Contractors Board Hammers Out Favorable Deal for Consumers
SACRAMENTO — A Contractors State License Board (CSLB) investigation that began more than two years ago resulted in financial relief for more than 50 victims of a water filtration scam and jail time for the company's salespeople. The scam involved the use of scare tactics to hook consumers -primarily Latinos - and violations of business codes to unlawfully sell and install water filtration systems. Consumers were coerced to pay up to $6,000 for a water filtration system that can be purchased for as little as $200.
Everclear Water Systems employee Laura Dora Ortega Saenz was sentenced in December in Ventura County Superior Court to 180 days in county jail and three years probation. Another employee, Juan Castenada Abanto, was sentenced to 90 days in jail and three years probation. The sentence further prohibits the employees from working in the consumer appliance sales industry and orders them to pay full restitution to their victims. They were convicted on August 16 of committing felony and misdemeanor violations, including grand theft, conspiracy to commit a crime, conspiracy to defraud another of property, unlawful acts by a salesperson, violations of water treatment device contracts, and contracting without a license.
Sentencing for the corporation was continued to February 1, 2002, and for company owner Aurora Elizabeth Vergara, to February 19. This investigation was conducted jointly by the Contractors State License Board and Ventura County District Attorney's Office.
On November 13, the Glendale Superior Court granted CSLB a permanent injunction against Everclear, prohibiting them from selling, soliciting, advertising, contracting for, or installing water filtration systems in California and from referring such business to other contractors, individuals and entities in California. During those court proceedings, Everclear representatives conceded that their contracts were unlawful because, among other violations, Everclear had violated the victims' lawful right to cancel contracts within three days of sale and were found to have falsely and fraudulently misrepresented the contracts to consumers.
During sales presentations, Everclear representatives made false, misleading and unfair statements regarding water contamination, health risks, and the performance of the water system. They pressured many homeowners into purchasing the system without benefit or opportunity to verify the sales representations. After the sale, Everclear violated the three-day "cool-off" statute, which states that the buyer has the right to cancel a home solicitation contract until midnight of the third day after signing the contract.
Letters recently sent from the CSLB to Everclear victims report that Everclear had been found guilty of felony and misdemeanor violations. The letters further state that four finance companies agreed to forgive future payments on Everclear victims' accounts.
"This is great news for the victims of Everclear and positive day for consumer protection. Not only can they enjoy the satisfaction of knowing this company was prosecuted, but many consumers will not have to pay on contracts that they were misled into signing," said CSLB Registrar Steve Sands.
Here is how Everclear perpetrated its scam: employees would solicit Hispanic residents to hear a two to four hour presentation in their home about the water filtration system. The presentation involved scare tactics, including stories of children becoming disabled or dying from drinking the local tap water and promises of free soap or pots and pans. Everclear violated written contract laws, such as not including a "Truth in Lending" statement or a "Right to Cancel" clause. Additionally, Everclear made false and fraudulent statements about the contract and the finance terms. The sales pitch was given in Spanish, but the contract -- for anywhere from $4,000 to $6,000 -- was in English, a violation of Civil Code.
Part of the presentation was a field water test. The employees failed to mention that the test is a precipitation test to determine levels of calcium and magnesium, two natural minerals found in water, which are essential to human health. It is a violation of Business and Professions Code to give a precipitation test without disclosing the nature and limits of the test.
Once a contract was signed and consumers discovered the true cost of the system, they called the company to cancel within three days. Consumers reported they were told either they could not cancel or there would be a $150 presentation fee. Some homeowners did not receive a return phone call at all. In some instances, the filtration system was installed before the three-day recission period was up, a practice known as "spiking the contract."
Because the water systems, which were merely water softeners, were installed as permanent plumbing fixtures, a license issued by the Contractors State License Board is required, and none of the Everclear representatives held a contractors license.
Contact the CSLB at www.cslb.ca.gov or (800) 321-CSLB for free consumer publications and tips on hiring licensed contractors.
The Contractors State License Board, which operates under the umbrella of the California Department of Consumer Affairs, licenses and regulates California's 278,000 building contractors.
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