Companies Pay $850,000 to Settle Investigation of Misleading Sales Practices Targeting Massachusetts
On June 29, 2020, two New York-based companies and their owners and presidents agreed to pay $850,000 to settle allegations that their high-pressure, misleading telemarketing operation victimized cities and towns across the Commonwealth.
Under the legal agreement reached with Attorney General Maura Healey and Inspector General Glenn Cunha, the companies are also banned from doing business in Massachusetts for one year.
In the agreement, filed in Suffolk Superior Court, the Commonwealth alleged that over the last ten years, Pioneer Products Inc., Noble Industrial Supply Corp. and their owners and presidents, Richard Weber and Benno Schubert, used high-pressure techniques and misleading statements to induce municipalities to spend large amounts on supplies that they did not want or need. Pioneer and Noble sell cleaning supplies, specialty products for fire departments and other chemical products through telephone sales calls.
An investigation by the Office of the Inspector General (OIG) found that the companies started with a cold sales call to a potential municipal customer. During that call, a Pioneer or Noble saleserson would persuade a municipal employee to place an order. At a later date, Pioneer’s and Noble’s salespeople would call back and say that they were sending the next order, even though the municipality had not placed another order.
If a customer disputed the order, the Pioneer or Noble employee engaged in misleading and high-pressure sales tactics to get the municipality to agree to the next shipment. They also told municipalities they would be subject to retroactive price increases if they did not pay for the next order. Pioneer and Noble even threatened to take legal action and refer cities and towns to debt collectors.
These high-pressure sales calls caused municipalities to pay for more merchandise.
The OIG and the Attorney General’s Office (AGO) will return nearly $400,000 to 43 cities and towns misled by Pioneer and Noble. The municipalities will also be able to keep all merchandise that Pioneer and Noble shipped. A total of $385,000 will be allocated to the state’s general fund.
The agreement also bans the companies from doing business in Massachusetts for one year and requires Pioneer and Noble to implement new policies and retrain their employees. The companies cooperated in the investigation and admit no wrongdoing.
The OIG’s Civil Recovery Unit (CRU) undertook the investigation and recovery. The CRU, in collaboration with the AGO’s False Claims Division, pursues civil actions to recover funds lost due to fraud, false claims and other wrongful conduct. It works closely with the OIG’s other investigative units as well as other state agencies and local governments.
The OIG operates a hotline for reporting fraud involving public funds or property at (800) 322-1323 or IGO-FightFraud@state.ma.us.
The False Claims Division was created by AG Healey in 2015. Its purpose is to safeguard public funds by enforcing high standards of integrity against companies and individuals that make false statements to obtain government contracts or funds.
Anyone with information about suspected fraud or abuse relating to state or municipal contracts or funds is urged to contact the False Claims Division’s tip line at (617) 963-2600.
Former Accountant for Three Massachusetts Towns Indicted for Stealing $729,000
On July 6, 2020, a Massachusetts grand jury indicted Justin Cole, former accountant for the towns of Uxbridge, Monterey and Millville, for allegedly embezzling more than $729,000 between December 2012 and June 2018. The grand jury indicted Mr. Cole on:
- Five counts of larceny over $250
- Two counts of larceny over $1,200
- Four counts of presentation of false claims
- Four counts of unwarranted privilege by a municipal employee
- One count of financial interest by a municipal employee
The charges resulted from a joint investigation by the Massachusetts Office of the Inspector General and the Massachusetts Attorney General’s Office.
Mr. Cole worked as Town Accountant for the town of Uxbridge, and he provided contracted accounting services to the towns of Millville and Monterey through his company, Baystate Municipal Accounting Group. According to the allegations in the indictment, Mr. Cole diverted the towns’ funds to other companies that he operated by submitting fake invoices for services that were never provided.
Mr. Cole also used town funds to pay office rent and purchase software for his private businesses. The indictment alleges Mr. Cole stole $657,335 from Uxbridge, $24,597 from Monterey, and $47,600 from Millville.
Mr. Cole is presumed innocent until proven guilty.