Attorneys General Sue Friedman’s Over Insurance Policies

Beleaguered Friedman’s Jewelers has yet more legal troubles—this time, from three state attorneys general who are suing the firm for misleading credit practices.

Attorneys general from Tennessee, Texas, and Florida all allege that the Savannah, Ga.-based company misled consumers with its credit policies, forcing consumers into insurance contracts without their consent.

A news release from Florida’s Attorney General Charlie Crist said some 19 states are expected to join the litigation.

The company is charged with regularly “duping” customers into paying for life, property, and other insurance when they thought they were insuring their financing of jewelry purchases. They also allege that the chain processed insurance for consumers without their signature or consent. Some consumers who asked about the additional charges said that Friedman’s representatives told them the insurance was required and could not be removed, the suits charge.

In a statement, Friedman said that “the Company does not condone any improper practices alleged in the complaints.… [T]he transactions challenged primarily arose years ago and … the Company has in place measures designed to monitor and assure compliance with Company policy concerning credit insurance sales practices.”

The case is just the latest in a series of problems for Friedman’s, which The Atlanta Journal-Constitution described as a “petri dish of corporate afflictions.”

Its legal problems include ongoing investigations by the Securities Exchange Commission and Justice Department into alleged securities fraud. The investigations arose out of an August 2003 suit by receivables factoring company Capital Factors. Another lawsuit, also filed in 2003, accuses the company of “discriminating against African-American employees and applicants.”

All this has led to talk of a Chapter 11 filing and a revolving door in the executive suites. The company recently announced that executive chairman Allan Edwards will resign at the end of his term in January, after only seven months on the job. Board member Peter Thorner will serve in the newly created position of vice chairman of the board. Richard Hettlinger, Friedman’s CFO, also has left, after holding his job for just a little over a month. He replaced Richard Cartoon, who resigned after only five months as CFO. Ken Maher, a furniture company executive, was then appointed interim CFO.

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