrote about the big telco scam known as NorVergence. This was a company that was selling cheap telco boxes to unsuspecting companies by using an overbearing, fast-talking sales force armed with misleading pitches promising things they couldn’t deliver. The end result was that people were buying boxes that were available online for $300 total for $300 per month for five years. Knowing they had a house of cards on their hands, the folks at NorVergence than handed over the five year leases to various financial institutions, took the cash and promptly shut down — leaving “customers” with useless boxes that they still had to pay leases on for five years, because the financial institutions didn’t care whether they worked or not, just that the leases got paid. Slowly, but surely, pressure has been put on these financial firms to drop the claims. Last year, some New York firms and some New Jersey firms were let out of the leases. Now, it looks like more New York firms are off the hook. Obviously, these financial firms should have paid closer attention to the leases they were buying up, but it’s still amazing how the executives of NorVergence got away with what they were doing. As we noted when we wrote up the first story, some of the executives had already bankrupted another firm doing much the same thing and were hard at work on a third version. Recently Broadband Reports noted that one of the NorVergence execs had started another firm, supposedly raising money for a charity, but which actually seemed to be pushing what appears to be quite a similar scam. While the financial institutions never should have bought those leases in the first place, all of this does make you wonder why the execs from NorVergence seem to have gotten off free and are able to keep starting up similar businesses.

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Comments on “More NorVergence Victims Let Off The Hook”

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dorpus says:

Sounds Exactly Like Silicon Valley

Isn’t that what these “Startup entrepreneurs” do? Start worthless companies making sham products, or sometimes no products at all, and congratulate themselves for having the “courage” to fail. It felt like a good 90% of companies in Silicon Valley operated on this model.

John says:

Re: Sounds Exactly Like Silicon Valley

Did you even read the article? This wasn’t just about a company that failed, it’s about a company that shammed customers into long term leases for a product that didn’t work and then sold those leases to bansk. That’s not just failing, that’s selling a sham.

dorpus says:

Re: Re: Re:2 Sounds Exactly Like Silicon Valley

Yup, I read the article. There are thousands of companies in the Valley with bizarre business models that no technologically literate person could take seriously — companies with products named after Star Wars or Star Trek artifacts, “quantum wireless” technologies that turn out to be low-tech hoaxes, or the “network solution providers” that bury themseves in weird terminology, and nobody has any idea what any of it means. Or there are the many “biotech” companies, claiming a false affiliation to Stanford, that are basically just New Age scams aimed at people who lack an understanding of molecular genetics.

IanT says:

Re: Re: Re:3 Sounds Exactly Like Silicon Valley

There’s a vast difference between investing in a company you think will succeed because you’re foolish and not experienced in a field, and creating a company you know to be a scam. There’s also a difference between a company that fails because it scams customers and a company that fails because it doesn’t repay its investors. The latter knows they are taking a risk with their money, the former does not, and can afford it less.

dorpus says:

Re: Re: Re:4 Sounds Exactly Like Silicon Valley

Is there such a difference? In my time in the Valley, it seemed like all the executives knew in advance their company wasn’t going to succeed — it was just their way of making a comfortable living. The same people regroup and call themselves some other company later on. They will hide behind the rhetoric of “creative destruction” or whatever, calling themselves “brave entrepreneurs”, promising to become the next Michael Dell. Since all the “legitimate” work in the Valley is about design, it is very easy to hide sham companies behind the wall of technical jargon. They can just say that the “real” work is being done at low-cost centers abroad. Have there been any Silicon Valley success stories lately?

dorpus says:

Re: Re: Re:6 Sounds Exactly Like Silicon Valley

Google/Yahoo? They amount to electronic yellow pages. Were yellow pages ever a lucrative business? They were losing money like crazy while there were many other search engines just like them. Their so-called contextual ads have been worthless in my experience, giving links to places that have nothing to do with what I want.

Isn’t netflix made fun of on here all the time, as the poster child of a bad business model? Ditto for ebay, why pay auctioning fees when there are plenty of other sites that let me advertise for free?

malhombre says:

Re: Re: Re:5 Sounds Exactly Like Silicon Valley

> In my time in the Valley, it seemed like all the executives knew in advance their company wasn’t going to succeed

Hmm, “all the executives”…ALL of them? How many exactly, D? How much time in the Valley?

“Creative destruction”? Are you postulating a massive conspiracy theory here? Guess I would need more evidence than your hearsay testimony.

Sorry, but there is a huge (and obvious, and well understood) difference between VC money poured into an unworkable business model as opposed to selling a defective product to the consumer-at-large.

If I tell a bunch of money guys that I have developed the perfect widgeting system, and they decide to back the operation, it is clearly understood and agreed in advance that they are liable to lose their investment (or make a bundle). If they fail to perform due diligence, hey, too bad they have no one to blame but themselves and no recourse – that’s the nature of gambling. It’s what they do.

On the other hand, if I sell substandard widgets on the open market, and make claims as to the benefits of my widgits, either I make it right or I will likely face numerous consumer protection laws (and/or class action lawsuits) designed, at the core level, to ensure a certain expectation of useability and utility to those who purchase that item or service.

If I buy a hammer, it is reasonable to expect it to drive a nail. I am a consumer, and I have a legal right to redress should my hammer fail to perform that task.

If, as a venture capitalist, I invest in the Bamboo Handle Hammer Co., and the company fails due to shoddy craftsmanship and product failure, I will likely lose my investment…too bad, I didn’t know much about hammers. Shame on me.

And Dorp, do you really think all those visionary folks in the Valley are simply con men? Call me naive, but I suspect most of them actually thought they had something. The market just didn’t bear them out. That just sounds more likely to me.

Free enterprise: I come up with an idea. I sell that idea to a bunch of gamblers who have every right to examine and evaluate every detail of my idea prior to making an investment. They do, but ultimately the idea fails. That makes me evil in some way? Gimme a break. That’s like sueing a casino because you lost your rent money. It’s just business as usual.

dorpus says:

Re: Re: Re:6 Sounds Exactly Like Silicon Valley

If you haven’t heard the expression of “creative destruction” before, then I would have to guess you haven’t spent time in the Valley, or even on techdirt. I spent 6 years in the Valley.

Whether a given company cons investors or consumers, the fact remains that the executives were crooks. They had no intention of forming a lasting company — they were just in it to pump a few bucks and run. I refuse to believe that the executives were so stupid, they actually thought their harebrained schemes would work.

rightnumberone (user link) says:

Re: Re: Re:7 Sounds Exactly Like Silicon Valley

After reading the article, I can’t figure out why people are upset.
Here is the crux of Elliot Spitzer’s crusade:
“Customers were told the blue Matrix box would provide wireless, toll-free telephone service and high-speed Internet access for a monthly fee.
“The equipment performed none of these functions,” Spitzer’s statement said. Instead, it contained a firewall and router, allowing voice and data transmission over high-speed service lines.”
Well, now let’s examine that statement. Assuming it was a wireless router, then it did in fact offer “wireless, toll-free telephone service and high-speed Internet access for a monthly fee.”
All one has to do to get that is install a Skype client on a workstation. Voila … wireless toll free telephone calling.
Charging $300 per month for a managed router/firewall doesn’t seem all that illegal to me. It’s expensive, but it ain’t illegal.
There may be more to this story, but from what I’ve read so far, looks like some stupid customers are being let out of expensive leases just because its cheaper for the big banks to settle than to collect.
Spitzer’s case – if this article fairly presents it – would never fly in court, but he’s threatening them.This is also known as legally extorting the with the threat of court and expensive legal fees.

rightnumberone (user link) says:

Re: Re: Re:8 Sounds Exactly Like Silicon Valley

And, not for nothing, but if I decide stupidly to pay too much for something … how exactly am I a victim?

If I am sufficiently spineless that some fast-talking boiler-room sales guy can separate me from my money, why is HE suddenly a victimizer and not a “truly effective salesperson”?

If I pay too much, then maybe I’m a victim of MORON disease, but that’s about it.

The culture of victimhood in this country is completely out of whack.

Let’s not exacerbate that problem here.

michael Vilain says:

Re: Re: Re:7 Sounds Exactly Like Silicon Valley

Just six years? You must be one of those recent graduates flocking around foosball in the break room. I just call them kids. I’ve been here since the mid-1980’s, long before the recent bubble back when you had to pay for bottled water, soda, and bring your own decent coffee from home. And pick up your own dry cleaning. Geeze, you kids don’t know what it was like back then (walking to school 6 miles in the snow).

If you don’t get the difference between consumer fraud and VC funding, I have a nice orange bridge that’s cheap…

dorpus says:

Re: Re: Re:8 Sounds Exactly Like Silicon Valley

So what you’re saying is you’re a clueless geezer who assumes all Valley companies are like that, and still hasn’t seen the light and gotten out of the business. Enjoy receiving your age discrimination, when you aren’t fooling yourself about the subtle differences between two kinds of fraud.

Rhonda Roland Shearer (user link) says:


The fact is these so-called settlements are not letting small business victims off the hook.Most state attorney general deals require victims to pay at least 10% of the whole five year contract which ranges from $10K to $300,000K.The net result is, even with the so-called settlement, you have mom and pop businesses or not-for-profits paying thousands of dollars for services they never received and the equipment was never worth more than the $200 or $1550 original cost.
Bankers should go to jail for falsely declaring on their books and to insurance companies that the this Norvergence equipment’s value was up to $200,000 per box not the real $200 or $1550! Documents prove these leasing companies knew the real equipment value. This lease flipping– where equipment values suddenly are raised by bankers from $1550 to $200,000– is like the land flipping deals from the 1980’s S&L crisis. Send these bankers to jail!
Check out reports about the Leasing companies partnerships with Norvergence and their joint fraud posted on

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