Field Reports1 Apr, 2007 By: Thomas Haire, Courtney Beth Pugatch Response
Froehlig and National Fulfillment Charged With Identity Theft by Tennessee Attorney General
Civil suit also names Howes, Entertainment America as part of alleged scheme to bilk at least 30,000 consumers.
By Thomas Haire (email@example.com)
FRANKLIN, Tenn. — Tennessee Attorney General Robert E. Cooper, Jr., filed a civil suit on Feb. 16 against long-time direct response industry fulfillment leader Rollie Froehlig, president, CEO and chairman of National Fulfillment, alleging that Froehlig, Ted Howes (the company's executive vice president and chief financial officer), National Fulfillment Inc., and sister company Entertainment America Inc., violated the state's Identity Theft Deterrence Act of 1999 and Consumer Protection Act of 1977, "by their unlawful scheme of engaging in identity theft by misappropriating credit card, debit card and other financial document information and personally identifiable information in their possession."
The original suit contends, "Defendants unlawfully used this information to bill approximately 30,000 consumers for a nonexistent good or product using the credit card/debit card numbers and information from current or previous clients of National Fulfillment or from other sources." Cooper's office filed the suit at the request of Mary Clement, the state's director of the Division of Consumer Affairs of the Department of Commerce and Insurance. On March 2, Chancellor Robert E. Lee Davies entered an order granting the state's request for a temporary injunction and asset freeze against the defendants.
"We are pleased with the court's ruling and look forward to pursuing this case aggressively at trial," Cooper said in a statement following the March 2 decree. "Combating identity theft is one of my top priorities in the consumer protection arena. I urge consumers to take proactive steps to protect their personal information from identity theft."
In the suit, the attorney general contends that the defendants (Entertainment America "acts as a broker house for National Fulfillment's clients to obtain payment and order processing" and "is located within the warehouse owned, and primarily used, by National Fulfillment," according to the suit) were successful in billing 30,000 consumers — and may have attempted to bill 300,000 consumers, if not for employees who noticed inconsistencies — "$19.90 each for a product that never existed under a phony account known as 'EmTech.'"
The attorney general's complaint also alleges that the defendants "unlawfully harvested" financial information belonging to customers of "some of its current and past clients in this billing scheme." Among those National Fulfillment past and current direct response marketing clients whose records may have been compromised, according to the investigation, are Emson, Aloette, Banjo Minnow and Youth Factor. According to the suit, only repeated requests by other members of National Fulfillment's management team for further information on the "legitimacy of the 'EmTech' account" slowed and eventually derailed the alleged fraud.
However, Froehlig's attorney, William Ramsey of Nashville-based Neal & Harwell, contends that the case is really one big error in judgment by Froehlig and the defendants. "Rollie violated his own company's policy by taking a product someone else had shipped and doing the billing for it," Ramsey said in an exclusive interview with Response. "The company that had shipped the product had gone out of business, and Rollie now realizes the reason he established policies like that. Still, after they did the billing, the company did credit any person who called in to dispute the charges, without question."
Ramsey added that the defense would now have to go through "the difficult process of computer discovery," contending that the database the company billed from was in "unusual formats" and that "some data is missing." At the same time, Ramsey has "floated" the idea of a settlement to the attorney general's office, in which the defendants would work with the state to find the best way to contact the parties billed and offer a refund to those who want it.
When contaced about the suit, Froehlig sent a statement to Response, which reads, in part: