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Attorney General Jason R. Ravnsborg

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Consumer Alert: Watch Out for Leasing Scams

Consumer Alert: Watch Out for Leasing Scams

PIERRE, S.D.-  Attorney General Larry Long is reminding businesses to be wary of new scams involving lease agreements.

"South Dakota businesses have been targeted in two recent scams involving lease agreements," said Long.  "Business owners need to be aware that the 'fine print' in some of these lease agreements might end up costing them lots of money."

Long cited two recent cases:  Norvergence and Royal Links.  The lease agreements in both cases contained a "hell-or-high-water" clause, which requires the lessee to make lease payments, regardless of any events affecting the equipment, and regardless of any change in circumstances.

"We were extremely lucky that Norvergence did little, if any, marketing in South Dakota" said Long.  "Our Office entered into settlements with two leasing companies to provide relief to the only two victims in South Dakota."  

In the Royal Links case, however, sixteen golf courses in South Dakota have filed complaints, and the Consumer Protection Division is working with other state Attorneys General to resolve the complaints.  Summaries of the Norvergence and Royal Links cases are reprinted below.

Long urges business owners to remember that "if it sounds too good to be true, it probably is."  Please contact the South Dakota Retailer's Association at 800-658-5545 or the Attorney General's Consumer Protection Division at 800-300-1986 if you have any questions.



1.         Royal Links article reprinted with permission of The Blade (Toledo, Ohio).

2.         Royal Links USA filed for Chapter 7 Bankruptcy on August 19, 2005, in the Northern District of Ohio.  The National Golf Course Owners Association (NGCOA) is pursuing legal action against Royal Links USA.  Some leasing companies continue to seek lease payments from the participating golf courses.

3.          Norvergence article reprinted with permission of the Colorado Office of Attorney General.

Article published Wednesday, November 24, 2004

Area drink-cart firm target of complaints


The deal sounded sweet to more than 1,000 golf courses nationwide: Lease a refreshment cart made and marketed by a suburban Toledo company, adorn it with advertisements they provide, and get reimbursed for the monthly payment to the beverage caddy's leasing company. 

The refreshment cart with a 10-case beverage cooler and other features from suburban Toledo's Royal Links USA Inc. cost about $12,500 leased, some golf course officials said. But, they said, it was probably worth less than $3,000. 

However, the reimbursements from advertising on the carts would cover the cost of the lease, at least one golf course official who entered into a contract with Royal Links reasoned. 

"Royal Links painted it as sort of a net zero, as a wash deal," said Mike Hammond, PGA head golf pro at Quail Ridge Golf Course in WinfieldKan., and owner of the commissary there. 

In recent months, though, Royal Links stopped making its monthly reimbursements to Mr. Hammond and other customers, including Pike Run Golf Course near OttawaOhio, although the companies leasing the carts purchased from the Holland firm continue to expect their payments. 

An October letter from Royal Links accused most refreshment-cart owners of not fulfilling their requirements for the advertising reimbursements. 

The letters offered the owners the option of entering a different agreement without the previous monthly payments or opting out all together, allowing them to use their carts as they wish. 

Now Mr. Hammond, Pike Run owner Ken Pester, and about 10 others have filed complaints with the Better Business Bureau of Northwestern Ohio and Southeastern Michigan and are seeking other avenues of recourse. 

Mr. Hammond, for example, filed a grievance with the Kansas attorney general's office, but was told to hire a private attorney since it was not a consumer issue. 

"It's a big mess," said Mr. Hammond. 

"There's some pretty big leasing companies that wouldn't be afraid to litigate." 

Royal Links President Robin Flaum could not be reached for comment. 

Company Controller Rick Helberg said the company was aware of two or three complaints and has responded to the BBB. 

He declined to answer questions. 

"We're trying to resolve these issues," he said. 

Royal Links' letter to the local BBB, which the agency provided along with samples of complaints, said Mr. Hammond was notified that the company would no longer make monthly reimbursements and originally had been given the option of buying the refreshment cart directly from the Holland firm or leasing it through an independent company. 

Royal Links is no longer offering the reimbursement program to future customers, it said. 

Richard Eppstein, president of the local BBB, said the disputes will have to be decided through the courts, not consumer agencies. 

Royal Links served players with its cart concept at the Jamie Farr Owens Corning Classic at Highland Meadows Golf Club in Sylvania last summer, and it plans to be at three trade shows early next year, according to its Web site. 

Contact Julie M. McKinnon at:
or 419-724-6087.

NorVergence marketed a Matrix box that purported to integrate and provide local telephone, long-distance telephone, wireless, and Internet services at a reduced rate to small businesses. NorVergence deceptively pitched the Matrix box and claimed it would provide telephone and Internet services while reducing service bills by 30%. However, an investigation conducted by the Colorado Attorney General’s Office revealed that NorVergence misrepresented the cost savings consumers could realize.

After NorVergence sold the consumers the Matrix box, it required customers to commit to leases for the equipment. Approximately 40 different finance companies hold these leases, including USB, and WFFL. NorVergence has between 
7,500 – 10,000 customers nationwide. 

In July 2004, NorVergence was forced into bankruptcy, leaving many customers without service. Under their leasing agreements, however, the customers were still responsible for the five-year rental agreement payments regardless of whether NorVergence ever provided the equipment and services.