SAN JOSE, Calif. (CN) - Retailers across the nation are being sued for using a “corrective education” program that is tantamount to extortion, a class of accused shoplifters claim in federal court.
The Utah-based Corrective Education Company calls it restorative justice. But the three lead plaintiffs, anonymously named in the complaint, call it a shakedown.
“Defendants are not small-time Mafia thugs,” the lawsuit says. “They do not break kneecaps; they do not torch storefronts. Many of the nation’s leading corporations number are among the Retailer Defendants. The individual defendants include graduates of the Harvard Business School, the University of Oxford, and Brigham Young University. But despite their glittering credentials, Defendants are all participants in a long-running, highly profitable extortion scheme that has extracted millions of dollars from thousands of poor, desperate people across the country. And RICO applies, with equal force, to street hoodlums and Harvard MBAs alike.”
One plaintiff, identified as Jane Doe from Loganville, Georgia, was detained at a Walmart in September 2017 after buying supplies for her child's birthday party. Walmart's loss prevention personnel accused her of stealing hotdog buns and a case of water. Under threat of being reported to the police, Doe agreed to participate in the CEC program.
She was shown a CEC video promoting its six to eight hour education course designed to teach “life skills” and “make positive behavior changes.” And she would need to pay for the program; either through a $400 upfront payment, or through a payment plan comprising a $50 upfront payment and monthly payments totaling $500.
The class action complaint lists Bloomingdale’s, DSW, Walmart Inc., Kroger, Abercrombie & Fitch, and CEC founders Darrell Huntsman, Glen Bingham, Brian Ashton, and executives Jeffrey Mitchell, Jeff Powers, Chris Cotrell, Richard Haddrill, Tim Hickey and Jeff Stringer as defendants.
“This case is intended to prove that we are all equal under the law,” said Joel Fleming, class attorney and partner with Block & Leviton. “Our country’s racketeering and extortion laws apply with equal force whether you’re a common street hoodlum or one of the Harvard MBAs who founded CEC. We’re trying to stop these illegal shakedowns and get compensation for victims.”
About 20,000 people are known to have gone through the CEC program since 2015.
Hilliard, Florida resident Mary Moe was detained at a Jacksonville, Florida Walmart in November 2017, accused of stealing snacks and hygiene products. She also agreed to participate in the CEC program after watching one of their videos, as did John Roe, accused of stealing a tri-ball hitch from a Texas Walmart in January 2017. While Roe agreed to participate in CEC under threat of being reported to the police, he hasn't been able to make his payments and his account has been sent to collections.
Founded in 2010, CEC touts itself as "the leading provider of restorative justice education,” saving first-time shoplifters from a criminal record while teaching them to make better life choices.
The lawsuit quotes a script CEC used between 2013 and 2016 that admonishes viewers: “Once again, when you complete the resolution program, no charges will be filed, you will not have to go to jail, and you won't have to pay any criminal fines. Most importantly, you will not have a criminal record and you will avoid the cost of civil demands. However, if you fail to comply with the requirements of this program, if you don't complete it, your case will be submitted to the police and they may issue a warrant for your arrest. This will happen only if don't complete the program.”
While Fleming noted that this is the first class action of its kind, San Francisco City Attorney Dennis Herrera sued to block the company from contracting with retailers, seeking civil penalties and restitution for extortion and false imprisonment. In 2017, the city won an injunction, with state court Judge Harold Kahn finding the CEC program runs afoul of California extortion laws.
“This is textbook extortion under California law, and has been so declared for at least 125 years,” Kahn wrote in his ruling last year.
CEC representatives did not respond to an email seeking comment Monday.
The plaintiffs seek statutory and punitive damages for racketeering. They are represented by Fleming and Jacob Walker with Block & Leviton in Boston.
Follow @MariaDinzeo
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