Complaint resolution service publishes case studies, recall information and consumer news.

Bayer, the folks who make aspirin and medical supplies, has a growing business in the diabetes care field.  With more than 20 million Americans currently suffering from diabetes and a projected 1 in 3 children aged 8 projected to contract the disease, there is big money in reaching diabetics and locking down their preferences.

The giant health care company has agreed to pay a fine of nearly $100 million to settle U.S. Justice Department allegations that they paid distributors to convert diabetic patients from their glucometer (a device that measures blood sugar), test strips (the expensive part of the proposition, ranging up to $1 each for the uninsured) and other supplies.

The federal agency says that supplier Liberty Medical received $2.5 million as payment for each Medicare patient converted.  The funds were designated “advertising”.

“If medical device manufacturers want to serve Medicare beneficiaries they must follow the law,” said Gregory G. Katsas, Assistant Attorney General for the Civil Division. “Paying healthcare suppliers to place a particular brand of device with Medicare beneficiaries violates the law and will not be tolerated.”

Bayer reportedly paid $375,000 to ten other suppliers. The $97.5 million fine settles claims against Bayer through 2007. The company was also required to enter into an agreement with the government regarding future conduct.

Posted under Customer Service

In one of the largest cases ever and the first to include potential criminal charges, state officials from multiple states have announced an agreement to resolve an investigation of market timing by Prudential Equity Group.

The company will pay $270 million in restitution to injured investors. Under a separate agreement with the U.S. Department of Justice, Prudential will pay a penalty of $330 million. The agreements also require the company to undertake a series of reforms.

“We are pleased that Prudential has joined the long list of institutions that have agreed to compensate customers harmed by market timing activity and implement sweeping reforms,” said New York Attorney General Spitzer.

The investigation of Prudential began with a subpoena from the New York Attorney General’s Office in August 2003.

The investigation – conducted in cooperation with the Securities and Exchange Commission, New York Stock Exchange, National Association of Securities Dealers and the states of Massachusetts and New Jersey – revealed that the company’s brokers defrauded at least 50 mutual funds and their investors between September 1999 and June 2003.

Specifically, the brokers provided hedge fund operators and other favored investors with phony customer account numbers that were used to conduct repeated in and out trading of various funds. The scheme helped the favored investors evade the scrutiny of the “timing police” at the mutual fund companies.

Senior managers at Prudential were aware of the fraud. In April 2002, the manager of Prudential’s Mutual Fund Operations Division shared with other senior Prudential managers the following e-mail from another mutual fund family, which complained about Prudential’s brokers:

“What we have seen scares us. It appears certain representatives are changing account registrations, tax id numbers, and branch and rep [ID] numbers in an effort to time the [mutual fund family’s] funds. All of these accounts have been stopped, but each day “new” ones pop up.”

In February 2003 the president of Prudential’s Private Client Group received a copy of an e-mail from the manager of Prudential’s branch office in Garden City expressing concern about the tactics used by Prudential’s top-producing broker to enable a customer to continue market timing at another mutual fund company:

“Fund companies have been misled as to the identity of the [brokers] of record… Recently, [a mutual fund company] was provided with information which was at best misleading to effect the removal [of] a block [from further market timing].”

Between 1999 and 2003, Prudential received more than a thousand letters and e-mails from mutual funds complaining of market timing by Prudential brokers. However, the company did not act to halt the activity, which harmed small investors who typically buy and hold their mutual fund shares.

Posted under Finance

Insurance giant State Farm announced that an internal audit has discovered that the company improperly titled tens of thousand of vehicles now driven by consumers. At issue is the company’s failure to identify vehicles as a “salvage” or similar designation before reselling the vehicle, typically through a closed auto dealer-only auction.

To its credit, State Farm approached the departments of motor vehicles throughout the United States and disclosed its error. Early estimates project that 30,000 consumers throughout the country may be affected. Consumer advocates including Michigan Attorney General Mike Cox praised the company, saying, “I commend State Farm for proactively entering this settlement and I am confident it will encourage other companies to double check their internal procedures to ensure consumers receive all vital information.”

Under the terms of the settlement, State Farm will pay $40 million to consumers with payments ranging from $400 to $10,000. The reaction by government and consumer officials is far different from the public relations blackeye suffered by the company in 1999 when an Illinois jury awarded $456 million to consumers in a class action suit that found that the company was using less safe non-factory parts when repairing their insured vehicles involved in collisions.

Each state is responsible for setting its own threshhold for salvage vehicles. Most states use a formula that compares the amount of damage to the value of the vehicle, but the rates vary from state to state. The vehicle owner, in this case State Farm, is required to report damage exceeding those threshholds to the state’s department of motor vehicles so the title can be “branded” or marked with a salvage or junk designation.

That designation is supposed to follow the car throughout its remaining life on the roads, but vehicle history companies such as CARFAX routinely find that a vehicle with a salvage title in one state may later get a title without that same designation in another state.

Consumers who believe that their vehicle is one of the State Farm vehicles not properly titled can call toll-free 866-858-1142. Payments to consumers are expected to begin late this year and continue through 2006.

Posted under Automotive, Customer Service