After an investigation by the California Attorney General's office, a company that sells cookware door-to-door agreed Wednesday to stop conducting phony tests to convince residents that their old frying pans were toxic, while the company and several executives must pay a total of $1 million in connection with deceptive sales tactics.
"This settlement will put an end to Hy Cite's bogus chemical tests and predatory lending terms and ensure that the company treats its customers fairly and honestly" said Edmund Brown, California's Attorney General.
Hy Cite, which is based in Wisconsin, is not a first-time offender in this area, according to the state, having already settled with California in a previous investigation over similar fraud tactics.
Under the current settlement, the company and several executives must pay $350,000 in restitution to the consumer victims, $350,000 in civil penalties, and $300,000 in attorney's fees and costs, totaling $1 million. These costs can be divided among Hy Cite and the executives as they please, but they are all responsible for making sure the payment is made. They must also follow a code of conduct.
In the recent settlement, Hy Cite must pay more than in the first settlement, since California hopes Hy Cite's actions will this time be deterred by a more severe judgment. Before, they paid restitution and $250,000 in penalties and costs, and were not subject to an independent monitor.
When asked to respond to the settlement, John R. Burczyk, the Vice President of Legal Affairs, said Hy Cite denies any wrongdoing.
The Attorney General's office has claimed Hy Cite targeted Latinos and set up two different and unequal financing plans for White and Latino customers, but these accusations are not in the complaint.
The Attorney General's office began the investigation of the company's sale tactics in March of 2007 after receiving consumer complaints.
To get in the door, salespeople for Hy-Cite told people they had won a prize, or asked them to participate in opinion polls. The salespeople then performed phony tests on the victim's cookware to demonstrate it was toxic, and offered their expensive cookware as a safe alternative.
The state investigation found that the company's door-to-door salespeople falsely claimed that the company's financing plan had a percentage rate of 2%, when it was actually 24%.
Apart from the financial penalties and compensation, the settlement specifies that Hy Cite must hire an independent monitor for three years to interview the company's customers in search of consumer fraud. It also restricts what the Hy-Cite's salespeople can say when promoting its cookware.
Hy Cite is represented by Martin S. Schenker. The Deputy Attorney General, Michele Van Gelderen, is representing California.
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