An agreement with a finance company will clear $3.5 million in debt for nearly a thousand soldiers who bought computers and other electronics at highly inflated prices and credit terms at a retailer outside the Army's Fort Drum military base, the state's attorney general said Tuesday.
Rome Finance Co. Inc., of Concord, Calif., also agreed through its bankruptcy trustee to take steps to restore the credit histories of hundreds of people, Attorney General Eric T. Schneiderman said. Telephone calls to Rome Finance's trustee weren't immediately returned Tuesday.
A lawsuit filed last year by the attorney general's office and pending in State Supreme Court accuses electronics retailer SmartBuy and affiliates of defrauding service personnel through "wildly inflated" prices and high interest rates paid directly from military paychecks. The lawsuit seeks restitution and credit repair.
"This company took advantage of service members using deceptive practices and roping them into high-interest contracts and ruining their credit ratings," Schneiderman said.
Schneiderman, visiting his office in Watertown, near the military base in northern New York, with Fort Drum officials, said Tuesday that one soldier ended up $6,000 in debt for a computer that costs $1,200.
"The last thing any soldier should have on their mind is the fact they were the victim of a scam back home that haunts them when they are overseas," Schneiderman said. "They're easy victims for some types of scams."
In one case from 2009, a soldier who later served in Iraq bought a 47-inch LCD TV for $4,632 plus 12 percent interest, the attorney general's office said. The soldier's wife found the same model for sale at a Sam's Club for about $1,100, it said.
SmartBuy, which last year closed a kiosk at a shopping mall near Fort Drum, has denied wrongdoing. It also had operated near military posts in North Carolina, Texas, Colorado, Oklahoma, Georgia, California and Tennessee.
SmartBuy attorney Gabe Nugent said the allegations against the company "aren't any more truthful or accurate than when they were first made two years ago."
He said the company, which has executive offices in Fayetteville, N.C., is in transition and no longer sells consumer goods.
"They're not in bankruptcy, but they're not in business," he said.
The New York attorney general's office said the store's clerks had aggressively pushed sales of electronics including laptops, game systems and flat-screen televisions to soldiers, declined to take cash payments and pressured buyers into payment contracts with hidden fees and exorbitant interest rates.
In May 2010, Assistant Attorney General Deanna Nelson wrote to top Pentagon officials advising them that the retailer was targeting military personnel and "unlawfully" attempting to sell them computers and other electronics with markups of double or triple normal retail prices plus financing averaging 244 percent in interest. She listed seven other stores near bases and wrote that most sales were paid through direct military payroll deductions commonly known as allotments.
Schneiderman's agreement with the finance company settles the debt for 995 soldiers, who owed an average of about $3,500 each.