The Texas attorney general filed a consumer-fraud lawsuit Monday against Friedman’s Inc., which is already under federal investigation for its accounting practices.

Attorney General Greg Abbott said the company misled customers about the level of “required” insurance coverage when applying for installment credit on purchases.

Abbott said Friedman’s pressured low-income customers to sign up for loan-protection insurance without being clear that the coverage was optional. Company employees failed to disclose the cost of the coverage, he said.

The attorney general is seeking civil penalties of up to $20,000 per violation of state laws against deceptive trade practices, plus legal fees and restitution for customers.

“The company represents itself as a long-term, reliable friend of the customer, yet it went to great lengths to lure unwitting customers into misleading insurance contracts as part of jewelry purchases on credit,” Abbott said in a statement. “The company should have been clear that these ‘side’ agreements are completely optional with such purchases.

The company offers multiple forms of credit on jewelry purchases, including the store’s own “Advantage Credit” program—a card that triggers the company’s retail installment credit contract with the customer.

“It is within this line of credit that the company engaged consumers in the scheme to buy credit insurance, which, often unbeknownst to buyers, can include property, life and disability insurance,” Abbott said. “This coverage should have been represented as optional to the customer, not mandatory.”

Friedman’s has more than 600 stores in about 20 states, including 65 in Texas.

Friedman’s has been named in class-action lawsuits and placed under federal investigation since it announced in late 2003 that it would restate financial results from 2000 through 2003 because of concern about how it accounted for bad debt and losses. The company disclosed in October that the Securities and Exchange Commission may recommend revoking or suspending its shares, which were delisted by the New York Stock Exchange.

The company has shaken up its board and seen the departure of two chief financial officers since announcing since the accounting controversy began. The latest of the personnel moves occurred Dec. 10 when the company announced that Allan Edwards, executive chairman, will resign at the end of his term in January, 2005, and that Richard Hettlinger, Friedman’s CFO, left the company after holding the job a little more than a month. Ken Maher, a furniture company executive, was named interim CFO by the company’s board of directors.

JCK