State Attorney General Eric T. Schneiderman announced in Watertown Tuesday a $3.5 million settlement with a financing company that is suspected of using payment contracts with hidden fees to scam area soldiers. The debt for 995 Fort Drum soldiers — some of whom owed thousands of dollars — will be wiped clean and they will keep the goods, he said. He added that his office would work with that financing company to try to restore the soldiers' credit.
According to Mr. Schneiderman, Rome Financial Co. Inc., of California operated SmartBuy, an electronics retailer at Salmon Run Mall that appeared to market specifically to military members, even telling the soldiers they could use computers and other electronics to keep in touch with their families while on deployment.
“It sounded great,” he said of the sales pitch.
He said the store, which had been at the mall since 2005, bought the goods at other big-box retailers and charged soldiers up to three times the price paid for the merchandise. The company, he said, refused to accept cash or credit cards and would require buyers to finance through them. Those finance agreements sometimes included compound interest of up to 244 percent. If payments were not made, the company would contact the soldier's supervisors.
In his speech, Mr. Schneiderman alluded to the five 10th Mountain Division soldiers who died in an explosion Thursday.
“We've been reminded recently about the price our men and women pay when they agree to go into the service, and we acknowledge that and the last thing any soldier should have on their mind is the fact that they were the victim of a scam back home that haunts them even when they're overseas,” he said.
The investigation began last spring after soldiers complained to the attorney general's Watertown office. Then-Attorney General Andrew M. Cuomo demanded SmartBuy cease its practice.
“Immediately upon learning of our investigation, SmartBuy shut its doors,” Mr. Schneiderman said, “but not without having done a tremendous amount of harm.”
Spc. Joseph A. Latarte — along with some 15 friends — fell victim to the scam in 2005. He said he paid $5,200 for a laptop that should have cost about $2,000. He had problems with it when he was deployed to Iraq.
“After a year, it was broken and unfixable,” he said. SmartBuy offered him no help to fix it, so he had to go out and buy a new one.
“I'm glad they were brought down,” he said. “It makes you angry. There's no other way to describe it.”
The investigation uncovered a number of tactics the company is suspected of using to make money.
Last year, one soldier was contacted on his MySpace account by a collection agent. In 2005, he financed a Sony FS520 laptop for $3,208.93 at 19.2 percent interest. His latest bill with the company was $6,000. The laptop is worth about $1,200. Another soldier purchased an HP 6433 laptop — worth about $1,000 — in August 2007 for $3,868. Rome Financial did not allow her to pay the item off early to avoid interest, according to the findings.
No criminal charges have yet been brought against any members of the company, Mr. Schneiderman said, but the investigation is ongoing.
Fort Drum garrison commander Col. Noel T. Nicolle made no effort to hide his anger when he said “despicable” is an appropriate term for the company. Scams, he said, are a part of military life and not unique to Watertown.
“These people have been around for a long time,” he said. “Every military installation has people who sit outside the gate who prey on soldiers and their vulnerability.”
He thanked the attorney general and said local law enforcement and community groups look out for the soldiers when it comes to scams.
Rep. William L. Owens, D-Plattsburgh, supports the attorney general's efforts.
“I thank him for his leadership on this issue. It is reprehensible to impose usurious interest rates and use tactics that prey on those who risk their lives to defend the freedoms we hold so dear,” he said in an email. “It is my hope that today marks a first step toward ensuring that our soldiers are treated fairly and with the respect and honor that they have earned through service to their nation.”
The attorney general's office is engaged in ongoing litigation against SmartBuy and four of its solvent finance companies: Frisco Marketing of N.Y. LLC, Integrity Financial of North Carolina Inc., Britlee Inc. and GJS Management Inc.
The companies are all owned or operated by John Paul Jordan, Stuart Jordan and Rebecca Wirt of Fayetteville, N.C. , and William Collins and Ronald Wilson, both of Concord, Calif.
Times staff writer Brian Amaral contributed to this report.