Litigation
Aug. 15, 2002
Qwest Settles With Colorado, Pays $2 Million
DENVER - Qwest Communications International will pay nearly $2 million in damages and restitution for alleged deceptive marketing tactics. Colorado on Tuesday became the latest in a growing list of states that have settled claims with Qwest for illegal or deceptive marketing practices, including switching customers' long-distance service without their knowledge and charging them for services not requested.
Colorado on Tuesday became the latest in a growing list of states that have settled claims with Qwest for illegal or deceptive marketing practices, including switching customers' long-distance service without their knowledge and charging them for services not requested.
Colorado Attorney General Ken Salazar said the Denver-based telephone company engaged in deceptive sales practices when it failed to offer the lowest-cost service packages to customers who requested "basic dial-tone service."
Instead, the company was citing "custom package" rates to customers that were twice as expensive as what they should have paid because they included services the clients did not request.
"This $1 million damage payment plus restitution to Colorado consumers is one of the largest consumer protection settlements obtained by the state of Colorado," Salazar said. "This is a good settlement for consumers because it will ensure that Qwest customers in Colorado will not be misled about the cost and range of services available to them."
Under the terms of the settlement, which still must be approved by a Denver District Court judge, the company will pay restitution in the form of refunds or credit to thousands of customers, which could amount to $1 million or more, Salazar said.
Colorado consumers have four more months to lodge complaints with Salazar's office if they, too, were paying for services they did not request.
Qwest has been cited in other states for similar practices. Company spokesman Skip Thurman confirmed Tuesday that six other Western states also were investigating the company for similar practices, but would not say which.
"We've got a new [leadership] team, and we're moving forward to a one-call resolution to ... [having] your problem solved," said Thurman, director of policy and law communications for the company. "We have had a zero-tolerance policy now for any sort of sales practice like that. There is an ironclad zero-tolerance policy. There is absolutely no toleration for that whatsoever."
Earlier this summer, the company replaced long-time chief executive officer Joe Nacchio with a new leader, Richard Notebaert.
Last October, the Arizona attorney general's office filed suit against Qwest, charging the company with similar deceptive practices. That matter is pending in state court.
In February, the Oregon attorney general office reached a similar settlement with Qwest. The company agreed to pay $575,000 in damages plus restitution to its customers for a practice called "cramming," the placing of the unauthorized charges on customers' bills and misrepresentations concerning wireless and high-speed Internet services.
Qwest provides local telephone service to a 14-state area in the Western United States, including part of California, and long-distance and Internet services nationwide.
The California attorney general's office did not returns phone calls about whether the state is investigating Qwest for similar practices.
Since 1999, Qwest has been the subject of numerous government actions in other states, including New York, Idaho, New Jersey and Minnesota, primarily for a practice known as "slamming," or switching long-distance service without a customer's knowledge, according to the Better Business Bureau.
In July 2000, the Federal Communications Commission fined Qwest $1.5 million and ordered it to strengthen its slamming compliance and monitoring policies.
"I don't think there was intent," Denver Better Business Bureau president Jean Herman said. "I think there was a corporate culture for sales, and whenever that is the corporate culture and it involves a customer problem, it doesn't make anybody any money and it doesn't get resolved as quickly as it should."
Herman said the Better Business Bureau nationwide has received thousands of complaints about Qwest's marketing tactics in the past two years. It was those complaints that prompted investigations in Colorado and other states, she said.
In Colorado, Qwest was charging customers $32.95 a month for custom services that included such services as call waiting, caller identification, last-call return and call forwarding even though customers didn't ask for those services, Assistant Attorney General Andrew McCallin said.
Instead, Qwest should have offered customers who wanted no-frills service its basic $14.92 monthly rate, he said.
On Tuesday, Qwest's stock closed at an all-time low of $1.11 a share, dropping 1 cent at the start of trading. In January 2000, it was worth more than $60 a share.
The Associated Press contributed to this story.
Charles Asbhy
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